Twenty-six years after reaching a historic Free Trade Agreement with the U.S., we’re at it again. This time our negotiating partners are European.
I was at a dinner on Thursday night that featured remarks by federal Finance Minister Jim Flaherty. It wasn’t a formal speech. But of course he found time to promote what would be front-page news across the country the next morning: Canada’s new Comprehensive Economic and Trade Agreement (CETA) with the European Union. To his left, at the head table, sat former Prime Minister John Turner. The man who, back in 1988, accused then-Prime Minister Brian Mulroney of “selling Canada out with one signature of a pen” with the Canada-U.S. Free Trade Agreement (FTA) smiled politely as Flaherty spoke. Still, the contrast between the country’s oldest living prime minister and its current finance minister was striking.
Think of how far this debate has come since that original FTA. At the time it was hard to imagine a more politically charged argument. Those opposed to the deal believed vehemently that nothing less than our way of life was at stake. It was a question of national identity. Surely this deal with Washington threatened our social safety net along with our sense of what it means to be Canadian. Those in favour of free trade welcomed the Americans’ dollars, even if it came with political influence (some welcomed both).
Fast forward 26 years, and the CETA debate is downright civil by comparison. “Everyone will agree that progress on a trade agreement with Europe is a good thing,” said New Democratic Party leader Tom Mulcair on CBC’s The House with Evan Solomon this weekend. He of course went on to say that the success of the deal depends on its details. But what he didn’t say, indeed what virtually no mainstream leaders are saying is that free trade is a bad idea. The focus is — appropriately — on the pros and cons of this plan.
Clearly, free trade has worked in this part of the world. The North American Free Trade Deal, which followed the FTA and included Mexico in the pact, was a historic success. This is not to say that there weren’t negative effects, there always are in deals that big. But look for example at what happened to Canadian exports to the U.S. in the years that followed FTA. Before the deal, exports sat at about 25% of gross domestic product (GDP) year after year. They jumped to 40% of GDP in the 1990s, and close to 50% after 2000.
Arguably, free trade with the U.S. has worked too well. The U.S. downturn that followed the financial crisis has taken a toll on Canadian exporters because so much of their business relies on consumers and businesses in that country. What’s clear now is that Canadian companies need to diversify outside North America.
This is precisely what CETA is meant to do. It is too early to say if it will be similarly successful. It is after all simply a negotiated agreement; no laws have been passed. There will be plenty of debate in the coming months about impacts to consumers, dairy farmers, car and pharmaceutical manufacturers and others. But it is safe to predict that we won’t see a repeat of the kind of overheated rhetoric that was so prevalent 26 years ago.
The case for free trade has been made.
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