American Trade Policy: 1923-1995

By Edward S. Kaplan | Go to book overview

7
The North American Free Trade Agreement

THE U.S.-CANADA FREE TRADE AGREEMENT

In March 1985 President Reagan, during a visit to Quebec, proposed a free-trade agreement to Canadian Prime Minister Brian Mulroney that would eliminate all tariffs and nontariff trade barriers (NTBs) between the two countries. 1 What became the U.S.-Canada Free Trade Agreement (FTA) was the precursor to the North American Free Trade Agreement (NAFTA).

Though the FTA was initially proposed in 1985, serious negotiations began only in October 1987 because widespread opposition to the FTA existed throughout Canada. Canadian business leaders were generally enthusiastic about the new markets that would open up to their products and services. However, most Canadian labor unions, led by the Canadian Labor Congress, did not want to open the Canadian market to U.S. goods. They were concerned that the United States would flood Canada with cheaply made goods, resulting in further job losses. Canada, at the time of these negotiations, was mired in a deep recession that made it difficult for Mulroney to sell the FTA to the Canadian people. 2

By early December 1987 the final details of the FTA had been worked out, and Mulroney announced that he would introduce legislation in the Parliament in May 1988 ratifying the agreement. Mulroney and his Progressive Conservative party wanted the House of Commons to approve the bill before the end of the year so that the FTA could go into effect on January 1, 1989, the date agreed to by both the United States and Canada. 3 However, the Liberal and New Democratic parties opposed the FTA; they were successful in blocking a vote on the agreement and forcing Mulroney to call for early general elections if he expected to meet his January deadline. John Turner, the leader of the Liberal party, wanted to become the new prime minister of Canada, and he hoped to use the FTA, which he called a threat to Canada's sovereignty, as his major issue. 4

While the Canadians were preparing for a new election, the FTA easily made its way through both the House of Representatives and the Senate in the United States by September 1988. The United States had recognized the importance of

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American Trade Policy: 1923-1995
Table of contents

Table of contents

  • Recent Titles in Contributions in Economics and Economic History ii
  • Title Page iii
  • Contents vii
  • Preface ix
  • 1 - Background to the Hawley-Smoot Tariff 1
  • Notes 18
  • 2 - The Hawley-Smoot Tariff 38
  • 3 - The Building of a Liberal Trade Policy 43
  • Notes 60
  • 4 - The Trade Expansion Act and the Kennedy Round 65
  • Notes 86
  • 5 - The Trade Reform Act and the Tokyo Round 89
  • Notes 108
  • 6 - Fair Trade and the Uruguay Round 113
  • Notes 132
  • 7 - The North American Free Trade Agreement 137
  • Notes 156
  • 8 - A Return to Unilateralism 159
  • Notes 167
  • Bibliography 169
  • Index 173
  • About the Author 177
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