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Canada in the World Main Page
III. THE PROMOTION OF PROSPERITY AND EMPLOYMENT
The United Nations Human Development Index has rated Canada as among those
countries with the best quality of life in the world. The protection and enhancement of
that standard is a key goal of Canadian foreign policy. As the Special Joint Committee
pointed out, Canada's prosperity depends on more than sound domestic economic
policies, although these are essential. It depends as well on wider global prosperity
and on our ability to take full advantage of the opportunities this presents.
Economic growth and job creation in Canada require a stronger focus on domestic
initiatives, including getting our fiscal house in order, so as to encourage investment
and the export of competitive goods and services. They also require a healthy, rules-based international economic system.
The system that has evolved since the late 1940s has underpinned productivity growth
and improved living standards worldwide. It has also constrained the ability of larger
economies to pursue economic policies unilaterally to the detriment of Canada. The
system has, on the whole, worked well for us and has demonstrated an impressive
capacity to adjust to changing times and pressures. Moreover, Canada has worked
hard to protect and promote our interests through the international economic system, a
system that we have shaped to a very significant extent.
An Evolving International Context
The Multilateral Trade System is critical to Canada's prosperity.
- Since the late 1940s, the development and defence of a robust, dynamic trading
environment has consistently found its natural home in the General Agreement on
Tariffs and Trade (GATT) and now in its successor, the WTO. The implementation of
the recently-concluded Uruguay Round of multilateral trade negotiations, which, among
other things, led to the WTO, was secured in late 1994 when the major world
economies and many key developing countries adopted the new balance of rights and
obligations in their domestic law.
The WTO extends international rules much more comprehensively than before.
The new rules will now cover trade in goods (including formerly largely excluded
sectors such as agriculture as well as textiles and clothing) and services. The new
rules also constitute important first steps to underpin fair competition for direct
investments. They provide considerably more effective mechanisms to resolve disputes
through the rule of law rather than the exercise of unilateral market power. The new
deal will bring improved overall growth prospects for the world economy and for WTO
members in particular, whatever the calculus followed in weighing the specific results.
Moreover, the new deal already identifies several important areas where WTO
members agree that further work must be completed over the next few years.
Growth creates new players in the global economy.
- Canada is one of the major world trading powers, along with its key partners, the
US, the EU and Japan, all members with us in the G-7 and the Quadrilateral Group.
Our trading, investment and technology relationships are the most intense with these
partners and, above all, with the US. They are at the centre of the world economy
today. We must continue to ensure that these relations are managed with care.
Globally, the leading exporters now also include Korea, Taiwan, China, Mexico,
Brazil and others. Moreover, economies such as Taiwan, Korea and Hong Kong have
emerged as important sources of overseas direct investment. On the other side of the
ledger, developing countries attract about one third of foreign direct investment flows,
with the bulk directed to the larger countries of Asia and Latin America. These new
players compete with Canada for market share and quality investments, while providing
increasingly attractive markets for the export of Canadian goods and services. Using all
available foreign policy instruments in a coordinated way, we must build relationships
with them and with other dynamic developing economies to reflect their current and
growing economic importance to us.
Unfinished business remains on the trade policy agenda.
- Despite useful progress made in the establishment of the WTO, the international
community still has a considerable distance to travel to adequately discipline the trade
and investment distorting subsidization of agricultural production, particularly by the US
and the EU. As well, improved disciplines on the use of antidumping measures will
continue to be a Canadian priority. These are examples of policy areas where frictions
between economies remain because the rule making to date is incomplete.
New trade policy issues in the global economy.
- The gradual reduction of more traditional trade and investment distorting barriers
through successful trade negotiations has raised new questions about the contribution
to growth made by a broader range of domestic regulatory regimes in all economies.
Moreover, emerging international players share with Canada an interest in seeking
improved and more secure market access to the US, the EU and Japan, and like
Canada, they attach importance to international rules that adequately discipline
pressures for the unilateralism and protectionism found in many economies. There is,
therefore, increasing scope for creative partnerships with a wider range of partners.
- The overarching objective of trade and environment discussions is to ensure that
the policies that emerge support sustainable development. Governments are faced with
the growing need for responsible, balanced solutions related to global commons issues
(for example, climate change, ozone layer depletion, straddling fish stocks) and
transboundary pollution impacts (such as North American air and water quality issues).
