Canada, not Japan, has been America's most important export market for the past 50 years, and in 1988 the two countries signed a free trade agreement. This text places that agreement in its historical context, reviews controversies surrounding the agreement, and looks ahead to future prospects.

This document discusses the challenge from Mexico, the North American trade regime, North American trade and investment patterns, and issues and options for the future. It also examines what is involved in a tripartite agreement.

This study examines from an American perspective the impact of the free trade agreement (FTA) on the evolution of the Canada-United States economic relationship. It puts into historical context the special trading relationship between Canada and the United States which prevailed over the early postwar period. It examines how FTA rules and dispute settlement procedures create an effective basis for managing bilateral economic relationships in the context of more decentralized policy processes. It also explores the potential impact on the bilateral trading regime of the changing nature of international competition, the adjustments taking place in the structure of the Canadian and American economies, and the challenges posed by continuing technological change.

Canada is the largest trading partner of the United States, and the two governments have begun negotiations for a free trade agreement which would tie their relationship even closer. This study analyzes the difficult problems that must be addressed in the negotiations - including quite different perceptions in the two countries of what constitutes fair trade. It suggests several possible ways of reducing differences over subsidies and countervailing duties. It also addresses the exchange rate relationship between the two dollars, and how this affects the trade outlook. An appendix by John Williamson calculated a fundamental equilibrium exhange rate for the Canadian dollar.