Twenty years ago, in the fall of 1987, the Canada-US free trade negotiations hovered precariously between success and failure. Time was running out. President Reagan’s authority to negotiate a free trade agree- ment was scheduled to expire in early October and the major issues were far from resolution. In an intensive, final three-day round of negotiations during which I represented Prime Minister Mulroney and Treasury Secretary Jim Baker headed the US side, success was achieved. A few months later, the final legal text was drafted and the Prime Minister and the President signed the agreement on January 2, 1988.

The negotiations were arduous enough and success had by no means been pre-ordained. But the conclusion of the Free Trade Agreement added new fuel to what had become a volatile national debate in Canada, a highly emotional roller coaster touching every corner of society and extend- ing well beyond the provisions of the actual trade agree- ment. It raised fundamental questions about the character of Canada, its relationship with the world and, in particular, its relationship with the US. Everyone seemed to have an opinion, from the chattering classes to seniors, from reli- gious leaders to feminists, from authors to actors and, of course, politicians from all sides. The debate polarized the country between Cassandras who predicted literally the end of Canada from a free trade agreement with the US and opti- mists who saw the agreement as a means to make the Canadian economy more competitive and trade with our major trading partner more secure.

The Cassandras were led essentially by self-appointed Canadian nationalists, perennial anti-Americans who defined Canada and Canadians as everything that was not either the US or American. They saw the Free Trade Agreement as a conspiracy to make Canada the 51st state, reflecting a latent sense of inferiority but imbued with an even more profound sense of moral superiority. Canadians were warned that their industry would be swallowed whole by American competitors. Our vineyards in the Niagara and Okanagan Valleys would be ”œpaved over.” Canadian cultur- al industries would drown in a flood of southern imports. Canadian foreign policy would be yoked to the White House and the Pentagon. In short, Canada would lose its ability to survive as a distinct North American entity.

Social policy activists declared that Canadian medicare would be deemed a subsidy and would have to be aban- doned in favour of American-style heath care. Senior citizens, including the Prime Minister’s mother, were told that their nursing homes would be privatized and that they would be thrown ”œout on the street.”

Labour leaders worried that facto- ries would close en masse. Unemployment would rise and Canada would become an economic backwater with Canadians condemned for eternity as hewers of wood and drawers of water.

Select religious leaders rushed into the debate preach- ing to their no doubt bewil- dered flocks that free trade would imperil Christian values. One bishop complained that any agreement that compelled Canadians to be more competi- tive was unchristian and uneth- ical.

Instant experts emerged from varied disciplines, includ- ing at least one from a family court, stimulating headlines and fear in equal proportions. ”œSellout” and ”œtraitor” were among the milder epithets used against advocates favouring free trade. The language of the critics was often as crude as the analysis.

Against this emotional assault it was difficult to defend the agreement with dis- passionate messages about ”œcomparative advantage” or Adam Smith’s theories on specialization.

At the height of the debate, Saturday Night commentator David Frum shrewdly observed that free trade’s opponents were hav- ing all the fun. They could, he point- ed, ”œwrite any old thing that comes into their heads… and did not consid- er themselves bound by the customary standards of evidence expected over matters of urgent public policy.”

But ultimately it didn’t matter. The Canadian people were not all lis- tening to the Cassandras. The govern- ment countered each of the allegations and, with strong support from many outside the political arena, sought to concentrate the debate on economic issues ”” the need for better and more secure access to Canada’s principal export market ”” and with an appeal to Canadian self-confidence, namely our ability to compete under an enhanced, rules-based trade system.

Free trade became the dominant issue in the 1988 election. As they say in Newfoundland, the campaign was a ”œdoozy.” The government was re-elect- ed with a second majority (the first for Conservatives since the days of John A.). The agreement was ratified by Parliament and came into effect January 1, 1989.

What has happened since? The Cassandras were proven wrong on all points to the extent that many of free trade’s most vehement, political oppo- nents eventually became ardent sup- porters. (The theory of elasticity is often present in politics.) One who did not, however, was Maude Barlow, erstwhile critic of the FTA, NAFTA and virtually any trade liberalization agreement. Writing two years after the agreement came into effect she declared solemnly that ”œCanada faces extinction as a nation.” As Churchill might observe ”œSome extinction; some nation!”

Statistics tell a powerfully pos- itive story all by themselves. Not only has Canada-US trade more than quadrupled since the FTA but the quality of the expan- sion, notably the increase in higher value Canadian exports, exceeded the government’s expectations. In short, the theo- ry worked ”” liberalization of trade fuelled specialization and efficiency with dividends for both producers and consumers. Two-way investment grew rapid- ly as firms on both sides of the border equipped themselves to take advantage of the agree- ment. Intra-firm trade accelerat- ed with productivity spin-offs on both sides. Over 70 percent of Canada-US merchandise trade today consists of trade within the same industries. Tariffs were reduced more quickly than initially contemplated.

More to the point, none of the dire predictions about van- ishing social programs ever materialized. Canada’s approach to health care certainly has prob- lems, but they are home-grown and in no way attributable to free trade if anything the US health care system is in more serious jeopardy. Costs are escalating dramati- cally ”” even without universal coverage ”” eroding US competitiveness and driv- ing many major US manufacturers to the brink of bankruptcy. Neither coun- try is satisfied with its approach to health care but at least the debate is no longer distorted by loopy links to trade agreements. Canadian social programs more generally face challenges but these are not the result of trade agreements.

