National Policy
Encyclopedia
The National Policy was a Canadian
economic program introduced by John A. Macdonald
's Conservative Party in 1876 and put into action in 1879. It called for high tariff
s on imported manufactured items to protect the manufacturing
industry. Macdonald campaigned on the policy in the 1878 election
, and defeated the Liberal Party
, which supported free trade
.
. He was also closely linked to the Montreal
and Toronto
business interests that would benefit from such a policy, and they played an important role in keeping the Tories in office until 1896.
Despite a brief experiment with free trade in the Canadian-American Reciprocity Treaty
before Confederation
, the Americans were intent on pursuing a strongly protectionist policy, with tariffs higher than Canada imposed under the National Policy.
With such high American tariffs, Canadian firms could not compete in the United States, but American firms could enter Canada. Canadian producers were particularly hurt by US producers dumping surplus goods in Canada, so as not to lower prices in the United States. tariffs were put on goods coming into Canada. These tariffs would make American goods more expensive.
The policy was introduced in the budget on March 14, 1879, and it created high tariffs on the import of most manufacturing goods. At the same time, the tariffs on raw materials were lowered also to help manufacturers. The tariff was not as high as that in the United States, however. The Canadian government was dependent upon revenue from customs - an income tax
had not yet been introduced, largely because it was feared that would hurt immigration at a time when Canada was having trouble attracting immigrants. Too high a tariff would have cut off almost all imports, thus depriving the government of revenue.
The policy quickly became one of the most central aspects of Canadian politics, and it played an important role in keeping the Tories in power until 1896, when Wilfrid Laurier
and the Liberals campaigned on a promise to keep the National Policy in place. While many Liberals still supported free trade, the National Policy was too popular in Ontario
and Quebec
to end. When the Liberals campaigned on free trade in the 1911 election
, they lost the election.
כטםפעװױ׳ש
. This opposition to the National Policy played an important role in the rise of the Progressive Party of Canada
in the 1920s. Its platform was entitled the "New National Policy", and it advocated free trade.
and Louis St. Laurent
. At the same time, the United States was lowering its tariffs. Economic integration surged during World War II, and in 1965 the automobile industry in the two nations became fully integrated. Complete free trade was not achieved until 1988 with the Canadian-American Free Trade Agreement brought in by Brian Mulroney
's Progressive Conservative
government.
In the years right after the policy was introduced, Canada experienced the same type of economic boom that many other nations experienced, as well as the construction of a manufacturing base and the development of the nation, which is generally what the Tories and economic nationalists use to justify the policy. However, Canada also suffered a net population ouflow, as more people emigrated out of Canada (usually for the United States), than arrived as immigrants.
Eden and Molot (1993) argue that there have been three national policies in Canada: the "National Policy" of defensive expansionism, 1867-1940; compensatory liberalism, 1941-81; and market liberalism, starting in 1982. The defensive expansion phase relied on the tariff, railway construction, and land settlement to build the country. The second national policy combined a commitment to the GATT system, Keynesian macroeconomic policies, and the construction of a domestic social welfare net. Current national policy relies on Canada-US free trade and NAFTA free trade, market-based policies, and fiscal restraint. They argue for a fourth policy called "strategic integration." It would consist of free trade, both external and internal; the building of a national telecommunications infrastructure based on the development and diffusion of information technologies; and human capital development.
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
economic program introduced by John A. Macdonald
John A. Macdonald
Sir John Alexander Macdonald, GCB, KCMG, PC, PC , QC was the first Prime Minister of Canada. The dominant figure of Canadian Confederation, his political career spanned almost half a century...
's Conservative Party in 1876 and put into action in 1879. It called for high tariff
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
s on imported manufactured items to protect the manufacturing
Manufacturing
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...
industry. Macdonald campaigned on the policy in the 1878 election
Canadian federal election, 1878
The Canadian federal election of 1878 was held on September 17 to elect members of the Canadian House of Commons of the 4th Parliament of Canada. It resulted in the end of Prime Minister Alexander Mackenzie's Liberal government after only one term in office. Canada suffered an economic depression...
, and defeated the Liberal Party
Liberal Party of Canada
The Liberal Party of Canada , colloquially known as the Grits, is the oldest federally registered party in Canada. In the conventional political spectrum, the party sits between the centre and the centre-left. Historically the Liberal Party has positioned itself to the left of the Conservative...
, which supported free trade
Free trade
Under a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...
.
Manufacturers
There were few factories in Canada when the policy began. Macdonald hoped that by creating a strong manufacturing base in Canada, the nation would become more secure and less reliant on the United StatesUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
. He was also closely linked to the Montreal
Montreal
Montreal is a city in Canada. It is the largest city in the province of Quebec, the second-largest city in Canada and the seventh largest in North America...
and Toronto
Toronto
Toronto is the provincial capital of Ontario and the largest city in Canada. It is located in Southern Ontario on the northwestern shore of Lake Ontario. A relatively modern city, Toronto's history dates back to the late-18th century, when its land was first purchased by the British monarchy from...
business interests that would benefit from such a policy, and they played an important role in keeping the Tories in office until 1896.
Despite a brief experiment with free trade in the Canadian-American Reciprocity Treaty
Canadian-American Reciprocity Treaty
The Canadian American Reciprocity Treaty, also known as the Elgin-Marcy 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 1854 to 1865...
before Confederation
Canadian Confederation
Canadian Confederation was the process by which the federal Dominion of Canada was formed on July 1, 1867. On that day, three British colonies were formed into four Canadian provinces...
, the Americans were intent on pursuing a strongly protectionist policy, with tariffs higher than Canada imposed under the National Policy.
