National Policy - Manufacturers

Manufacturers

Macdonald hoped that by creating a strong manufacturing base in Canada, the nation would become more secure and less reliant on the United States. 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.