How Free Trade Came to Canada: Lessons in Policy Analysis

HOW FREE TRADE CAME TO CANADA: LESSONS IN POLICY ANALYSIS

Charles McMillan

It is 20 years since the negotiation of the Canada-US Free Trade Agreement, but before the two sides even came to the table, the political stars had to be aligned in the right direction. In Canada, the aggregation of political and economic forces began with the election of the Mulroney government in September 1984, and the recommendation of the Macdonald Commission for a “leap of faith” on free trade in 1985. In the US, the Reagan administration thought it could leverage trade talks in the multilateral arena by undertaking bilateral trade talks with Canada, its largest trading partner. And Brian Mulroney, who had opposed unfettered free trade during the Conservative leadership campaign in 1983, became its proponent in 1985. Charles McMillan, who was Senior Policy Adviser to the Prime Minister at the time, provides this revealing policy backgrounder on the origins of the deal.

Les négociations entourant l’Accord de libre-échange entre le Canada et les États- Unis remontent à 20 ans, mais il a fallu attendre la conjonction de nombreuses planètes pour que les parties consentent simplement à s’asseoir à la même table. Au Canada, la synthèse des forces économiques et politiques s’est amorcée avec l’élection du gouvernement Mulroney en septembre 1984, puis la Commission Macdonald a recommandé en 1985 de « franchir le pas » en direction du libre- échange. Aux États-Unis, l’administration Reagan a cherché à favoriser les négociations multilatérales en engageant d’abord des discussions bilatérales avec le Canada, son premier partenaire commercial. Et Brian Mulroney, qui s’était opposé en 1983 à la libéralisation des échanges pendant la campagne à la direction du Parti conservateur, s’est ravisé deux ans plus tard pour s’en faire le grand promoteur. Charles McMillan, alors principal conseiller politique du premier ministre, brosse un tableau révélateur des origines de l’entente.

he US-Canada Free trade Agreement (FTA), and its Any prospective agreement with the US on any topic, extension, the North American Free Trade let alone something as central as trade, places the prospects T Agreement (NAFTA), is passing an anniversary of for other countries to examine the US position. For Canada sorts, celebrated by free trade proponents as a second- itself, despite the numerous economic studies promoting best option to a new multilateral agreement, and chided free trade, including the bête noire of Canadian nationalists, by opponents as the steady slide to economic depend- Professor Harry Johnston, in his 1962 opus, The Canadian ence on the vast American marketplace. Canada and the Quandary, the 1971 study, Looking Outward by the Economic United States, the two countries then sharing the largest Council, and of course, the lead recommendations of the trade flows in the world, broke new ground on several Macdonald Royal Commission in 1985, there was little sign fronts — in agriculture, in investment, in tariff reduc- that either Ottawa or the provinces were prepared to make tion, in services and in dispute settlement. At the time, any bold policy leaps. Indeed, with the single exception of the US-Canada agreement coincided with an enormous Peter Lougheed in Alberta, none of the premiers saw free build-up in global protectionist pressures and, paradoxi- trade as a policy winner, and for the most part, most provin- cally, with the first case of a significant US bilateral trade cial governments were prepared to hide behind the implicit agreement, given the difficulties of negotiating a new framework of tariff protection acceptable to the leading round of multilateral trade negotiations, the so-called manufacturing jurisdiction, Ontario. Despite occasional Doha Round. rantings of policy analysts and a few Canadian CEOs, such

