Trade and Economic Policy: The Long and Winding Road

• Pages: 217-262

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 

Trade and Economic Policy:

The Long and Winding Road

Introduction

One of the key factors in questions about how similar and how

dierent Canada and the United States are relates to their deep

and long trade and economic relationship. On one level, both

countries share a fundamental outlook that a democratic pol-

itical system wed to a capitalist economy is the best model for

advancing the interests of their citizens. Consequently, there are

many areas of cooperation that reinforce this reality. On the other

hand, the two countries often have diering economic goals in

competition with one another, which often lead to political con-

f‌lict requiring the maintenance of a deep and broad set of rela-

tions that stretch all the way up to the prime minister’s and the

president’s oces. ese relations, furthermore, are always com-

plicated by the great power and size imbalance between Canada

and the United States. Hence the many examples wherein trade

and economic policy interests are the same, only dierent, as are

the systems employed in each country to manage their respective

budgets, as this chapter shows.

THE SAME, ONLY DIFFERENT

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A. The Evolution of Trade and Economic Relations

Between Canada and the United States

1) Imbalance in Interests

In , Goldwin Smith posed what became known as “the Can-

adian question” when he wrote, “Whether the four blocks of ter-

ritory constituting the Dominion can forever be kept by political

agencies united among themselves and separate from their Contin-

ent, of which geographically, economically, and with the exception

of Quebe c ethnologically, they are parts, is the Canadian question.”

is is a question that continues to be asked to this day, but with

the added complication of American administrations who often fail

to understand the historical importance of the Canadian-American

relationship. So, ironically, the question of whether Canada should

integrate further into the American empire remains unanswered

despite the ongoing intensif‌ication of trade and e conomic relation-

ships between the two countries.

Canada has been characterized as evolving from colony to

nation . . . to colony. After Canada moved from the French and

British empires in the seventeenth, eighteenth, and nineteenth

centuries, did it then simply become an economic vassal of the

American empire in the twentieth and early twenty-f‌irst centur-

ies? Patterns of trade and economic development between Canada

and the United States reveal a lot about Canada’s capacity as a

sovereign nation to shape its own destiny, as do patterns of foreign

investment. e capacity of the United States as a sovereign nation

to shape its own destiny, in contrast, never comes into question.

Given the massive imbalance in economic size and popula-

tion, we might reasonably ask, how much does Canada mean to

the United States? As one State Department ocial put it, “e

United States doesn’t have a Canada policy. It has Canada policies.”

Invisible and Inaudible in Washington is the title of a book by Edelgard

Mahant and Graham Mount on the historical lack of an articulated

American policy toward Canada. Other titles like Neighbours Taken

Trade and Economic Policy



for Granted and Forgotten Partnership hint at the nature of the Can-

adian-American relationship, at least as seen in Canadian scholar-

ship. ere is no State Department unit dedicated to Canada-United

States relations, for instance, despite that same department making

the observation: “e relationship between the United States and

Canada is among the closest and most extensive in the world.”

is is ref‌lected in the staggering volume of bilateral trade as well

as in interpersonal contact, with about , people crossing the

border every day before the COVID- pandemic caused restrictions

to be placed on cross-border movement. Since the border reopened

in , the number of crossings returned to pre-COVID- levels.

Presidents Richard Nixon and Ronald Reagan both once referred

to Japan as the United States’ largest trading partner. Both were

wrong. Former Canadian ambassadors to the United States have

documented just how hard it is for Canada to be noticed in Wash-

ington. Yet Canadian governments and civil society are practically

obsessed with relations with the behemoth to the south. Moreover,

this obsession vacillates between love and admiration, and fear and

loathing insofar as Canadian attitudes toward greater continental

economic integration are concerned. is adds up to considerable

challenges in articulating and implementing trade and economic

policy, and deciding appropriate approaches to attracting foreign

investment.

Free trade with Canada, like other Canadian issues, generally

attracts little attention in the United States. A New York Times editor-

ial on Canada-United States free trade entitled “Worthwhile Can-

adian Initiative” won a prize for “most boring headline.” Canada,

on the other hand, has obsessed about free trade with the United

States since the s, with the outcome of several elections having

been determined by the issue.

Managing the contemporary Canadian-American trade and

economic relationship can be roughly divided into two eras — pre-

free trade and free trade. Before the current free trade era, there

was an implicit set of norms that evolved over decades. Formal

and informal behavioural patterns emerged sanctioned by customs