WI: Canadian-American Free Trade in 1911

In the early 20th century, America offered Canada a free trade agreement which the Liberals under Laurier eagerly agreed to. They spent some time writing out the treaty and had it finished by 1911.

Now the reciprocity treaty aroused quite a bit of contreversy and although the Liberals easily had another two more years to their mandate, they decided to bet on it and ran an election on the issue. This back fired and they lost. It should be noted that the agreement passed in the US congress.

Now my WI is this. What if Laurier and the Liberals see the writing on the wall (they lost seats in the last election) and decide to just go for it and sign the treaty. Canada gets free trade with the United States 87 years earlier.

How does this affect Canadian-American relations? Canadian-British relations? the British Empire as a whole?
 
The Tories are going to raise hell over it and would probably force an election on the issue, thus allowing them to win and form a Government. (After all, IIRC, they still believed in protectionism and trade with Britain over the US.) Thus, like OTL.
 
In the early 20th century, America offered Canada a free trade agreement which the Liberals under Laurier eagerly agreed to. They spent some time writing out the treaty and had it finished by 1911.

Now the reciprocity treaty aroused quite a bit of contreversy and although the Liberals easily had another two more years to their mandate, they decided to bet on it and ran an election on the issue. This back fired and they lost. It should be noted that the agreement passed in the US congress.
One of the Main reason for Controversy was a Statement by the Senator from Montana,
During the Debate in the Senate, He began talking about this treaty leading to the Annexation of Canada.
Needless to say, the Opposition in Canada picked up His Statement and Ran with it.
 
dreadnought jenkins

What's in it for Canada? It will lose its own protection against the US's much larger industrial base. Its main products, agricultural and mineral will probably still face resistance from the US given the strong established interests there. Also would it face problems in continuing to trade with current partners? Given that the US generally had higher trade barriers than most other nations at the time would Canada have to impose similar tariffs? This is ignoring of course the cultural and blood links between Canada and the rest of the British empire. Or how the French Canadians feel about getting too closely entangled with the US.

Steve
 
As one might expect, this would strongly benefit the Western agricultural provinces, but heavily damage Canada's Central Canadian manufacturing base.

Cheaper goods, of course, and probably an export boom to the United Sates. However this must be weighed against the loss of manufacturing—whose jobs are better paid, and whose industry represents a national resource in of itself.

Most of East Asia has been highly successful in following an economic model predicated on strong protective trade barriers to shelter infant industry. As they embrace free trade they have industries that are fully up and running, and globally competitive.

Canada generally attempted something akin to that pre-1988, but with less success. For example the Auto Pact with the United States basically transformed Canadian industry in that sector to a branch plant of US companies, with certain exceptions.

Unfortunately Canadian companies (for various reasons) have not generally been globally competitive with or without free trade.

Free trade with the United States in 1911 would probably wind up with the US owning most Canadian industry (and the rest gone) as they found themselves unable to compete.

Further, as the US does now, any disputes arising from free trade would likely be settled (de facto) in American favour. I refer to softwood lumber, where Canada won every legal battle over it (which the Americans ignored) but still lost.

Essentially Canada would become a North American colony of the United States, lacking native industry and with the financial and economic levers controlled by the US.

Whether that's a bad thing, depends on how much free trade increases the per capita GDP of Canada—would could be quite a lot, given that America tends to have somewhat higher per capita GDP than Canada any given year the last century.

Nevertheless Canada's ability to set an independent course from the United States would be lost on any issue the Americans felt strongly about.

One of the Main reason for Controversy was a Statement by the Senator from Montana,
During the Debate in the Senate, He began talking about this treaty leading to the Annexation of Canada.
Needless to say, the Opposition in Canada picked up His Statement and Ran with it.

It was actually the Speaker of the U.S. House of Representatives, James Beauchamp "Champ" Clark, who foolishly stated that the agreement was the prelude to the political incorporation of Canada into the United States.

Also it was by the speed and large majorities (268 to 89, and 53 to 7) by which the treaty passed Congress which scared Canada.