24 OPTIONS POLITIQUES OCTOBRE 2007 How free trade came to Canada: lessons in policy analysis as Walter Light of Northern Telecom, the Canadian population were push- across a range of sectors: automo- free trade was simply not on the ing for this agreement, and it wasn’t biles, consumer electronics, semi- national agenda. the primary goal of either political conductors and steel. Across the leader in 1984. Indeed, the forces industrial world, policy-makers rec- n the US, trade talks are only one side pushing the US administration were ognized the fragility of the growing I of a larger economic agenda. By 1975, quite different than the policy drivers integration of the market economies. the US was starting to feel the first signs in Canada, and conventional ideology, The symptoms of the problems were of dramatic post-war shifts in the global economic or nationalist, weren’t (and remain) deeply embedded with economy. Richard Nixon faced the first directly central. So why did the agree- the problems themselves, namely, dramatic shift, the devaluation of the US ment succeed? As Harold MacMillan, the value of the stock market, the dollar and leaving the gold stan- devaluation of the world’s dard by abandoning the post-war A new government in Ottawa, most important currency, the Bretton Woods framework estab- debt crisis of the Third World lished in 1944. President Ronald elected in a sweeping election and the intractable problems Reagan started an inexorable victory on September 4, 1984, and a of monetary instability, i.e., trend to a “managed trade” new Prime Minister with no specific major currency fluctuations framework governing such key promises or direct interest in bilateral and huge gyrations in capital sectors as textiles, automobiles flows. In the 1980s, the and semi-conductors, where the free trade with the US, became United States and Japan were key economic relationship was leading proponents of an FTA in the the two major players shaping governed by the two biggest next election, in November 1988. It the biggest economic crisis of economies, the US and Japan. remains a paradox that neither the the post-war era. The two countries were mirrors The US and Japan were in of each other, rising surpluses Americans nor the Canadian fact at a watershed. Yet at a time and deficits, a creditor and debtor population were pushing for this when joint cooperation and status, where their joint policies agreement, and it wasn’t the policy coordination are essen- affected the global economy in primary goal of either political leader tial preconditions for monetary such areas as exchange rates, cap- and trade stability, Japan and ital flows and third world debt. in 1984. Indeed, the forces pushing the US had allowed their bilat- Severe imbalances, in part influ- the US administration were quite eral relationship to change. As a enced by OPEC, required new different than the policy drivers in leading economist noted: policy coordination and led to Canada, and conventional ideology, Japan is already challenging annual meetings of leaders, the the United States with a G4, then the G5 and later the G7, economic or nationalist, weren’t major new drive toward cre- including Canada. Just as the directly central. So why did the ativity and leadership in Reagan administration had to agreement succeed? As Harold advanced technology... face severe Japanese industrial MacMillan, the British Prime Japanese bureaucrats and competition in traditional manu- politicians will be sorely facturing (e.g., autos, cameras, Minister, would say, “Events, dear tempted to seek new avenues motorcycles, radio and TV), and boy, events.” for national advancement. new sectors like consumer elec- American officials will find it tronic, and industrial machinery (NNC the British prime minister would say, harder than ever to ward off self- equipment, robots), big business in the “Events, dear boy, events.” defeating protectionist measures. US saw an FTA with Canada as a side In the run-up to Ronald Reagan’s The media will have a field day issue, secondary to trade pacts with sweeping election victory in 1984, publishing the charges and coun- Japan and Europe. two issues dominated the American tercharges of angry politicians. A new government in Ottawa, economy. The first was the deep Public opinion in both nations elected in a sweeping election victory recession in 1982, when interest rates could take an ugly turn. on September 4, 1984, and a new climbed to double digits, and Paul Traditional diplomacy will fail. Prime Minister with no specific prom- Volker, the Fed chairman, declared The growing integration between ises or direct interest in bilateral free war on inflation. The second issue Japanese industry and American trade with the US, became leading pro- was the growing problem of industry and the resulting manage- ponents of an FTA in the next election, American competitiveness, in partic- ment and technology linkages across in November 1988. It remains a para- ular the growing inroads of Japanese the Pacific, to Japan and Southeast dox that neither the Americans nor producers in the American market Asia, and eventually to China, point to

