February 5, 2009
Address by the Honourable Stockwell Day, Minister of International Trade and Minister for the Asia-Pacific Gateway, to the Toronto Board of Trade
Well, thank you, Carol [Wilding, President and CEO of the Toronto Board of Trade], for the introduction and, ladies and gentlemen, for the warm welcome on a 20-below- without-wind morning. And it’s great to see a turnout like this in spite of it. Carol was just telling me that the Board is working on a paper of indicators that will be released soon that measures a number of things. Economic, of course, is going to be the foremost single point, but a lot of other indicators are being brought in: sustainability, level of green initiatives and this type of thing. Are you tying in the Leafs’ record and where they are? Is that going to be a factor? Yeah, their goals against are pretty formidable. They’ve got high ratings in that particular area.
I don’t know if you want to take a lead from the country of Bhutan. I was in India a couple of weeks ago and I didn’t get to Bhutan, but one of their representatives tracked me down and wanted me to see some of the work that they do, and Bhutan is kind of interesting. It’s been a monarchy for hundreds of years and just very recently they’ve moved to a sort of a constitutional democratic monarchy. The King is still very much revered and has quite a bit of power, but it’s a first sort of a handover of power to a democratic set-up, so it’s getting a bit of interest over there.
But they don’t use GDP. They have what’s called the Happiness Index. It’s a country of about 780,000 people and they’re modernizing in many ways, and they do look at the economic factors, but they tie in quite a number of others and it’s called the Happiness Index. So I don’t know, Carol, if that’s what you’re going to be coming out with, in your report, but in this day and age maybe that’s something that we could look to and focus on a little bit.
Carol quite rightly talked about what’s happening related to this bill, this move, this initiative in the United States. And let me just say that the developments that we’ve seen over the last week or so show the importance of and the power of diplomacy. Because, really, that’s what we have put to the test and that’s what we’ve put to use in the last several days—even before that: when we first got indications that this bill was working its way first through the House of Representatives. And in the United States, it goes through the House of Representatives, and then it goes through the Senate, and then the two are reconciled and it becomes a true congressional bill.
And it was basically saying, as you’ve heard—it’s been well reported—that there would be protectionist moves against any projects, especially those at the municipal and state level and even the federal level—any projects that were receiving stimulus money. Well, hundreds of billions of dollars is a lot of money to cover, and the fact that it would affect, first of all, steel and iron had a very ominous sound for us here in Canada. In terms of steel and iron products, our companies ship about $11 billion to the United States in various forms in a year. Those are the 2007 numbers. And if any portion of that, of course, would be negatively affected or shut out, the effects would be considerable.
Prime Minister [Stephen] Harper was the first world leader to publicly raise this issue and to speak against this. We have had our diplomatic people in Washington [D.C.] and our ambassador and others engaged fully. We wanted to make this a full-court press at every level. And it was very encouraging to see, for instance, everything from the Canadian Chamber of Commerce moving quickly. I had discussions with the Canadian Council of Chief Executives, and they began to marshal and mobilize their contacts.
We saw, over a period of a few days, industry itself in the United States start to speak up and say that, hey, this particular bill might help their companies domestically, but it would absolutely harm them in an international context. And the pressure began to mount.
During my meetings with [Peter Allgeier, Acting] U.S. Trade Representative, we started to get some initial signals they were listening. First of all, it’s important to understand that, when an issue like that hits, quite rightly, the media is on to it; and they should be: the immediacy of things, of which things move, literally at the speed of light, sometimes brings inordinate pressure in a particular situation. And we were immediately having some industry groups calling on us to begin with retaliatory legislation. And the pressure on that at the political level can be significant, but it’s important to size up the field, assess the situation, use diplomacy as far as possible; and what I find in international trade—or anything to do with international issues: relationships are very important.
Picture you and your neighbour. Your neighbour might have a concern with your dog, whatever that might be. Well, if your neighbour starts shrieking at you from over the fence and lobbing his garbage into your yard and not returning the lawn mower that he borrowed and things like that, that can make the discussion about the dog a very strained one. But if he approaches it in a situation where he can share with you the mutual benefits of having your dog under control, things can move along a little better. And relationships are very important.
And we were vigorous from the start. We expressed some understanding of what they’re going through in the United States, but we said, “This is global. We’re all going through this synchronized global downturn.” And we asked them to consider history, the history of the Great Depression. It’s been very encouraging to see that history now much talked-about in the mainstream media. And people in general have a sense and understand that when that recession started in 19—well, ‘28, some could argue—but ‘29 and then ‘30, and you can measure the stock market responses to the level of protectionist activity that was taking place in Congress. And, when they finally came through with what’s called the Smoot-Hawley [Tariff] Act, that caused retaliatory trade wars around the world and it was a drag on all economies. All of a sudden, the markets for U.S. cars, for their farm equipment and steel and everything else started to plummet precipitously because these other retaliatory trade walls were going up. And it’s one of the key indicators of taking a recession and moving it into a very significant depression. We reminded them of that history.