President Taft himself believed it would turn Canada an adjunct to the United States in private letters to Teddy Roosevelt:

Taft said:
It would transfer all their important business to Chicago and New York, with their bank credits and everything else, and it would greatly increase the demand of Canada from our manufactures.
 
dreadnought jenkins

What's in it for Canada? It will lose its own protection against the US's much larger industrial base. Its main products, agricultural and mineral will probably still face resistance from the US given the strong established interests there. ... Or how the French Canadians feel about getting too closely entangled with the US.

Steve

I wasn't aware of strong French Canadian hostility to America; and wouldn't the point of free trade be that Canadian raw materials could cross the border freely?
 
dreadnought jenkins

What's in it for Canada? It will lose its own protection against the US's much larger industrial base. Its main products, agricultural and mineral will probably still face resistance from the US given the strong established interests there. Also would it face problems in continuing to trade with current partners? Given that the US generally had higher trade barriers than most other nations at the time would Canada have to impose similar tariffs? This is ignoring of course the cultural and blood links between Canada and the rest of the British empire. Or how the French Canadians feel about getting too closely entangled with the US.

Steve

It was the agricultural and mineral west and the maritimes that wanted Free trade the most. The west wanted the cheaper American machinery instead of the more expensive and better access to the American market.

The Reciprocity treaty I believe wasn't actualy totally free trade I believe. From what I've gathered is that it was a deal about raw resources with some other manufactured goods, but I can't find what.

Quebec was early on very anti-Britain and very pro-Canada. They wanted Canada to set their own course so I'd expect them to be okay with it outside the industrial areas, which of course, were anti-reciprocity.

Canada has already had free-trade in the past with the United States, and it was generally regarded as a good thing for Canada and the US.

For other relations, I'm not quite sure. I'd love to hear ideas though.

It should be noted that I'm not sold on wether this is a good thing. Such things as the potential destruction of Canadian industry are valid cons.

Would Canada become an adjunct to the USA? Could this lead to some kind of North American EU?
 
Quebec was early on very anti-Britain and very pro-Canada. They wanted Canada to set their own course so I'd expect them to be okay with it outside the industrial areas, which of course, were anti-reciprocity.

Canada has already had free-trade in the past with the United States, and it was generally regarded as a good thing for Canada and the US.

Quebec wanted free trade with the US as a counterweight to being part of Canada. However they voted against the Liberals in 1911 because of Laurier's support for a Canadian Navy.

Free trade was regarded as explicitly a good thing only for the Atlantic and Western provinces, with the Conservative MacDonald government (and Central Canada) preferring instead to build up Canadian industry and in favour of tighter ties with the Empire. (That is, the Conservative Government of the first few decades after Confederation.)

However, as mentioned, it's thirty years too late for free trade to bring any good effects for the Atlantic provinces (by 1940 or so, they should be doing well though).

It would also devastate Quebec and Ontario in the short term, and turn them in branch plant subsidiaries of the United States in the long term.

The Western provinces would make out like bandits. An export boom to the US, and cheaper machinery from the US.
 
Quebec wanted free trade with the US as a counterweight to being part of Canada. However they voted against the Liberals in 1911 because of Laurier's support for a Canadian Navy.

Free trade was regarded as explicitly a good thing only for the Atlantic and Western provinces, with the Conservative MacDonald government (and Central Canada) preferring instead to build up Canadian industry and in favour of tighter ties with the Empire. (That is, the Conservative Government of the first few decades after Confederation.)

However, as mentioned, it's thirty years too late for free trade to bring any good effects for the Atlantic provinces (by 1940 or so, they should be doing well though).

It would also devastate Quebec and Ontario in the short term, and turn them in branch plant subsidiaries of the United States in the long term.

The Western provinces would make out like bandits. An export boom to the US, and cheaper machinery from the US.

I thought as much, though how about in the long term for central Canada?

Was there any truth to the (in retrospect counter productive) boasts about anexation?

