The Canada–United States Free Trade Agreement (CUSFTA), official name as the Free Trade Agreement between Canada and the United States of America (), was a bilateral trade agreement reached by negotiators for Canada and the United States on October 4, 1987, and signed by the leaders of both countries on January 2, 1988. The agreement phased out a wide range of trade restrictions in stages, over a ten-year period, and resulted in a substantial increase in cross-border trade as an improvement to the last replaced trade deal. With the addition of Mexico in 1994, CUSFTA was superseded by the North American Free Trade Agreement (NAFTA) (, ).
As stated in the agreement, the main purposes of the Canadian-United States Free Trade Agreement were: Eliminate barriers to trade in goods and services between Canada and the United States Facilitate conditions of fair competition within the free-trade area established by the Agreement Significantly liberalize conditions for investment within that free-trade area Establish effective procedures for the joint administration of the Agreement and the resolution of disputes Lay the foundation for further bilateral and multilateral cooperation to expand and enhance the benefits of the Agreement
History
Background
Starting in 1855, while Canada was under British control, free trade was implemented between the colonies of British North America and the United States under the Reciprocity Treaty. In 1866, a year before Canadian Confederation, the United States Congress voted to cancel the treaty. Canada's first Prime Minister, John A. Macdonald, attempted and failed to reinstate reciprocity, after which the government of Canada moved to a more protectionist policy, the National Policy. Fears grew among many politicians that closer economic ties with the United States would lead to political annexation.
The Liberal Party of Canada had traditionally supported free trade. Free trade in natural products was a central issue in the 1911 Canadian federal election. The Conservative Party campaigned using anti-American rhetoric, and the Liberals lost the election. The issue of free trade did not rise to this level of national prominence in Canada again for many decades.
From 1935 to 1980, the two nations entered a number of bilateral trade agreements that greatly reduced tariffs in both nations. The most significant of these agreements was the 1960s Automotive Products Trade Agreement (also known as the Auto Pact).
After the signing of the Auto Pact, the Canadian Government considered proposing free-trade agreements in other sectors of the economy. However, the United States government was less receptive to this idea, and in fact, wanted to phase out some guarantees in the Pact. Canadian attention turned to the question of a broader free-trade agreement between the two countries.
During the next two decades, a number of academic economists studied the effects of a free trade agreement between the two countries. Several of them—Ronald Wonnacott and Paul Wonnacott, and Richard G. Harris and David Cox—concluded that Canadian real GDP would be significantly increased if both U.S. and Canadian tariffs and other trade barriers were removed and Canadian industry could consequently produce at larger, more efficient scale. Other economists on the free-trade side included John Whalley of the University of Western Ontario and Richard Lipsey of the C. D. Howe Institute.
Others were concerned that free trade would have negative effects, fearing capital flight and job insecurity because of international outsourcing, and also that closer economic ties with the "Giant to the South" might risk an erosion of Canadian sovereignty. Opponents included Mel Watkins of the University of Toronto and David Crane of the Toronto Star, one of Canada's leading newspapers.