In order to facilitate international cooperation in this area, but also to foreclose
unilateral action (sometimes with protectionist intent or impact), governments have
turned increasingly to the negotiation of international environmental agreements as a
key element of sustainable development. Important instruments already negotiated by
Canada, bilaterally and multilaterally, relate to ozone depletion, air and water quality,
the transboundary movement of hazardous wastes, climate change, biodiversity and
desertification. More will be tackled. In addition, governments around the world are
increasingly taking action to address domestic environmental problems.
- Another "new" issue is the explosion of private investment abroad over the past
15 years and the increased mobility of investment capital. This calls for balanced rule
making, given concerns over potentially anti-competitive practices by individual private
sector firms and particularly by large multinational enterprises. We will need to ensure
that new rules promote Canadian growth and job creation, and that they work more
generally in the interests of small, open economies that need investment.
Directions for Canadian Policy
In light of these considerations, the Government intends to pursue the following
priorities related to the international trade and payments system:
Managing our economic relationship with the United States.
- Canada's economic relationship with the United States remains the most
complex and substantial among any two countries in the world. Of Canadian exports,
80% are destined to the US, and the US accounts for 65% of foreign direct investment
in Canada. As such, good management of that relationship is our overriding priority.
Much of what we do bilaterally, regionally and internationally, relates directly to the
management of that special relationship. Careful account must be taken of both the
real differences and the considerable similarities between the interests of the two
countries. Canada-US relations are based on common values and myriad economic
transactions that underpin mutual prosperity. Yet differences of view do arise in such
an intense, multifaceted relationship. They are differences between sovereign
partners, acting as equals within that relationship.
Consequently, the Government plans to secure and enhance our economic
partnership with the US in a variety of ways. We will deepen and broaden NAFTA by
negotiating further reductions in trade and investment distorting practices and by
expanding NAFTA membership to other countries in the hemisphere, starting with Chile.
More generally, we will continue to work hard to encourage outward-looking and
cooperative US economic policies, for example, by advancing trade liberalization in our
hemisphere through NAFTA expansion and by encouraging the work now underway on
a Free Trade Agreement of the Americas; by intensifying the scope of continental
environmental cooperation; by encouraging creative US engagement in the prompt and
dynamic launch of the new WTO; and by strengthening the trade and investment links
being developed through APEC. Engaging the US constructively on these and other
international issues not only assists in managing our bilateral relations where we have
differences of view, but also permits both countries to cooperate with greater
international impact in the many areas where we have similar policy objectives.
We will accelerate efforts to manage sectoral irritants through an active
advocacy program in Washington, D.C., the recruitment of like-minded allies in the
various regions of the US and the encouragement of sectoral partnerships between the
private sectors of the two countries. Moreover, we will encourage provincial
governments and parliamentarians to be more fully involved in this work through a
more structured sharing of information and coordinated design of advocacy programs.
Working towards an open international trading system.
- Multilaterally, we will accord the highest priority to the full and effective
implementation of the WTO. Our intra and inter-regional efforts will all have as their
objective the reinforcement of the global trading system. We are deeply convinced of
the great economic benefits that we, as a nation, have derived from this system over
the past 50 years, a conviction reflected in the fact that the foundation of the WTO was
a Canadian proposal that enjoyed all-party support. Canadian vision, based on a
broad consensus at home, thus made a major contribution to the way the world will
carry out its commerce in the future.
Looking ahead, we will engage actively in addressing new challenges. In part,
this requires concluding the supplementary negotiations, already envisaged under the
aegis of the WTO, on government procurement and on trade in certain services. As
well, we are ready to meet the challenge of moving beyond the current agenda. We
will, for example, promote careful analysis, now underway in the WTO, on how to
increase the compatibility of international trade and environmental obligations and
policies where these overlap and conflict. We will initiate the careful groundwork
needed to establish the next round of trade and investment liberalization upon which
Canadian prosperity depends. We will also promote work at the Organization for
Economic Cooperation and Development (OECD) and the International Labour
Organization (ILO) on the relationship between internationally recognized labour
standards and the multilateral trading system.
Strengthening economic ties with Europe.
