Law and Institutions of International Trade Class 4 MGT 3860Z Daryl Hanak

MGT 3860Z -- Fall s-60s – North America Canadian colonies had to find new markets with the repeal of the British preferences in the 1840’s and looked towards the rapidly expanding US. But American high tariffs were in place, justified on basis of “infant industry” argument In 1854, a “Reciprocity Treaty" was concluded between the Canadian colonies and the US. Gave Canadians duty free access for their traditional exports – unprocessed raw materials (fish, timber, etc.). The US got access to Atlantic inshore fishery and free navigation on the Great Lakes. Many US legislators not happy with it and manufacturers in the Northeast were unhappy with competition from Canadian manufacturers and farmers. In 1866, the US abrogated the agreement during the US Civil War-- Great Britain was supporting the South in the Civil War Provided incentive for Canadian colonies to negotiate Confederation in 1867

MGT 3860Z -- Fall ’s-1870’s North America Between there were three attempts to negotiate a replacement deal with the US and each one was turned down by either the US Administration or the US Senate. In response to continued Canadian economic downturn in, Sir John A. McDonald’s government gradually introduced measures that became a “National Policy" in which included high tariffs to build up the domestic industrial manufacturing base, a cross-country railroad/transportation policy and an increase in immigration.

MGT 3860Z -- Fall ’s Reciprocity With little success in negotiating a reciprocity agreement with the US, the Canadian governments focused on their traditional privileged status in Great Britain. However, it took some time for Great Britain to move from its free trade stance that adopted in 1840s. Canadian governments began offering tariff preferences to Britain in 1897 and the colonies lobbied Britain to develop comprehensive “Imperial Preferences”. NZ and South Africa followed Canada in 1903, and Australia in Canada negotiated reciprocal preferential agreements with the other former British colonies (Australia, New Zealand, South Africa) as well as some special relationships with France, Germany and Latin American countries. Only the 1920s did the British government introduce policies clearing the way for a comprehensive system of "Imperial Preferences".

MGT 3860Z -- Fall National Policy and Reciprocity By the early 1900’s National Policy was becoming more sophisticated subsidies tariff classifications, antidumping duties Gave Canadian producers advantage over their foreign competitors in the domestic Canadian market. Attracted manufacturing to Canada by both foreign and domestic entrepreneurs who were content to manufacture for the domestic market alone. In 1911, there was an effort to get a reciprocity agreement with the US which was successful with the US Administration. It was, however, rejected by Canadians in the 1911 election. Wilfrid Laurier, the Liberal Prime Minister who successfully negotiated the reciprocity agreement was defeated by the Tories (Borden), who were championing the continuation of the Imperial Preferences system.

MGT 3860Z -- Fall 2005 Reciprocity Lessons (Hart) The maintenance of the National Policy approach benefits to manufacturing interests in Central Canada, maintaining their protections Important Canadian political lesson, it would be 70 years before a Canadian government would threaten the protections of the business establishments in Toronto & Montreal Western Canada was stung by the defeat of reciprocity discussions with the US. Western farmers established an anti-tarrif “Progressive Party” which ran for twenty years before being absorbed into the conservative party (Progressive Conservatives - PC) Influenced approach of Canada to subsequent potential reciprocity deals in 1935 and 1948.

MGT 3860Z -- Fall 2005 Canada-US FTA 1983 negotiations start, and agreement is signed in 1987 Political parties taking opposite sides this time -- the Tories defeated the Liberals in 1911 by arguing against Reciprocity with the US. Now, the Tories promoted the most sweeping trade negotiation with the US that Canada have ever undertaken -- and the most comprehensive trade agreement that the US had ever negotiated up to that time. Prime Minister Brian Mulroney

MGT 3860Z -- Fall 2005 Canada-US FTA Wrenching national debate around the Canada-US FTA Swallowed up by the US. Loss of national sovereignty, national identity. Everything that was good and right about Canada would be lost. “They” would take our water, they would take our oil, we would prevent us from providing public health care, we would have to carry guns. Every anti-American idea or philosophy was resurrected, polished and magnified. Debates within Canada that are somewhat unique – health care, education, social services, water. Didn’t receive the same public attention in the US – Canada “mostly harmless”, not really foreign.

MGT 3860Z -- Fall 2005 Canada-US FTA Canada-US Free Trade Agreement concluded in much less integrating from the political side than the European union, but still a significant advance on the existing multilateral system that became the WTO. Much of the Canada-U. S. FTA was used as a basis for the development of the NAFTA. One of the most important elements in the long-term, for Canada is the dispute resolution mechanism in the free trade agreement. This permitted Canada to have an independent arbitration of whether the US is complying with its trade agreements. Having an arbitration system based on rules neutralized to some extent the ability of the US to throw its economic weight around to get its way. Respect for the rule of law is high, relatively, in the US. If they have made in agreement and if there is a relatively open, fair and balanced dispute resolution procedure, the American government will usually abide by the decisions made in those tribunals. Particularly when they have had a hand in designing the system.

MGT 3860Z -- Fall 2005 NAFTA North American Free Trade Agreement encompassing US, Mexico and Canada US originally proposed a bilateral trade agreement with Mexico. Canadian trade diplomats panicked. A US bilateral agreement with Mexico would damage Canada’s hard fought preferential access to the US under the Canada-US Free Trade Agreement. Negotiations start in 1988 and conclude in 1992 Innovations in areas of investment, environment and labour Salinas, Bush Sr., Mulroney

MGT 3860Z -- Fall 2005 NAFTA The slow progress in the Uruguay Round negotiations meant that there was a great deal of intellectual capital development surrounding free trade agreements. Using the Canada-U. S. FTA has a basis, the negotiators went well beyond that model to develop a state-of-the-art trade agreement at that time. In many important respects, the NAFTA remains the high watermark for Canada and the basis for its future negotiations with other countries. Important features of this agreement are its comprehensive investment provisions as well as its comprehensive commitments related services, subject to only the specific reservations and exemptions that countries identified. Key element for Alberta– energy chapter

MGT 3860Z -- Fall 2005 NAFTA The NAFTA ignited a public debate in the US somewhat along the lines Canada experienced with the Canada-US FTA. The difference, though, is that the American debate surrounding the NAFTA focused on the US-Mexico relationship. Canada's involvement in the NAFTA was almost a non-issue for the American public. They were, however, concerned about the loss of jobs (great sucking sound) from the US to Mexico and the "race to the bottom" that would follow if American companies had to compete with those in Mexico. There is a considerable debate about whether bilateral free trade treaties are good or bad for the multilateral system.

MGT 3860Z -- Fall 2005 Canadian Bilaterals Chile The CCFTA entered into force on July 7, Canada is the only industrialized country with which Chile currently has such a treaty. Israel This Agreement entered into force on January 1, 1997, Costa Rica The free trade agreement and the two parallel accords entered into force on November 1, 2002

MGT 3860Z -- Fall 2006 Potential Agreements and Negotiations for Canada Singapore Central America EFTA Dominican Republic “Emerging” Markets China Brazil India