A Large But Poor Economy

My age is showing. When I tell my students at Carleton University about my involvement in the 1986–88 Canada-U.S. free trade negotiations, they regard me as a fossil. The most strident Canadian political controversy of a generation holds little but historical interest for them.

There is, of course, quite a lot of history there. For generations, politicians held fast to the notion that free trade with the United States might make economic sense but that it was a political loser. That idea had been hammered home in two national elections and held sway for nearly a century. In both 1891 and 1911, the Liberal Party, led by Sir Wilfrid Laurier, staked its future on the economic benefits of bilateral free trade and in both cases lost to the Conservatives, first under the leadership of Sir John A. Macdonald and later under that of Sir Robert Borden. Both Tory leaders were able to convince the electorate that freer trade spelled political ruin for the young Dominion. Free trade thus earned its reputation as a political graveyard. Based on the historical norm, Brian Mulroney’s decision to take the issue to the electorate in 1988 was thus more of a political gamble than most people might have appreciated.

Circumstances, of course, are never the same, as we learn from these two lively, informative and well-researched accounts of the two earlier elections, but the parallels are what will strike veterans of the 1988 election. The arguments and rhetoric advanced by both sides in 1891 and 1911 have an all-too-familiar ring, as do the critical roles played by the provincial premiers, the media and the business community.

Both Christopher Pennington’s The Destiny of Canada: Macdonald, Laurier and the Election of 1891 and Canada 1911: The Decisive Election That Shaped the Country by Patrice Dutil and David MacKenzie are a pleasure to read and evoke many memories. They also fill in many details about these two fascinating elections, each of which played a pivotal role in defining the kind of country that Canada would become. Economic historians have pointed out that Canadians chose a less prosperous path, but one that strengthened the development of unique Canadian cultural and political preferences, including a deeply embedded suspicion of many things American. These two elections also confirmed for the Maritime and the Western provinces the weight of Ontario and Quebec in determining election outcomes. The 1911 election, in particular, harmed Prairie export interests and spawned the first of a series of populist movements—the Progressives—that ended the two-party political system established at Confederation.

Both books skillfully sketch the political context within which the elections were fought, each making the case that while other issues may have preoccupied Canadians at the time—from race and religion to education and defence—it was their attitudes to two free-trade initiatives that dominated the electoral debate and shaped party platforms.

By 1891, Macdonald had been in office for nearly 19 years and had led the Conservatives into battle in all seven previous campaigns. His aversion to free trade in 1891 arose less from principle than from political calculation. His own protectionist National Policy, championed in the 1878 election, had developed in response to repeated American rebuffs of Canadian proposals for reciprocity. By 1891, the National Policy, while far from successful as an economic policy, had attracted enough adherents to capitalize on patriotic jingoism combined with linguistic and religious tensions to re-elect Macdonald one more time.

As Pennington explains, Laurier, the new and untried Liberal leader, had more or less backed into championing “restricted reciprocity”—the accepted terminology for free trade at that time—as a result of both Conservative policies and U.S. trade policy. Debate over Macdonald’s National Policy and its implementation had polarized attitudes within the Liberal party. By making protection an integral part of Conservative policy to knit Canada together from east to west, Macdonald had forced the Liberals to adopt reciprocity with the United States as central to their approach. Given the perceived meager results of the National Policy, however, the Liberals had decided to champion unrestricted reciprocity at the next election, a more radical version of reciprocity than had been espoused earlier.

The 1854 Elgin-Marcy agreement had extended tariff-free trade on a reciprocal basis to 28 products: both Canada and the United States would admit these products free of tariffs. After U.S. abrogation of that treaty in 1866, subsequent Canadian efforts sought to replicate this approach on a mutually agreed range of products. The new Liberal proposal sought to introduce tariff elimination on a much wider range of products, without requiring that either side reciprocate on the same products. As a result, Canada would seek free access on products of greatest interest to Canadian exporters, while the U.S. would seek free access on its own range of products.

In an effort to outflank the Liberals and respond to mounting criticism of the high tariffs of the National Policy, Macdonald had authorized one more try at old-fashioned reciprocity. He had tried to attract U.S. interest in 1885 and at the beginning of 1891 made another quiet overture, once again to be rebuffed by U.S. officials. Given the U.S. response, Macdonald knew his policy for the next election. He would rely on a burst of patriotism and the slogan “the Old Leader, the Old Policy, the Old Flag.” Macdonald now maintained that even old-fashioned reciprocity would lead to economic and political ruin.

Pennington provides us with a host of detail on the organization of the election, the role of the leaders, the challenge of finding viable candidates, the problem of dealing with loose cannons in both parties (and, for the Liberals, with those in the United States), the large role played by the highly partisan press and the influence of various interest groups. The result is a thorough and satisfying explanation of the reasons that Macdonald and the Conservatives held onto power. Pennington shows convincingly that, absent the emotional forces raised by reciprocity, the Liberals had every reason to be optimistic. The Conservatives had grown tired after 13 continuous years in office. Patronage—or boodling, as it was then called—had morphed into clear instances of corruption. Macdonald’s hold on Quebec could now be challenged by an attractive native son. Time had allowed the Liberals to build stronger constituency and provincial organizations. The prognosis for Laurier and his colleagues looked good, except that they had miscalculated Macdonald’s uncanny ability to tug at emotional heart strings. He was out of the gate first with a manifesto that framed the election as a matter of Canada’s survival as a British nation. Laurier never succeeded in recasting the issue as a matter of prosperity. The result was a clear victory for Macdonald.