POLICY OPTIONS 25 OCTOBER 2007 Charles McMillan

a dramatically different environment all levels to worry about the new trade for dispute settlement, especially a bi- for multilateral or binational trade environment of the US. But events national review panel for appeals. agreements. For two decades, Japan’s were also changing in Canada, but From a multilateral perspective, balance of payments remained rough- from different quarters. the US-Canada trade agreement ly in equilibrium, and the merchan- Canada’s own competitiveness offered a number of policy signals, dise trade surplus was approximately had seriously deteriorated; unemploy- some ominous for future US views on $35 billion. By 1983, riding a crest of ment was at historic highs; govern- world trade policy: phenomenal productivity and investment deficits and national debt were 1. Is the trade agreement the latest, ment growth, Japan’s trade surplus in virtually out of control. In early 1986, but most concrete, evidence of one year equalled that of the previous as the Canadian government decided American retreat into a Fortress North American policy, Politically, the forces challenging the US-Canada deal were reinforced with potential uncompromising, not only from Canadian nationalists, but bilateral agreements with from provincial governments like Ontario. As Allan Gotlieb, Mexico and Canada? (These agreements followed earlier Canada’s ambassador to the US at the time, neatly put it, trade arrangements by the “In the US, there are those who believe that unilateralism is US, namely a bilateral deal strength; in Canada, there are those who believe that with Israel in 1985 and the bilateralism is surrender.” Caribbean Basin economic initiative.) two decades. In 1987, the trade surplus to enter into trade talks for a compre- 2. Is the trade agreement a clear pol- approached $101 billion — the largest hensive free trade agreement with the icy alternative to the traditional in recorded economic history. In the United States, a succession of problems multilateral approach of trade lib- US-Japan context, in the 15 years prior flowing politically from “managed eralization, wherein the US nego- to 1986, two-way merchandise trade trade” started to emerge with force. tiates a series of bilateral increased to $115 billion, from about Japanese-American bilateral disputes agreements with like-minded $54 billion — a growth of $61 billion. added to the tension, especially in countries? In fact, Treasury Secre- Japan’s exports to the US accounted such sectors as steel, agriculture, semi- tary James Baker spelled out this for $53 billion of this $61 billion, and conductors and automobiles. approach quite boldly: “If possi- US exports to Japan accounted for only ble, we hope...liberalization will $8 billion, or less than 13 percent. Of owever, there were also particular occur in the Uruguay Round. If this low amount, almost half, or $3.5 H US-Canada sectoral disputes such not, we might be willing to billion, came not from car exports, not as carbon steel and softwood lumber. explore a ‘market liberalization from sophisticated electronics, but These disputes greatly added to the approach, through minilateral from gold, sold for re-export from stress of the “managed trade” arrangements or a series of bilater- Japan. approach, especially in light of the al agreements...Other nations are application of US trade remedy laws, forced to recognize that the Unit- rowing competitive problems at which had the perverse effect of defin- ed States will devise ways to G large, and the hollowing out of ing unilaterally what constitutes unfair expand trade — with or without the manufacturing centre in the Mid- trading practices. It was in this politi- them.” west of the US, in key states like cally charged climate that Canada and 3. Is the US-Canada FTA the launch Michigan, Ohio and Illinois, placed the US undertook to negotiate the of a new US approach to initiate a severe political pressure for protection bilateral free trade agreement in 1986 broader policy framework by both state governments and mem- between the two countries. It is the between the United States and bers of Congress, and Ronald Reagan most important bilateral initiative other countries, forgoing the tra- responded with a series of “managed since 1945, since the two countries ditional multinational trade agree- trade agreements” limiting Japanese share such a huge trade relationship. ments starting since 1945, the imports to set levels. The essence of the deal has been amply GATT agreements? Would the US For Canada, these US develop- reviewed elsewhere; it suffices to high- prefer these bilateral deals, with ments in the early 1980s were particu- light certain features, namely reduc- Japan, with the European Com- larly ominous. Canada’s dependence tion of tariffs over a ten-year period, munity, as the basis of trade mat- on the American market, and the cen- free trade over time in energy, certain ters, but on the broader agenda of trality of North American integration agricultural products and services; lib- military, political and technologi- in such keys sectors as cars, energy and eralized investment and government cal issues between the world’s pulp and paper, forced governments at procurement; and new mechanisms largest market economies?

