By Mark Leier
If there is anything more boring than the history of Canadian tariffs, I would chew my own leg off in an attempt to escape from it. Yet from Confederation to the National Policy to Prairie populism to the Maritimes Rights movement to the Auto Pact to NAFTA and the Trans-Pacific Partnership, fights over tariffs have been at the centre of Canadian politics and economics. Is there a way to help students appreciate this part of Canadian history?
Probably not. But “The Great Canadian Tariff Game” can help them understand tariffs and why they have framed some of the most divisive moments in Canadian history.
I devised the game for the first-year post-Confederation survey course. At Simon Fraser University, this is taught as a large (200+) lecture with tutorials of 10-18 led by teaching assistants. The basic outline is simple. The students in the tutorials are divided into four groups, each group representing a different sector of the Canadian economy with a different view on tariffs. Each group is asked to develop its own position on the tariff to present to Wilfrid Laurier, played by the instructor, to influence him and the Liberal party as it designs its platform for an upcoming election.
The teaching assistants are given broad instructions, the scenario, and all of the roles, laid out below. All of the students are given the Scenario and the members of each group are given the role for their group (included at the end of this post). The instructor goes over the rules briefly, then lets them hammer out their positions and strategies. While playing the game, the actual numbers and figures don’t much matter. The point is to help students understand that the debates over tariffs are much more than arcane disputes: they are crucial to basic economic issues for people and companies. Fights over tariffs reflect the unequal development of capitalist economies, the tendency of capital to centralize and concentrate, competing interests and the role of the state in capitalist economies.
Teaching assistants and students report that they find the game lively and informative. Students quickly understand and take up their roles with enthusiasm and are great at devising arguments, incentives, and threats to deliver to Wilfrid Laurier. The small group work encourages students to talk and the different viewpoints help them learn about conflict in history, and in the classroom.
The game needs fine-tuning and refinement, but even in this stage, it’s been useful to get students to understand why tariffs mattered. It connects them with the current debates over free trade that many students are concerned about and gives them some sense of the political economy of the 19th and 20th centuries in ways rather different from the standard economic discourse of today.
And it beats lecturing about the Reciprocity Treaty.
For Teaching Assistants: The Great Canadian Tariff Game, Background
Off-hand, I can’t think of anything less exciting than a discussion over tariff rates in Canadian history. Yet the tariff was at the heart of Canadian political debate from Confederation to the present, when it takes the form of fights over free trade and globalization.
Why do tariffs figure so large in Canadian history? They’re about money and taxes, two things most people get excited about. Who pays for what and how are fundamental political and economic questions. The Great Canadian Tariff Game is an attempt to help students think about why the tariff generated such debate and attention.
Divide the tutorial into four groups, as equal in number as possible. Assign each group a role: directors of Maple Leaf Manufacturing, owners of Jones and Sons Stoves and Horseshoes, prairie farm family members, and Toronto metalworkers. Give each member of each group the sheet with their role and task on it. Go over the Scenario pages they have been given, and then briefly explain the roles and tasks. Explain that you will be acting as Wilfrid Laurier, the leader of the Liberal party, and you will determine the party’s platform on tariffs based on which group makes the most compelling argument. Remind them that as a politician you need both money and votes to win an election.
Give the groups 10 minutes or so to develop their goals and methods of persuasion. Then have each group briefly outline its position. Consider having each member of the group speak on one point to ensure everyone talks. You might write down their key points on a flip chart or blackboard, or have someone from each group write their points down. After all the groups have delivered their points, you can let each group make a short closing remark.
Ponder your decision. You may elect to adopt any group’s position, or you may take refuge in the grand Canadian tradition of saying the matter needs more attention and thought and they may rest assured that your party, if elected, will devote every energy to it. Laurier himself spoke of the “scientific tariff,” a magical formula that would make everyone happy. That magic formula, however, was never revealed….
Other questions for the group to discuss are, whose concerns and interests are ignored in political debates about the tariff? Who can take part in these debates and who is excluded?
The year is 1890, and a federal election is looming. John A. Macdonald and his Conservative party won a majority of seats in the 1887 election, but Wilfrid Laurier’s Liberal party has been making steady gains. Both parties are honing their political platforms in anticipation of the election.
One of the issues each party must figure out is the tariff. A tariff is a tax, or duty, charged on goods imported into the country. If you go to the United States and purchase goods, you may have to pay customs duties when you bring the goods back to Canada. That is a tariff. A tariff on US manufactured goods makes those goods more expensive in Canada. The tariff is also an important source of funding for the Canadian government.
Canadian manufacturers often want a tariff on US goods. Why?
US manufacturers have significant competitive advantages over Canadian manufacturers. The Canadian population in 1890 was about 4.3 million, the US population, about 63 million. The larger market in the US meant larger sales and larger profits, and larger companies. Larger companies can take advantage of economics of scale and use their size to negotiate lower prices when they purchase materials and supplies. A company such as GiantMegaCorp can use its larger profits to invest in national advertising and increase its market share. It can also afford the newest and most productive technology. This technology replaces skilled workers with less skilled workers who are paid less. The company can then produce and sell products—let’s say stoves—more cheaply than smaller firms can, and so squeeze them out of the market. It can also wield some influence over politicians to get government contracts and to get laws passed that benefit the company.
