Canada's Experience with Trade Policy

Karyne Charbonneau, Daniel de Munnik () and Laura Murphy

Discussion Papers from Bank of Canada

Abstract: This paper compiles the contemporary view on three major Canadian-led trade policies that have marked Canada's economic history since Confederation: the National Policy (1879), the Canada-US Agreement on Automotive Products (Auto Pact, 1965) and the Canada-US Free Trade Agreement (FTA, 1989, including its extension to the North American Free Trade Agreement, NAFTA, 1994). The National Policy imposed broad-based tariff increases on imported manufactured goods with the primary intention to promote the development of the Canadian manufacturing sector. However, its effects on the manufacturing sector and on welfare overall were likely negative. The Auto Pact (which helped to liberalize trade in automobiles and auto parts between Canada and the United States) and the Canada-US FTA and NAFTA reversed the protectionism established under the National Policy generations earlier. These agreements generated more trade flows among Canada, the United States and Mexico and had positive benefits for Canadian consumers and producers. Because of production specialization and lower import prices, all participating countries benefited from trade liberalization. These benefits tend to be widely dispersed and fully realized over the longer term. In contrast, trade liberalization can also create significant short-run adjustment costs, negatively affecting certain industries and workers.

Keywords: International topics; Trade Integration (search for similar items in EconPapers)
JEL-codes: F13 N71 N72 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2018
New Economics Papers: this item is included in nep-his and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocadp:18-1

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