Stuck on a Spoke:
Proliferating Bilateral Trade Deals
are a Dangerous Game for Canada
e-brief
C.D. Howe Institute
Institut C.D. Howe
August 16, 2007
William B. P. Robson*
Canada’s Minister of International Trade, David Emerson, heralded a free trade
agreement with the European Free Trade Association in June by saying “Canada is
back in the game.” In July, the government announced talks on free trade with
Colombia, Peru and CARICOM (the Caribbean Community). While the new
agreement is an overdue triumph over special interests, and western-hemisphere
liberalization offers economic and political benefits, a broader view of trade policy
shows that Canada has fallen behind — and is perhaps even playing in the wrong
arena.
To be sure, with the Doha Round of multilateral negotiations in the World
Trade Organization stalled, Canada should not merely watch as other countries
pursue alternative trade strategies. Rather than poking about various corners of the
world for new bilateral trade deals, however, Canada’s top priority should be
guarding and enhancing links with its most important partner: the United States.
Canadians seem to have forgotten some key trade interests that were front-
of-mind 15 years ago. Following the 1988 Canada-US Free Trade Agreement (FTA),
many observers saw threats to Canada from proliferating bilateral deals. The main
concern was the emergence of hub-and-spoke arrangements — countries with
larger economies or better negotiators amassing lots of bilateral arrangements with
themselves at the centre.
For Canada, the prospect of life as a single spoke on a US hub was
worrisome. Ron Wonnacott,1 among others, argued that a potential US-Mexican
bilateral FTA threatened Canada in two ways. It would undermine support for
*
I thank Colin Busby for research assistance. John Hancock and Krista Lucenti of the World Trade
Organization, John Manley of McCarthy Tetrault, Finn Poschmann of the C.D. Howe Institute,
and several other reviewers provided valuable comments and discussion.
1
See, for example, Wonna