China: Talk of tariffs strictly political?

[msgadget]

The mid-terms are coming up and people are frustrated but imposing tariffs on China won't solve our problems. If they're not talking about the affects of the WTO or *all* trade agreements, either they just don't get it or they're being deliberately misleading.




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Senators Charles Schumer and Lindsey Graham have sponsored legislation that would impose 27.5% tariffs on Chinese exports to the U.S. if Beijing doesn't let the yuan appreciate. And this spring, the Bush Administration may brand China as a "currency manipulator" when it issues a report on key trading partners.

...

What U.S. trade hawks rarely point out is that a big reason China's global trade numbers have ballooned is that foreign companies are prospering on the mainland. About half the exports coming out of China are actually from multinationals producing there. In high-tech, the figure is closer to 90%, led by companies such as Motorola (MOT ) and Nokia (NOK ). Global auto companies such as General Motors (GM ), Toyota (TM ), Nissan (NSANY ), and Honda (HMC ) enjoy huge market share in the Chinese auto market.

And big global banks such as HSBC (HBC ), Bank of America (BAC ), Goldman Sachs (GS ), and Citibank (C ) are making serious inroads into China's rapidly expanding banking and financial services sectors (see BW Online, 1/18/06, "Don't Be Afraid of China").

SOME REFORMS. So tariffs on Chinese exports would hit the earnings of big American companies and take their toll on U.S. stock markets. Morgan Stanley analyst Andy Xie figures a 27.5% tariff would cost companies exporting out of China about $69 billion, most of which would be shouldered by U.S. companies operating on the mainland.

...

For now, though, China has no intention of adopting the kind of shock therapy some in the U.S. are calling for. Schumer and others want China to let the yuan float freely against foreign currencies rather than in a narrow band, as is the case today. Others think Beijing should lift capital controls that prevent most individual Chinese from investing their savings overseas.

...

If the U.S. slaps punitive tariffs on Chinese goods, Beijing will surely retaliate. These tariffs will eventually get passed along to consumers in both countries, and thereby depress growth. Should things really turn nasty, the Chinese could find other uses for the $200 billion or so worth of U.S. Treasury bonds and other long-term fixed investments its central bank holds. That would put upward pressure on U.S. interest rates.

...

So when Hu visits the U.S. this month, expect plenty of heated language and a bit of brinkmanship about unfair trade and Chinese mercantilism. But with any luck it will be just talk, with little real action that could ultimately inflict serious damage to both sides.

[Warpy]

1. Tariffs have to be carefully targeted

and assessed according to the percentage of sales a company that has offshored jobs expects to make in the US. A compnay like Qwest that offshored much of its office staff to India but expects Americans to foot 100% of the cost needs a punitive tariff.

We need to make offshoring as inconvenient and unprofitable as possible. Yes, it will cause inflation in the short term, but this country can't survive on exporting the jobs and the paychecks and importing the bills. It's just not sustainable.

[msgadget]

2. Good idea, Warpy

You should write someone with the idea, put it in your signature line, call C-Span. There aren't a lot of people in office right now (or running) who will touch such a protectionist idea but we can't go on suffering under this globalization beast. If we don't start screaming and keep on screaming through '08, the debate will once again be about some social issue.

Off-shoring isn't going to stop until the countries outsourced to reach full employment and it becomes cost-prohibitive. By that time another cheaper market will have opened up and woosh, that sucking sound hits, say, India. In manufacturing it happened in Mexico, which lost jobs to China and China's outsourcing to Japan and is about to start losing more to The Next Cheapest Underveloped Nation. IT is gone, graphics are going, R&D is well on its way overseas and without intellectual property rights we're nothing. Our trade agreements have to be rewritten with labor and environmental protections for each nation and to return soveriegnity to the regions signing the agreements. The conservative notion that human and labor rights (or even economic impact) do not have to be considered has to be fought vigorously, constantly. Tariffs, even the specific tariffs you prescribe, are a drop in the problem bucket but we've got to start with an idea and move on from there.

Edit to add missing word

[old_techie]

3. Agreed

And dont forget that "guestworkers" are part of the whole globalization mess.

[Quequeg]

4. we should increase tariffs until the outsourcing stops

There was a guy (Jack Davis) who ran for Congress in New York in 2004 and got 44% of the vote. Anyway, this guy owns a manufacturing company and his campaign was all about "saving jobs, farms, and industries."