I was at the discussions taking place in Davos last weekend. I met with our World Trade Organization representatives and other trade ministers, and we managed to quite easily put out a statement there suggesting that we, as elected people, were going to be under huge pressure from our own constituents to start building these retaliatory trade walls. And so, on a variety of levels—business, political, academic, international—the pressure began to mount.
And the first sign that we were making progress came three days ago, when the Democratic House Leader specifically mentioned Canada’s concerns and said, “Canada’s concerns are justified.” That was quite a breakthrough, for the Democratic House Leader to be saying that. And then we had responses from the White House and the Administration and the spokesperson for President Obama. And then President Obama himself, two nights ago, indicating that he did not want to see protectionist trade barriers and wars begin. And then, last night, this amendment, which says that anything that comes out of that has to comply with their international obligations. We couldn’t argue with that, because that was the precise language that the Prime Minister had been using, that I had been using and that others had been using, saying, “What we ask of our neighbour is that they respect their international obligations, specifically NAFTA and WTO obligations.”
This is not finished yet. The bill still has to go back for this reconciliation between the two houses, but we feel we’ve made some great headway. We’re keeping on this full-court press 24-7 to work with our U.S. counterparts to see this through to what we hope will be a successful conclusion.
The whole discussion provides a backdrop for the things that I want to talk to you about today. And I know you’ve got business and things to get to. I’m going to try and have you out of here by noon. I have some things that I want to cover.
You know trade policy is so important—and even more so in a time of global downturn such as we are facing right now. I want to mention first what we’re doing on the machinery of our trade policy. I want to touch on that for a minute and then suggest to you two reasons why trade policy is important in and of itself, and then on a competitive basis.
So, first, let me talk about the Trade Commissioner Service of the Government of Canada in terms of international trade. You may be surprised to hear we have approximately 150 offices across and around the world where you can find Canadian trade commissioners. In Canada, we have over a dozen offices so that businesses around the country can regionally locate themselves to get the type of information they need. And in the United States, we actually have 13 consuls general, and we have about 23 offices all told in the United States. So, around the world, there’s a network of trade commissioners who live in those countries. Sometimes they are Canadian. Sometimes they are nationals working with Canadians in those offices. They know what’s going on on the ground in those countries, and they can be a huge asset to you coming into that country: having a base where you can touch down and make your contacts and look at your operations.
I’m announcing today an initiative of the Trade Commissioner Service, in which we are taking it up a notch. We are going to be advertising: you’ll see the large billboards in nine airports across the country, and you’ll see our ads in publications, dozens of publications, both mainstream and business publications, networking publications nationally and internationally. We are doing all we can to elevate the reality that we’re here, and that—I know it sounds like a scary phrase, but—we are from the government and we’re here to help you. And we want to make help available. And so this is going to become more publicly known. We’re very pleased to officially announce this initiative today and move it along.
In terms of pursuing trade opportunities, you know we hear all the time, “What is Canada going to do to diversify business so that we’re not reliant on the United States?” Well, if I can just deal with a couple of what I think are minor misnomers here. When I was studying in school, as far back as about... I remember grade five; I remember it well; it was the three best years of my life. And I can remember, in grade five, being told this. This is the phrase that was used when they were talking about economies: they would say things like “Canada sells textiles to other parts of the world.” “Canada sells farm equipment.” “Canada sells cars.” “Canada sells light bulbs.” Whatever it might be.
At a young age we are—I think maybe well-intendedly, but misguidingly—told that Canada sells these things. As you know, that’s not correct. Hard working, entrepreneurial, innovative, risk-taking Canadians sell things to other people in other parts of the world. And in government and, broadly, in the public, we have to remember it’s you: it’s the businesspeople who constantly put it on the line every day to market your skills, your services. It’s the workers in our manufacturing plants that are there every day hoping that they’re going to make that product so well that it’s going to be attractive to consumers in other areas of the world. So we have to separate what’s government responsibility and what is the responsibility and the opportunity for business. So it’s not Canada that does these things, though the government can open the doors and make the playing field as level as possible for you—the innovators, the investors, the workers and the risk-takers. That’s a key distinction that needs to be made.
And then, in the process of doing this, we have to look at the second part of somewhat of a misnomer, which says we’ve got to break away from our dependency on the United States when it comes to business. Anywhere I travel in the world, people tell me that Canada is their envy because they’re so close to the United States and so close to such a huge market.
