Canada is the most important trading partner of the United States and the major export market for thirty-five U.S. states. It is the United States’ largest market for food and also is a major market for manufactured goods. The United States imports more agricultural products from Canada than from any other nation and depends on it for forest products and energy.
Major trading between Canada and the United States began with the
Aware that this act placed a serious hardship on Canada, Britain negotiated the Canadian-American Reciprocity Treaty (Elgin-Marcy Treaty) of 1854 with the United States to provide a market for Canadian raw materials, especially wheat and timber. In accepting the treaty, the United States agreed to eliminate its tariff of 21 percent on the import of raw materials. In exchange, the United States was granted fishing rights off Canada’s east coast. In addition, each country received some navigation rights on the other’s lakes and rivers.
The treaty resulted in rapid growth in Canada’s economy, as exports to the United States grew rapidly, eventually increasing by 33 percent. Exports from the United States to Canada, however, increased by only 7 percent. Trade between the two countries doubled by 1864. Then in 1866, the United States decided to end the treaty, citing three reasons. First, it seemed that only Canada was benefiting from the treaty. Second, the implementation of the
In 1871, negotiations for the Treaty of
From about 1875 to 1900, neither Canada nor the United States was in favor of free trade. In 1891, Canadian Liberals ran on a platform of unrestricted free trade and lost the election. Many Canadians feared political takeover by the United States because free trade would increase Canada’s economic dependence on the United States.
In spite of the distrust between the two countries, U.S. companies invested large amounts of money in the Canadian commercial sector, and Canada’s developing unions affiliated with their American rather than British counterparts. This increase in economic ties paved the way for an attempt at negotiating a new free trade agreement between the two countries.
In 1911, President William Howard Taft and Prime Minister Wilfrid Laurier concluded an agreement to provide limited free trade on a significant number of manufactured items. In a surprising reversal of its protectionist attitude, the U.S. Congress passed the agreement. However, the Conservative opposition defeated the agreement in Parliament. Laurier himself was defeated in the following general election. Too many Canadians still believed that free trade with the United States would lead to political annexation of Canada.
The early 1930’s witnessed continuing opposition to free trade from both Canada and the United States. In 1930, Congress passed the
In 1934, the situation began to change, as the United States passed the
After the war, Canada was once again wary of economic dependence on the United States, and having seen its imports from the United States rise to twice as much as it was exporting, Canada preferred multilateral trade agreements and relied on the General Agreement on Trade and Tariffs (GATT) and the agreements reached under the North Atlantic Treaty Alliance (NATO). However, economic involvement between the two countries continued to increase. Canada possessed enormous stores of raw materials but needed the industrial supplies and technology of the United States.
In January, 1965, the
From the 1960’s to the 1980’s, United States-Canadian trade relations vacillated between a move toward free trade and the imposition of tariffs or surcharges in various areas of trade. In 1983, Prime Minister Pierre Trudeau’s government entered into negotiations for free trade in certain economic sectors. Then, in 1985, Prime Minister Brian Mulroney began negotiating a free trade agreement with the United States. In October, 1987, the treaty was drawn up and subsequently ratified by the U.S. Congress and the Canadian Parliament. Within a ten-year period, starting in January, 1989, all tariffs between the two countries were to be eliminated by the treaty.
However, the subject of free trade soon became a topic of interest to politicians not only in Canada and the United States but also in Mexico. In December, 1992, President George H. W. Bush, Prime Minister Mulroney, and Mexican president Carlos Salinas de Gortari signed the
The treaty had to be ratified by the legislative body in each of the countries. In all three, it met with strong opposition as fears of job losses, economic dependence, and political annexation arose. However, the treaty was ratified by all three legislative bodies and went into effect on January 1, 1994. In general terms, NAFTA brought about free trade among the three countries.
The treaty has not solved all the problems and controversies surrounding trading between Canada and the United States. The imposition of a 27 percent tariff on the import of Canadian softwood lumber by the United States has caused considerable argument. Canada has been concerned about the provision in NAFTA that states that once anything is sold as a commodity, governments are prohibited from stopping its continued sale as such. The “commodity” causing the problem is water from Canadian lakes and rivers. Another issue involves the importation of banned substances. There has also been dissension over certain changes that Canada has made to its taxation laws.
Public opinion about the benefits of or harm done by NAFTA remain varied, as free trade has been an ongoing issue between Canada and the United States since their first exchange of goods. Whether free trade eliminates or increases jobs, whether it creates a dangerous economic dependence between countries, or whether it has the potential to destroy a country’s autonomy all remain unresolved topics of debate associated with trade between the United States and Canada.
Anastakis, Dimitry. Auto Pact: Creating a Borderless North American Auto Industry, 1960-1971. Toronto: University of Toronto Press, 2005. Views the Auto Pact as good for the Canadian economy, although it eliminated a Canadian automotive industry. Illustrations, bibliography, and appendixes. Corsi, Jerome R. The Late Great U.S.A.: The Coming Merger with Mexico and Canada. Los Angeles: World Ahead Media, 2007. Sees NAFTA as leading to a North American community like the European Union and predicts dangers for the United States. Illustrations, foreword, and appendixes. Hakim, Peter, and Robert E. Litan, eds. The Future of North American Integration: Beyond NAFTA. Washington, D.C.: Brookings Institution Press, 2002. Discusses the issue of how fully NAFTA addresses the relationship among the United States, Canada, and Mexico, and contains essays by experts from the countries. Orchard, David. The Fight for Canada: Four Centuries of Resistance to American Expansion. Westmount, Que.: Robert Davies Multimedia, 1998. Discusses the history of opposition to free trade, U.S. investment in Canada, and the dangers of Canadian economic dependence on the United States. Thomas, David M., and Barbara Boyle Torrey, eds. Canada and the United States: Differences That Count. Peterborough, Ont.: Broadview Press, 2007. Gives insights into Canadian and American attitudes, and can be useful to understand the underlying cultural differences that cause problems in trading, especially free trade. Thompson, John Herd, and Stephen J. Randall. Canada and the United States: Ambivalent Allies. Athens: University of Georgia Press, 2008. Covers Canadian-United States relations from the American Revolution to the present. Weintraub, Sidney, ed. NAFTA’s Impact on North America: The First Decade. Washington, D.C.: Center for Strategic and International Studies, 2004. In-depth, unbiased analysis of NAFTA and its effects.
Fur trapping and trading
General Agreement on Tariffs and Trade
International economics and trade
Mexican trade with the United States
North American Free Trade Agreement
War of 1812