Though he lost the election, he continues the fight with his website and his association:
www.SaveAmericanJobs.US (not to be confused with .ORG or .COM)

With expertise in manufacturing that spans 40 years, Jack Davis is on a mission to save jobs, farms and industries from government policies that have moved many American jobs out of the country, while undermining the ability of American workers to compete with low-wage earners in other countries and decimating the American middle class.

Anyway, he has some straightforward ideas in this article titled "balanced trade, not fair trade"
http://www.saveamericanjobs.us/sa-jd-sp-040609-balancedtrade.shtml

America needs Balanced Trade. Balanced trade described in simple terms is, if a country desires to sell products to the United States, they are required to buy an equal dollar amount of products or services from the United States.

The United States cannot force another country to do something they don't want to do (example: Iraq).

Historically, the proven method of controlling imports is with tariffs.

To obtain this balance, the United States will charge a balancing tariff (tax) on imported products. The tariff percentage amounts are variable and will be increased in five-percent increments until the trade balance is obtained.

If the United States exports more dollars in trade than it imports from a specific country, the tariff will be reduced until the trade balance is obtained or the tariff is zero.

The ideal Balanced Trade is equal trade with zero tariffs.

Since Red China has the greatest imbalance of trade, 124 billion dollars in 2003, we should apply a ten-percent balancing tariff on their total value of exports. In 2003 this was 152.4 billion dollars.

If ten percent were not sufficient, it would be increased to 15 percent then 20 percent and increased until the balance of trade is obtained. A tariff of 20 percent would provide the U.S. government with 30.5 billion dollars in 2003.

America imported products and services valued at 1.259 trillion dollars in 2003. This produced a trade deficit of 535 billion dollars. A ten-percent tariff on this would have provided the government with 126 billion dollars.

Select your favorite government program; Drugs for the Needy, Education, Social Security, Medicare, National Defense, Reducing the National Debt or Reducing Income Taxes, etc. Here are the funds.
...
Just placing the duty on Red Chinese products will send a strong message to all the other nations: You will be next. America is serious about balanced trade. Start buying American products.

I love the idea of just increasing tariffs until we get the desired result. We could debate forever about what the right tariffs should be, but the goal is clear: balanced trade. It's impossible to figure out what the exact, right tariff should be, because there are just so many factors involved, such as differences in laws for the environment, labor, and the currency. So, we should just gradually increase the tariffs until we get the right result.

Also, we cannot make other countries adopt our laws. So, the idea of dimplomatically and gently encouraging "fair trade" is ridiculous. I mean, other countries resent us when we try to tell them what to do, and they're simply not going to do anything unless they feel it's in their interest. For instance, we're not going to convince China to allow workers to form unions, which will then increase the price of labor. The goal of the Chinese leadership is to keep the price of labor cheap, so that their country can as a "tractor beam" for both our low-tech and our high-tech industries.

Also, even if we did have "fair trade", countries like China have so much cheap labor that it's going to take 50 years, if ever, for the price of their labor to get anywhere near our level. For instance, Delphi Auto Parts pays their workers in their Chinese plants $3/hour (2$ in wages, 1$ in benefits). How long is it going to take to get that up to $60/hour (including compensation) which is what is paid in their American plants.

We don't want economic policies which ensure that we lose in a "fair" way. We want policies that ensure that we win from trade, which means that we need "balanced trade, not fair trade." And if we had balanced trade, then every country would benefit from trade. And that would be fair.

As the first post (by msgadget) makes clear, the reason we supposedly cannot have tariffs is that the multinational corporations and Wall Street would lost some of their profits. Unfortunately, these are the wealthy interests which Congress is inclined to represent, since these wealthy interests fund their expensive PR-managed re-election campaigns. But tariffs would be good for American citizens. Spread the word!!!

www.StopGlobalism.com       www.VOIDnow.org

[msgadget]

5. Thank you so much, Quequeg

Your post brought tears to my eyes. When I hear politicians vaguely refer to fair trade I'm still not encouraged. Every single thing that's wrong with this country today has to do with trade, globalization and a very polluted and manipulated 'free market'. It's so hard NOT to be sucked in by side issues but all lead back to WHY we're not prospering in this booming economy, why we war, why fundamentalism crept back, why our middle class is dying and why the party of the people has found a third way. Until WE talk about it all the time and until those we favor address these issues full on, we're doomed to more of the same in perpetuity.

Now I'm off to read your links.

