John A. Macdonald, previously the inaugural
Prime Minister of Canada from 67 until he resigned in 1873, returned to power in 1878 after his electoral victory that year, which enabled him to implement the National Policy. The policy had three-parts which would improve and expand Canada's economy, including:
Promoting Canadian industries and manufacturers John Macdonald influenced Canadians to buy Canadian products in support of Canada's economy. Easily imported goods and products from the
United States were much cheaper than Canadian-made goods. Macdonald proposed to put taxes or tariffs on American imported goods and products. 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 American producers dumping surplus goods in Canada to avoid lowering prices in the United States. Tariffs were put on goods coming into Canada, which made American goods more expensive. 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 for it to end. When the Liberals campaigned on free trade in the
1911 election, they lost the election.
Imperial Preference In 1897, the National Policy came to incorporate
imperial preference, i.e. preferential tariff rates for imports from Britain. Initially, tariffs were reduced by one-eighth for imports from Britain, rising to one-quarter in 1898 and one-third in 1900. The Liberals, under Laurier, found imperial preference a convenient vehicle for reducing tariffs, as it appealed to the Empire-mindedness of Conservatives. Canadian imperial preference proved very effective. Keay and Varian have estimated that, within just a few years, Canadian imperial preference had the effect of doubling the value of imports from Britain, relative to the value of imports from Britain in the absence of the policy.
Completing the National Railway When
British Columbia joined the Confederation, the Canadian government promised a railway system to connect British Columbia with the east of Canada. Macdonald promised the railway to facilitate the transport of goods and services from the west to the east of Canada.
Settling the West Macdonald made a promise to improve the farming industries in the west. This action was to highlight the west as the main producer for agriculture production in Canada.
High tariffs John A. Macdonald's national policy became a huge public issue once the Liberal government led by
Alexander Mackenzie failed to raise the budget on tariffs in 1876. Once Macdonald came back into power in 1878, a higher tariff was introduced in the budget of Canada and business. The purpose of high tariffs were solemnly for the expansion of the base of Canadian economy and to project a more confident country for development in Canada. Tariffs were raised for goods and services on a majority of manufacturing goods that were made outside of Canada. The raise of tariffs on foreign manufactured goods was to protect Canadian made products and Canadian manufacturers.
Unpopularity in the west Although the policy was popular in central Canada, it was extremely unpopular in western Canada. This opposition to the National Policy played an important role in the rise of the
Progressive Party of Canada in the 1920s. In its platform, the "
New National Policy", it advocated free trade. ==Dismantled by Liberals==