Negotiations toward a free trade agreement with the U.S. began in 1986. The two nations came together and agreed to the Canada-U.S. Free Trade Agreement (FTA) in 1987. This historic agreement placed Canada and the United States at the forefront of trade liberalization.
Key elements of the agreement included the elimination of tariffs, and the reduction of many non-tariff barriers, and it was among the first trade agreements to address trade in services. It also included a dispute settlement mechanism for the fair and expeditious resolution of trade disagreements. Of particular importance to Canada was the fact that the FTA established a ground-breaking system for the binational review of trade remedy determinations, providing an alternative to domestic judicial review. In practical terms, Canada and the U.S. agreed to remove bilateral border measures on traded goods, which included the removal of tariffs on goods such as meat products, live animals, wine, clothing and textiles, as well as most agricultural products.
Shortly after the implementation of the Canada-U.S. Free Trade Agreement, Canada, the U.S. and Mexico negotiated the North America Free Trade Agreement, creating the largest free trade area in the world. NAFTA established a strong foundation for growth and has proven a valuable example of the benefits of trade liberalization for all three countries.