Transatlantic Free Trade: Not a Novel Idea at All

The benefits of the Conservative government’s recently signed trade deal with the European Union are going to be unknown for some time. It will take an army of economists, lawyers and political scientists to assess the pros and cons of that deal and to measure its benefits for the Canadian economy (or lack thereof).

Whatever the outcome of this assessment will be, however, this transatlantic agreement has been in Canada’s dreams since 1948. It is not a novelty by any standard.

It was in the late 1940s when Canada, along with the United States, negotiated the Washington Treaty, which created the North Atlantic Treaty Organization in 1949. Representatives from Canada, the United Kingdom and the US were part of the core drafting team; delegates from Norway, Denmark, Iceland, Portugal and Italy later joined for the final negotiating sessions.

The lesson learned from that time was that Canadian foreign and economic policy should go hand in hand rather than be seen as mutually exclusive.

The strategy for the government of Prime Minister Louis St. Laurent was very clear. In addition to convincing the Americans of the benefits of a transatlantic alliance (yes, they needed to be convinced) Canadians wanted to foster the transatlantic interdependence of national economies.

Canadian negotiators were pushing for some sort of a political and transatlantic free trade regime during the negotiations where states from both sides of the Atlantic would be subject to fewer tariffs and trade barriers and closer political co-operation. This, so the hope went, would diminish future transatlantic tensions, increase co-operation, and thus contribute to a lasting peace in Europe.

Canadian negotiators were clever and successful, but unlucky. They succeeded in pushing the US and the UK in particular to agree to what has become Article 2 of the treaty. The most important sentence of this article is the last, which up until this day says that the NATO allies “will seek to eliminate conflict in their international economic policies and will encourage economic collaboration between any or all of them.”

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Article 2 became commonly known as the Canadian article, recognizing Canada’s extensive lobbying efforts and vision for a different type of alliance. Canadian idealism about NATO, however, was short lived and overshadowed by the Korean War in 1950 that dragged NATO deep into geostrategic east-west rivalries of the Cold War.

It left no room for building a transatlantic trade regime, and security trumped the trade agenda for decades to come. Above all, foreign policy became national security policy, not national economic policy, and Canada actively took part in this by contributing to building NATO’s large conventional force postures in Western Europe. The consequence was that NATO strived institutionally, but the idea of a transatlantic security regime basically died off.

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At the Cold War’s end, the Canadian article and its reaffirmation of the importance of NATO on the one hand and the transatlantic economic relationship on the other hand were revisited. Once again, Canadian negotiators embarked on a strategy to recall Article 2 and to use it to gain access to the new and evolving markets in Central and Eastern Europe.

This time around, the difference was that the Canadian government was faced with a huge federal deficit that brought this country to the brink of bankruptcy. For sure, moving some trade experts to DFAIT to promote Canada’s new foreign (economic) policy helped along the way, yet not exclusively. The lesson learned from that time was that Canadian foreign and economic policy should go hand in hand rather than be seen as mutually exclusive.

It took until the next economic crisis in 2008-09 to rekindle the idea of a transatlantic free-trade zone, and about 65 years for a Canadian dream to finally come true. The last hurdle that remains are the 28 EU member states that have to ratify the agreement.


Published in Embassy Magazine, December 16, 2013

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