26 OPTIONS POLITIQUES OCTOBRE 2007 How free trade came to Canada: lessons in policy analysis

Jack Goldsmith, McGill University Fathers of free trade: Donald S. Macdonald, whose Royal Commission recommended the “leap of faith” on free trade, and Brian Mulroney, who as prime minister sold it to the country, together in 1999. Macdonald’s recommendations, writes Charles McMillan, “paralleled the policy initiatives” of the new Mulroney government in 1985, leading to the trade talks which ended with agreement in October 1987.

Prime Minister Yosuhiro The US-Canada trade deal tried to tor determining investment flows, Nakasone’s January 1986 visits to meet three tests. First, this bilateral rather than trade barriers, further Washington and Ottawa made clear deal advances multilateral negotia- Japanese and North American integra- that the Japanese objected to a tions at the GATT (which later became tion will increase trade as each country “Fortress North American” policy the WTO). In fact, the US-Canada adjusts its industrial structure based on framework, where discriminatory agreements broke new ground on tariff real comparative advantage. measures would be taken against third barriers, investment, agriculture and The starting points are obviously countries, especially Japan. Clearly, the services, and these areas may serve as a different. Canada, like most European Japanese knew the underlying bilateral model at the GATT talks. Second, bilat- countries, is trade dependent, up to 30 issues facing Canada and the US, eral initiatives can be trade-creating, percent of GNP. Canada, alone among including the fact that so much of this rather than trade-destructive, because the G7 countries, relies heavily on two-way trade represents trade flows it advances international trade ration- unprocessed raw materials and a limit- across subsidiaries of companies locat- alization. In the North American con- ed range of services. With the excep- ed on both sides of the border, i.e., text, domestic subsidiaries on both tion of automobiles, Canada has a within the framework of multination- sides of the border, rather than closing, relatively weak manufacturing sector, al subsidiaries, and special arrange- as apocalyptic views have argued, will especially on such criteria as R&D per- ments in other areas, such as the lead to product specialization and new formance, export marketing and US-Canada Auto Pact, NORAD and the market niches. Third, because financial capitalization. Canada’s defence-sharing agreement. exchange rates will be the primary fac- domestic economy experiences high

