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Bold bets for our country
It’s time for deliberate action

bold bets
 

VIDEO IS PLACEHOLDER

How a bold bet on the environment rescued NAFTA

"Throughout history, the destiny of nations has often been shaped by change and by chance and by the things that happen to them. And then there are those unique nations who shape their destinies by choice, by the things they make happen."

US President George H.W. Bush, December 17, 1992, at the signing of NAFTA

The story of the North American Free Trade Ageement is not straightforward—nor is it over. Bold thinking was required to win over all the participants for the initial agreement, and more bold thinking will be necessary to keep it going as a relevant and mutually beneficial economic force. Progress: 1965 –The Automotive Products Trade Agreement (a.k.a. the Canada-US Auto Pact) is signed, integrating the Canadian and US auto industries into a shared North American market. 1981 – Ronald Reagan becomes the US president, having campaigned in support of a free trade accord for North America. 1986 – Canada and the US. begin negotiating a free trade agreement. 1988 – The Canada-US Free Trade Agreement (CUSFTA) is signed; Brian Mulroney is re-elected after a campaign in which CUSFTA was the central issue. 1989 – CUSFTA enters into force. 1991 – Canada, the US, and Mexico begin negotiating a trilateral free trade agreement. 1994 – NAFTA, NAAEC, and NAALC become effective. 2004 – Canada-US bilateral trade totals $599 billion (up 57 percent since NAFTA took effect); Canada-Mexico bilateral trade totals $12.5 billion (up 98 percent since NAFTA took effect). 2014 – Canada-US bilateral trade totals $752.3 billion (up 97 percent since NAFTA took effect); Canada-Mexico bilateral trade totals $23.9 billion (up 279 percent since NAFTA took effect). 2015 – Justin Trudeau is elected Canadian prime minister, after campaigning on a platform that free trade agreements are good for Canada’s economy. Challenge: 1984 – Brian Mulroney is elected Canada’s prime minister, after having campaigned against a wider free trade initiative with the US. 1993 – Jean Chrétien becomes the Canadian prime minister, after campaigning on a promise to rewrite or scrap NAFTA. 1993 – Environmental experts raise concerns over the potentially disastrous effects of rapid industrialization in Mexico. 2017 - Donald Trump becomes the US president following a campaign in which he promised to rewrite or scrap NAFTA; Canada, Mexico, and the US begin negotiations to “modernize” the deal. Solution: 1984 – Donald Macdonald, chair of the Royal Commission on Economic Union and Development Prospects for Canada (a.k.a. the Macdonald Commission), calls on Canadians to take a “leap of faith” and seek more open trade with the US. 1985 – The Macdonald Commission report recommends Canada seek a free trade agreement with the US. 1994 - The North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labour Cooperation (NAALC) are proposed as companions to NAFTA. 2018 and beyond – NAFTA renegotiation talks continue…

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

In the wake of Canada’s 150th anniversary, we find an opportunity to look forward to our future

With our sesquicentennial year behind us, we have much to be proud of. Today Canada stands as one of the best countries in the world in which to live and work. An uncertain global economy and the impact of technological change put our prosperity at risk. We face complex challenges that could imperil our prosperity in the years to come: the challenge of increasing global competition and the impact of technological disruption. Complacency will mean falling behind.

It's time to be bolder. Deloitte believes we must consider the type of country we want to be in the decades to come and lay the foundation. The time for deliberate action is now.

 

Canada faces complex challenges and tremendous uncertainty

Canada cannot be the best place in the world to live and work without accelerating strong, sustained economic growth. But as Canadians, we must find the right balance between growth and widespread benefit, and make strategic choices that help us achieve both.

UN Human Development Index Score - Selected countries, 1990-2015

Show Chart DataHide Chart Data
UN Human Development Index Score - Selected countries, 1990-2015
Country 1990 1995 2000 2005 2010 2015
Canada 0.849 0.86 0.867 0.891 0.903 0.92
Norway 0.849 0.883 0.917 0.931 0.939 0.949
Australia 0.866 0.885 0.899 0.915 0.927 0.939
Switzerland 0.831 0.846 0.888 0.904 0.932 0.939
Germany 0.801 0.834 0.86 0.892 0.912 0.926
United States 0.86 0.877 0.884 0.898 0.91 0.92
Canada
Norway
Australia
Switzerland
Germany
United States
 
Complexity High Low Limited Significant Positive impact on Canadian quality of life JackpotGreat potential value with little complexity Bold betGreat potential value with significant challenges Simple winLimited value with relatively simple implementation Long shotComplex action offering some benefits

What is a bold bet?

In the context of a country it involves action — taken by citizens, government, the private sector — that puts the status quo at risk and steers the economy or society in a new and distinct direction.

Get the full report to learn more about Bold bets for our country: It’s time for deliberate action.

2017+ Future endeavours 1998 CPP rescue 1995 Budget cuts 1987 CUSFTA/NAFTA 1982 Canadian Constitution 1966 Universal healthcare 1965 Canada-US Auto Pact 1962+ Oil sands developed 1880s Canadian Pacific Railroad 1867 Confederation

Canada is a country shaped by bold actions

When exploring Canadian history, we can identify clear examples where Canada’s history was shaped by a bold action.

Many bets have shaped our country, but five appear to have had the greatest positive impact on Canada.

 

Lessons learned from history

Focus investment on those industries, sectors, and technologies that will be dominant sources of competitive advantage Create new models and approaches that focus on lifelong learning, diversity of learning, and direct links to the business world outside the classroom Open for business— Canadian style Back Canada’s current and future global champions Disrupt the education status quo Dramatically accelerate our engagement in the global economy to further drive competitive advantage Leading with courage

Our conversations with public and private sector leaders across the country and our own findings point to three initial and crucial areas where difficult choices and alignment between business, government and academia can put Canada on the path to continued success.

 

Back Canada’s current and future global champions

  • Focus investment on those industries, sectors, and technologies that will be dominant sources of competitive advantage

Open for business – Canadian style

  • Dramatically accelerate our engagement in the global economy to further drive competitive advantage

Disrupt the education status quo

  • Create new models and approaches that focus on lifelong learning, diversity of learning, and direct links to the business world outside the classroom

Leading with courage is the key to bold action.

Bold bets for our country: It’s time for deliberate action.

It's time to lead with courage.

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Explore other Canada at 175 reports

Canada at 175 is Deloitte’s multiyear research initiative to study the issues at the heart of Canada’s future success and provide a perspective on our path to prosperity. 

Canada at 175

At Deloitte, we believe Canada can continue to be the undisputed best place in the world to live and work over the next 25 years. Canada at 175 is our multi-year research initiative to study the issues at the heart of Canada’s future success and provide a perspective on our path to prosperity.

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