Brian Mulroney Divided and Reshaped Canada Through Free Trade With the U.S.

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Brian Mulroney Divided and Reshaped Canada Through Free Trade With the U.S.


Brian Mulroney first led the Progressive Conservatives to power when I was early in my career as a journalist. But I have never discussed his political life in detail. His decision to negotiate a free trade agreement with the United States changed Canada’s economic history but took up much of my working life for several years.

Mr. Mulroney died on Thursday at the age of 84 in a Florida hospital after falling at his home there. Alan Cowell has written a lengthy obituary for Mr Mulroney, documenting his many significant achievements as well as the allegations of financial misconduct and influence peddling that followed his time in office. These accusations damaged his reputation, even among former supporters, and ultimately contributed to the downfall of the federal Progressive Conservative Party.

[Read: Brian Mulroney, Prime Minister Who Led Canada Into NAFTA, Dies at 84]

I mainly reported on the free trade negotiations from Washington. In contrast to Canada, where it often seemed as if all political and public debates were being swallowed up by the talks, the negotiations there were barely registered.

Nothing in my professional experience has polarized Canadians as much as Mr. Mulroney’s move toward closer economic integration with the United States. Despite the economic benefits of free trade, Canadian industry at the time consisted largely of often inefficient branch operations that produced a limited range of products to avoid import tariffs of up to 33 percent on manufactured goods. The workers in these factories and the communities that depended on them were rightly concerned that supplies from their parent companies’ larger and more efficient U.S. plants would eliminate their free-trade jobs.

(The auto industry was an exception. In 1965, Canada and the United States reached an agreement that allowed American cars to enter Canada duty-free in return for continued production in Canada, most of which were then shipped to the United States.)

Mr Mulroney’s decision to push for free trade was a reversal of the Conservative Party’s legacy. Early in Canadian history, tariffs were comparatively low and served primarily to raise money for the government. In a time without income taxes, tariffs were effectively a sales tax on imported products. But John A. Macdonald, the Conservative leader and the country’s first prime minister, successfully campaigned in the 1878 election for what he called the “National Policy.” A key element of this was the imposition of high tariffs to create an invisible protective wall around Canada’s industries. It lasted more or less for a century until Mr. Mulroney arrived.

One of Mr. Mulroney’s selling points for a free trade agreement was the possibility of ending seemingly eternal trade disputes like the one over Canadian softwood lumber exports to the United States.

While Mr. Mulroney and President Ronald Reagan publicly flaunted their friendship, the talks did not go smoothly. When I met with a group of reporters in a lavish meeting room in the U.S. Treasury building on a Sunday morning in October 1987, it was far from certain that a deal would be announced. But an agreement was reached that included a system for resolving commercial disputes, which was the biggest sticking point, even if it wasn’t exactly what Mr. Mulroney had promised.

The following year the federal election was fought over free trade and Mr Mulroney prevailed.

The later addition of Mexico to the creation of the North American Free Trade Agreement – ​​and the subsequent globalization of trade after the agreement establishing the World Trade Organization reduced many tariffs around the world – left the Canada-U.S. Free Trade Agreement in the shadow of history.

But the original free trade agreement had profound positive and negative effects on the Canadian economy. Jobs have actually disappeared. A 2001 study by the National Bureau of Economic Research in Cambridge, Massachusetts, found that in Canadian industries affected by the largest tariff cuts, jobs fell by 15 percent between 1989 and 1996, compared to the number of products produced before blocked by high tariffs rose by 70 percent.

On the positive side, at least from an economic perspective, the study found that in industries once protected by tariffs, labor productivity – the amount factories earned per hour worked – increased by a significant average annual rate of 2.1 percent increased. Higher productivity generally helps lower prices for consumers and, of course, benefits factory owners and investors.

Canada did not become the 51st post-free trade country, as Mulroney’s critics feared. But the pact failed to deliver on some of its promises. The softwood lumber dispute continues to fluctuate decades later. And not every community benefited from the recovery in jobs and factories, which ultimately reverberated throughout the economy.

[Read: This City Once Made Much of What Canada Bought. But No More.]

Furthermore, as Alan details in Mr. Mulroney’s obituary, free trade and several other important changes he brought to Canada during his time as Prime Minister were ultimately pushed out of public memory. The reason was a story directly involving Mr. Mulroney that I reported: his acceptance of “envelopes filled with cash,” an investigation found, in three meetings with a German arms and aviation lobbyist.

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Ian Austen is a native of Windsor, Ontario, educated in Toronto, based in Ottawa, and has covered Canada for the New York Times for two decades. Follow him on Bluesky: @ianausten.bsky.social.

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2024-03-02 11:00:02

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