- Our mature trade and economic relations with Europe continue to be of great
importance. We will ensure that they are supported at the bilateral level, especially
with our major partners. However, we will devote particular attention to the EU, which
is increasingly exercising jurisdiction in areas of interest to Canada. The Government
will review how to build on the results of the recently implemented multilateral trade
negotiations to deepen further trade liberalization with the EU. In consultation with the
business community, we will carefully explore the possibilities of reducing or eliminating
barriers to trade between Europe and North America for the full range of Canadian
export interests (particularly agricultural exports), including through a free trade
agreement between the EU and NAFTA.
Building relationships in new markets.
- Asia-Pacific
- The Government intends to pursue actively APEC's call for freer trade in the
Pacific Rim region in the decades ahead, and is prepared to participate in phasing out
barriers to trade within APEC. Key economic challenges include the need to liberalize
practices that have distorted investment flows across the Pacific, the development of a
consensus on the importance of further tariff reductions and the need to intensify
technical cooperation in areas as diverse as customs procedures and forestry
practices. The Government will build on the "Team Canada" approach that it employed
so effectively in Asia last year when the Prime Minister, accompanied by the Minister
for International Trade and the Secretary of State for Asia-Pacific, led a group including
provincial and business leaders to the region.
- Latin America
- We will devote close attention to Mexico, a partner of growing importance to
Canada, and to other major Latin American countries. Canada and Mexico have much
to gain and learn from each other through further cooperation in NAFTA. This
relationship holds promise over time in other spheres as well, including close
cooperation in a broad range of multilateral institutions such as the UN. Both countries
have a common interest in using NAFTA as a vehicle to extend free trade in the
hemisphere, commencing with Chile, and perhaps moving beyond. The Government is
committed to expanding our economic relationship with the region, as highlighted by
this year's "Team Canada" visit led by the Prime Minister, accompanied by the Minister
for International Trade, the Secretary of State for Latin America-Africa, and business leaders.
Promoting foreign direct investment and rules to control anti-competitive behaviour.
- Canada will seek improved and more transparent international rules governing
foreign direct investment and anti-competitive practices through a variety of
mechanisms, including the negotiation of a new generation of bilateral Foreign
Investment Protection Agreements (FIPAs) with developing countries and the
economies in transition in Central and Eastern Europe. We will also pursue the
development of a Multilateral Investment Agreement through the OECD and the WTO,
and through future accessions to NAFTA. In addition, we will encourage greater
vigilance toward the possible anti-competitive actions of large multinational firms
through agreements promoting active co-operation among competition (anti-trust)
authorities.
Developing rules and institutions for the new global financial system.
- The network of international economic and financial institutions, centred on the
Bretton Woods system, has been central to the management of the world economy, not
least by supporting development efforts around the globe. Like all the post-war
institutions, they need to adapt - to radical change over recent years brought about by
advances in technology that have revolutionized capital markets; to new challenges of
sustainable development; to new balances of international power; and, to the growth of
private capital flows and development of the private sector.
Canada's membership in the G-7 provides a valuable opportunity to influence
change in these institutions. The Government will chair Halifax Economic Summit
discussions in June 1995 on the reform of international economic institutions such as
the International Monetary Fund (IMF), the World Bank, and possibly other institutions.
This review must address the evolving roles of these bodies as well as the relationship
between them and the numerous agencies related to the UN. Elimination of duplication
and competing mandates will also be a major Canadian objective, consistent with our
own resource constraints and fiscal strategy. We will pursue these goals in the
Economic Summits and in other fora in the years ahead.
The proliferation of new financial instruments with complex legal and operating
frameworks raises issues relating to the transparency of international exchange and
other financial markets, the adequacy of safeguards for customers and systemic issues
related to the stability of the international financial system. We will explore with our
OECD partners whether the systems that regulate financial markets and institutions
domestically should be replicated internationally to strengthen global financial stability.
Ensuring a positive relationship between international rules for the sustainable management of the environment and the economy.
- The Government will urgently promote internationally agreed rules on the
sustainable management of high seas fishing that include recognition of the special
interests of coastal states like Canada and that reflect the devastating impact on
hundreds of Atlantic Canadian communities of the current decline of fish stocks. The
Government has already announced that we would ratify the UN Convention on the
Law of the Sea soon, and is reviewing domestic legislation to bring it into conformity
with the provisions of the Convention with a view to proceeding with ratification.