Would such economic closeness create more continental organisations earlier or would it scare Canada off anyway? Is there any possiblity of a North American EU?

Would this have any effect on Canada during World War I in terms of arms manufacturing?
 
As if they weren't already because of the National Policy? :rolleyes:

In 1911? They were not. Also you neglect to mention that branch plant or no branch plant, in 1911 ruining the fledging Canadian industrial base is far far different then the effects of free trade on a more or less competitive one, in a time when American industry was also slipping.

They would become branch plants IOTL (helped quite a lot by the free trade Auto Pact) and the same fate would happen ITTL, but in 1911 they were not.

Think of Japan or South Korea (trade barriers to protect infant industry) versus Africa with no trade barriers and hence, no industry. Japan retaining their industrial base into the 21st century while the rest of the Western world has not—that's a good thing, and it's helped them even when their banks and government badly screwed up in the '80s. Japan might have had basically zero economic growth in the '90s, but they retained low unemployment and stable corporations.

Would Central Canada recover? Well, sure. But much of the industry wouldn't, and of course new growth would be owned by the Americans.


The larger effects of the financial sector moving to America (as neither Montreal nor, obviously, Toronto were up to snuff globally at that point in time) would be pretty disastrous above and beyond the eventually recoverable impact to industrial workers and Central Canada.
 
I think EM has the analysis from the Canadian POV pretty much correct: Free Trade might very well result in a richer Canada, but a less self-sufficient one. DJ, however, also seems to suggest that there's potential for the Treaty to pass before an election can stop it. I won't speak to that.

However, it seems to me there are a few fairly interesting points from a US perspective. The biggest one is to reverse the attachment of the US to protectionist policy just as the British Empire might be flirting with it (1911 is about the time when the Conservatives in Britain began to adopt Imperial Preference as a party platform, IIRC)*. If the US can be convinced about 20-40 yrs before GATT or the failure of Smoot-Hawley of the merits for a hegemonic economy of pursuing Free Trade, things get pretty interesting. For one, the response to WWI (or the equivalent) may be different and may entail something like GATT / Bretton Woods as part of the League. (No guarantees it works, though.)

I would have a harder time seeing such an agreement an automatic precursor of a "NAU" situation. For one, there'll be a lot of intervening crises that might affect the situation: a downturn in the US or worldwide, a world war, etc. For another, such a policy in Latin America is much more complex, given the turmoil (eg Mexican Revolution) occurring there OTL. Now, a policy of Free Trade in the Americas coupled with something like a Proto-Good Neighbor policy might be interesting, but it would be a big turn given only a decade prior the US forced the independence of Panama to build the Canal. I'm not sure the participants would be on board with the potential imperial benefits to the USA and imperialists in the USA at this time might not be as open to extending the policy.

*It also occurs to me that Canada adopting (or even flirting more concretely with adopting) such an agreement is likely to have interesting repurcussions in Britain. This could well lead to a government in Britain trying to force Canada out of its agreement, with Canada in turn (and ironically) acting to defend its autonomy by defending its right to make a treaty that essentially abrogrates its industrial autonomy.
 
I wasn't aware of strong French Canadian hostility to America; and wouldn't the point of free trade be that Canadian raw materials could cross the border freely?

Faeelin

What I meant was that the US has officially been free-trade since ~45 but given the political power of the agricultural interests and the nation of US politics, thinking mainly of pork-barrel factors here, I suspect that Canadian primary producers might find trade a lot less free than they expected. There are plenty of ways of restricted trade if part of the government, national or local, wishes to and the rest of the organisation is not strongly motivated to intervene to stop it.

By Quebec I mean the French speaking population has a fairly secure position as a substantial minority with significant safeguards to their language culture etc. Anything that moves towards absorbing Canada, including them, in a much larger Anglo state which doesn't give the same safeguards would probably be pretty unpopular. [Hence why the French province was so distrustful if not hostile to the US in the 1770s and 1812].

