Brawley, Chapter 22

Brawley, Chapter 22 - POLI 243-International Politics of...

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POLI 243-International Politics of Economic Relations March 14, 2009 Power, Money, and Trade, Brawley: Chapter 22: Canada and the Free Trade Agreement with the U.S. Background: The Historical Parameters of the U.S.-Canada Relationship: 1911: reciprocity fails: Canada and US pursue freer trade on several occasions: o Interwar period: disastrous Smoot-Hawley Tariff: exacerbated Great Depression o Deals between US and Canada to liberalize trade: 1935 and 1938: bilateral agreements fueled by need to stimulate production and employment 1965: Auto Pact: Canada’s high tariffs: attracted investment by US producers who wanted to sell in Canadian market Introduced waivers on the duty for original equipment parts and automobiles Allowed US firms to integrate production in the two countries In return: US manufacturers had to produce a certain number percentage in Canada: with the amount relative to the level of sales in that country This was managed trade (but liberalized compared to trade barriers) Many of the agreements: went against Canada’s larger protectionism ideology 1911: rejected US offer to freer trade due to goals of national unity and industrialization 70 years later: Canadian’s initiated talks to liberalize trade: o One factor driving this: impact of an economic downturn By mid-1980s: Canadian political leaders: beginning to worry about ensuring success access to the US market: o Industrial leaders and businessmen were increasingly concerned if Canadian firms were to remain competitive: then could achieve higher economies o Meant ensuring a greater volume of goods produced could be sold: Canadian market was not large enough to support that Late 1985: at Canada’s initiative negotiations with US on free trade agreement were requested Fears of the New Protectionism: Reason for negotiations: provide insurance against several forms of potential problems in international trade: o General Agreement on Tariffs and Trade (GATT): provided enormous benefits to countries (like Canada) which rely heavily on trade o As more countries enter trade: economically advanced countries were wracked into economic downturns and rising interest rates: no wonder that protectionist pressures rose These pressures: were somewhat controlled by GATT: if a country raised tariffs then other states were allowed to retaliate with tariff hikes GATT rules: prevented tariffs from rising too much but spiked increase in non- tariff barriers (NTBS) NTBs: are clearly against the GATT principles: but difficult to control: used to block imports: o Easily disguised as the exercise of a state’s regulatory powers in the area of environment, safety or health Another Canadian fear: GATT’s future hinged on the progress of multilateral negotiations: o Uruguay Round: dragging on to greater lengths: issues such as trade in services and agricultural goods threatened to upset the talks o Many feared GATT would cease to serve as a source of stability in economic relations
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This note was uploaded on 04/28/2011 for the course POLI 243 taught by Professor Markbrawley during the Spring '09 term at McGill.

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Brawley, Chapter 22 - POLI 243-International Politics of...

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