The North American Free Trade Agreement: Policy- or Investment-led?

Abstract

For both Canada and Mexico, the decision to negotiate free trade with their most important trading partner was a dramatic change in policy direction. Canada, which had long eschewed a free trade arrangement with the United States, negotiated the Canada-US Free Trade Agreement (FTA), which came into effect on 1 January 1989. Then, just as Canadians were beginning to adjust to their new relationship with the United States, Mexican President Carlos Salinas and US President George Bush announced (in June 1990) that their two countries would begin discussions on a bilateral free trade pact. For Mexicans, the decision to seek a free trade agreement with the United States was the culmination of a concerted effort to liberalize their economy since the mid-1980s. For Canada, it had the potential to erode some of the gains of the FTA.