And so I’m making this point carefully: that we have this giant advantage of being side-by-side with the greatest consuming engine in the world. And therefore, if a Canadian business is going to want to diversify somewhere else, that we want to help you make that happen. But we’re not saying, “Break away from your deals with the U.S.” Because, with the deals you have in the United States, you are the envy of the world.
Having said that, in this global, synchronized downturn which has initiated in the United States, we do start to realize that—and you know this—if you are totally dependent on a particular market in the U.S., you may right now be experiencing a downturn; and companies that are also invested in other places are going to be able to spread the risk—except for the fact that when the whole world starts going down, the risk gets spread in a very interesting way.
Philosophically, first of all, and then practically: free trade. I don’t have to go on at length with this group. But you know that the freedom to trade is really the root cause of our prosperity in Canada. We are as prosperous as we are because we are free traders. And it’s important for me to remind my constituents that Canadians cannot buy everything that we make. We’re too good at it. We make more than we consume. And our job, as government, is to make sure that we are opening all the doors we possibly can and smoothing the way and levelling the playing fields so that, wherever you decide to market your skills or your services, you’re going to have a level playing field. And I believe it goes without saying we can compete with the best of the world any time, any day of the week. That’s been the secret to our success. We understand the importance of being able to trade freely. And any time we put up a barrier to trade, somebody else is going to respond somewhere, and their government is going to respond, because that industry in their country will say, “The Canadians put up that wall so we’ve got to put up a wall too.” And that makes it more difficult for our exporters to ship into that market.
And so we say to our American friends and we reminded them, especially this last couple of weeks, “If you really want to protect your workers, if you really want to protect an industry, you open up the doors of opportunity. You increase their chances to market their products; you don’t slam those doors.”
Now to give you a sense of how I think. What President Obama said was the right and the intelligent thing to do. He is a student of history. He knows that the markets will drag down if they launch into protectionist activity. But we also need to know and have some sympathy not just for him but for us as politicians. Are you feeling sympathy for politicians right now? It’s not something we find a lot out on the street. So we don’t seek it. But you need to know about the polling that was just done in the United States.
But polling is interesting, because the questions can be a little specious. They just asked the question, “How many of you are for the U.S. stimulus package and the ‘Buy American’ protection parts of it?” Over 84 percent said, “We’re for that.”
“How many of you think we should not have those protections and it should be open and free trade?” Only 4 percent of Americans said they were for that, and in spite of that, the President quite rightly said “We have to reduce the trade barriers and make sure we don’t run afoul of our international agreements.”
So I say that to you, and you wonder sometimes, “Why would politicians anywhere build these protectionist walls?” We’re under pressure from constituents and constituent groups. And what I do in my constituency is share with them the long-term view here that we can’t start to put anchors on our economies or we all start to get dragged down by it and people begin to understand that. But just to give you a sense of President Obama and what he did: knowing where the polls are and helping people trying to understand that.
So, on the philosophical side, we know that when you trade you prosper. Economic observers and historians say things, famously, like “If goods don’t cross borders, soldiers will.” That’s a fact of history. When you trade a product, with the product comes a bundle of ideas on where that product came from, and even going back to Phoenician times, it’s in trading those products—whether it was spices or silks or whatever it might be—that the thoughts, the ideas, the philosophies of the places that were most able to be prosperous began to be transferred. And so, by allowing our businesses to transfer product, we transfer more than that. The goals of democracy and human rights and the rule of law all begin to move secondarily to the transfer of the products themselves. So, philosophically, we are free traders for those reasons, and we would not be prosperous if we weren’t.
And then, on the practical side: if we are not pursuing freedom of trade around the world, we are, as a government, putting you at a competitive disadvantage, because, believe me, our friends, allies and competitors are very aggressive out there in terms of bilateral trade agreements.
There’s this giant organization called the World Trade Organization where we’ve got 153 members, depending on the time of day, trying to move along with massive trade agreements. That’s good and necessary and important, and we need to pursue those. But that’s a somewhat labourious process. In the meantime, the United States, countries in the Americas where we have a renewed focus, Australia, the UK—they’re out there rapidly pursuing, securing and signing free trade agreements. Chile, with whom we have an agreement, has 21 different trade agreements covering 55 countries.
Now, if you’re trying to sell your product in one of the countries that has a free trade agreement with Chile, the company you’re competing with is going to have a slight advantage, if they’re part of a free trade agreement with Chile, because there’ll be a tariff wall somewhere that they don’t have to pay that you will be paying on your product. And that’s why we’re very aggressive on this.