Steve
 
I think EM has the analysis from the Canadian POV pretty much correct: Free Trade might very well result in a richer Canada, but a less self-sufficient one. DJ, however, also seems to suggest that there's potential for the Treaty to pass before an election can stop it. I won't speak to that.

I will—the treaty could indeed pass. The Liberals IOTL called an election over the issue, but they could have forced it through, especially if certain Americans hadn't made certain stupid public comments & if the US Congress had been slower and less overwhelming in their vote to pass it.

However, it seems to me there are a few fairly interesting points from a US perspective. The biggest one is to reverse the attachment of the US to protectionist policy just as the British Empire might be flirting with it (1911 is about the time when the Conservatives in Britain began to adopt Imperial Preference as a party platform, IIRC)*. If the US can be convinced about 20-40 yrs before GATT or the failure of Smoot-Hawley of the merits for a hegemonic economy of pursuing Free Trade, things get pretty interesting. For one, the response to WWI (or the equivalent) may be different and may entail something like GATT / Bretton Woods as part of the League. (No guarantees it works, though.)

Now this would be very very interesting. I'm not sure the US would reverse much in the way of protectionist policy (after all, their deal with Canada is mostly aimed at getting cheap the non-industrial production of Canada) but if they at least weaken their protectionist stance somewhat both Europe and America would get quite a lot out of it being at similar levels of development.

I don't think the US would do anything in the Far East, possibly excepting Japan, and Africa remains a backwater.

I would have a harder time seeing such an agreement an automatic precursor of a "NAU" situation. For one, there'll be a lot of intervening crises that might affect the situation: a downturn in the US or worldwide, a world war, etc. For another, such a policy in Latin America is much more complex, given the turmoil (eg Mexican Revolution) occurring there OTL. Now, a policy of Free Trade in the Americas coupled with something like a Proto-Good Neighbor policy might be interesting, but it would be a big turn given only a decade prior the US forced the independence of Panama to build the Canal. I'm not sure the participants would be on board with the potential imperial benefits to the USA and imperialists in the USA at this time might not be as open to extending the policy.

Agreed. However Latin America isn't industrialized much, their short-term benefits would be a lot higher than Canada's. Couple that carrot plus perhaps some increased immigration to the US and the obvious stick that was Panama and I think the US could make a stab at it. Given the way most of Latin America turned out they'd probably benefit in the longer term as well, not least because a stable moderately interventionist America could tamp down the region's tendency to have poor leadership.

*It also occurs to me that Canada adopting (or even flirting more concretely with adopting) such an agreement is likely to have interesting repurcussions in Britain. This could well lead to a government in Britain trying to force Canada out of its agreement, with Canada in turn (and ironically) acting to defend its autonomy by defending its right to make a treaty that essentially abrogrates its industrial autonomy.

Heh. Yours is more likely, but I could also see the British government reacting another way—those darn colonies are trying to establish independence, so let's put together some kind of federal framework. Would give a real kick in the pants to actually making the British Empire work properly as a united entity.


What I meant was that the US has officially been free-trade since ~45 but given the political power of the agricultural interests and the nation of US politics, thinking mainly of pork-barrel factors here, I suspect that Canadian primary producers might find trade a lot less free than they expected. There are plenty of ways of restricted trade if part of the government, national or local, wishes to and the rest of the organisation is not strongly motivated to intervene to stop it.

By Quebec I mean the French speaking population has a fairly secure position as a substantial minority with significant safeguards to their language culture etc. Anything that moves towards absorbing Canada, including them, in a much larger Anglo state which doesn't give the same safeguards would probably be pretty unpopular. [Hence why the French province was so distrustful if not hostile to the US in the 1770s and 1812].

I agree on the top point, the USA can always monkey around simply given the disparity between the two countries. They do so today, and they'd surely do so in the early 20th century.

As for the latter point, Quebec had been swinging around to a different point (though I'm not sure when, exactly, it became obvious): we're in Canada, the US isn't going to absorb us, so let's have stronger ties to Americans as a counterbalance.
 
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