On the evening of Oct. 3, 1987, Brian Mulroney was in his office in the Langevin Block, on a conference call with his team in Washington that had just initialled the Canada-U.S. Free Trade Agreement.
It was almost literally five minutes to midnight, and the expiration of president Ronald Reagan's "fast track authority" to negotiate a deal "up or down," without amendments by the U.S. Congress.
The Americans, led by treasury secretary Jim Baker, had finally agreed to an independent dispute-settlement panel, which they had always refused on the grounds it would impair their sovereignty. For Mulroney, the dispute-settlement mechanism was his deal-breaker.
Mulroney had explained to Baker earlier that he would be calling Reagan at Camp David, and asking him to explain how the Americans could make a nuclear-arms reduction deal with their worst enemy, the Soviets, but couldn't make a trade deal with their best friends, the Canadians.
Baker asked for about 20 minutes and later burst into his own boardroom at the U.S. Treasury, where the Canadians were gathered, threw a piece of paper on the table, and said, "There's your goddamn dispute-settlement mechanism."
It was the making of a historic deal, 25 years ago Wednesday. On the open call to his delegation, Mulroney asked one question: "Is this better than what we've got?"
It was a moment when time stood still. And the answer, from his chief of staff, Derek Burney, in Washington:
"Yes, prime minister."
"Then, go ahead."
Later, in the wee small hours of Sunday morning, Mulroney met the media at the bottom of the Langevin staircase and said: "A hundred years from now, all that will be remembered is that it was done, and the naysayers will be forgotten."
Twenty-five years on, Mulroney's reflections on the anniversary are published in a Q&A in Inside Policy, the new magazine of the Macdonald-Laurier Institute.
"We're a much more confident, outward-looking people," he says. "We're much more confident and competitive because we know we can compete and succeed with anyone in the world. Look, if you can do it with the United States of America, you can do it with anyone."
And in a 25-year impact study published in the same issue, BMO Capital Markets deputy chief economist Douglas Porter concludes the FTA, and subsequently the North American Free Trade Agreement of 1992, "were critical ingredients in helping modernize the Canadian economy, and have ultimately played a big role in transforming Canada from a relative underachiever among industrial world economies to a relative overachiever."
There are two particular standouts, bilateral foreign direct investment and energy trade, notably oil and gas.
The BMO study notes that "U.S. direct investment in Canada has jumped from $76 billion in 1988 to $326 billion today," or nearly 19 per cent of Canada's GDP. Canadian direct investment into the U.S. has also jumped from $51 billion then to $276 billion, or 16 per cent of our GDP.
Energy has been a huge winner under free trade. The deal in the FTA was security of access to the U.S. in return for security of supply from Canada. Exports of oil and gas, including refined product, were $102 billion last year, or 22 per cent of all our merchandise exports to the world. That's up from $17 billion and 11 per cent of exports in 1992, states BMO Economics. More than 99 per cent of all our oil and gas exports go to the U.S., where it sells at a discount, but a $100-billion export segment is a stunning number.
Other sectors of the economy that were supposed to be losers under the FTA have come up big winners, such as the wine and clothing industries. It's no mystery - instead of producing plonk, Ontario and B.C. are now making world-class wines. Peerless Clothing of Montreal is the world's largest maker of men's suits.
After a decade of spectacular growth, exports to the U.S. levelled off in the first decade of the new century. The loonie is now a petro-currency at parity with the U.S. There was the thickening of the border after 9/11, and the financial crisis and recession of 2008-09, which hurt trade. But overall, it's clear that Canada is a more prosperous place because of the FTA.
Finally, there's the intangible benefit of a change of mindset.
"I think that's one of the big achievements of the Free Trade Agreement," Mulroney says, "the transformation of our attitudes from being somewhat timorous about the Americans, and somewhat fearful of the Americans, to a situation where Canadians are not only confident about dealing with our friends in the U.S., but also around the world."
Inside Policy editor L. Ian MacDonald is a former chief speechwriter to Brian Mulroney.
l.ian.macdonald @macdonaldlaurier.ca
