Happy 25th birthday, free trade

1988 federal election paved way for pivotal deal with U.S.

Those of a certain age may recall a federal election 25 years ago fought over an issue then controversial in some circles: Free trade. A quarter of a century ago today, on Nov. 21, the Progressive Conservative government of Prime Minister Brian Mulroney was re-elected on a platform to implement the Canada-U.S. free trade agreement, signed the year previous, but which had been held up in the Liberal-dominated Senate, and thus had become the key issue leading into the 1988 federal election.

Twenty-five years ago, the Mulroney Tories won handily, with 169 seats, beating the anti-free trade Liberals (83 seats), then the official Opposition, and the similarly antifree trade New Democrats (who garnered 43 seats).

Entering into an election fighting in favour of free trade with the world’s largest super power was an act of great courage, and it was perhaps the most brutal and vicious election ever fought.

Indeed, years later, while campaigning for the October 1993 election, then Liberal Party of Canada leader Jean Chretien vowed to tear up the North American Free Trade Agreement should he be elected. Thankfully, the pro-free trade element within the Liberal party didn’t allow that to happen and Chretien broke his election promise.

There was always a pro-business, pro-free trade element in the Liberal party — the party had been historically in favour of free trade, including famously under Wilfrid Laurier, who lost the 1911 election on the matter; in 1988, many Liberals thus opposed Liberal leader John Turner’s opportunistic and hysterical anti-free trade stance during the election campaign.

That the Liberal party of the day was not shot through with ideological anti-free trade types akin to the New Democratic Party was evident from two other pieces of evidence. First, it was a former Liberal cabinet minister, Donald Macdonald, appointed by Liberal Prime Minister Pierre Trudeau, whose royal commission on Canada’s economy helped restart the free trade debate on the Canadian side of the border in the 1980s.

As mentioned, by 1993, when the Liberals did come to power under Jean Chretien, the new prime minister and his party’s stance on free trade had returned to its historic position. That Liberal government would later sign the North American Free Trade Agreement, negotiated by the Mulroney government, after Chretien’s ascension to power, and he would go on to sign other subsequent free trade agreements with other countries, including Chile in 1996 and Costa Rica in 2002.

Beyond setting the record straight on the politics of the 1988 free trade election, there is no question that the original free trade agreement has been immensely economically beneficial to Canada and the United States. Job numbers are one bit of evidence here.

According to the OECD, in 1987, the year the free trade agreement was signed though not yet in force, 12.4 million Canadians were employed; that climbed to almost 13.2 million jobs in 1990 before a recession in Canada and the United States cut into employment numbers in both countries. Still, Canada would soon post ever-higher job numbers and recorded 14.5 million Canadians employed by 1999, this after the original free trade agreement and the second one, the North American Free Trade Agreement, were long in force.

Similarly, in the United States, pre-free trade employment stood at 114.2 million in 1987, and except for a brief dip in 1991, climbed steadily toward 134.7 million by 1999.

Except for the two recession years of 1991 and 1992 in Canada, and 1991 in the United States, both countries recorded positive employment growth between 1987 and 1999, and in fact, for most years until the 2008-09 recession.

The effect on unemployment was dramatic.

To use Canada as the example, unemployment rates, which had been in the double digit range in the early and mid-1980s, and again during the early 1990s recession, eventually fell to as low as 6.9 per cent in the very last quarter of 1999.

Free trade was never perfect. Over the decades, some American protectionism has cropped up time and again, whether on softwood lumber, or more recently, on Buy America provisions. But such blemishes only speak of the need for tighter and tougher enforcement in favour of free trade.

The election of 1988, and the free trade deal which became effective afterwards, secured access to the American market for most industries.

It has been a boon to Canada ever since and laid the groundwork for the most recent deal between Canada and Europe.

Entering into an election fighting in favour of free trade with the world’s largest super power was an act of great courage