With such high American tariffs, Canadian firms could not compete in the United States, but American firms could enter Canada. Canadian producers were particularly hurt by US producers dumping surplus goods in Canada, so as not to lower prices in the United States. tariffs were put on goods coming into Canada. These tariffs would make American goods more expensive.
The policy was introduced in the budget on March 14, 1879, and it created high tariffs on the import of most manufacturing goods. At the same time, the tariffs on raw materials were lowered also to help manufacturers. The tariff was not as high as that in the United States, however. The Canadian government was dependent upon revenue from customs - an income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...
had not yet been introduced, largely because it was feared that would hurt immigration at a time when Canada was having trouble attracting immigrants. Too high a tariff would have cut off almost all imports, thus depriving the government of revenue.
The policy quickly became one of the most central aspects of Canadian politics, and it played an important role in keeping the Tories in power until 1896, when Wilfrid Laurier
Wilfrid Laurier
Sir Wilfrid Laurier, GCMG, PC, KC, baptized Henri-Charles-Wilfrid Laurier was the seventh Prime Minister of Canada from 11 July 1896 to 6 October 1911....
and the Liberals campaigned on a promise to keep the National Policy in place. While many Liberals still supported free trade, the National Policy was too popular in Ontario
Ontario
Ontario is a province of Canada, located in east-central Canada. It is Canada's most populous province and second largest in total area. It is home to the nation's most populous city, Toronto, and the nation's capital, Ottawa....
and Quebec
Quebec
Quebec or is a province in east-central Canada. It is the only Canadian province with a predominantly French-speaking population and the only one whose sole official language is French at the provincial level....
to end. When the Liberals campaigned on free trade in the 1911 election
Canadian federal election, 1911
The Canadian federal election of 1911 was held on September 21 to elect members of the Canadian House of Commons of the 12th Parliament of Canada.-Summary:...
, they lost the election.
כטםפעװױ׳ש
Unpopular in west
While the policy was popular in central Canada, it was extremely unpopular in western Canada. The policy forced farmers to buy Canadian agricultural equipment at higher prices, but they also had to compete on the international market for grainCereal
Cereals are grasses cultivated for the edible components of their grain , composed of the endosperm, germ, and bran...
. This opposition to the National Policy played an important role in the rise of the Progressive Party of Canada
Progressive Party of Canada
The Progressive Party of Canada was a political party in Canada in the 1920s and 1930s. It was linked with the provincial United Farmers parties in several provinces and, in Manitoba, ran candidates and formed governments as the Progressive Party of Manitoba...
in the 1920s. Its platform was entitled the "New National Policy", and it advocated free trade.
Dismantled by Liberals
The National Policy was slowly dismantled under the many years of Liberal rule under William Lyon Mackenzie KingWilliam Lyon Mackenzie King
William Lyon Mackenzie King, PC, OM, CMG was the dominant Canadian political leader from the 1920s through the 1940s. He served as the tenth Prime Minister of Canada from December 29, 1921 to June 28, 1926; from September 25, 1926 to August 7, 1930; and from October 23, 1935 to November 15, 1948...
and Louis St. Laurent
Louis St. Laurent
Louis Stephen St. Laurent, PC, CC, QC , was the 12th Prime Minister of Canada from 15 November 1948, to 21 June 1957....
. At the same time, the United States was lowering its tariffs. Economic integration surged during World War II, and in 1965 the automobile industry in the two nations became fully integrated. Complete free trade was not achieved until 1988 with the Canadian-American Free Trade Agreement brought in by Brian Mulroney
Brian Mulroney
Martin Brian Mulroney, was the 18th Prime Minister of Canada from September 17, 1984, to June 25, 1993 and was leader of the Progressive Conservative Party of Canada from 1983 to 1993. His tenure as Prime Minister was marked by the introduction of major economic reforms, such as the Canada-U.S...
's Progressive Conservative
Progressive Conservative Party of Canada
The Progressive Conservative Party of Canada was a Canadian political party with a centre-right stance on economic issues and, after the 1970s, a centrist stance on social issues....
government.
Assessment
The assessment of the National Policy is mixed. In general, economists argue that it increased prices and lowered Canada's efficiency and ability to compete in the world. By not becoming merged into the larger, more efficient American economy, Canada built too many monopolistic firms, and too many small inefficient factories with high prices for consumers. The overall impact was not large because the policy applied only to the manufacturing sector, which played a relatively small role, compared to agriculture, fishing, transportation, mining, lumbering and services, which were not affected by the National Policy. Historians tend to see the policy in a more positive light, viewing it as a necessary expense to create a unified nation independent of the United States.In the years right after the policy was introduced, Canada experienced the same type of economic boom that many other nations experienced, as well as the construction of a manufacturing base and the development of the nation, which is generally what the Tories and economic nationalists use to justify the policy. However, Canada also suffered a net population ouflow, as more people emigrated out of Canada (usually for the United States), than arrived as immigrants.
Eden and Molot (1993) argue that there have been three national policies in Canada: the "National Policy" of defensive expansionism, 1867-1940; compensatory liberalism, 1941-81; and market liberalism, starting in 1982. The defensive expansion phase relied on the tariff, railway construction, and land settlement to build the country. The second national policy combined a commitment to the GATT system, Keynesian macroeconomic policies, and the construction of a domestic social welfare net. Current national policy relies on Canada-US free trade and NAFTA free trade, market-based policies, and fiscal restraint. They argue for a fourth policy called "strategic integration." It would consist of free trade, both external and internal; the building of a national telecommunications infrastructure based on the development and diffusion of information technologies; and human capital development.
- American System (economic plan)American System (economic plan)The American System, originally called "The American Way", was a mercantilist economic plan that played a prominent role in American policy during the first half of the 19th century...
, a similar policy used in the United States