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The National Policy was a protectionist policy. It was a main focus of the Conservative Party for decades. It began under Prime Minister John A. Macdonald. It continued under many of his successors. Under the policy, Canada imposed high tariffs (taxes) on imported goods. This shielded manufacturers in Canada from US competition. The policy was in effect from 1878 until the Second World War.
This article is a plain-language summary of the National Policy. If you would like to read about this topic in more depth, please see our full-length entry: National Policy.
Mackenzie's Low Tariffs
Prime Minister Alexander Mackenzie's Liberals were in office from 1873 to 1878. They had stuck to a policy of using tariffs for revenue purposes only. They had been faithful to this non-protectionist policy through the depression of the 1870s. But in 1874–75, the Liberals failed to work out a free trade deal with the US. They also failed to raise tariffs in the 1876 budget.
Tariff protection for manufacturers became the rallying cry of John A. Macdonald's 1878 election campaign. He was returned to power in 1878. He included a higher tariff in his 1879 budget.
Tory Economic Strategy
High tariffs were meant to broaden the base of the Canadian economy. The plan was to restore the confidence of Canadians in their country’s growth. Macdonald was also aware that the National Policy would assist a group of wealthy businessmen. They could then be counted on to give generously to the Conservative Party.
The tariff on most foreign goods was increased. This gave Canadian manufacturers a great deal of protection. The reduced customs duties on imported raw materials and semi-processed products was also important to manufacturers. This lowered their costs of production.
Over time, the National Policy took on a broader meaning in the Conservative Party. It tended to equate the Policy with its plans for economic growth. These included the Canadian Pacific Railway, Western settlement and immigration laws. The Policy became the central pillar of the Conservative Party for decades.
Ongoing Election Issue
Wilfrid Laurier brought the Liberals to power in 1896. His government used the same protectionist approach of the National Policy tariff. The general tariff was kept at similarly high rates. In 1911, the Laurier government signed a free trade deal with the US. It made only a few concessions on import duties. Most of the deal got rid of duties on natural products. Customs duties were lowered on only a small list of manufactured goods.
But Canadian manufacturers were alarmed by the deal. They supported the Conservatives in the 1911 election. Robert Borden became prime minister. The National Policy continued.
Slowly Dismantled
The National Policy was a successful issue in central Canada. But it was very unpopular in the West. It fed into the lingering resentment toward the country’s eastern manufacturing base.
The National Policy was slowly dismantled by the Liberal Party under prime ministers William Lyon Mackenzie King and Louis St. Laurent in the 1940s and 1950s.
Free Trade Revival
After the Second World War, the Canadian and American economies slowly integrated. The two countries signed the Canada-U.S. Autopact in 1965. In 1989, they signed the Free Trade Agreement (FTA). It was replaced in 1994 by the North American Free Trade Agreement, which included Mexico. NAFTA was in turn was replaced by the Canada-United States-Mexico Agreement (CUSMA) in 2020.
(See also Free Trade, Customs and Excise; Imports to Canada; International Trade.)
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