Overview

This section will cover the three free trade agreements between Canada and the United States.

CUSFTA
NAFTA
CUSMA

Canada United States Free Trade Agreement (CUSFTA)

Given the recession in the early 1980’s, Canada sought out a comprehensive free trade agreement with the U.S. in pursuit of economic growth. The goal was to build on the success of the automotive product agreement of 1965 (auto pact). This agreement had eliminated tariffs on automobiles which resulted in lower consumer prices for vehicles, increased vehicle production in Canada, and created thousands of new jobs in the automotive industry. The aim of CUSFTA was to apply this to other sectors.

CUSTFA hoped to: • Give Canadian businesses economies of scale to become competitive internationally • Increase output of natural resources in Canada • Attract foreign investments • End threat of U.S. protectionism (limiting access to U.S. market for Canadian businesses and consumers) • Encourage innovation and increase productivity • Boost employment and living standards for Canadians

At the time, existing tariffs were already below 1% on average prior to the agreement. Instead, Canada was interested in gaining unlimited access to the American economy while the U.S desired access to Canada’s energy sector and cultural industries such as film or music.

The CUSFTA was a decade-long deal that came into effect on January 1st, 1989. The investor-state dispute resolution was introduced for the first time in this deal. This controversial clause allowed U.S. corporations to sue Canada if new policies negatively affected profits for American companies.

Canada failed to acquire an exemption from U.S. trade remedy laws, which protected U.S. industries from cheaper imported goods. Canada was negatively impacted by this through U.S. efforts to restrict softwood lumber imports or unilateral initiatives such as "Buy America" restrictions in public infrastructure projects. Finally, CUSFTA failed to liberalize certain industries from state control, such as soft-wood lumber, minerals, and fresh-water.

Effects of CUSFTA: • Canada's exports to the U.S. made up 40% of its GDP, an increase from 25% prior to CUSFTA • Increased dependency on U.S. market for exports (74.5% 1988 82% in 1996) • Canadian manufacturer profits increased 1.2% • Labour productivity increased 0.6% on average in manufacturing industries

North-America Free Trade Agreement (NAFTA)

Shortly after the implementation of CUSFTA, Mexico began free trade discussions with the U.S. Canada asked to join the agreement in fear of a U.S.-Mexico agreement undermining the success of CUSFTA. This led to negotiations between the three countries. NAFTA was signed in 1993 and came into effect on January 1, 1994. This created one of the world’s largest trading blocs in terms of GDP.

Two side agreements were added due to concerns of liberalization of labour and environmental regulations. The North American Agreement on Labor Cooperation was put in place to enforce labor standards in each country. The North American Agreement on Environmental Cooperation was implemented to promote environmental protection and support cooperation to address continental environmental challenges.

The agreement hoped to: • Provide each country with a "most-favoured nation" status which ensures the best trade terms for each member • Eliminate trade barriers and promote movement of goods and services • Promote fair competition • Increase investment opportunities • Expand on the trade agreement with trilateral, regional, and multilateral cooperation