POLICY OPTIONS 27 OCTOBER 2007 Charles McMillan

foreign ownership, strong inter- sectors like steel, lumber, energy and Canadians directly on a whole series of provincial trade barriers and a small- agriculture. economic reforms. The industry sec- scale industrial base outside the Shortly after Mulroney was elected tors were all-encompassing: housing, Toronto-Montreal corridor. For high- on September 4, 1984, with the largest energy, forestry, small business, tech sectors, where economies of scale parliamentary majority in Canadian tourism, mining, fisheries. The policy in production runs are central, Canada history, Mulroney accepted the areas covered a wide spectrum — tax was the only G7 country without President’s invitation for bilateral talks reform, welfare policy, regional devel- secure access to a market of 100 mil- in Washington. At those meetings, opment, export financing, science and lion consumers. Further, Canada’s President Reagan reiterated his 1980 technology, and international trade. micro problems in the 1980s were an initiative for a Canada-US-Mexico free However, already facing American pro- accumulation of neglect over the pre- trade zone, linking the peoples tectionist sentiments, trade policy vious two decades. And politically, the throughout North America to a new became a central priority of the forces challenging the US-Canada deal liberalized trade regime, however Canadian corporate community. were uncompromising, not only from vague the details. At this point, Canadian nationalists, but from exhausted by the long 58-day national ver the next year, a series of provincial governments like Ontario. campaign, and preoccupied by the O events set the stage for launching As Allan Gotlieb, Canada’s ambassador need to form a new government and the bilateral trade talks. They are to the US at the time, neatly put it, “In cabinet, Mulroney pushed only for a instructive for understanding the the US, there are those who believe new bilateral process — an annual political dynamics of how the free that unilateralism is strength; in meeting of president and prime minis- trade negotiations actually got started Canada, there are those who believe ter, and a quarterly meeting of and what they imply for other bilater- that bilateralism is surrender.” Canadian and US foreign ministers. al negotiations. When the new Prime The new Conservative govern- Minister spoke in New York on ut are the antecedent conditions, ment, in keeping with its campaign December 10, 1984, to the Economic B i.e., those political and personality commitments, recalled Parliament on Club, a group of elite American indus- factors necessary for momentous November 5, 1984, with a Throne trialists and bankers, hosted by David change, present in the FTA agreement? Speech — an omnibus policy state- Rockefeller, the policy context for free Those conditions are instructive on ment of legislative intentions, much trade had started to change dramati- this score. Much has been made of the Reagan- Mulroney had campaigned for the leadership of his own party Mulroney personal relation- throughout the spring of 1983 on a strong pro-US platform, ship. It began during the and for changes on policy issues largely inimical to American June 1984 Washington visit by the then Opposition companies — namely, Trudeau’s policies on energy, foreign Leader Brian Mulroney, investment, NATO, intellectual property, Crown corporations only a week after John and international trade. Personally, Mulroney was initially Turner, himself a strong lukewarm on comprehensive free trade, but spoke openly and pro-American lawyer and former senior cabinet min- critically on bilateral trade restrictions in sectors like steel, ister, succeeded the enig- lumber, energy and agriculture. matic Pierre Elliot Trudeau to the leadership of the Liberal Party. like a State of the Union address — and cally. For one thing, the new Prime Mulroney had campaigned for the announced major new initiatives, Minister began to realize the sheer leadership of his own party through- including policies for competitiveness depth of US protectionist sentiment in out the spring of 1983 on a strong pro- and liberalized trade. In a major and Congress, as witnessed by the spate of US platform, and for changes on more detailed statement, the bills then being introduced before policy issues largely inimical to Mulroney government set out its both the House and the Senate. American companies — namely, national economic agenda — an eco- Moreover, the lobbying efforts of Trudeau’s policies on energy, foreign nomic framework based on market lib- Canadian business groups — on lum- investment, NATO, intellectual prop- eralization, downsizing of ber, agriculture, steel and fisheries — erty, Crown corporations and interna- government, improved tax incentives exposed the “finger in the dyke” tional trade. Personally, Mulroney was and social policy reform. As part of the nature of the exercise. The Americans initially lukewarm on comprehensive agenda pronouncements, the govern- were in no mood for trade rhetoric — free trade, but spoke openly and criti- ment launched a massive consulta- least of all from their largest trading cally on bilateral trade restrictions in tions exercise — a process to consult partner. The PM’s New York speech,

