 Mulroney government began negotiations with the United States in September  Deal was finally reached in October 1987

Main Points of Free Trade (FTA) 1. Elimination of tariffs. The lifting of tariffs on goods and services traded between the two countries would begin on January 1, 1989 and be completed by January 1, Dispute settlement mechanism. A five- member panel with at least two members from each country would settle disputes that arose between Canada and the United States with regard to trade.

3. Investment. Restrictions on American investment in Canada would still have the right to screen and approve takeovers in cultural industries such as publishing and media. 4. Energy. Canada could not restrict the sales of energy resources to the United States, except in times of shortage. 5. Agriculture. All tariffs on agriculture products and processed food would be eliminated over a 10-year period.

 The Liberals and NDP were against the FTA, as were the labour unions.

 Opposition was based on two beliefs: 1. FTA would lead to a loss of Canadian jobs because American-owned manufacturing plants could shut down in Canada and move to the United States 2. Canada would lose its independence because of our reliance on trade with the US.

NAFTA  New agreement was proposed that would introduce Mexico to the North American trading bloc.  Canada did not have much interest in negotiating a deal with Mexico.  Total value of trade between the US and Canada was approximately $300 billion, trade between Canada and Mexico was only around $3 billion.

 The geographic position of the US made such an agreement ideal for that country.  It could take advantage of cheap Canadian raw materials and inexpensive Mexican labour.  Mulroney felt that Canada had little choice but to negotiate. If the United States signed a deal on its own with Mexico, US trade could take a major shift toward Mexico.

 Canada would be left isolated.  Europe and Asia already had large, open market trade agreements.  If Canada, Mexico, and the United States created a North American market, it would involve 390 million people and would control an estimated 31% of the world’s wealth!

December 1992, NAFTA was signed.  The main conditions included:  Tariff-free trade by 2008  No quota limits on imports  Equal access to natural resources  A provision that allowed companies to sue the countries’ governments if legislature hurt their ability to compete  Trade disputes to be handled by a NAFTA panel

 Supporters argued that it would make Canada more attractive to global investors because they would use Canada to access North American market.  Also argued that NAFTA would make North America more competitive with Asia & Europe.  Because of globalization, Canada needed to secure North American market so they could eventually expand to South America

 Critics worried that it was a step toward American domination of Canada.  There was a fear that Canadian industries (esp. Publishing and television) would be threatened by American corporations.  Also feared that industries such as steel, textiles, and automobiles would be vulnerable to cheaper labour costs in US & Mexico which might lead to wage reduction for Canadians.

 Opponents also maintained that lower environmental standards in Mexico would result in similar conditions in Mexico.  Finally, some felt that tax-supported social programs – particularly health care – would be under attack by Canadian businesses.  Businesses funded these programs and they had additional costs so in order for Canada to compete, these social programs would be halted.