Mel Watkins: “I told you so”
By Roger Bill
We were warned, but the Canadian economist Mel Watkins is dead, so he really didn’t say, “I told you so.”
If Mel Watkins had, however, still been among us when U.S. President Donald Trump levied 25 per cent tariffs last week on Canadian exports to the U.S., he could have said, “I told you so.”
In 1987 then Canadian Prime Minister Brian Mulrooney negotiated what was called the Free Trade Agreement with U.S. President Ronald Regan. The country was divided. The Conservative Prime Minister needed the approval of the House of Commons and the Senate to enact the agreement. Mulrooney’s problem was the Senate where the Liberal Party, led by John Turner, held a majority of the seats and was withholding its approval.
Mulrooney called an election the following year. He said the country was “open for business.” The central issue was the Free Trade Agreement. Voter turnout was 76 per cent (in the 2021 federal election it was 62 per cent).
The Liberals produced a campaign ad depicting the border between Canada and the U.S. disappearing. Ed Broadbent, the Leader of the New Democratic Party, said the deal would lead to Canada becoming America’s “51st state.”
Mulrooney’s Conservative Party won the election. The Senate approved the agreement, and the Free Trade Agreement became the Free Trade Act.
On the sidelines of the debate were Mel Watkins and James Laxer, two economists who were members of the NDP and central to the creation of what was called the Waffle wing of the NDP in 1969. The two academics penned what they called a Manifesto for an Independent Socialist Canada. They argued for public control of resources before the creation of the national energy company Petro Canada. They advocated for the Foreign Investment Review Agency. They called the 1987 Free Trade Agreement a “Charter of Rights for Corporations.” They warned of the risks of being the junior partner in a deal with the U.S. At the peak of the Free Trade debate in 1988, Laxer produced a TV documentary called, In Bed With an Elephant.
According to the World Bank, exports represented 26 per cent of Canada’s Gross Domestic Product (GDP) in 1988. Following the Free Trade Agreement and revisions in the 1994 North American Free Trade Agreement, exports grew and by 2000 represented 44 per cent of Canada’s GDP. Translated that means exports to the United States became even more important to the Canadian economy. Now with the Trump tariffs the country is going to discover just how vulnerable it has allowed itself to become.
Justin Trudeau says Trump is serious about his 51st state blatherings. Andrew Furey calls Trump “a maniac.” Nothing seems impossible with Trump. For example, last month on the third anniversary of Russia’s invasion of Ukraine, the General Assembly of the United Nations voted on a resolution blaming Russia for its full-scale invasion and supporting Ukraine’s sovereignty and territorial integrity. Ninety-three countries voted in favour of the resolution. Russia, North Korea, and the United States voted against it.
On the domestic front the American Securities Exchange Commission has withdrawn a years-long legal battle with Coinbase, a cryptocurrency exchange platform. Despite the CEO of Wall Street’s largest bank, JP Morgan Chase’s Jamie Dimon, calling bitcoin “worthless” and telling a Senate Banking Committee, “If I was the government, I’d close it down,” Trump is promoting the creation of a national cryptocurrency reserve. Business journalist Nathan Tankus describes the President’s plan as, “A scam built atop an accounting gimmick wrapped in bullshit.”
In 1988 Canada debated which trade path to follow. Stand alone or become part of a larger North American common market? Mel Watkins warned of the risks, but he probably never thought there would be a felon running the White House.