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Charles McMillan

that “Canada is open for business,” Liberals defeated the Conservatives in was the advocacy of a comprehensive gave a strong pro-free trade signal on the 1985 Ontario election. US-Canada free trade agreement. By both sides of the border. Ironically, a Social policy reform in Canada coincidence, the report’s release to the concrete statement on free trade was had become the biggest political cause public occurred the same week that deleted from the text of the speech. célèbre for the new government. Mulroney flew to Washington for his Mulroney’s public views on free Centring as it did on the famous meeting with President Reagan. trade were heavily influenced by Mulroney by-election statement in It was in this larger context that the Ontario’s traditional protectionist Central Nova,the Nova Scotia seat he most radical policy agenda item sur- stance, often cloaked in the guise of borrowed from Elmer MacKay, that faced — free trade with the United States. The Macdonald As a Liberal politician, Don Macdonald had strong credentials Commission, widely report- as a staunch nationalist, a defender of Canadian interests. His ed and praised in the Canadian media, paralleled report was released in September 1985, but Mulroney could the policy initiatives have shut down the commission when he won his election in launched in the November 1984. Its major recommendation was the advocacy of a 1984 Throne Speech and comprehensive US-Canada free trade agreement. By Economic Statement, despite their separate ori- coincidence, the report’s release to the public occurred the gins. By the early spring of same week that Mulroney flew to Washington for his meeting 1985, Mulroney and his cab- with President Reagan. inet had begun to rethink and refocus Canada’s trade Canada’s national interest. The new Canadian medicare was “a sacred policy. Important initiatives in areas prime minister himself had opposed trust,” the defiant mood of social such as export promotion, trade free trade during the leadership cam- activists, reinforced by a senior citizen- enhancement in the Pacific Rim, and paign in 1983, not so much on its eco- ry with strong memories of double- export financing had been introduced. nomic merits as on its political perils. digit inflation, challenged the new But the central role of US-Canada trade After all, it was a Conservative govern- government’s attempt at policy policy — and the Canadian options of ment under Robert Borden that had reform, which focused on a scheme for functional trade, bilateral sectoral trade defeated the 1911 Laurier initiative on de-indexing seniors’ pensions. The or comprehensive free trade — had free trade with the United States. ardour for dramatic reform in social become the basis of the government- Ontario’s Premier, William Davis, was policy soon died, especially after a ran- industry consultations exercise a strong Mulroney ally during the corous Question Period in December launched in January 1985. 1984 federal election campaign, but 1984. The free trade issue, by default, announced his resignation in the moved to the forefront of the govern- o the surprise of the International spring of 1985. ment’s reform agenda. T Trade Minister, James Kelleher, his But other events were also at work department and indeed the entire cab- avis left a de facto political leader- — another product of Mulroney’s good inet, the consultations exercise pro- D ship vacuum in Canada’s anti- luck. In 1982, the Trudeau government duced an overwhelming consensus in free-trade movement. Alberta’s strong had appointed a blue ribbon Royal the Canadian business community to pro-free-trade Premier, Peter Lougheed, Commission on Canada’s economic push for a bilateral trade agreement — quickly seized the initiative. Indeed, at future. Trudeau selected Donald S. the cause, lest it be misunderstood, of the February 1985 meeting between Macdonald as chairman. Macdonald the Liberal defeat on trade reciprocity Mulroney and the ten provincial pre- had been close to Trudeau — as in 1911. This time, the Canadian pri- miers held in Saskatchewan — only finance minister, energy minister, per- vate sector and many supporters one month prior to the Reagan- sonal friend and go-between to the among labour, academe, and some Mulroney Shamrock Summit in Canadian business community. provinces, moulded a constituency for Quebec City — Lougheed led the forces But as a Liberal politician, Don a free trade agreement with the US. calling for a dramatic new initiative on Macdonald had strong credentials as a The Prime Minister seized the initia- bilateral trade. The new Ontario staunch nationalist, a defender of tive and announced the launch of the Premier, Frank Miller, was largely mute Canadian interests. His report was US-Canada free trade initiative on on the question and the pendulum released in September 1985, but September 26, 1985. quickly shifted in federal government Mulroney could have shut down the Canada’s detailed preparations for circles — intellectually and politically, commission when he won his election the actual negotiations — including ven more so when David Peterson’s in 1984. Its major recommendation the monitoring work of a special

