The Canada - U.S. Free Trade Agreement: Implications for the Bilateral Trade Balance

Hereinafter "Legal Text"].2. The FTA evolved under the leadership of Prime Minister Brian Mulroney, elected September, 1984.His Progressive Conservative Party government has made the FTA an issue of central importance.The so-called "Shamrock Summit" in Quebec City in March, 1985, between him and President Reagan marked the symbolic beginning of the present process.However, the former Liberal government under Prime Minister Pierre Trudeau laid much of the groundwork for the FTA.Under Mr. Trudeau, sectoral free trade was seriously discussed and the Royal Commission on the (105) 106 MD.JOURNAL OF INTERNATIONAL LAW & TRADE [Vol.13became law in both countries in time to meet the January 1, 1989, implementation date originally provided for.3 Canada and the United States share the world's largest bilateral trading relationship.In 1987, the value of bilateral merchandise trade approached US$130 billion."The next largest bilateral trade flow, that between the U.S. and Japan, is almost a third smaller.5 From a legal perspective, the FTA represents the second free trade agreement the United States has negotiated.The first, the U.S. -Israel Free Trade Agreement, was signed in 1985.0Some elements of the two agreements are similar and certainly the U.S.-Israeli experience provided a reference for the negotiations.7 From an economic perspective, Economic Union and Development prospects for Canada (the so-called "Macdonald Commission") was instituted.Moreover, long beforehand, the Reciprocity Treaty of 1854 and the Laurier-Borden election campaign of 1911 brought Canadian-American free trade to the forefront.3. Passage of the FTA was quicker in the U.S. than in Canada.On August 9, 1988, the House of Representatives approved legislation (H.R. 5090) to implement the FTA by a vote of 366 to 40.Later, the Senate also approved implementing legislation (S. 2651).In Canada, the FTA became one of the major issues in the November 21, 1988, federal general election which returned Prime Minister Brian Mulroney's Progressive Conservative government to a second majority government.Thus supported, Parliament's passage in December of Bill C2, An Act to Implement the Free Trade Agreement between Canada and the United States of America, came into effect January 1, 1989, after receiving Royal Assent on December 30, 1988.4. See Horlick, "Transition in the U.S. Administration," Canadian Competition Policy Record, Vol. 9, No. 4, pp.36-38 (Dec.1988).All figures are in U.S. dollars unless otherwise indicated.The extent of bilateral trade may be measured in both Canadian and U.S. currency, in real or nominal terms, and in seasonally adjusted and unadjusted figures.The estimate of $130 billion is in U.S. currency, not seasonally adjusted and in nominal terms, as will be all bilateral trade figures in this article unless otherwise specified.5. While the U.S.-Canadian trading relationship is the world's largest, the U.S.-Canada merchandise trade deficit is the second largest U.S. bilateral trade deficit after that for the United States and Japan.See F.N. PECK, PERSPECTIVE ON FOREIGN TRADE, (First Boston Econ.Dept.May 22, 1987).The latter merchandise trade deficit measured $59.8 billion in 1987 (not seasonally adjusted).U.S.