A Canadian Perspective on U.S. Administered Protection and the Free Trade Agreement

The negotiation of the Canada-United States Free Trade Agreement over the 1986-1988 period builds upon over 130 years of bilateral trade and investment policy. With Canada's economy being roughly one-tenth the size of that of the United States, the negotiation of commercial arrangements to govern the bilateral trade and investment relationship assumes great importance in the smaller partner. The size asymmetry means that Canada, as the smaller nation, needs to secure a rules-based system rather than a power-based system in its trading relationship with the United States, which accounts for nearly 80% of its exports. Canada is also the largest trading partner of the United States, taking about 25% of all United States exports. The innovative legal framework of the new bilateral free trade agreement, signed by President Reagan and Prime Minister Mulroney on January 2, 1988, is of significant interest to lawyers as well as economists. There are important extensions of the concept of national treatment and right of establishment that will affect investment decisions by businesses in both the goods and service sectors. There are also new dispute settlement procedures and legal processes to be implemented; these can have major implications for the United States-Canadian commercial relationship. In this paper the trade-related measures will be described in detail.