Canada-US Free Trade and Some Options

Abstract

The topic of Canada-US free trade, or some variation thereof, has been around since well before Confederation, so it is unlikely that this symposium will produce the last word on the topic. Yet, with any luck at all, we may be able to clarify some of the issues and viewpoints. With the Tokyo Round of GATT tariff reductions underway, perhaps discussion of whether we have some form of free trade is, for many industries, largely academic. Freer trade is in the process of occurring in a multilateral framework. Nevertheless, I have been asked to consider policy options we might undertake apart from and/or prior to negotiation of a free trade arrangement with the United States. Before doing so, however, I believe that it will be useful to have another look at the estimates of net gains that are supposed to accrue to Canada from free trade. This will be the first purpose of this paper. My position is that these net benefits may well be exaggerated and that Canadians should not enter into negotiations with any illusions on this matter. Next, in considering alternatives, the premise will be not unlike that of many who strongly advocate free trade, namely, that free trade, by itself, will not resolve the complex problems of the Canadian manufacturing sector. Many other supporting policies will be necessary if manufacturing in Canada is to survive and prosper. My overall position is that free trade might well be the final objective, but we should first be preparing ourselves for it more fully.