When Canada built a border wall

Recent trade disputes between Canada and the United States are nothing new. Today’s tariff wars and NAFTA showdowns are part of a generations-old continuum of confrontations. Both countries have played roles. And while the U.S. may be in protectionist mode today, Canada has a history of protectionism going back 100 years — as explained by the late Canadian historian Michael Bliss in his classic work Northern Enterprise: Five Centuries of Canadian Business, which has just been republished in a new edition. This excerpt from the re-release highlights the global trade environment and the cross-border politics that still echo today.

An international financial panic in 1873 marked the beginning of five years of severe trade retrenchment, falling prices, and increased international competition in an atmosphere of rapid technological change and transportation improvement. Almost overnight many Canadian manufacturers found their markets threatened by American and British imports.

Big, efficient producers in those countries exploited falling transportation costs and the extension of the railway network to try to find new markets or at least dump surplus stock at cut prices. Wave after wave of failures, closings, and layoffs savaged the ranks of Canadian producers. Every significant industry suffered except farm implements, which was still growing to meet unsatisfied agricultural demand. There were very hard times in Canada. “Do you think there will ever again be good times?” a prominent Montreal businessman asked one of his financial friends in 1878.

Protectionist sentiment revived with a vengeance. Parliamentarians who investigated the condition of the Dominion’s manufacturing industries, and the causes of the depression, faced witnesses from industry after industry demanding more protection. New organizations were formed to spread the gospel of protection. The most important was the Ontario Manufacturers’ Association, created in 1874 and renamed the Canadian Manufacturers’ Association within a decade. Printing presses spewed protectionist literature. Money was available to advance the cause.

The shrill platitudes and convoluted metaphors of protectionist rhetoric were not nearly as important in the debate as the relationship between tariff protection and jobs. Big manufacturers employed hundreds of workers; even medium-sized ones employed dozens. Unemployed labourers and artisans posed many problems, social and political. Sometimes they even demonstrated in the streets, demanding workorbread.

One big public meeting of workmen in Montreal in the winter of 1876 was read a letter from George Stephen supporting their demand for job-creating tariffs. Robert Hay, the furniture man in Toronto, had cut his workforce in half and was about to go into politics to get more protection. E.B. Eddy in Ottawa had to suspend payments to his creditors, and declared he could not compete with American wood products. Dozens of other manufacturers across the Dominion were in similar straits, laying off workers, cutting wages, demanding that government come to their aid.

Alexander Mackenzie’s Liberal government inclined to doctrinaire free-trade beliefs, including a laissezfaire view of the functions of government. The Finance Minister, Sir Richard Cartwright (grandson of the pioneer Kingston merchant), was particularly determined that the state not become involved in propping up inefficient or incompetent firms. He saw no reason why government should tax 95 per cent of the public for the sake of five per cent. He would not rob the taxpayers, Cartwright said, “and in particular I decline to do it on behalf of the poor and needy manufacturers who occupy those squalid hovels which adorn the suburbs of Montreal, Hamilton, and every city of the Dominion.”

The Conservatives had no such hesitancy about using the power of government to shape the economy and nourish an important (and often highly concentrated) voting interest.

When Cartwright refused to bend to pressures for a general tariff increase in his 1876 budget, Macdonald committed his party to a “readjustment of the tariff ” which would “not only tend to alleviate the stagnation of business ... but also afford fitting encouragement and protection to the struggling manufacturers and industries, as well as to the agricultural products of the country.”

Prominent manufacturers lined up with the interventionist Conservatives against the laissez-faire Liberals in the 1878 general election. The Tories were fully committed to what Macdonald now called a “National Policy” of aiding home manufactures. His speeches raised issues of employment policy, national development, and the need for diversification that would be central to debates on Canadian economic policy and business development for more than a century:

“We have no manufactures here. We have no workpeople; our work-people have gone off to the United States. They are to be found employed in the Western States, in Pittsburg, and, in fact, in every place where manufactures are going on. These Canadian artizans are adding to the strength, to the power, and to the wealth of a foreign nation instead of adding to ours. Our workpeople in this country, on the other hand are suffering for want of employment. Have not their cries risen to Heaven? Has not the hon. the Premier been surrounded and besieged, even in his own Department, and on his way to his daily duties, by suffering artizans who keep crying out: “We are not beggars, we only want an opportunity of helping to support ourselves and our families…”

The ascendant manufacturers and their worried work people had persuaded the state to rig the business environment in favour of their industries and their incomes.

The Canadian consumer would foot the bill, paying the price for protection.