The forest products industry is both the largest net contributor to Canada's
balance of trade and a major source of employment. Responsible for approximately 20
per cent of world trade in forest products, Canada is an influential player
internationally. The environmental role of forests is very significant: forests affect the
pace of global warming; are a storehouse for biological diversity; prevent soil erosion;
preserve water quality; and serve a cultural and spiritual role, especially for aboriginal
people. Canada, therefore, has a large stake in the long-term health of forests, as do
many other countries. Therefore, we will pursue assertively, in close co-operation with
a variety of allies, internationally agreed rules on sustainable forest management,
ideally embodied in an International Forests Convention. This will assist Canada to
ensure and to expand its access to forest product markets, and to better support other,
particularly developing, countries, in their efforts to manage their forest resources sustainably.
We will promote regional environmental standards consistent with sustainable
development and enhanced competitiveness by actively supporting the implementation
of the North American Agreement on Environmental Cooperation. The Government will
also implement the recently-approved Environmental Industries Strategy, aimed at
increasing these industries' growth rates and exports, while responding to the
Government's objective of a clean environment. The Strategy will support Canadian
industry, fund new initiatives to develop and commercialize innovative environment
technologies, and improve access to domestic and global market opportunities for
environmental companies. The Government will also undertake environmental
assessments in conformity with the Canadian Environmental Assessment Act.
Canada has a particular role in defending and developing the Arctic
environment, an area where international cooperation is vital and is just beginning.
Through enhanced international cooperation and national commitment, demonstrated
through our recent appointment of the Ambassador for Circumpolar Affairs, we will seek
to slow the process of global climate change and to protect and improve the Arctic
environment and the health and livelihoods of the region's inhabitants.
With our partners, we will also explore means of improving international
governance on environmental issues. The current structure of institutions significantly
involved in this field includes the UN Commission on Sustainable Development, the UN
Environment Program and other UN agencies, the Global Environment Facility, the
World Bank, the IMF, the regional development banks, the WTO and a host of others.
The scope for consolidation to improve efficiencies and effectiveness across these
organizations will be assessed.
Bringing the developing world into the international economic system.
- Canada's commitment to deepening and widening trade and investment
liberalization will also make an important contribution to strengthening the capacity of
developing countries to grow through the marketplace.
Canada will fully implement its undertakings under the Uruguay Round of
multilateral trade negotiations to liberalize market access into Canada. This includes
measures with regard to the phase-out of the import quota system under the Multi-Fibre
Arrangement, the reduction of import duties on goods of interest to many developing
countries, and further limits on subsidy practices that distort the trade of many
developing and developed countries alike.
We will actively use our leverage to make further liberalization a major objective
in all future trade negotiations in which we are involved, whether in the WTO, through
NAFTA accessions or in APEC. We intend to reform Canada's General Preferential
Tariff to provide better access to the Canadian market, particularly for the least
developed countries, and will press our partners to do the same. We will be mindful of
the impact of such action on a number of domestic economic sectors that would be
affected.
- Debt relief will also assist many developing countries to become greater
participants in the world economy. Canada has long pushed for more debt relief in fora
such as the G-7 and the Paris Club (the group of major international lender
governments) for severely indebted low income countries (SILICs), especially in sub-Saharan
Africa. These efforts have recently paid off in the Paris Club, which has
agreed to a higher level of debt relief on the whole stock of debt of eligible countries.
International Business Development
The Government has consulted widely with Canadian businesses of all sizes and
export experience, and has carefully considered the recommendations of the Special
Joint Committee and those of the International Business Development Review, on how
best to facilitate the participation of Canadian businesses in the international economy.
Selectivity is especially vital given tight fiscal circumstances. To provide these value-added,
focussed services, we will further concentrate our resources abroad. We will
scale back domestic operations and, in selected markets, make greater use of locally-engaged
staff. Support for trade fairs will be limited to major fairs that are important to
particular sectors. There will be less emphasis on providing commercially available
information, and more on the exercise of our international trading rights (pursuant to
the WTO and NAFTA, for example) and on state-of-the-art market intelligence gathered
through Canadian embassies and consulates abroad.
The Government will work with interested provinces, municipalities, and the private sector on four priorities:
- Increasing the participation of Canadian businesses in the international
economy. The Government will continue to work closely with all firms to open doors to
foreign governments and to key economic agents. It will target its direct financial trade
promotion support on small- and medium-sized enterprises (SMEs). The Program for
Export Market Development will be concentrated on firms with sales of less than $10
million or with fewer than 100 employees. We will work with the private sector, the
provinces and other government bodies to identify and assist "export ready"
companies, and to provide timely, opportunity-specific market intelligence on sectors
and markets that offer the greatest growth potential, including service sectors.
