The North American Free Trade Agreement (NAFTA) has been a political punching bag for more than a quarter of a century. Even now, as negotiators from Canada, Mexico, and the United States work to find a way to update the deal—under threat from U.S. president Donald Trump to scrap it if they fail—it might be hard to remember that NAFTA almost didn’t happen at all. The issue of free trade dominated two general elections in Canada, including the one in 1993 in which both the NDP and Liberal Party of Canada campaigned to either rewrite the deal or walk away from it. Even then, the deal may still have collapsed if not for a little-known and often-overlooked environmental side agreement―and the courage of leaders in all three countries to enact it.
NAFTA is one of the bold bets―courageous decisions and actions―that have propelled Canada forward and positively shaped our history. Like Confederation itself, the building of the transcontinental railway, and the adoption of universal health care, NAFTA has had a truly dramatic and overall positive impact on the course of this country, while overcoming significant challenges to realize these ideas.
Today, the trade deal is widely accepted as a key factor in Canada’s economic prosperity, opening up a $19 trillion regional market with 470 million consumers and creating an economy 2.5 percent larger every year than it would otherwise be. But it took another bold bet―the North American Agreement on Environmental Cooperation (NAAEC), to overcome perhaps the biggest obstacle to successfully reaching a deal.
“A leap of faith”
Bold bets tend to be few and far between because they are usually complex, contentious, and courageous. As fans of the 1980s British television comedy Yes, Minister will know, most politicians shy away from making a “courageous” decision. Sir Humphrey Appleby from the television series once advised, “If you want to be really sure that the Minister doesn't accept it, you must say the decision is ‘courageous’... ’controversial’ only means that will lose you votes. ‘Courageous’ means this will lose you the election!”
When it comes to NAFTA and its predecessor, the Canada-US Free Trade Agreement (CUSFTA), that fictional advice almost became reality.
Brian Mulroney, the prime minister most responsible for leading these agreements, was originally against freer trade with the United States. But a year after the Progressive Conservatives won the 1984 general election on a promise to oppose any free-trade initiatives, he abruptly reversed course when the head of a government commission―former Liberal cabinet minister Donald Macdonald―called on Canadians “to take a leap of faith” and seek more open trade with the United States. Mulroney subsequently won the 1988 election with free trade as the main issue, and used his new majority in Parliament to ensure the CUSFTA became law later that year.
One bold bet leads to another
Unlike NAFTA, NAAEC is virtually unknown despite the vital role it played in getting the free-trade deal ratified and implemented. But like NAFTA, it represents another bold bet that has positively shaped Canada’s future.
The Liberal Party of Canada had vowed to renegotiate or tear up NAFTA in 1993 when Jean Chrétien came into power. However, like Mulroney in 1984, Chrétien became a free-trade convert once in office, not only keeping NAFTA as it was but also coming up with the innovative NAAEC to earn the buy-in of Liberal Party of Canada supporters who hadn’t yet come onside, and make it possible for a skeptical U.S. Congress to ratify NAFTA. Opponents of the deal wanted provisions to protect the environment, fearing that North American industries would move their production to Mexico where environmental laws were less stringently enforced, harming the environment not only there but also across the continent.
Canada and Mexico, both onside for NAFTA, were unwilling to reopen a deal that had taken three years to negotiate. But Canada knew a way had to be found to address these environmental concerns. The logjam was finally broken by keeping the original NAFTA and addressing the environmental concerns in a side agreement. It was the first time such issues were addressed within the context of a trade deal.
Far from being just an afterthought, NAAEC has become an integral part of environmental cooperation in North America, so much so that both Canada and the United States want enhanced environmental protections in any renegotiated NAFTA, even going so far as to suggest bringing those protections into the core of the agreement rather than in a side deal.
Canada needs more bold bets
Few people could have predicted 25 years ago how important the bold bet represented by NAAEC would become to its participants’ prosperity. Yet without it, and without the courage of the leaders of Canada, Mexico, and the United States to incorporate environmental protections into a trade agreement, we might never have seen how NAFTA would grow the North American economy to the benefit of all three countries.
As Deloitte argues in its Bold bets for our country report, Canada needs more strategic thinking like this to address the challenges and opportunities we face as a country. That means not shying away from hard discussions and big decisions that will take us toward the prosperous future we envision 25 years from now.
Bold and courageous decisions will help make Canada the best place to live and work.
Bold, courageous decisions like the one that brought us the North American Agreement on Environmental Cooperation, which made NAFTA possible.
“I’m very pleased that this turned out to be a major win for Canada and that we turned out to be on the right side of history on such an important economic chapter. It’s a tribute to the government of the day and those Canadians in business and elsewhere who supported our initiatives and had the courage to stand up and defend these in very difficult times.”
– Former Prime Minister Brian Mulroney on the 20th anniversary of NAFTA, January 2004