The U.S.-Canada free trade deal that started it all

It took until almost the very last minute for the U.S. and Canada to agree on the terms of a free trade deal in 1987.

Canada was prepared to walk without a dispute settlement mechanism

Reporter Mike Duffy explains how the deal came together at the last minute. 3:01

It took until almost the last minute for Canada and the United States to agree on a new trade deal this week.

U.S. negotiator Peter Murphy was keen to report an agreement had been reached. (CBC Archives/Sunday Report)

The deal, now known as the USMCA (United States-Mexico-Canada Agreement), was a replacement for NAFTA, the North American Free Trade Agreement.

The situation was eerily similar 31 years ago, when Canada and the United States finally agreed on a bilateral free trade agreement late in the evening on Oct. 3, 1987.

Free trade at last

"It was a handshake more than 75 years in the making," said CBC reporter Mike Duffy, in Washington, D.C. the day after the deal was struck. "Not since Sir Wilfrid Laurier tried and failed have the U.S. and Canada been so close to a free trade deal."

The fine points would be settled over the next 90 days, but the overall terms were set.

Canada had been willing to walk away if it didn't get a key concession: a binding dispute resolution mechanism to be used in the event of a trade dispute.

"What it provides for is a binding decision by a binational panel that would basically take the place of a court review," said U.S. Treasury Secretary James Baker at a joint press conference announcing the deal.

The final agreement was reached about 11:30 p.m., and the Americans announced there was a deal before Prime Minister Brian Mulroney decided to accept the offer, according to Duffy.

Reporter Wendy Mesley recaps the terms of the brand-new deal. 2:26

CBC's Sunday Report devoted almost its entire time slot to the new free trade deal.

Details were still few, but reporter Wendy Mesley had some she could share.

"We may not know the full implications of this historic agreement until later this week," summed up CBC correspondent Wendy Mesley. (CBC Archives/Sunday Report)

"On subsidies and regional development, there is no agreement on a new set of rules. Everything stays in place," said Mesley. "That's good news for Canada."

More good news

There were no changes to Canada's marketing boards, nor to its rules protecting magazine publishing or Canadian television advertising revenues.

But auto tariffs had to go, and Canada had to allow greater access to its market for American wine producers.   

"It's open season on wine," said Mesley, although beer was still protected.

The U.S. set the stage for global free trade but found there was a downside by 1987. 4:00

Trade was a complicated issue for Americans at the time, according to a report filed the same day for CBC's Venture by correspondent Dunnery Best.

"America is of two minds about trade," he said. "The nation is on a buying spree. Goods are pouring in from around the world, and that's causing a trade deficit headed for $150 billion this year."

Americans wanted free and easy access to goods in every category. But they didn't like the impact foreign goods had on domestic industries.

Complicated feelings

"It's an easy symbol of what's wrong with America," said trade lawyer Shirley Coofield. "We have allowed countries free access to our markets and we are being beat out in other markets." (CBC Archives/Venture)

"They want to buy what they want to buy, and nobody's going to tell them they can't buy a Toyota, " said Shirley Coofield, a Washington trade lawyer. "But if they happen to work for the shoe industry, they're just incensed if anyone else is buying imported shoes."

As the trade balance tipped, Americans began to feel uncertain about their role they established leading the world in promoting free trade.

"We've gone from a country that viewed itself as ... having the job of leading the rest of the world toward free trade," said Bob Hertstein, a former U.S. trade policy director. "To a country that feels somewhat besieged by what's happening to it in the international trading system.

"We created a world through American leadership and yet we're not able to succeed in it."

Trade meets 'America first' politics

"You can't get elected now only on foreign trade-bashing," said U.S. lobbyist Frank Manciewicz. (CBC Archives/Venture)

The trade deficit issue was beginning to have a political impact, as leaders in Washington became aware of growing discontent among Americans.

But the trade talks with Canada — the Americans' biggest trading partner — were reassuring.

"If these negotiations ... had flopped, it would have sent a negative signal to the rest of the world," said Best. "Instead, the success of the talks indicates that America still cherishes a belief in liberal trade policies."

Lobbyist Frank Manciewicz said it showed that politicians could no longer get elected only on "foreign trade-bashing," as they had in recent years. 

"You don't think a man could get to the White House by campaigning on an 'America first' trade [policy]?" asked Best.

"No, I do not," said Manciewicz. "There are too many people out there driving Hondas."

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