The fears that bilateral trade agree- ments would emasculate commitments to multilateral trade proved equally hollow. Success in the FTA, and subse- quently NAFTA, actually helped galva- nize the conclusion of the Uruguay Round, which gave birth to the World Trade Organization (WTO). In fact, the WTO adopted some features from NAFTA, notably the dispute settlement system, to strengthen its effectiveness.

Throughout the Mulroney and subsequent Chrétien/Martin years, Canada pursued its own course on for- eign policy, supporting the US and other NATO allies where it was in Canada’s interest, e.g., the Balkans and Afghanistan, while opposing the US where it was not, e.g., on South Africa and Iraq. The Harper government is proving itself no less capable of man- aging a vibrant trade and investment relationship with the US while pursu- ing policies that serve distinct Canadian interests, whether in our own hemisphere or on issues such as Arctic sovereignty.

With the glaring exception of soft- wood lumber, the dispute settlement provisions of the FTA, made perma- nent in NAFTA, are doing what was intended ”” reducing the threat of arbitrary or capricious use of protec- tionist US measures against Canadian exports. The blatant abuse by the US of final rulings by NAFTA panels on the perennial lumber dispute necessitated, once again, a ”œmanaged trade” solution but has left a serious scar on the agreement as a whole, undermining confidence more generally about the willingness of the US to live up to solemn treaty obligations.

The Free Trade Agreement was not perfect. It was a negotiated compro- mise reflecting a balance of gives and gets by both sides. It was a bold initia- tive, much more so for Canada than for the US, made possible by the tenacity and commitment of the two political leaders at the time ”” Prime Minister Mulroney and President Reagan. The FTA, NAFTA and the Uruguay Round represented a high-water mark of achievement for Canadian trade policy. The fact that not much has happened of that magnitude since on the trade front is a tribute to the political will mustered at that time.

By any measure, Canada is a stronger, more prosperous country than it was 20 years ago. No one would claim that free trade merits all the cred- it nor that it has been flawlessly imple- mented. But it would be difficult for the most dedicated of the Cassandras to claim that Canadians would be bet- ter off today without improved access to the US market and without the more competitive Canadian economy that has been generated by regional and global trade liberalization.

Canada’s prosperity is vitally linked to our proximity to the vast US market and one of the biggest threats to our future prosperity would be an outbreak of protectionism from our southern neighbour. Whether or not Canada is the target, we could easily become the victim. Whether in the name of security or anti-globalization, US protectionism is a constant threat to our economic well-being.

Canada’s first priority must there- fore be to restore full commitments to the dispute settlement provisions of NAFTA. We should also use the increasing integration of the Canada- US economies as a platform for bold trade negotiations with the European Union and the major economies of Asia.

We should address the broad issue of border management in a way that respects legitimate concerns about secu- rity while using 21st-century technolo- gies to facilitate efficient movements of people, goods and services. It seems per- verse that, as Europeans find new ways to ease and expedite movements within their borders, North America is moving in the opposite direction.

The new passport requirement is proving more onerous than effective. Four-to-five-hour lineups at the bor- der for trucks and tourists are count- er-productive to both economies. Particular focus is merited on cus- toms pre-clearance procedures that would ease congestion along the bor- der. As David Ganong pointed out eloquently at the recent Montebello Summit, we also have different regu- lations on the production of things like jelly beans that serve no practi- cal use whatsoever. The introduction of new user fees and extra inspec- tions at the border are egregious examples of protectionism under a different disguise.

At their Montebello Summit in August, the leaders of Canada, the United States and Mexico made a solemn joint commitment ”œto a secure border that remains open to the exchange of goods and services and the interaction of people.” The words are compelling but concrete actions emulating this sentiment would be more convincing.

It is never easy to get and sustain US attention to genuine Canadian priorities ”” whether on trade or other bilateral issues. Inattention or indifference in Washington was a huge obstacle to the trade negotiation 20 years ago and near- ly caused the initiative to collapse. The never-ending challenge for Canada in managing relations with the world’s only super power is to generate commit- ment, tenacity and vigilance from the top while reinforcing it systematically at other levels. The real lesson from 1987 is that, with the right leadership and con- fidence about our objective, we can overcome both the hand-wringing Cassandras at home and the customary ambivalence of the United States.

But trade policy and trade agreements are only one element of meas- ures needed to assure our future well-being. On the home front, we need a coherent policy framework that will give Canadians the best chance to compete and prosper in a rapidly globaliz- ing world. We need funda- mental tax reform that levels the playing field for Canadian firms and stimulates invest- ment ”” domestic and foreign; regulato- ry reform that respects legitimate public policy interests instead of home-made solutions designed simply to distin- guish Canada from the US. After too many years of talk with too little action, our provinces need to match the exam- ple of Alberta and B.C. and remove internal trade and investment barriers. Most importantly, we need comprehen- sive investments in education and infrastructure (ports, railroads, bridges, municipal transit, etc.) by all levels of government that will sustain our ability to compete and prosper in an increas- ingly integrated global economy. That too requires the kind of vision, stamina and political leadership we were fortunate to have had 20 years ago.

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