We have, right now, working its way through Parliament—as a matter of fact, in the last parliamentary session, I can proudly say I was responsible for half of all the legislation in Parliament: we had two bills, and mine was one of them—but one of those bills is the European Free Trade Association agreement. It’s not the entire EU. It’s actually Norway and Iceland and Switzerland, and tied in with Switzerland is Liechtenstein. Now, these are four areas with whom we have significant trade, and we now have a free trade agreement with them. It’s been signed. When I was in Switzerland on Friday—on the day I was there—they passed it through their upper house. So you just show up at another country and things move.
But they’re taking it through their process and we’re taking it through ours. Once we sign an agreement with another country, it has to be ratified in Parliament, and it’s going through a 21-day process there. We will have free trade agreements with those four entities.
That’s good and important of itself, but it’s a lever for us into the broader European community, the EU itself. That is our goal: to have a free trade agreement with the 27 countries of that giant market.
Strategically, here’s how we’re pursuing this. The presidency of the EU rotates every six months. The Czech Republic presently holds the presidency. They are a very vigorous free-trading nation. And I met with their key people in Prague about two weeks ago. We have their great support in making sure that our desire to begin formal discussions on a free trade agreement is on the agenda with the European Commission. I met with a key European commissioner a week ago to make sure that the Commission understood we are very ambitious about this. And we have that process. It’s informal right now. We don’t have the agreement to start the agreement, but we want to see that move along. We want to see 27 countries in that network being available to you without tariffs and without barriers.
We also have an agreement that we’ve signed recently with Peru. That will be tabled and that will work its way through Parliament. We have another one that we’ve signed, and it’ll be introduced, related to Colombia. We are concluding negotiations right now with Panama in that regard. I will be in South Korea in about two weeks. We’re close to an agreement there. There are a few hurdles that still have to be done. And a couple of weeks ago I was in India.
Now that’s, first, to give you an example of what we’re doing. My instruction and the Prime Minister’s instruction to our officials is “Free-Trade-Deals-R-Us.” And we want to do this in a way, obviously, that makes sense to our industry and to our business, but we are aggressively pursuing these.
Where we can’t get a free trade deal itself imminently, we’ll work on a sectoral basis. And so in India, I met with their prime minister. We’ve sent the signal we want, ultimately, a broad, comprehensive trade agreement—a free trade deal—with India. It is, as you know, one of the fastest-growing economies in the world, the fastest-growing middle class in the world. We have a common parliamentary heritage, common language, common respect for human rights and the rule of law, great opportunities. India is one of the countries that will still see growth this year—albeit somewhat more limited than the year before. And we would really like a trade agreement with them; we’ve sent that signal.
But if you don’t have that, then we work on a sectoral basis. And so I had members of Canada’s nuclear industry with me. India, because of its phenomenal economic growth, will be requiring 25 to 30 nuclear reactors for clean energy over the next 10 years, and Canada, of course, has one of the most respected nuclear industries in the world. And we were able to open up the doors of invitation for those company representatives to be able to move more freely in that particular sector. So we address it: where we don’t have a free trade deal, we will move on your behalf on a sector-by-sector basis.
Now, along with trade policy, as you saw, I’m sure, in the recent comprehensive economic action plan—we don’t call it a budget anymore, it’s a comprehensive economic action plan—you will see that we want to make sure that we stay competitive. As a matter of fact, we are still on track, for 2011, to have the lowest corporate tax rates in the OECD. So we are reducing on the tax side corporately. To bolster the free-trade approach, we broaden this with science and technology agreements between two countries, where we may not have a free trade agreement, for instance with Brazil. A month and a half ago, we signed an agreement. I was in Brazil to do that on a science and technology exchange where companies can tie into federal government funds research and development related to science and technology. We’re doing everything we can.
And then, on the monitoring side, we try and stay away from retaliatory trade practice and building trade walls, but we do have mechanisms in place if we feel that Canadian product is facing an unfair or a subsidized disadvantage. Just as an example, we are in the dispute mechanism process right now with China in about 20 different product areas. Six of those are to do with steel and iron, where we have made a determination of classical dumping: where products are coming in, they’re being, possibly, subsidized or having an unfair advantage and being dumped into the Canadian market.
So we are free traders but we believe in referees. And we set up these systems of referees, and we monitor this hourly when product hits our borders. And if an industry feels they’re facing an unfair dumping or subsidized situation, we will look at that. If that’s our determination, then we launch the dispute mechanism. Our determination is to keep the field level.
So that gives you an idea of what we are doing on the trade side. We’re making some great progress on these comprehensive trade agreements. We’re keeping your taxes down and it is not the role of government, as I wrongly thought in Grade 5, to sell your product. But it is our role to make sure that you have every legal advantage available to you through trade agreements, through regulatory regimes that are harmonized and that work, and through common-sense approaches where government can clear the way, level the playing field. And then you get to do what you do best, and what Canadians have done best throughout our history, and that is to market to the world and to market with success. Thank you for being a very successful part of that.
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