[Quequeg]

8. You're welcome, msgadget

Yea, the fundamentalism is creepy. There's that book that recently came out called "American Theocracy", which is about the influence of religion on politics.

But also mentions how a growing number of Americans are hoping for the "end times." I read somewhere that people around the world turn more toward religion when their government stops working.

Here's an excerpt from Lou Dobbs, who interviewed the author of the book:
http://transcripts.cnn.com/TRANSCRIPTS/0603/20/ldt.01.html - March 20, 2006

PHILLIPS: One of the reasons I think we have kind of screwed up economic politician <I think the word "politician" should be "situation"> in some ways is that a lot of Americans have stopped worrying about the economy because they're waiting for the second coming.

DOBBS: And you mean this quite literally?

PHILLIPS: I mean it quite literally.

DOBBS: You talk about 30 to 40 percent the electorate is caught up in scripture, exerting their influence, even power, over the White House and the Republican party. You're comfortable that it's that large a number of people, and that indeed that influence is felt that strongly within the White House?

PHILLIPS: Well, I think so. And it's partly because a considerable number of Republicans and conservatives and evangelicals believe that religion should guide politics and they have no hesitation about pushing their view on a whole host of issues. Whether it be the biblical aspect of the Middle East or science on the White House.

DOBBS: Kevin, your new book, a very important book, "American Theocracy," got off to a bang up start today because, when the president was being asked questions in Cleveland, this is -- I'd like to show you what happened there along with everyone watching and listening. If we could roll that.

(BEGIN VIDEO CLIP)

QUESTION: Do you believe this, that the war in Iraq and the rise of terrorism are signs of the apocalypse?

BUSH: I haven't really thought of it that way.

(END VIDEO CLIP)

DOBBS: The question was specifically about Kevin Phillips' new book, "American Theocracy," in which you postulate as we have just said, the influence of -- it's interesting. The answer by the president went on for five minutes. And as one of my colleagues said, a simple yes or no would have done it, it seemed to him. That isn't what we got.

PHILLIPS: He can't. A survey by "Newsweek" several years back found that 45 percent of American Christians believed in Armageddon, that it was coming. And about the same percentage thought the anti- Christ was already on Earth. Now, if you were to take the religious Christians, and the Republican coalition includes most of the religious Christians, you probably have about 55 percent of the Republican coalition that believes in this. He can't answer the question weather or not he believes in Armageddon or it's happening in the Middle East. He's damned if he does and damned if he doesn't.

DOBBS: As a matter of fact, the questioner went on to say, do you believe in this, and if not, why not. Literally, as you put it, he was damned if he did and damned if he didn't. We don't mean that in a sectarian way.

Let's turn to the other aspect of this. The influence, the capture, not only of this White House, but the country by debt. The financializaion, if you will, every word you wrote has a ring of truth to it in that we think of all the debt. We look at the explosion in Wall Street. We look at the explosion in financial instruments. What doesn't go away is that four and a half trillion dollars in trade debt.

Now we can go up to nine trillion dollars with ease because Congress has made it convenient for the treasury to do so. We have unfunded liabilities in Medicare and Medicaid. Trillions of dollars in Social Security. The impact on this country in monumental and it is lasting, isn't it?

PHILLIPS: Unfortunately, it's hard for me to see, short of some panic, that goes into a financial crisis, how you really lessen this and lessening it that way with the vulnerability of housing would be a disaster.

But what's happened in a nutshell is that since the 1970s, you have seen manufacturing in this country slide as a percentage of the GDP from a very large lead back then. And during the 1990s it was passed by financial services, the FIRE sector: finance, insurance and real estate. By 2003, you basically had 21 percent in the FIRE sector, GDP. And you had 13, 14 percent in manufacturing.

Now what's pushed up the roll of financial services in that sector is in most part, debt. In the sense of public, international, private, mortgage, credit cards, huge.

DOBBS: And I don't even dwell on the possibilities or the prospects for panic. Because one can hope against hope that we'll make policy adjustments. But what is clear is that our working men and women in this country, their families, our middle class is at huge risk here. And I have got to ask you. How hopeful are you that we can see this become once again become a government that represent the people who count, who make the country work?

PHILLIPS: I wish I could say I thought that would happen but if you look at two previous leading world economic powers, Britain, 100 years ago, and the Dutch after New Amsterdam, but they were considerable. In each case what happened was an erosion of actually making things, as the society shifted towards trading things and moving money around and all of that sort of stuff.