30 OPTIONS POLITIQUES OCTOBRE 2007 How free trade came to Canada: lessons in policy analysis cabinet committee, 15 separate sector Conservative caucus, worried by what regions show that other factors were at trade advisory groups and an umbrella a trade agreement might mean for work. A main factor was that an FTA advisory committee of private sector industries in their local riding, placed would lead to the potential abandon- personnel — all strengthened the gov- significant time burdens on the Prime ment of Canada’s medicare program ernment’s hand for specific negotiat- Minister and the PMO. and that pushed traditional supporters ing issues. Joe Clark was placed in Three time lines were in fact well to vote against the Conservatives. charge of the special cabinet commit- underway, and each had only some Virtually all the shibboleths tee, which could draw on external and over-lapping personnel to coordinate against free trade turned out to be illu- internal advice, including from the Canadian responses within the govern- sory. Despite plant closures, as firms main negotiator, Simon Reisman. At ment. The first, of course, was the nego- rationalized their production runs, the start, the aim was to reduce the tiating time period, where both Reagan expanded production to meet new markets and introduced In a perfect world, for small countries like Canada negotiating powerful new technologies, bilateral free trade agreements with the biggest economy in trade expansion, job cre- the world, all instruments of government need a central ation and trade growth reached unprecedented lev- focus. Unfortunately, in the practical world, other factors are els, doubling every eight at work. The Mulroney government faced these practical years. Canada’s biggest issues on a daily basis. provincial economy, Ontario, overtook Michigan political pressures for exemptions by and Mulroney were totally committed. as the biggest auto and truck producer. placing all issues on the bargaining For Ronald Reagan, who wanted a signif- It is the largest information and table, including cultural issues and icant defence agreement with Mikhail communication technologies (ICT) sec- investment subsidies. The negotiators Gorbachev and the Soviet government tor in Canada, and the world’s third on both sides of the table soon recog- before his term expired, a failure to sign biggest, rivalled only by New York and nized what the political masters were a deal with Canada was not a preferred Silicon Valley in California. Canada’s only too quick to underscore: threat- option. And Mulroney needed a deal for smallest province, Prince Edward ened industries, after all, are not only the pending 1988 election. The second Island, where all Conservative members job-intensive, they are vote-intensive. time line was the 1988 election, and lost their seats in 1988, has unprece- In a perfect world, for small coun- Mulroney’s desire to win an unprecedented export growth, high-tech job tries like Canada negotiating bilateral dented, successive two-term majority creation and new business formations free trade agreements with the biggest government, forgoing the disastrous in aerospace and biotechnology, thanks economy in the world, all instruments 1962 election when John Diefenbaker to supportive policies like the fixed link of government need a central focus. not only lost his majority but most of (the Confederation Bridge), new airport Unfortunately, in the practical world, French Canada, including Quebec. The facilities and R&D science policies. other factors are at work. The third time line was to implement an More to the point, now that the Mulroney government faced these enormous policy agenda, and supportive FTA and NAFTA are firmly in place, it is practical issues on a daily basis. policy to trade adjustments in such areas difficult to find significant political as science and technology, regional eco- leaders who opposed the FTA policy in he huge majority and the largest nomic agencies, small business and 1988 still in agreement with that posi- T cabinet in Canadian history led to training, while keeping Conservative tion today. Brian Mulroney might take a succession of scandals, and six minis- caucus MPs supporting the FTA. comfort in the words of Winston ters resigned in the first four years. The Churchill: “To improve is to change; to government initiated a new constitu- n the end, the 1988 election was a be perfect is to change often.” tional accord, the Meech Lake agree- I pivotal turning point for the ment, which on its own caused Canadian economy. Mulroney won Charles McMillan, professor of interna- political discord among significant 170 seats out of an enlarged House of tional business, Schulich School of stakeholders. Constant budget deficits, Commons, and carried all of Alberta’s Business at York University, and currently amounting to $30 billion a year, and 26 seats, and most of Quebec, 63 of 75. a Fulbright Scholar at Brandeis rising national debt angered conserva- Predictably, the six cabinet ministers University, was senior policy adviser to tive deficit hawks. Media foreplay by who lost their seats came from regions Prime Minister Mulroney from 1984- the trade negotiators, and some unfor- which thought they would be eco- 1987, the period in which Canada tunate media comments by Simon nomically vulnerable to trade competi- undertook the free trade initiative with Reisman, angered many senior cabinet tion and loss of local jobs. Ironically, the United States. His latest book is The ministers. And many members of the however, close analysis of these Strategic Challenge.

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