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1989 – Canada–United States Free Trade Agreement: Eliminating Barriers to Trade

The idea of free trade with the United States had been around at least since Confederation, but it took more than a century to be fully realized. For decades, the United States has been Canada’s largest trading partner. Yet there had been barriers to the free flow of goods and services.

In the late 1980s, there was a push to liberalize trade. Canada wanted improved and secure access to theU.S. market. The goal was to promote productivity, full employment and to encourage foreign direct investment. Canada also wanted to strengthen the competitiveness of Canadian firms in global markets and to ensure the steady improvement of living standards.

In May 1986, Canadian and U.S. governments began negotiating a trade agreement that touched off debate across Canada. Organized labour was concerned about job losses if businesses relocated to the United States or if they could not survive increased competition from U.S. firms. Businesses, on the other hand, wanted improved and secure access to the U.S. market. Canadian nationalists feared that increased economic integration would threaten Canadian culture and sovereignty.

By October 1987, the 20-chapter Canada–United States Free Trade Agreement (CUSFTA) was finalized. It was signed in 1988 and came into effect on January 1, 1989.

The CUSFTA included a schedule for the elimination of all tariffs on trade between Canada and the United States by January 1, 1998. It established a mutually beneficial framework for the fair and predictable treatment of investors. It also included rules governing trade in services.

The CUSFTA established the necessary institutional provisions to provide for the joint management of the agreement and to avoid and settle any dispute respecting the interpretation or application of any element of the agreement. Its dispute settlement mechanism promotes fairness, predictability and security by giving each partner an equal voice in resolving problems through ready access to objective panels.

Regarding trade remedy procedures, the CUSFTA established a dispute settlement mechanism that guaranteed the impartial application of each partner’s anti-dumping and countervailing duty laws. Binational panels can review final determinations of dumping or subsidies.

The implementation of the CUSFTA generated some transitional employment losses in some sectors, but employment gains in others. The economies of both countries became more integrated. Canadian exports to the United States have increased, especially in goods such as telecommunications equipment, and in services such as financial services and consulting. There is now much more U.S. investment in Canada and vice versa.

The CUSFTA was the beginning of even larger regional trading blocs. After just five years, on January 1, 1994, the CUSFTA was replaced by the North American Free Trade Agreement (NAFTA), which includes Mexico. (See 1994—North American Free Trade Agreement (NAFTA): Creating the World’s Largest Free Trade Area.)

Links

Canada-United States Free Trade Agreement
Source: Agriculture and Agri-Food Canada
http://www.agr.gc.ca/itpd-dpci/english/trade_agr/fta.htm

Trade Negotiations and Agreements
Source: International Trade Canada
http://www.dfait-maeci.gc.ca/trade/menu-en.asp

Canada-United States Free Trade Agreement Implementation Act (1988, c.65)
Source: Department of Justice Canada
http://lois.justice.gc.ca/en/C-10.6/index.html

Trade Data Online
Source: Industry Canada
http://www.strategis.ic.gc.ca/sc_mrkti/tdst/engdoc/tr_homep.html

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