Once you start to make that transition, there doesn't seem to be any way to go back because you create an elite that is then a set of vested interest in the new way of doing things. And they don't much care whether or not they're still making steel in Sheffield, or in Pittsburgh.

DOBBS: We do have to one advantage. And that is a Constitution and 200 years of tradition and values that have served us well. Maybe it's -- I'm going to be an optimist, Kevin, and I know in your heart you want to be as well, or you couldn't have written such an important examination of the crisis that confronts us.

Kevin Phillips, the book is "American Theocracy." It's terrific -- it's an important read. We thank you for being here. Come back soon. Thank you.

[msgadget]

11. "There doesn't seem to be any way of going back..."

Chilling, isn't it? And, my biggest fear.

As it happens, I am a fan of Phillips and this book is next on my reading list. I'm still slogging through Friedman's relentlessly optimistic The World is Flat. Just my luck, I'm nearly finished and a revised edition has just been released. :(

[Quequeg]

12. I slogged through half of "The World is Flat"

It does have some interesting anecdotes, quotes, and general info, but it's just hard to read a whole book reveling in globalism (due to the fact that we're continually inundated with that point of view.)

As I recall, Friedman seems to think that the answer is for us to work harder. But we already work harder than most everyone in the industrialized world.

http://www.reclaimdemocracy.org/articles_2004/working_poor_business_week.html

...the U.S. has the highest child-poverty rate in the industrialized world... "Our low-income mothers work twice as hard as those in any other industrial country -- but their kids are the worst off"

(Here are the average work hours/day for the 10 wealthiest nations.)
http://www.globalismscorecard.org/stats.htm

But there was another character I recall whose motto was "I will work harder." This was "Boxer the Horse" from Animal Farm, who ended up working himself to death, after which, his body was melted down for glues, hides, and bone-meal. As the farm became more productive, the rations for the animals were reduced, while the pigs got wealthier.
http://www.online-literature.com/orwell/animalfarm/9/

Jeff Faux recently came out with a book called "The Global Class War". Here is Jeff Faux's review of Tom Friedman's "The World is Flat".
http://www.dissentmagazine.org/article/?article=189 - Flat Note from the Pied Piper of Globalization

In any event, Friedman's confidence born of ignorance takes him just so far. Gradually, the book becomes infused with worry that Americans might not be up to the task. We don?t take science and engineering degrees, we lack ambition, we waste energy, and we don't work hard enough.

Much of this is true. We certainly waste energy, and most Americans are not so "ambitious" that they will work themselves to death for Chinese wages. Yet the fact is that Americans work longer hours than workers in any other advanced nation. And as for science and engineering degrees - or for any degrees for that matter, given the flattened world, it is hard to make the case to young people that they should invest in technical professions that are rapidly being outsourced.

Though it's good to work hard for the jobs, perhaps, we wouldn't have to work so hard, if we worked a little harder on our government. And it seems that the economic returns of hard work are shrinking every year. So, we need to work harder on our government, before we all become slaves.
http://www.noslaves.com/

www.StopGlobalism.com       www.VOIDnow.org

[msgadget]

6. Okay, I agree with most of this

but I don't put tariffs low on the list in hopes of fair trade because, as you point out, there's no such thing. I place trade agreements HIGH - right at the top - because of what they chain us to, the elimination of our inherent protections as citizens. Our trade agreements, as you know, bind us to the whims of the corporations and countries they enrich - any inconvenient or 'competition' threatening little local (or big federal) law can just vanish. Tariffs are, I agree, a great opening gambit but I'm afraid that concentrating on them to the exclusion of all the rights our legislators signed away will not gain us lasting individual prosperity and will not restore our democracy.

I highlighted the many so-called American companies who import goods here for sale because tariffs will place more of the burden on consumers at a time when our buying power is about Wally World level. Can you imagine the entire U.S. - liberal, centrist and conservative - in such a circumstance? Do you think the companies who've off-shored will move back here? These are not rhetorical questions, I'm curious about how willing Americans are to shift things back to their favor. I am more than willing to (continue) having lower buying power but I may be in the minority.

[Quequeg]

9. Yes, we need a whole new trade policy.

I think you're right that tariffs aren't the whole issue. We need an overall better trade policy, which includes better trade agreements and removing ourselves from the World Trade Organization, among other things.

But I think tariffs would be an important part of a better trade policy.

