Law and Institutions of International
Trade
Class 4
MGT 3860Z
Daryl Hanak
1850s-60s – North America
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Canadian colonies had to find new markets with the repeal of the
British preferences in the 1840’s and looked towards the rapidly
expanding US. But American high tariffs were in place, justified on
basis of “infant industry” argument
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In 1854, a “Reciprocity Treaty" was concluded between the Canadian
colonies and the US. Gave Canadians duty free access for their
traditional exports – unprocessed raw materials (fish, timber, etc.).
The US got access to Atlantic inshore fishery and free navigation on
the Great Lakes.
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Many US legislators not happy with it and manufacturers in the
Northeast were unhappy with competition from Canadian
manufacturers and farmers.
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In 1866, the US abrogated the agreement during the US Civil War-Great Britain was supporting the South in the Civil War
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Provided incentive for Canadian colonies to negotiate Confederation
in 1867
MGT 3860Z -- Fall 2006
1860’s-1870’s North America
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Between 1867-1874 there were three attempts to
negotiate a replacement deal with the US and
each one was turned down by either the US
Administration or the US Senate.
In response to continued Canadian economic downturn in ,
Sir John A. McDonald’s government gradually introduced
measures that became a “National Policy" in 1879 --which
included
•high tariffs to build up the domestic industrial
manufacturing base,
•a cross-country railroad/transportation policy and
•an increase in immigration.
MGT 3860Z -- Fall 2005
1890’s-1910 -- Reciprocity
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With little success in negotiating a reciprocity agreement with
the US, the Canadian governments focused on their traditional
privileged status in Great Britain.
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However, it took some time for Great Britain to move from its
free trade stance that adopted in 1840s. Canadian
governments began offering tariff preferences to Britain in
1897 and the colonies lobbied Britain to develop
comprehensive “Imperial Preferences”. NZ and South Africa
followed Canada in 1903, and Australia in 1907.
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Canada negotiated reciprocal preferential agreements with the
other former British colonies (Australia, New Zealand, South
Africa) as well as some special relationships with France,
Germany and Latin American countries.
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Only the 1920s did the British government introduce policies
clearing the way for a comprehensive system of "Imperial
Preferences".
MGT 3860Z -- Fall 2005
1911 National Policy and Reciprocity
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By the early 1900’s National Policy was becoming more sophisticated
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subsidies
tariff classifications,
antidumping duties
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Gave Canadian producers advantage over their foreign competitors in the
domestic Canadian market.
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Attracted manufacturing to Canada by both foreign and domestic
entrepreneurs who were content to manufacture for the domestic market
alone.
•In 1911, there was an effort to get a
reciprocity agreement with the US which was
successful with the US Administration. It was,
however, rejected by Canadians in the 1911
election. Wilfrid Laurier, the Liberal Prime
Minister who successfully negotiated the
reciprocity agreement was defeated by the
Tories (Borden), who were championing the
continuation of the Imperial Preferences
system.
MGT 3860Z -- Fall 2005
Reciprocity Lessons (Hart)
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The maintenance of the National Policy approach
benefits to manufacturing interests in Central Canada,
maintaining their protections
Important Canadian political lesson, it would be 70
years before a Canadian government would threaten
the protections of the business establishments in
Toronto & Montreal
Western Canada was stung by the defeat of reciprocity
discussions with the US. Western farmers established
an anti-tarrif “Progressive Party” which ran for twenty
years before being absorbed into the conservative party
(Progressive Conservatives - PC)
Influenced approach of Canada to subsequent potential
reciprocity deals in 1935 and 1948.
MGT 3860Z -- Fall 2005
Canada-US FTA
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1983 negotiations start, and
agreement is signed in 1987
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Political parties taking opposite
sides this time -- the Tories
defeated the Liberals in 1911 by
arguing against Reciprocity with
the US. Now, the Tories promoted
the most sweeping trade
negotiation with the US that
Canada have ever undertaken -and the most comprehensive trade
agreement that the US had ever
negotiated up to that time.