Smaller Canadian stove manufacturers, therefore, find it very difficult to compete with GiantMegaCorp. On a level playing field, with free trade between the US and Canada, the smaller Canadian firms could get beaten badly; they simply cannot produce their stoves as cheaply as GiantMegaCorp. Therefore, they ask the Canadian government to put a tariff on the US stoves. That extra tax makes the US stoves more expensive and so Canadians buy Canadian stoves, creating Canadian jobs and making everyone happy.
In reality, manufacturers in different regions have different needs. So do workers, and so do farm families. Any tariff makes some Canadians happy and some angry. Abolishing the tariff makes some happy, and some angry. Reactions to the tariff are expressed through voting. What is a politician to do?
The Four Groups for the Game
MAPLE LEAF MANUFACTURING: You are on the board of directors of Maple Leaf Manufacturing, or MLM. Fifty years ago, it was a small Toronto company, Maple Manufacturing, employing 10 people. It expanded, then merged with Leaf Equipment to form MLM. It bought out two other firms and another competitor went broke, leaving MLM the only stove manufacturing company in Central Canada. It has modern equipment and a skilled work force of 400 men and women. It makes a good stove, but it can’t make a profit unless it sells the stove for $100. The US company, GiantMegaCorp, sells a similar stove, with the Stars and Stripes, not a red maple leaf, on the front, for $90. Calculate the tariff rate you need so you can compete with GiantMegaCorp. What arguments will you make to Wilfrid Laurier to convince him to set the tariff at that level? What inducements and threats can you use?
JONES AND SONS STOVES AND HORSESHOES: You’re part of a small family business in Truro, Nova Scotia. Your great-grandfather started a one-man black smithy sixty years ago, and it has become a well-known local company, now with 12 employees. Your stove is very well made, and you are proud of the craftsmanship and proud that you are a local family firm with roots in the community. You know you make a great product, but are worried that a bigger Toronto company, Maple Leaf Manufacturing, or MLM, will move into your local market. You don’t have the economies of scale that MLM has, the access to transportation and markets, or the money to purchase the newest, cost-saving technology. You need to sell your stove for $110 to make a profit. MLM, with its modern equipment, sells its stove for $100. You want to modernize your plant so you can compete, but the big banks, headquartered in Toronto and Montreal, aren’t keen to loan you money, as they don’t think you can beat MLM and any money they lend you would be lost if you go bankrupt. Even worse, the US company, GiantMegaCorp, is considering entering the market with its stoves that sell for $90. Calculate the tariff rate you need so you can compete with MLM and GiantMegaCorp. What arguments will you make to the Liberals and Conservatives to convince them to set the tariff at that level? What inducements and threats can you use?
PRAIRIE FARM FAMILY: Your family has immigrated to Canada from the “old country.” It’s been hard. You sell your wheat on the international market, which means the price you get for your wheat varies drastically even though your costs remain the same. When the harvest is good, you have lots of wheat to sell—but so does everyone else. When there is lots of wheat on the market, the price of wheat drops–it’s the law of supply and demand. When the harvest is poor, there’s less wheat, and the price increases–supply and demand–but then you have less wheat to sell. Because the price for wheat is set on the stock exchange, it can vary drastically and you have little idea what this year’s crop will be worth at harvest time. If you have a crop: a hailstorm can wipe out your entire crop in 20 minutes; locusts can destroy it almost as quickly. And if you get a crop off, there might not be enough railway cars available to get it to market in time. You need a new stove. The Canadian company, Maple Leaf Manufacturing, or MLM, makes a very nice stove that costs $100. The giant US firm, GiantMegaCorp, makes a similar stove, though it has the Stars and Stripes, not a red maple leaf on the front, and it sells for $90. Or it would, if the current Canadian tariff didn’t boost the price to over $100. You’re as patriotic as the next person, but what is your position on the tariff? What arguments will you make to Wilfrid Laurier to convince him to adopt your position? What inducements and threats can you use?
TORONTO METALWORKER: You work at Maple Leaf Manufacturing, or MLM, a large Toronto stove company with 400 employees. Women are paid less than men in the company, even when they do very similar work, but it is better than being a domestic servant or staying on the farm. Some men are skilled trades workers, but increasingly production is mechanized and resembles assembly line work. The stove you make sells for $100, and it’s a good stove, with a proud red maple leaf on the front. But you’ve read in the newspapers, both the Liberal Globe and the Conservative Empire, that the US company, GiantMegaCorp, wants to expand into Canada. Its stove sells for $90. If the company can sell its stoves here, what will happen to your job? A tariff makes the GiantMegaCorp stove more expensive than the MLM stove. What is your position on the tariff? What would be an effective rate, from your perspective? What arguments will you make to the Liberals and Conservatives to convince them to set the tariff at that level? What inducements and threats can you use?
Mark Leier is a professor of Canadian history at Simon Fraser University