And I think jobs & industry would come back to America, if the economic incentives were properly created. We will always want and need to buy things. So, if we have policies that make it cheaper to make the stuff here (as opposed to offshore), then companies will make it here.

Take for example, lawn sprinklers. Those yellow sprinklers were made in America by a small company (Nelson Lawn Sprinklers) in Peoria, Illinois. And then in the year 2005, Walmart gave the company an ultimatem:
1) Either move your production to China
2) or Walmart will buy another brand of sprinklers that is already manufacturing in China.

So, the Peoria company moved it all to China.

But suppose, we put up high tariffs, such that it would be cheaper to make the lawn sprinklers in the U.S. In that case, I don't see why we couldn't restart up the factory and make the lawn sprinklers here again.

And it's not like the lawn sprinklers were prohitively expensive before they moved offshore.

I think that a large part of the reason that goods are cheap is because of improved manufacturing technology as well as distribution technology. I'm not sure that companies really pass most of the savings of cheap labor onto the consumer.

A couple of years ago, I saw this PBS episode of NOW (that comes on every Friday) and Bill Moyers was interviewing a woman who used to work in a clothing sweat shop. While the interview was occurring, they were walking through a clothing store. The woman held up a shirt that was selling for $20 and she said, "sometimes, it makes me sad when I look at this, because I know the person who made it probably only got paid a nickle."

Well, if they're only paying the workers 5 cents, then why are the shirts sold for $20?

The corporatists try to scare us about how the price of everything is going to jump tremendously, if the cheap labor goes away. But we can tell that companies aren't operating very efficiently by the huge CEO salaries.

There was another PBS show about illegal aliens who were picking tomatoes in Florida. The aliens found out that one of their company's customers was Taco Bell. So, they began a huge campaign that took about 5 years to convince Taco Bell to double their pay. Taco Bell finally agreed to double the pay of the tomato pickers. In addition, Taco Bell said that they were not going to have to raise the price of their tacos.

Well, if we can double the pay of illegal aliens and this doesn't result in a price increase, then what are consumers getting for the cheap labor? And where is the savings going?

If we had tariffs, I think that companies would have to absorb most of the costs in order to keep their sales volume high. Prices would go up some, but not tremendously. Corporate profits would be hurt though.

Besides, the main costs that people complain about are the costs of housing, education, and health care. These are domestic industries, which won't be greatly affected by tariffs.

Whatever the consequences of tariffs and other populist economic policies, it would be a very good sign if they were implemented, because it would show that the views of American citizens were finally having some impact on economic policy, which is an area of concern that the elites don't think we even have the right to talk about, let alone control. The main problem with our country is the lack of democracy, especially when it comes to economic issues. So, I'd be happy with any sign this has changed, because then, we can start moving back in the right direction.

I mean, the American people may get it wrong sometimes, but I believe the American people will get it right more often than the elites will, because the elites don't share our interests.

www.StopGlobalism.com       www.VOIDnow.org

[msgadget]

10. I like it,

especially the part about companies absorbing the extra costs. Their profits are enormous yet still they strive for even greater producticity and profitability. But, most of all I love what you say about tariffs sending a message or being a signal WE'RE being listened to. Graham and Schumer went to China and are thinking of a rather small tariff (in comparison to the tariffs China imposes on our imports) - what do you think of their efforts?

I promise I'm not being a naysayer in reminding you the Taco Bell incident happened before...well, before right now. Corporations have ALL the power because, instead of doubling pay, they can even more easily choose to get tomatoes from some underdeveloped nation instead. These days workers don't have ANY power - not even a little bit. Our biggest problem is the precedent setting Wally World and it's crushing pressure on suppliers for the lowest price regardless the human consequences. And, considering they sell every damned thing what industry is as vulnerable as Taco Bell was with the tomato pickers? I personally would LOVE to be able to buy quality American made jeans again - the ones with good weighty denim, genuine flat felled seams, rivets, quality thread stitching - the whole bit. How would we go about signaling our discontent with the quality of the goods they have made abroad? If we shop here Wally World is likely to notice and then raise its heavy foot over our few remaining jeans manufacturers until they cave or move.

[Monk06]

7. The Pandora's Box of Free Trade

It would be useful to examine the history of FTA's between the US and Canada in the last 150 years.
The Treaty of Reciprocity gave Canada and the US tariff free access to US and Canadian markets. In addition both
countries had access to fish resources in each others coastal waters including rivers.

