Mulroney Mulroney government government began began negotiations with negotiations with the United States the United States in September in September 1985.1985.

Deal was finally Deal was finally reached in reached in October 1987October 1987

Main Points of Free Trade (FTA)

1.1. Elimination of tariffs.Elimination of tariffs. The lifting of The lifting of tariffs on goods and services traded tariffs on goods and services traded between the two countries would begin between the two countries would begin on January 1, 1989 and be completed by on January 1, 1989 and be completed by January 1, 1998.January 1, 1998.

2.2. Dispute settlement mechanism. Dispute settlement mechanism. A five- A five- member panel with at least two member panel with at least two members from each country would members from each country would settle disputes that arose between settle disputes that arose between Canada and the United States with Canada and the United States with regard to trade.regard to trade.

3. Investment.3. Investment. Restrictions on American Restrictions on American investment in Canada would still have the investment in Canada would still have the right to screen and approve takeovers in right to screen and approve takeovers in cultural industries such as publishing and cultural industries such as publishing and media.media.

4. Energy.4. Energy. Canada could not restrict the Canada could not restrict the sales of energy resources to the United sales of energy resources to the United States, except in times of shortage.States, except in times of shortage.

5. Agriculture.5. Agriculture. All tariffs on agriculture All tariffs on agriculture products and processed food would be products and processed food would be eliminated over a 10-year period.eliminated over a 10-year period.

The Liberals and NDP were The Liberals and NDP were against the FTA, as were the against the FTA, as were the labour unions.labour unions.

Opposition was based on two beliefs:Opposition was based on two beliefs:

1.1. FTA would lead to a loss of Canadian FTA would lead to a loss of Canadian jobs because American-owned jobs because American-owned manufacturing plants could shut down in manufacturing plants could shut down in Canada and move to the United StatesCanada and move to the United States

2.2. Canada would lose its independence Canada would lose its independence because of our reliance on trade with because of our reliance on trade with the US.the US.

NAFTANAFTA New agreement was proposed that New agreement was proposed that

would introduce Mexico to the North would introduce Mexico to the North American trading bloc.American trading bloc.

Canada did not have much interest in Canada did not have much interest in negotiating a deal with Mexico.negotiating a deal with Mexico.

Total value of trade between the US Total value of trade between the US and Canada was approximately $300 and Canada was approximately $300 billion, trade between Canada and billion, trade between Canada and Mexico was only around $3 billion.Mexico was only around $3 billion.

The geographic position of the US made The geographic position of the US made such an agreement ideal for that country.such an agreement ideal for that country.

It could take advantage of cheap It could take advantage of cheap Canadian raw materials and inexpensive Canadian raw materials and inexpensive Mexican labour.Mexican labour.

Mulroney felt that Canada had little Mulroney felt that Canada had little choice but to negotiate. If the United choice but to negotiate. If the United States signed a deal on its own with States signed a deal on its own with Mexico, US trade could take a major shift Mexico, US trade could take a major shift toward Mexico.toward Mexico.

Canada would be left isolated.Canada would be left isolated.

Europe and Asia already had Europe and Asia already had large, open market trade large, open market trade agreements.agreements.

If Canada, Mexico, and the United If Canada, Mexico, and the United States created a North American States created a North American market, it would involve 390 market, it would involve 390 million people and would control million people and would control an estimated 31% of the world’s an estimated 31% of the world’s wealth!wealth!

December 1992, December 1992, NAFTA was signed.NAFTA was signed.

The main conditions included:The main conditions included:

Tariff-free trade by 2008Tariff-free trade by 2008 No quota limits on importsNo quota limits on imports Equal access to natural resourcesEqual access to natural resources A provision that allowed companies to A provision that allowed companies to

sue the countries’ governments if sue the countries’ governments if legislature hurt their ability to competelegislature hurt their ability to compete

Trade disputes to be handled by a Trade disputes to be handled by a NAFTA panelNAFTA panel

Supporters argued that it would make Supporters argued that it would make Canada more attractive to global Canada more attractive to global investors because they would use investors because they would use Canada to access North American Canada to access North American market.market.

Also argued that NAFTA would make Also argued that NAFTA would make North America more competitive with North America more competitive with Asia & Europe.Asia & Europe.

Because of globalization, Canada Because of globalization, Canada needed to secure North American needed to secure North American market so they could eventually expand market so they could eventually expand to South Americato South America

Critics worried that it was a step Critics worried that it was a step toward American domination of Canada.toward American domination of Canada.

There was a fear that Canadian There was a fear that Canadian industries (esp. Publishing and industries (esp. Publishing and television) would be threatened by television) would be threatened by American corporations.American corporations.

Also feared that industries such as Also feared that industries such as steel, textiles, and automobiles would steel, textiles, and automobiles would be vulnerable to cheaper labour costs in be vulnerable to cheaper labour costs in US & Mexico which might lead to wage US & Mexico which might lead to wage reduction for Canadians.reduction for Canadians.

Opponents also maintained that lower Opponents also maintained that lower environmental standards in Mexico would environmental standards in Mexico would result in similar conditions in Mexico.result in similar conditions in Mexico.

Finally, some felt that tax-supported Finally, some felt that tax-supported social programs – particularly health care social programs – particularly health care – would be under attack by Canadian – would be under attack by Canadian businesses. businesses.

Businesses funded these programs and Businesses funded these programs and they had additional costs so in order for they had additional costs so in order for Canada to compete, these social Canada to compete, these social programs would be halted.programs would be halted.