Canadian-American Reciprocity Treaty

The Canadian-American Reciprocity Treaty was a trade treaty between the colonies of British North America and the United States. It covered raw materials and was in effect from 1855 to 1866.

Table of contents

1 Origins 2 Effects 3 End

Origins

After Great Britain moved to free trade and repealed the Corn Laws the Canadas had to search for new sources for their exports, especially of wheat and timber. The treaty was negotiated by the British on behalf of the Canadians. In 1854 the Americans agreed to eliminate 21% tariff on natural resource imports. In exchange the Americans were given fishing rights off the east coast. The treaty also granted navigation rights to each others lakes and rivers to the two nations.

Effects

In Canada there has long been a dispute as the effects of the treaty. The period after the treaty's introduction saw a large increase in Canada's exports to the United States, and a rapid growth of the Canadian economy, especially in what would be southern Ontario. For decades afterwards Canadian economists saw the reciprocity era as a halcyon period for the Canadian economy. Canadian exports to the United States grew by 33% after the treaty, while Americans exports only grew by 7%. Ten years later trade had doubled between the two countries.

After the Second World War this view was challenged, especially by L.H. Officer and L.B. Smith, both University of Toronto economic historians. They argued that the growth of trade was caused by the introduction of railways to Canada and by the Civil War leading to huge demand in the United States. They also argue the statistics are questionable. Before the tariffs much smuggling took place. Free trade brought this trade into the open, but did not actually grow the economy. 1855 saw a poor wheat harvest in the United States and the United Kingdom. It also saw Russian wheat supplies cut off by the Crimean War. This lead to a great year for Canadian week independent of the introduction of the tariff. It was also argued that the trade hurt Canadian manufacturing. For instance the export of milk and barley hurt the Canadian cheese and beer trades.

End

The treaty was ended by the Americans in 1866. This worried Canada and was an important impetus to Confederation in 1867. While the new country attempted to have a return to reciprocity, the Americans would not agree. Eventually John A. Macdonald set up a Canadian system of tariffs known as the National Policy. In 1911 an agreement between Wilfrid Laurier's Liberals and the Americans was rejected by the electorate in the 1911 election. Tariffs did begin to steadily decrease and both nations joined GATT after WWII. Free trade between the two nations did not again come into being until the 1988 Canadian-American Free Trade Agreement, brought in by Brian Mulroney's Conservatives.