What our former PM got wrong on free trade

Like all Canadians, I am sad at the loss of Brian Mulroney and extend condolences to his family. He will be correctly remembered as one of Canada’s most consequential prime ministers.

There have been many reports and opinions written on his legacy. Almost universally, the consensus seems to be that his economic policies and his bold move to take Canada into a continental free trade agreement, were good for Canada and, in retrospect, a success. I was deeply involved in the free trade debates and would like to offer a different opinion.

One of the first things that Mulroney did on being elected prime minister in 1984 was to unveil his plans for Canada to a blue chip audience of business leaders at the Economic Club in New York City.

There, and in a nine-page supplement in the New York Times, he declared Canada to be “open for business.” Canada was under new management, a “marriage of government and business.” From now on, Canada would “lay out the welcome mat for American investors” and dismantle foreign investment rules.

The ad actually boasted about how much control American corporations already had in Canada’s natural resources sector and promised tax cuts and “decelerated wage settlements” to further entice them North.

These were welcome words for U.S. president Ronald Reagan, who, with British prime minister Margaret Thatcher, was promoting a form of economic globalization that would transfer power and authority from governments to the market and newly minted transnational corporations that had outgrown their domestic origins and wanted the freedom to move production to low wage areas of the world.

How better to further this agenda than to negotiate a free trade agreement, first with the United States and then with Mexico, where the market would be “free” from government oversight to operate as it saw fit. The transformation of the Canadian economy and its impact on workers was set in motion.

No longer constrained in Canada by “site here to sell here” policies such as the old Auto Pact, U.S. parent companies shut down their Canadian branch plants, resulting in the loss of hundreds of thousands of highpaying, secure manufacturing jobs, particularly in the auto sector, where plants and jobs migrated to Mexico.

When the North American Free Trade Agreement (NAFTA) was signed, manufacturing accounted for almost 20 per cent of our GDP. It now accounts for only 10 per cent. While salaries and benefits for CEOs and the wealthy have skyrocketed, workers’ wages have remained stagnant and young workers are increasingly entering a precarious workforce.

NAFTA also gave corporations enormous new powers as they were now able to sue governments if they considered their laws — be they related to environmental, health or workers’ rights — a threat to their bottom line.

Under this clause, called investor state dispute settlement, American corporations claimed millions of dollars from Canada for regulations protecting the environment. Thankfully, and due to the hard work of activists in all three countries, this provision was dropped in the renegotiated North American agreement.

Mulroney also started the sell off of Canadian crown corporations and institutions, which became easier to do as he had cancelled the Foreign Investment Review Agency set up under a former government to protect and promote Canadian control of essential industries.

Mulroney, Reagan and Thatcher sang a siren song. Get governments out of the way! Let the market rule! Economic globalization, with its program of free trade, privatization and deregulation and everyone would benefit. Corporations surely did. According to the British Organization Global Justice Now, 69 of the richest entities on the planet are transnational corporations. Only 31 are governments.

And Canadian CEOs did too. The Canadian Centre for Policy Alternatives reports that the richest CEOs are paid 246 times more than the average worker.

In the end, the proof is in the pudding. Ask young people who are working in the gig economy, struggling to pay off debt and unable to afford to buy or rent even a modest home. The “free market” has failed us time and again, and it badly failed us during the COVID crisis. Canada’s founding narrative was sharing for survival. It is time to return to it.

Brian Mulroney, Ronald Reagan and Margaret Thatcher sang a siren song. Get governments out of the way! Let the market rule! Economic globalization, with its program of free trade, privatization and deregulation and everyone would benefit. Corporations surely did