We will work with interested provinces to develop programs and services to help
shape businesses' attitudes towards foreign cultures, enabling them to work better in
foreign markets. The evolving business environment puts a premium on maximizing
human resources with a global, dynamic outlook. The Canadian Foreign Service
Institute (CFSI), DFAIT's centre for professional training in international management
and policy, will work to expand its programs to other federal government departments,
provincial governments and the private sector in order to contribute to this effort to
build our international business culture in Canada. We will also work with the Export
Development Corporation (EDC) and the commercial banks to improve export finance
availability, particularly for SMEs.
- Diversifying International Business Markets.
While recognizing the critical
importance of the US market for Canadian prosperity, we will also encourage
incremental growth in other promising markets by:
- working with the private sector to help companies build on their success in the
US and expand into offshore markets;
- focussing more resources on high growth markets in Asia-Pacific and Latin
America and, in Western Europe, targetting our resources on investment, technology
and strategic alliances. We will encourage Canadian companies to test the potential of
emerging African and Middle Eastern markets, including post-apartheid South Africa.
We will rely more on locally-engaged staff in the US and Western Europe and redeploy
Canadian personnel resources to Asia-Pacific and Latin America. New trade offices
will be opened in selected countries in these regions, with costs to be financed through
a reallocation of resources;
- working to maintain competitive export finance and insurance, and foreign
investment insurance services on the basis of a financially self-sufficient system with a
modest ability to subsidize credits in priority markets in response to subsidies from our
major competitors. We will also seek more intense and effective cooperation with
Canada's private banking system to reach SMEs and share repayment risks; and
- promoting Canadian culture and learning abroad as a way of creating an
identifiable image for Canada and its goods and services. We will seek to make better
use of Canada's artists and scholars as part of a fundamental re-thinking of the way we
promote ourselves and our products abroad. It will be important to continue to develop
new export markets for the products and services of our cultural industries. At the same
time, we will provide foreign service officers with better tools needed to sell Canada
abroad, including Canadian culture and learning.
- Attracting International Investment and Assisting Science and Technology.
Sound domestic economic policies will continue to maintain and improve the
investment climate in Canada. We will also work hard to achieve greater certainty and
predictability in Canada-US trade relations, especially in the area of trade remedy laws.
Such predictability will be important to investors wanting to reach the NAFTA market.
As one instance, the Government will provide company-specific briefs to the
chief executive officers and to the boards of directors of international companies
located in Canada, making the case for new investments and product mandates for
Canada. DFAIT will introduce Canadian SMEs to international investment partners as
sources of capital, technologies, management skills and access to markets. We will
also develop initiatives to facilitate greater access to and acquisition of international
technologies by Canadian firms in cooperation with other organizations, such as the
National Research Council (NRC).
Canada's full participation in the global knowledge-intensive economy is vital.
Our science and technology will help us to achieve this goal. To that end, the
Government will foster:
- acquisition by industry of the newest best practice technologies;
- awareness by foreign investors of Canadian science and technology capability;
- participation of Canadian business in international research and development alliances; and
- an international framework of rules that allows unfettered access to international technology opportunities.
- Building partnerships and a "Team Canada" approach.
The Government will
strengthen partnerships and build an international business "team" on three fronts:
within the federal government, with the provinces and with the private sector, including
both larger firms with export experience and SMEs. The Government will work with
interested provinces to ensure export preparation for companies seeking new markets.
We have initiated discussions on a strategy that defines roles and responsibilities and
seeks to eliminate overlap and duplication and install one-stop shopping for export-related intelligence and services.
We are working with both government and private sector partners to respond to
their priorities, including technology and investment dimensions, both informally and
formally, through mechanisms such as the International Trade Business Plan, the
International Trade Advisory Committee (ITAC), and the several Sectoral Advisory
Groups (SAGITs).
In 1994, tourism was Canada's fifth largest source of export earnings.
Recognizing tourism's importance, the Government is committed in this industry as well
to a "Team Canada" approach, working with public and private sector partners to
promote Canada as a prime international travel destination.
Canada in the World Main Page
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