When the treaty was abrogated by the US, instead of accepting to US reinstatement of tariffs on
Canadian goods, Canada responded by bringing all the British North American colonies into
Confederation in order to increase trade outside the American market, creating the nation of Canada
in the process..

Canada at the time consisted of Ontario and Quebec. With free trade it would have remained so
and 'Canada' west of Manitoba would likely have become American territories and eventually
states of the US. The principle of unintended consequences could hardly be better demonstrated.

Tariffs on Chinese goods will force China into accelerating development of new markets in Asia
effectively shutting the US out of the Asian market accept for India which is highly protectionist
WRT trade. Bad deal all around. Globalization is not a movement it is an economic fact. Elvis has
left the building.

For a summery of the Treaty of Reciprocity and its consequences goto

http://canadianeconomy.gc.ca/english/economy/1866us_Ends_Reciprocity.html

The text is in the public domain and hence appears in its entirety

1866 – The United States Ends Reciprocity

Trade relations between Canada and the United States have never been free from disagreements—disputes surfaced in the past as they do today. The two countries have, over time, oscillated between protectionism and free trade. The first free trade between the two countries took place even before Confederation. Goods had moved duty free for more than a decade prior to the termination of the agreement in 1866, a year before Confederation.

In 1854, after years of negotiations, Lord Elgin and William Marcy--the Governor General of British North America and the U.S. secretary of state, respectively--signed the reciprocity treaty. The Elgin-Marcy treaty allowed tariff and quota-free cross-border shipments for a large number of primary products, such as coal, fish, grain, butter, cheese and lumber.

The urge to free trade in North America was prompted by the bountiful fishery off the east coast of the continent and the abundance of Canada’s natural resources. The Americans wanted, more than anything else, to fish in the Canadian waters, and the 1854 treaty ensured that right. The Americans got free access to Canadian seacoasts and bays and the right to enter all creeks and harbors for fishing, with the exception of salmon and shad fisheries. Similar fishing rights in the U.S. waters were also reciprocated to the British North Americans.

The treaty not only marked an increase in trade with the U.S. but also made the two nations interdependent: trade continued to increase even after cancellation of the treaty. By 1868, the U.S. became Canada’s largest export market, surpassing the United Kingdom.

Canada wanted to renew the treaty, but a series of diplomatic frictions with the U.S. made it unlikely. Between 1860 and 1865, the northern and southern states of the U.S. were engaged in a civil war. Canada was regarded by the North as tacitly supporting the South during the civil war. Furthermore, U.S. farmers opposed the treaty as they were receiving lower prices for their produce. For these and other reasons, the renewal of the treaty became almost impossible.

In 1865, the U.S. gave notice that it intended to cancel the Elgin-Marcy treaty in the following year. The original negotiation stipulated that the treaty would remain in effect for at least 10 years, and be revised at the end of the 10-year term. Any party that did not wish to continue should notify the other side 12 months prior to the termination. In March 1866, President Andrew Johnson annulled the first free trade agreement in North America. After that the Canadian government attempted several times to renew the treaty but the U.S. did not show any interest.

The sudden loss of a big export market, however, helped galvanize Canadians into creating a Confederation that would extend from the Atlantic to Pacific oceans, making it the second largest country in size, just smaller than Russia. The Confederation debates of 1864 to 1866 were full of references to larger markets. Since the very beginning of European settlement, Canadians had debated the orientation of its trade strategy: whether it should go east-west or north-south. In 1867, the argument was settled as the province of Canada, consisting of Quebec and Ontario, joined with Nova Scotia and New Brunswick in a Confederation. To consolidate economic ties among the provinces of the new nation, Canada’s first prime minister, John A. Macdonald, soon embraced a protectionist trade policy—the National Policy of 1879—and vigorously expanded the national market through state-assisted railway development.

For more than a century following the termination of the reciprocity treaty, the pros and cons of free trade were debated both in Canada and in the U.S. In 1891 and 1911, actual negotiations for freer trade were engaged, only to be rejected by Canadian voters. Both World War I and World War II served to integrate the Canadian and American economies. The post-WWII pursuit of multilateral trade liberalization also served to merge trade along continental lines.

In 1989, Canada and the United States signed the free trade agreement (FTA), and in 1994, Mexico, Canada and the United States signed the North American Free Trade Agreement , thereby acknowledging the drift towards economic integration of the last half century. In recent years, attempts to expand the free-trade agreement into South America have been undertaken. The issue of free trade, which is older than Confederation itself, will continue to evolve.