A Macdonald-Laurier Institute Publication December 2013 Straight Talk: Celebrating Free Trade This instalment of Straight Talk is based a discussion with Derek Burney and James Baker III that took place at the Macdonald- Laurier Institute’s November 21, 2013 James A. Baker, III, was Former ambassador Derek Calgary gala marking the anniversary of the 61st Secretary of State Burney became Chief of under President George H. Staff in the Office of the the 1988 “free-trade election”. Burney, W. Bush, and helped guide Prime Minister in 1987, former chief of staff to Prime Minister Brian the country through the end where he was directly of the Cold War. As the 67th involved in the negotiation Mulroney, and Baker, former US secretary Secretary of the Treasury and successful conclusion of state, were the key negotiators of the under President Ronald of the Canada-US Free- Canada-US Free-Trade Agreement that was Reagan, he played a key role Trade Agreement. Mr. in the Canada-US Free-Trade Burney served as Canada’s ratified by Canadian voters 25 years ago. Agreement negotiations. He Ambassador to the United The two reminisced about those difficult also served as White House States from 1989 to 1993 negotiations and the ensuing political Chief of Staff to Presidents and played a central role in Reagan and Bush. Long the negotiations that led to battle, and reflected on the legacy of active in US presidential the North American Free- free trade between our two nations.B Ther iepolitics, nMr Bakerg led PTradea Agreementpe (NAFTA)r discussion was moderated by Calgary presidential campaigns for and the conclusion of the Presidents Ford, Reagan, Acid Rain Treaty. Herald editorial pages editor Licia Corbella, and Bush over the course of Mr. Burney was appointed and has been condensed and edited for five consecutive presidential Chairman and Chief clarity. elections from 1976 to Executive Officer of Bell 1992. He is currently a Canada International (BCI) senior partner at the law in 1993. He is currently firm Baker Botts L.L.P. senior strategic adviser at Norton Rose Fulbright in Ottawa. The authors of this document have worked independently and are solely responsible for the views presented here. The opinions are not necessarily those of the Macdonald- BrieLaurier Institute,ng its DirectorsP or aSupporters.per 1 Straight Talk – Celebrating Free Trade December 2013 Licia Corbella: Recognizing the importance of the Canada-US Free-Trade Agreement is easy now, 25 years after the fact, but it was a huge risk politically for Prime Minister Brian Mulroney and his caucus. Why was that risk worth undertaking, Mr. Burney? Derek Burney: It was a big risk, there’s no question about it. In my view it was an act of political courage on the part of the Prime Minister because everybody knows that the basic economic theory for free trade was pretty compelling, but everybody also knew that for Canada the political risk was substantial. It’s infused by our history; we had previous free-trade elections where it was defeated and so there was a lot of political risk associated with it. But, Mr. Mulroney was elected and one of his primary objectives was that he wanted to restore a good relationship with the United States and it wasn’t just on trade, it was across the board. He wanted to get rid of things like the National Energy Program – I don’t have to tell anybody in Alberta about that. He wanted to change some of the investment review mechanisms in Canada. There was a broad agenda of co-operation with the United States that he was seeking. Free trade came about in part because he saw that as a fundamental element in the relationship. I think it’s important for people to understand that he knew that it had positive support in the West and in Quebec and those were two pillars of Mr. Mulroney’s government, politically. Eventually it got the support of seven of our premiers and I think that was significant. Intellectual support came from the Macdonald Royal Commission. Now, Canadians will know that Donald Macdonald was a nationalist liberal under the Trudeau government, so it was quite surprising when he came out recommending, after an intensive analytical study, that we take the risk, a leap of faith he called it, and engage in free-trade negotiations with the United States. So, we all knew about the risk going in, but we had no idea just how electric the election in 1988 would turn out to be. Licia Corbella: So, why was it such a big issue during that election? Derek Burney: There’s something called the Senate in Ottawa – you’ve been hearing about it lately. Back in 1988 our Senate refused to approve the Free-Trade Agreement even though it had been negotiated and approved by our House of Commons. The Senate rejected it because the Senate was under control, at that time, of the Liberals and the opposition leader of the day said to let the people decide. So, he basically forced the Prime Minister to call an election. An election was due in 1988 anyway, but this conspired to make it an election about free trade. So, it was one of the rarer single- issue election campaigns we’ve had in our history and it certainly dominated the seven weeks of the campaign and it was quite a roller-coaster as I recall. Licia Corbella: It has been described by some historians and journalists as the most vicious and vitriolic negative election campaign ever. What were some of the things that were being said, and what made it so vicious? Derek Burney: Canadians were warned that they were going to lose their health care; they were going to lose their social programs and lose their water. Virtually everything we had was going to be lost as a result of free trade. We were accused of selling our country out; we were called traitors in open assemblies. I can recall that both the Prime Minister and my mother got quite agitated because the opposition leaders came into senior citizens’ homes and told them that with free trade the Americans were going to come in and kick them all out. So, we both got calls saying, what on Earth are you guys doing? So, it’s a little hard to try and convince people who have had the politics of fear used like that and teach them the comparative advantages taught by David Ricardo. The language was quite vitriolic. But the rebound was equally profound. I had football coaches coming to my door in Ottawa offering me TV scripts that we could use to try to instill some confidence that we could actually compete in North America. I always felt that what we were up against more than anything else was the kind of nationalism which has its ugly stepsister in Canada – anti-Americanism. Let’s face it, that had 2 Straight Talk – Celebrating Free Trade December 2013 more to do with the opposition than anything that was actually in the agreement because if you actually looked at the agreement none of the dire threats were ever going to transpire. In fact, the happiest note I can give you is that many of the strongest opponents of the free-trade deal politically became champions of the agreement once they were elected to office in 1993, so I take a little bit of satisfaction on that factor alone. Licia Corbella: Even though the relationship between Prime Minister Mulroney and President Reagan was personally very close and amicable, the deal took a lot of very hard work. It took about two years from my understanding and came down to the very last moments prior to midnight on October 3, 1987, the deadline that was set under the congressional fast-track provision. So, Secretary Baker, perhaps we’ll turn it over to you, what are some of your most vivid recollections of negotiating the deal on that night? James Baker: Free-trade agreements are tough, they are difficult, they are easy to demagogue against, they are very hard to sell. We had our problems with it, we didn’t have the horror stories that you just related about the giant colossus to the south that’s going to come up there and kick all your people out of the hospitals and so forth. It must be really difficult to live next door to the United States. I don’t see how you do it. I don’t see how you’ve survived all this long, but the most remarkable thing I want to tell you about this Free-Trade Agreement, is that it happened at all. I think we had about 20 minutes on the clock before the time for fast-track authority as far as US Congress was concerned would have expired. The last issue we were dealing with was the dispute settlement mechanism which many of our senators and congressmen thought intruded on the sovereignty of the United States. This was a very big issue, but it was only one of the issues. All issues in free-trade agreements are very, very difficult because there are always losers. Generally, the general economy, the general creation of jobs and that sort of thing is always a plus, but there are interests and sectors that get gored and they are very vocal. We never would have gotten it but for the top-down leadership of Ronald Reagan and Brian Mulroney – the political courage if you will – because they decided they wanted to do this and they made it happen.