Prime Minister Brian Mulroney
MGT 3860Z -- Fall 2005
Canada-US FTA
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Wrenching national debate around the Canada-US FTA
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Swallowed up by the US.
Loss of national sovereignty, national identity.
Everything that was good and right about Canada would be
lost.
“They” would take our water, they would take our oil, we
would prevent us from providing public health care, we would
have to carry guns.
Every anti-American idea or philosophy was resurrected,
polished and magnified.
Debates within Canada that are somewhat unique – health
care, education, social services, water.
Didn’t receive the same public attention in the US – Canada
“mostly harmless”, not really foreign.
MGT 3860Z -- Fall 2005
Canada-US FTA
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Canada-US Free Trade Agreement concluded in 1988 -- much less
integrating from the political side than the European union, but still a
significant advance on the existing multilateral system that became the
WTO.
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Much of the Canada-U. S. FTA was used as a basis for the development
of the NAFTA.
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One of the most important elements in the long-term, for Canada is the
dispute resolution mechanism in the free trade agreement. This
permitted Canada to have an independent arbitration of whether the US
is complying with its trade agreements.
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Having an arbitration system based on rules neutralized to some extent
the ability of the US to throw its economic weight around to get its way.
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Respect for the rule of law is high, relatively, in the US. If they have
made in agreement and if there is a relatively open, fair and balanced
dispute resolution procedure, the American government will usually
abide by the decisions made in those tribunals. Particularly when they
have had a hand in designing the system.
MGT 3860Z -- Fall 2005
NAFTA
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North American Free Trade Agreement encompassing
US, Mexico and Canada
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US originally proposed a bilateral trade agreement with
Mexico. Canadian trade diplomats panicked. A US
bilateral agreement with Mexico would damage Canada’s
hard fought preferential access to the US under the
Canada-US Free Trade Agreement.
•Negotiations start in 1988 and
conclude in 1992
•Innovations in areas of investment,
environment and labour
Salinas, Bush Sr., Mulroney
MGT 3860Z -- Fall 2005
NAFTA
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The slow progress in the Uruguay Round negotiations
meant that there was a great deal of intellectual capital
development surrounding free trade agreements.
Using the Canada-U. S. FTA has a basis, the negotiators
went well beyond that model to develop a state-of-the-art
trade agreement at that time. In many important
respects, the NAFTA remains the high watermark for
Canada and the basis for its future negotiations with
other countries.
Important features of this agreement are its
comprehensive investment provisions as well as its
comprehensive commitments related services, subject to
only the specific reservations and exemptions that
countries identified.
Key element for Alberta– energy chapter
MGT 3860Z -- Fall 2005
NAFTA
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The NAFTA ignited a public debate in the US somewhat
along the lines Canada experienced with the Canada-US
FTA. The difference, though, is that the American debate
surrounding the NAFTA focused on the US-Mexico
relationship. Canada's involvement in the NAFTA was
almost a non-issue for the American public.
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They were, however, concerned about the loss of jobs
(great sucking sound) from the US to Mexico and the
"race to the bottom" that would follow if American
companies had to compete with those in Mexico.
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There is a considerable debate about whether bilateral
free trade treaties are good or bad for the multilateral
system.
MGT 3860Z -- Fall 2005
Canadian Bilaterals
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Chile
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The CCFTA entered into force on July 7, 1997. Canada
is the only industrialized country with which Chile
currently has such a treaty.
Israel
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This Agreement entered into force on January 1, 1997,
Costa Rica
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The free trade agreement and the two parallel accords
entered into force on November 1, 2002
MGT 3860Z -- Fall 2005
Potential Agreements and
Negotiations for Canada
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Singapore
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Central America
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EFTA
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Dominican Republic
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“Emerging” Markets
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China
Brazil
India
MGT 3860Z -- Fall 2006