A DECADE OF FREE TRADE Standing Firm On Free Trade Interview with the Right Honourable Brian Mulroney Brian Mulroney will likely go down in Cana- dian history as the Prime Minister who introduced the most controversial changes in economic policy in the last half century, especially the Canada-US Free Trade Agree- ment. Many Canadians voted against free trade in the 1988 federal election, and some continue to argue against it. But with the benefits of the actual deal now showing themselves, the historical epitaphs will sure- ly recognise the value of Mulroney’s political courage and economic foresight. He was interviewed in his Montreal office at Ogilvy Renault in July by Christopher Ragan, Edi- tor of World Economic Affairs. agreement with the United States. I was June 1983. I was seeking the leadership. The Free-Trade Vision in favour of free trade, but not, as I refer I said that one of the principle objectives WEA: We have just celebrated the to it, unfettered free trade. I was con- of my administration would be to 10-year anniversary of the Canada-US cerned that we could not get a free-trade expand dramatically the management of Free Trade Agreement. Free trade agreement with an independent dis- trade and trading opportunities with the now seems to be something that most pute-settlement mechanism that would United States and to refurbish the rela- Canadians accept. But it was obvi- allow us to even the scales. As it turned tionship of trust between Canada and ously very controversial. Judging by out in the event, we did. It changed a lot the United States. some of your comments before you of things for me. WEA: What role did the report of became Prime Minister, even you Apart from that, there was the scepti- the MacDonald Royal Commission seemed a little sceptical of the idea. cism engendered by the growing inten- play in your thinking? Were you really that sceptical of free sity of the protectionist lobby in Wash- Mulroney: A very significant role. At trade in the early 1980s? And if so, ington at the time, and my reluctance to that time, there had not been any recent why? engage in that at that time, pretty well in economic literature on this entire ques- Mulroney: The comments to which the middle of a recession. tion. Proponents and detractors were you refer came during the course of the That was some of the thinking that relying on outdated information. The 1983 leadership convention. Mr Crosbie surrounded my comments at that time. MacDonald Commission, which was an had come out during that convention in You can check with my speech to the excellent piece of work in all areas, hit favour of a comprehensive free-trade Conservative convention on the 11th of this one clearly on the head with up-to- WORLD ECONOMIC AFFAIRS ● AUTUMN 1999 19 A DECADE OF FREE TRADE date approaches and data and very per- the smaller party by far, wanted and by the way, a few years later when they suasive arguments. My recollection is needed this agreement much more than were adopted for the World Trade that in March of 1985 I met President did the United States. Perhaps they felt Organisation. But by and large I am Reagan in Quebec City and put to him a that in the crunch, if Canada made quite satisfied. I’m very pleased with the proposal that we should initiate enough substantive gains we would result. exploratory talks on a comprehensive remove that particular demand. free-trade agreement and he agreed with We had a small group of ministers in Selling the FTA Politically that. Some time later—in the early fall of the Privy Council Office on the last night WEA: Let me move on to selling the 1985—the report of the MacDonald of the negotiations going on in Wash- deal politically. Trade has always been Royal Commission came out. The argu- ington. Toward the end of that evening, important for Canada and it has ments in the report were very helpful in I took a call from Jim Baker who was in always been a source of debate. The focusing the national attention and the charge of the American team at that 1988 election, of course, was fought national debate on these things. time. (By the way, it was a very good almost entirely on that issue. Was sell- thing because had Baker not been there ing the idea of free trade difficult Negotiating the Deal we would not have had a deal—he was within your own cabinet and caucus? WEA: By many accounts of the dif- absolutely instrumental in bringing the Mulroney: There is a new book out by ficult negotiation process, the FTA American side to a position where they Daniel Savoie that talks about the grow- almost didn’t happen. The negotia- would deal.) Baker said to me that he ing concentration of power in the office tions over the dispute-settlement had met with various Senators and Con- of the Prime Minister. I think there is mechanism were apparently very gressmen and, for the reasons I just gave some truth in that. I think this has been heated. Why was the dispute-settle- you, he felt there was little or no chance an inexorable and highly controversial ment mechanism so contentious? that an independent dispute-settlement development over the years. Savoie Mulroney: The argument in the US mechanism worth its salt could be makes the point that if and when the Congress was that the establishment of included in the final deal. I told him: “I Prime Minister decides that he is going an independent dispute-settlement want you to advise the White House that to do something, he would be a very mechanism was the equivalent of a sur- I am going to be placing a call to Presi- weak Prime Minister if he could not render of sovereignty. Under the Ameri- dent Reagan. I am going to tell him that carry his own party and his caucus and can Constitution the Congress is sover- I have just been advised that the Ameri- his cabinet. And so while there was eign in matters of international trade. can side has been able to do a nuclear opposition in some areas within my cab- The view then was that trade disputes arms reduction treaty with its worst inet and my caucus, I could see that we were essentially resolved through brute enemy and cannot do a free-trade agree- were going to carry the day in terms of strength and power. So any formal dis- ment with its best friend.” So Baker said: getting it through the party, getting it pute-settlement mechanism was viewed “Well, why don’t you give us a little time through the government. as a dilution of American sovereignty, on that.” He called me back within the But there were some tough spots. I particularly on the Congressional side. hour. We had the dispute-settlement remember when there was a break-down My argument with the Americans was mechanism that night, as we wanted it. in the negotiations and I indicated that that when you join an international If I had needed to speak to President Simon Reisman should interrupt the organisation—NATO, the United Na- Reagan—he was very committed to free negotiations and come home. That was tions, or whatever—you surrender a trade, particularly free trade with Cana- widely construed in the country as sig- small bit of your sovereignty in the inter- da—he would have been very tough on nalling the end of negotiations. Paren- ests of greater international harmony the American side in demanding expla- thetically, the Americans made it very and social and economic intercourse. nations of this obstructionism. And as clear while they were here at the McGill That is just a fact of life. But it is not a the last decade has established, the exis- conference that for them that was a turn- surrender in the abject sense. It is a con- tence of the dispute-settlement mecha- ing point as well. They realised how seri- ciliation in the positive sense. And in any nism has not in any way diminished ous we were and they knew that they case, I indicated to them that there were American sovereignty; it has civilised the would have to answer to Ronald Reagan no circumstances—none—under which trading relationship in an enormous way about how this thing had fallen apart, I would agree to a free-trade agreement but it has not vitiated American sover- and so that brought Baker deeply into that did not contain an independent dis- eignty. the negotiations—which was beneficial pute-settlement mechanism. WEA: In retrospect, what would for all concerned at the end of the day. WEA: Did they seem to think that you identify as the significant items I remember a cabinet meeting that took Canada would go to the trouble of that could have been improved? place immediately following my decision negotiating an agreement without Mulroney: I had hoped that we could to bring Reisman home, and the deci- one? If there is no dispute-settlement have done more about anti-dumping and sion was greeted with some relief by a mechanism, what would be the point? the American law itself as it would be number of members of the cabinet, Mulroney: Well, you never can tell. It applied to disputes. I would like to have whose names will be unmentioned, but could be that, in the minds of some seen the independent dispute-settlement who said, “Well, you tried hard Prime important strategists there, Canada, as provisions tightened up—as they were, Minister, you gave it your best.” WORLD ECONOMIC AFFAIRS ● AUTUMN 1999 20 A DECADE OF FREE TRADE WEA: Crocodile tears, I’m sure.