The Canadian Century. Brian Lee Crowley
Later chapters will lay out the blood, sweat, toil, and tears we expended to reduce our welfare dependence and put our public finances and tax burden on a sounder footing—or at least give them a strong push in that direction. But these were the last elements of our partial restoration of Laurier’s plan for Canada. Others came earlier.
For example, we finally realized the limits of incremental trade deals with the United States in specific sectors, such as autos, especially as we began to see how signally we had failed to shift our trade to other nations. We could not beat the Americans—in large part because “beating them” implied being on a different economic team, which increasingly we were not—so we had to join them.
No politician was willing to call down upon his or her head the kind of repudiation that Laurier had endured on the issue, so progress was cautious and measured. We employed that handy standby called upon by all Canadian governments that hope to provoke change without taking responsibility for it—Pierre Trudeau appointed former federal finance minister Donald Macdonald to head a royal commission on Canada’s economic prospects. After years of research and hearings, the Macdonald Commission delivered itself of a report, the content of which is now largely forgotten—except for the seemingly revolutionary recommendation to launch free trade talks with the Americans. The sentence from the Macdonald Commission’s report that summed up that document’s virtual repudiation of twenty years of poor policy was: “the message is that there is less and less place to hide [in the global marketplace].”40
While he would not deliver his report until the government that had commissioned it was long gone from office, Donald Macdonald let the cat out of the bag in an interview with William Johnson of the Globe and Mail: free trade with the US was going to be on the table.41 His fellow Liberal, and the prime minister who appointed him, Pierre Trudeau, did not share Macdonald’s enthusiasm. Even Trudeau understood that the old hiding places were offering less and less shelter, however, and had plans for expanding sectoral free trade agreements with the US—reciprocity in bite-sized pieces.42
Trudeau soon passed from the scene, and the Liberal government was defeated by the resurgent Conservatives under Brian Mulroney, who showed no interest during his 1983 Tory leadership campaign in opening free trade talks with the Americans. In his remarks on the subject he conflated two contradictory ideas: namely, that Canada is vulnerable to US unilateralism when it is in the Americans’ interest and that the proper response to this threat is to refuse to negotiate an agreement with them that might limit the threat:
Now there’s a real honey—free trade with the Americans! Free trade with the Americans is like sleeping with an elephant. It’s terrific until the elephant twitches, and if the elephant rolls over, you’re a dead man. I’ll tell you when he’s going to roll over—he’s going to roll over in times of economic depression and they’re going to crank up the plants in Georgia and North Carolina and Ohio and they’re going to be shutting them down here. That’s why free trade was decided on in the election of 1911. It affects Canadian sovereignty, and we’ll have none of it, not during the leadership campaigns, nor at any other times.43
But the Macdonald Commission recommendation became the idea that would not die, and the protectionist proclivities of the US Congress toward Japan, among other successful trading nations, breathed new life into the Nixonomics nightmare.
A debilitating recession gripped the economies of Canada and the US by late 1981. In both countries, unemployment levels rose steadily and economic output declined substantially. In addition, the Tokyo Round of multilateral trade discussions, which began in the mid-1970s, was concluded in 1979, to very mixed reviews. Although it helped bring down customs duties, for example, a number of seemingly intractable problems were left unresolved.44
In this context of economic and legal uncertainty, protectionist forces in the United States advanced an increasingly salient message that beguiled a far wider audience. Indeed, a steady increase in the US trade deficit provoked widespread despondency with multilateralism in general and the world trading system in particular. Early on, therefore, the Reagan administration—under strong pressure from a Congress determined to halt what was perceived as the unfair trading practices of America’s major trading partners—was politically obliged to introduce a series of aggressive measures designed to curb imports despite Reagan’s own free-trading instincts. While the US trade actions largely targeted Japan, the threat of sweeping import duties and quotas produced significant alarm in Canada. For the first time in decades, both business and government were forced to reassess the value to Canada of secure and enhanced access to the US market.45
As the country’s economic prospects continued to darken relative to those of our southern neighbour, and the need to expose complacent Canadian business to the bracing shock of some continental competition became undeniable, Mulroney and the business establishment came to embrace free trade. An agreement was reasonably quickly struck with the sympathetic administration of Ronald Reagan and endorsed by a Congress by then in a rather different mood than in its most aggressive Japan-bashing days. Now they were imbued with the optimism of the president and buoyed by what seemed to be a resurgence of American power. It also helped that Canada, in the eyes of American policymakers, was not Japan but instead a friendly and trusted neighbour who seemed much less threatening.
Free trade was not to be an easy sell at home, however. Just as in 1911, and in earlier elections where free trade had been a central issue, feelings ran high. The parties might have reversed their respective positions—the Tories in favour of free trade, the Liberals opposed—but otherwise the script had been used before.
In June 1988, John Turner “took almost everyone by surprise” when he announced that he had instructed his senators not to allow the passage of the facilitating legislation until the Canadian people had been given a chance to vote on the issue.46 The government could not postpone matters to 1989 if free trade was to be implemented on schedule in January. Therefore, on September 30, Prime Minister Mulroney called on the governor general and proposed an election for November 21.
Mulroney’s election call precipitated one of the most emotionally charged campaigns in Canada’s history.
In the months leading up to the election, the NDP’s vociferous opposition to the agreement had contributed to that party’s growing support in the polls. As the campaign commenced, Turner was determined to recapture potential voters who opposed free trade, and therefore, “It was the Liberals who gave it a higher profile once the campaign began.”47 By turning free trade into “the fight of [his] life,” Turner plunged into the campaign with more zeal and passion than he had shown during his previous four years in opposition.48 In one dramatic confrontation, he accused Mulroney of repudiating Canada’s independence: “I happen to believe that you have sold us out.” Ignoring Mulroney’s reprimand and repeated interruptions, Turner, as historian Stephen Azzi eloquently points out, “found the words to tap into English Canada’s perennial fear of falling into Uncle Sam’s grasping hand”:
We built a country East and West and North. We built it on an infrastructure that deliberately resisted the continental pressure of the United States. For 120 years we’ve done it. With one signature of a pen, you’ve reversed that, thrown us into the north–south influence of the United States and will reduce us, I am sure, to a colony of the United States, because when the economic levers go, the political independence is sure to follow.49
The Mulroney Tories—and not John Turner’s Liberals—won the election, however, and were able to use their parliamentary majority to pass the enabling legislation. Free trade was now a reality.
The agreement was not perfect, and in particular has proven frustratingly weak in its ability to put limits on America’s unilateralist instincts. Still, it has proven a boon to the Canadian economy, and the higher degree of certainty that it introduced in Canadian business decision-making vis-à-vis US markets is reflected in subsequent significant increases in cross-border trade.50
Three-quarters of a century after his bitter defeat over this very issue, the building block that had always eluded Laurier