What was the Canada-United States Free Trade Agreement of 1989?

The Canada-United States Free Trade Agreement (CUFTA, often called the FTA) was a bilateral free-trade agreement signed by Prime Minister Brian Mulroney and US President Ronald Reagan on October 4, 1987. The Agreement received Canadian parliamentary approval in late 1988 (after Mulroney's November 21, 1988 federal election victory on the FTA issue) and US Congressional approval in 1988. It came into force on January 1, 1989. The FTA eliminated most tariffs and trade barriers between Canada and the United States and laid the foundation for the North American Free Trade Agreement (NAFTA) of 1994.

The FTA's negotiation was driven by several factors. Canadian exports to the United States had grown to about 75 per cent of total Canadian exports by the mid-1980s. The Macdonald Royal Commission on the Economic Union and Development Prospects for Canada (1982 to 1985, chaired by former Liberal Cabinet minister Donald Macdonald) had recommended free trade with the United States in its September 1985 report. The US side wanted access to Canadian energy and services markets. The Mulroney government embraced free trade as a major policy departure from previous Liberal protectionism.

The FTA's main provisions eliminated tariffs between the two countries on most goods over a 10-year phase-in period (substantially reducing them by 1998). It established national-treatment rules for services and investment, requiring each country to treat the other's businesses no worse than its own. It included a binational dispute settlement system (Chapter 19 panels), particularly important for Canada given the size disparity between Canadian and American economies. The FTA included specific provisions for automotive trade (extending the 1965 Auto Pact), energy (limiting Canadian discrimination against US energy purchasers), and government procurement.

The 1988 federal election (November 21, 1988) was effectively a referendum on the FTA. Mulroney's Progressive Conservatives won 169 of 295 seats with 43.0 per cent of the vote, defeating John Turner's Liberals (83 seats, 31.9 per cent) and Ed Broadbent's New Democrats (43 seats, 20.4 per cent). The Liberals and New Democrats had opposed the FTA. Although a majority of voters had actually opposed the FTA (Liberals plus NDP received about 52 per cent), the PC majority in seats allowed the government to ratify the agreement. The FTA's effects have been extensively debated. Canadian exports to the United States grew rapidly (from about 75 billion dollars in 1989 to about 235 billion dollars in 2000). Canadian manufacturing rationalised. The FTA was extended into trilateral form by NAFTA (signed December 17, 1992 by Mulroney, US President George H.W. Bush, and Mexican President Carlos Salinas), which came into force January 1, 1994. NAFTA was replaced by CUSMA (Canada-US-Mexico Agreement) in July 2020.