Laurier’s time, however, would come. Macdonald’s death soon after the election led to a succession of less skillful leaders. During the Liberals’ time in office, Laurier worked at building the party in his own image. His chance came in 1896, and he was rewarded with a resounding victory, followed by further triumphs in 1900, 1904 and 1908. He proved a worthy successor to Macdonald, displaying the same kind of genius for compromise and moderation that nurtured Canada’s further development as a nation despite linguistic, ethnic, religious, regional and other tensions.

On the trade front, he had learned his lesson. He recruited W.S. Fielding, the premier of Nova Scotia, to become his finance minister and relied on the veteran Richard Cartwright to carry trade and commerce. Macdonald had established the protective tariff as a policy instrument for inducing the growth of import-substitution industries, but Fielding and Cartwright made it into a pragmatic instrument of trade and industrial policy, one that coincided with a period of growth and prosperity. As a result, trade policy contributed significantly to the Liberals’ hold on power in the opening decade of the 20th century.

By 1910, reciprocity with the United States appeared to have been truly banished from Canadian policy thinking. Or perhaps not. This is the story explored by Dutil and MacKenzie. They can be excused for insisting on the uniqueness of the election. To me, the continuity between the 1891 and 1911 elections was remarkable. In each case, a government perhaps too long in office faced a challenger with fresh ideas and appealing new personalities. Both elections boiled down to a referendum on the extent of the Dominion’s ties to Britain, with Canada-U.S. reciprocity the most prominent element, but naval defence and other values also played a role. Conservatives and Liberals took the same positions as they had in 1891, but this time the Conservatives were the challengers and the Liberals were holding the reins of power. Both elections shaped the country and both ensured a larger but poorer economy. Each confirmed protectionism as the default position, a political preference not challenged until the final years of the 20th century.

Like Pennington, Dutil and MacKenzie devote considerable attention to setting the political context and circumstances that placed reciprocity at the centre of the electoral debate. They sketch in detail events in Ottawa and Washington that convinced Laurier to give reciprocity one more chance. After two years of diplomatic overtures and careful negotiations, the two governments succeeded in crafting a sensible agreement that met the political sensitivities of both sides. The U.S. proposal for wide-ranging reciprocity had been firmly rejected. In its place, Fielding had negotiated an agreement that gave the western farmers access for their products to the U.S. market plus reduced rates on imported agricultural implements that improved access for mineral and forest products, and that retained protection for Ontario manufacturers. With this agreement, the Liberals had protected the National Policy and married it to the original goal of reciprocity, combining the political appeal of both policies.

The Liberals’ triumph, however, proved short lived. They had miscalculated the strength of protectionism among Canadian manufacturers. Even before the results of the negotiations were announced, they had begun to plot strategy and then condemned the agreement as thinly disguised free trade. More critical to their case (given the weakness of their substantive position), manufacturers insisted that reciprocity in any form undermined the imperial connection and would harm Canadian independence of action. Again, debate on the trade policy merits of the agreement was overshadowed by appeals to patriotism and warnings about the imminent demise of the country.

Two campaigns were waged that summer. In Quebec, reciprocity hardly raised a ripple. There the issue was Laurier’s decision to demonstrate his commitment to the Empire by developing a Canadian navy. To Quebec Nationalists and their spokesman, Henri Bourassa, Laurier had sold out to the Empire and the Reciprocity Agreement was no more than a smokescreen to hide the government’s true intentions. In Ontario, the naval decision was characterized as an inadequate substitute for contributing directly to the imperial navy, while the Reciprocity Agreement spelled the end of Canada. Even in the West and the Maritimes, where some saw the Reciprocity Agreement as a pitiful surrogate for the real thing, Laurier’s imperial connections were considered suspect. The result was one of the meanest election campaigns in Canadian history. An unholy alliance between Borden Conservatives, disaffected Liberals and Bourassa Nationalists focused on the common enemy for diametrically different reasons.

The election results were decisive. The popular vote split was close: 51 percent for the Conservatives and Nationalists and 48 percent for the Liberals, but Borden could count on a solid parliamentary majority. Laurier and Fielding went down to personal defeat. Reciprocity was dead for at least two generations and the Conservative version of the National Policy was safe. Canada was no longer a nation of farmers and merchants. The manufacturing interests had shown their strength. For the next 70 years, no government would be prepared to confront their protectionist instincts. Only with a change in the views of business would bilateral free trade become politically acceptable.

All this is skillfully told in these two books. The authors searched the archives, the contemporary press, personal diaries and letters, and official documents and crafted two books that should appeal to a wide readership. Their appeal is enhanced by the decision to concentrate on narrative until the concluding chapter in each book, at which point they draw out the broader meaning of each election on the basis of solid documentary evidence. Pennington and Dutil and MacKenzie are to be congratulated for bringing the issues that dominated these important elections to the attention of modern readers in such entertaining and informative styles.