response to global economic problems. In 1984, the
Conservatives won 211 seats in the House of Com-
mons, and the Liberals dropped to a record-low rep-
resentation of just 40 seats. One major aspect of
Mulroney’s platform in securing this victory for his
party was the pursuit of a more capitalist economy.
This domestic agenda would be linked to Mulroney’s
foreign policy.
The “Special Relationship” In describing the type
of relationship he wanted Canada to have with the
United States, Mulroney used the phrase “special re-
lationship.” To address Canada’s economic prob-
lems, the Conservative prime minister pursued closer
links with the United States. He wanted more trade
with his country’s southern neighbor, hoping that
an influx of American dollars could improve the Ca-
nadian economy. Mulroney also sought greater di-
rect foreign investment from American businesses.
Indeed, he even referred to Canada as being “open
for business.” In order for Canada to implement
these policies, it was necessary for the government
to reduce its existing regulations on foreign trade
and investment.
Thus, soon after becoming prime minister, Mul-
roney took multiple actions in the area of foreign
economic policy to increase trade and foreign in-
vestment. In 1985, his government created Invest-
ment Canada, a new bureaucracy whose goal was
to attract investment from abroad. Simultaneously,
Canada and the United States started talks on a free
trade pact. This policy was extremely controversial
in Canada. Indeed, it was the most important issue in
the 1988 elections. Liberals argued that free trade
with the United States would lead to a loss of Cana-
dian jobs, as American businesses would likely close
down plants in Canada because they would no lon-
ger have to worry about tariffs on goods sold there.
The Conservatives countered by saying that free
trade with the United States would increase the like-
lihood of lower prices and provide Canadian busi-
nesses with greater access to the large American
market. Though they lost some seats in Parliament,
the Conservatives retained their majority, and the
Canada-United States Free Trade Agreement went
into effect on January 1, 1989. As a result, tariffs
would gradually be eliminated, and each country
gained preferential access to the other’s market.
Closer Ties but Differences Remain Under Mul-
roney, Canada developed the strongest relationship
that it had ever had with the United States. Despite
this situation, divisions remained between the two
neighbors. One point of contention was the status
of the Northwest Passage—a region of the Arctic
Ocean. In 1985, the United States sailed thePolar Sea,
an icebreaker, through this ocean region without
seeking Canada’s permission. Mulroney angrily re-
sponded to the U.S. action by stating that the North-
west Passage belonged to Canada “lock, stock, and
barrel.” He then announced that Canada would con-
struct its own modern icebreaker and acquire a fleet
of nuclear-powered submarines to patrol the passage.
The environment constituted another point of
contention between the United States and Canada.
A debate developed over territorial waters, and much
of the debate had to do with the supply of fish. In
particular, the stocks of cod were declining. Canada
believed that some Americans had engaged in over-
fishing. Another environmental issue that arose was
acid rain. Even though he had a close relationship
with President Reagan, Mulroney demanded that
the United States act to reduce the pollution emit-
ted by its factories in its midwestern and northeast-
ern regions. Much of this pollution from U.S. facto-
ries resulted in acid rain falling in Canada.
A third issue over which Canada and the United
States differed was apartheid in South Africa. The
primary foreign-policy concern of the United States
was the Cold War with the Soviet Union and curtail-
ing the potential expansion of Soviet influence. Rea-
gan therefore supported any nation that would ally
with the United States against Moscow, whatever that
nation’s human rights record might be. South Africa
was such an ally, and the Reagan administation op-
posed the adoption of economic sanctions against
the country’s racist regime. Mulroney, however, sup-
ported such sanctions, deeming that human rights
should sometimes take priority over Cold War alli-
ances.Impact Canadian foreign policy experienced a sig-
nificant shift in the 1980’s. Canada forged its closest
relationship ever with the United States. It also fol-
lowed the trend set by its southern neighbor and the
United Kingdom, pursuing deregulation in its for-
eign economic policy. Such policies demonstrated a
major change in the Canadian political climate, as
the Conservatives gained ascendancy by advocating
free trade, deregulation, and increased foreign in-
vestment.386 Foreign policy of Canada The Eighties in America