Canada-United States Free Trade Agreement

6 June 2016

This free trade agreement was an agreement between Canada and the United States signed on 4th October 1988 and was finalized on October 1997. Within a period of ten years, the agreement managed to remove many trade restrictions, a scenario that led to increased cross border trade.

After a short period of time probably three years after achieving the above, North American free trade agreement decided to suspend the agreement. This agreement focused on eliminating barriers related to trade of both goods and services between the two countries, facilitating conditions that allowed fair competition within a zone characterized by free trade fully supported by this agreement and bring significant liberal conditions for investment opportunities within the free trade area.

Canada-United States Free Trade Agreement Essay Example

It was also aimed to establish and formulate procedures effectively to ensure joint administration of this agreement and at the same time give a framework for conflict and disputes resolution within the area in the process of exchanging goods and services.[1] Elsewhere, the agreement was made to lay foundation for advancement in the process of developing multilateral and liberal cooperation to enhance and expand benefits accruing to the agreement. On a rational point of view, we may wish therefore to establish the sensibility of this economic block in terms of the impacts that it reinstates to the Canadian economy.

This free trade with the United States was a controversial aspect from Canada’s point of view. Through history, Canadians who were in close connection and had close ties with Americans were seen to have been encouraging political annexation by the Americans. It was thus not a good and health undertaking for the Canadians political sphere. The agreement reached by the two nations resulted to great trade liberalization between the two countries and wiped out the tariffs which earlier on existed as barriers to trade between the two countries.

The free trade agreement was not all about tariffs fundamentally, but it captured all sorts of trade barriers that limited access of each partner’s market by the two countries. The agreement ultimately averaged tariffs on goods and services that crossed the border to less than 1% in 1980s. As each of the countries targeted the opponent’s market access, Canada demanded unlimited access to the United States market and at the same time United States demanded access to Canada’s cultural and energy industries which were very sensitive industrial sectors to the Canadian economy.[2]

As the negations continued, Canada was finally granted the right to protect industries such as health care, education and cultural sectors but exposed water sector to the Americans. With all these negotiations and efforts Canadians did not however win the free competition in acquiring procurement contracts in the American government. This area was conserved for America to itself.

In paying attention to the ramifications of the agreement after the implementation, a rapid increase in trade between the two nations was noticed. In 1990s, the agreement had shortly been formed and experts generated 40% to the gross domestic product in Canada.  In the 20th century, exports contributed 25% to the gross domestic product of Canadian economy. After this period and around the year 2000, this contribution reached to the 50% valuation.

After the liberalization of trade, the Canadian dollar decreased the value of the currency and therefore highly propelled this growth to greater heights. This growth was also realized because there was a global special attention towards development of free trade and international trade was therefore increasing. However, in 2007, the value of Canadian dollar reduced far much than the international value of the American dollar, meaning that the benefits that Canada used to enjoy from the free trade were taken over by the United State.

Currently, the agreement has not fully liberalized the trade because it has not established a free trade in some areas of Canada like softwood lumber. Generally, Canadians complain that Americans imposed restrictions and thus violated the provisions of the agreement. Up to now, cultural industries of Canada are still health although it is feared the agreement undermines the sovereignty of Canada as a nation.

Because of this malpractice of the Americans protectionism, the agreement still remains a controversy in the states of America and the politics of Canada no longer support it. The ruling party in 1990, the national Democratic Party never supported free trade but the liberals were ready to renegotiate some areas of the agreement to suit the country’s state of affairs. Because of this modifications, a new agreement was signed, the north American Free Trade Area Agreement, this time including Mexico.[3]

They believed that increase in the number of countries helped in expanding the free trade area and the accruing benefits. In contrast to the increasing and massive tide of Americans protectionism believed to close the markets, the free trade agreement negations between Reagan administration and that of Brian Mulroney was believed to open up markets on both borders to benefit the two countries and set an example for the remaining world to change their trading patterns towards economic diversity.

By the time of implementation of this treaty, it was the largest bilateral free trade agreement in the world. After its implementation, non tariff barriers like import licenses which initially existed between the countries were eliminated. The agreement also set aside a special dispute resolution board to handle cases involving unfair trade practices.

The treaty was also aimed at increasing the Gross Domestic Product of both countries and therefore increased the competitiveness of both economies internationally. Canada had a limited market but after the agreement, it could easily access the American markets. The U.S.-Canada trade agreement was to demonstrate the cause and significance of free trade all over the world. Goods from countries that were not parties to the U.S.-Canadian markets were highly disadvantaged when they happened to penetrate to this free trade area, giving a relevant incentive to operate on trade liberalization.

After signing, this agreement was presented to the congress for ratification and thus it gave the lawmakers of the United States a nice chance to say no to protectionism in trade but instead cite a common and fair market poem where every country involved could have benefited.[4]

[1] Hart Michael & Robertson Colin (1994) Decision at Midnight: Inside the Canada-U.S Free Trade Negotiations. University of British Columbia Press, pp.20

 [2] Harold Crookell (1990) Canadian-American Trade and Investment under the Free Trade Agreement. Westport, CT, Quorum Books, pp.12

 [3] James Shoch (2001) Trading Blows: Party Competition and U.S. Trade Policy in a Globalizing Era. University of North Carolina Press, pp.14

 [4] Clark Cynthia & Turney Elaine (2003) Encyclopedia of Tariffs and Trade in U.S. History- Vol.2. London, Greenwood Press, pp.35

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