One of the great Canadian success stories that emerged from NAFTA was the growth of the Montreal-based men’s apparel business. As a trade story, it was not just about negotiations over percentages of tariffs—it was about the evolution of a sector and its relationship with the federal government. 

Bob Kirke and Elliot Lifson  

Somewhere in the midst of the 1987 Canada-US Free Trade Agreement (FTA) negotiations, a somewhat minor flexibility was established in the rules of origin for apparel. This provision allowed that, instead of having to make all clothing from fabrics produced in Canada or the US, a limited amount of clothing could be made from imported raw materials (i.e. fabric from Italy) and still enjoy the tariff benefits of the FTA. In the bigger scheme of things, this was not a seismic issue. The election of 1988 may have been fought on free trade—but it was not fought on issues around free trade for men’s suits. 

Once the FTA came into force however, Canadian companies began to export their products to the United States in huge volume, taking advantage of the ability to use superior third-country fabrics in their garments. Canadian companies dramatically increased their exports to the United States, upsetting the powerful US textile industry.

In July 1992, we were approaching the end of the NAFTA negotiations. The last issue resolved had to do with how many suits made in (primarily) Montreal might be able to access the US market duty-free—exports that were made using the limited carve-out from the rules of origin. Discussions around these provisions consumed the final days of the NAFTA talks. 

These so called “tariff preference levels” cast a shadow on the negotiations. Late-night calls between industry and cabinet ministers were made, and at the 11th hour a deal was struck which preserved these important provisions.

When we began to re-negotiate NAFTA (in what would become CUSMA) the shape of the North American clothing industry had changed. Having said that, not everything had changed. Indeed, there was a unique confluence of events that put our industry at risk (again) when the negotiations for CUSMA began. From the outset of the negotiations, the US government attempted to overturn the origin rules that allow quantities of apparel made in Canada from imported fabrics to qualify for free trade—precisely the same issues that had been debated 30 years earlier. 

One of the few sectors in the United States which was supportive of the protectionist Trump trade agenda was the US textile industry—and they pushed hard to roll back all of the provisions originally built into the Canada-US FTA and NAFTA.

While the negotiating position of the US government was familiar, it was not necessarily expected. At the same time, what actually happened is somewhat instructive.

Prior to the Canada-US FTA it is fair to say that the apparel industry had no government relations strategy or objectives. While engaged in many issues, most were local/provincial/sub-sectoral in nature. During the FTA negotiations, the industry came together and began to understand how important a coherent relationship with government and political leaders would be.

Just as our prime minister, by necessity, has a special relationship with the US president, industries also must cultivate and foster relationships with political leaders, senior government officials and those at all levels of the bureaucracy. 

Industries that fail to cultivate these relationships leave their fate to politicians and officials that (justifiably) do not understand their industries. The lessons learned during the FTA and subsequent negotiations have become a key part of our industry’s approach to government: we need to defend our interests and we need be serious about doing so—and it also demonstrated the benefits of consistent involvement, engagement, and support for Canadian officials, negotiators and political leaders to protect the interests of this industry.

One of the important things that happened in the course of the FTA negotiations was the creation of the Sectoral Advisory Group for International Trade (SAGIT), and this, more than anything else, helped to consolidate an industry position. In our case, the SAGIT for clothing and footwear really made trade policy a priority for this sector. While no longer a feature of trade policy-making, the SAGIT for clothing and footwear played a major positioning role for the clothing industry in the talks leading to the Canada-US Free Trade Agreement in 1987.

The apparel industry is more diverse than outsiders might appreciate and larger than most understand: When the FTA was negotiated there were over 30 sub-sectoral associations, guilds or other bodies in Montreal alone, each defending a small piece of turf. The FTA forced that to change. Highly local or marginal groups gradually disappeared from the landscape. At the same time, leaders of the industry stepped forward and took up the work of representing its interests.

Whereas in the past, the apparel industry might have complained about its lack of profile in Ottawa, in the lead-up to the FTA, industry leaders challenged the federal government to take our concerns seriously. What the industry learned was that relationships matter. What they also learned was that government matters, and government needed our input.

A series of visionary industry leaders worked collaboratively within the SAGIT to secure important provisions in the Canada-US FTA and subsequently in NAFTA. They also developed parallel adjustment measures, carve-outs and novel rules of origin that allowed the industry to survive and thrive. In simple terms, these provisions allowed a single suit company in Montreal, Peerless Clothing, to employ nearly 2,500 people in its factory at its peak, and become a world leading manufacturer of its products. Many other apparel manufacturing firms embraced free trade to become world-leading suppliers of their products.  

These leaders showed up; they worked with the government on a collaborative basis to secure important benefits for Canada. They behaved as if the survival of their companies depended on it, because in many cases, it did.

We embraced every opportunity to meet directly with the officials negotiating these agreements, especially in the SAGIT. These same meetings laid the groundwork for many of the issues that drove our government relations for decades: the elimination of duties on imported raw materials and sectoral duty remission programs for specific products. And it was with the commitment of leaders in the industry together with the range of officials throughout many departments that we developed those ideas and laid the groundwork for a successful negotiation. But the need to bring industry to the table started at the top. The contribution of Prime Minister Mulroney cannot be overstated.

Which brings us back to CUSMA.

At no point in the last 30 years have we had greater cooperation from a dedicated, knowledgeable and open negotiating team than we had during the CUSMA talks. Given the unique disadvantages that confronted the Canadian negotiators, it was up to the government to pull together every resource available. That Chrystia Freeland and the Canadian government were able to rely on former Prime Minister Mulroney as an advisor only reinforces this.

CUSMA was a dramatic departure from the norms of trade negotiations. For our industry, that meant working collaboratively with different negotiating teams and equivalent industry groups throughout the continent. In many sectors, ours included, Canadian negotiators were seen to be far more available and constructive than their American counterparts. US industry was at a disadvantage because under the Trump administration, their relationships with government had broken down. That was not the case in Canada.  

In the end, our negotiators ensured that the final resolution was a win-win deal. In our sector, the United States cannot complain about different provisions within CUSMA, because the United States enjoys a huge ($1.3 billion) trade surplus with Canada in textiles and apparel.  The US industry has figured out how to use all the advantages of our trade agreements. 

Fortunately, relationships matter in all jurisdictions, above and below the surface. Thank goodness that’s the case.  

Bob Kirke is Executive Director of the Canadian Apparel Federation.

Elliot Lifson is President of the Canadian Apparel Federation and Vice-Chairman of Peerless Clothing.