February 26, 2009
Address by the Honourable Stockwell Day, Minister of International Trade and Minister for the Asia-Pacific Gateway, to the National Press Club Attaché Luncheon
Based on a Transcript
It is a real honour to be here and a privilege. I want to talk about why this government uses a combination of diplomacy, reality and pragmatism to make the case for freedom of trade. Sometimes it is said we do that for ideological or philosophical reasons. I would suggest that there may be some ideological basis to a government supporting freedom of trade because of a particular understanding of human nature, an understanding that we perform better when we have more opportunities and there’s a certain element of competition, and that monopolies usually lead to inefficiency. And we can make all those kinds of philosophical arguments, but I would suggest to you today that the present fiscal and environmental climate in which we find ourselves is actually making the case for us.
It also gives us an opportunity to see the human impulses at work, nationally or internationally. And I’d like to reflect on that, take a real-life example of what’s happened recently, and then we’ll go back into the past a little bit, and then I’ll come back to the future and talk about what we’re doing these days. Then I’ll close with enjoining you to help us make the world a better place through trade. And that’s quite literally what I believe can happen.
It was about three weeks ago now that we saw Prime Minister Harper take the stage and in a very public way—and as diplomatically as possible, but also as strongly as possible—send a message to our largest and most important partner, the United States. And that message was that we expect the United States to live up to its trade obligations. That’s a very strong statement to make to your neighbour publicly, especially on the eve of the new president coming to visit and pay his respects. But it was timely, it was needed, and it was one of a series of important components to an overall diplomatic strategy that answers to what we saw, and what eventually people around the world saw, as a protectionist response to a fiscal crisis.
When we saw the elements of the bill that worked its way first into the House of Representatives and then to the Senate, we had great concerns because of the Buy America emphasis and specific reference to steel and iron products. And then when it moved to the Senate, there was an eleventh hour addition of all manufactured goods, related to the infrastructure plans. You know, in a historical context, we understand that the Buy American Act provisions and its basis have been in place since 1933. And they were toughened in 1982. What we were asking for was a “standstill,” as reflected in the November 2008 Washington Declaration of the G20. Again, it was the Prime Minister who took a lead position at that particular conference, reflecting on what looked like a crumbling of the Doha Round of World Trade Organization negotiations, in saying we’ve got to put a stop right now to the protectionist impulse. It is understandable, it’s a human impulse, to become isolationist in the face of threat, when it comes to trade.
And so the G20 sent a very strong declaration that echoed in the most significant way upon those of us who were meeting right after that in Peru, at the Asia-Pacific Economic Cooperation Ministerial Meeting. There was a real sense around that table that with it looking like the Doha Round was grinding down, there had to be a renewed focus on whether things could happen in Geneva in December, which as we know they didn’t, or whether things could happen after the Obama administration came into place in ’09, that there had to be continued movement, that the last thing that we needed to see right in a time of fiscal contraction were trade walls going up.
Now, these are difficult to resist, and people will say, well, we know from history—and certainly President Obama is a student of history—that when there was a global contraction beginning to happen in 1929 and then moving into 1930, it was again the United States—the free enterprise, entrepreneurial, individualistic champion of less government and more innovation and entrepreneurial activity—that actually led with some very protectionist legislation. And we’re all quite aware of that.
The response then, as you know, in Canada and around the world, was that if they’re doing that, then we’re going to build walls too. And everybody scurried about and built trade walls and isolated themselves and proved once again, in a tragic and gripping way, that when trade walls go up, economies go down. The American Smoot-Hawley Tariff Act and the other acts around the world that followed were significant contributors to what became the Great Depression.
Our hope was that we would have learned a lesson from that, and this was reflected in the Washington Declaration. That is why it was so alarming to us to see this new U.S. legislation coming forward.
You know, we should have learned a lesson. And our hope is that we will prove Winston Churchill wrong, when he said the only thing that we learn from history is that we don’t learn from history. We’re hoping to prove that wrong, and yet here it was materializing. And people might say, how does that happen? Everybody knows better, and yet here is a large group of intelligent men and women of all parties wanting to build these protectionist walls in the United States.
Well, it happens because of democracy itself, because in a time of crisis the people who are affected, our constituents, come to us and say, “You’ve got to do something; you’ve got to protect us.” And it’s at those moments that an elected person has to say, “What is going to be the best approach in the long run here?” Too often in politics, because we’re always focused on the next opinion poll, it becomes a tyranny of the urgent that drives us, instead of being guided by what’s important. What we need to do at those times is take a step back, and take the time to explain to those constituent groups the long-term effects of policy, which in fact can hurt them and hurt everybody else in the long run.
Now, I appreciate the fact that, with what appears to be a Keynesian streak in our latest budget (it’s actually not, but we borrowed from them), when Keynes was asked about the long-term effect of ongoing structural deficits and deficit financing, his response was, well, you know, in the long run we’ll all be dead.
Well, my kids won’t be and neither will my grandkids. That’s why, especially in these times of fiscal crisis, we have to think in the long run. And that’s why it’s important for people like the Prime Minister to take a leadership position, as he did. In taking that position, he was not just suggesting something to the Americans, but he was taking the moment to share something with all Canadians. And we have continued to put that message out: that if you want to protect jobs and if you want to protect industry, you do what you can as a government to open the doors of opportunity for them. You don’t close those doors. That’s why we are speaking through the media, getting the message out and working with industry groups in Canada and the United States, to put pressure on the administration so that industry groups themselves would come to the table on this issue.
And as we saw, very significant industry groups in the United States were saying to the administration that this is great legislation for us domestically for a while, but it’s going to hurt us in everything we’re doing around the world. We had the first signs that our message was getting through when the House Democratic Majority Leader publicly said, we heard the concerns of the Canadians and their concerns are justified. It was somewhat comforting to hear that. Three days later we heard President Obama, virtually using the words that the Prime Minister had articulated in the House of Commons, say that U.S. policy had to live up to international treaty obligations. That also was greatly comforting.
I might add that he said this in the face of polls being presented to him that indicated that over 85 percent of Americans were in favour of the Buy America legislation. So that was a significant thing to say as an elected person. Now, we also understand how polls work. If you get a phone call, as a citizen, asking, “Do you like the fact that we’re protecting you with the Buy America Act?” how many are going to say no? But we have to be able to look at what the real question is and project, sometimes, even beyond the poll. And so the President took that position, and then just before his arrival here in Canada there was an amendment to that legislation overriding everything else, saying that nothing in that act can contravene their treaty obligations.
So there we had an example of diplomacy, of leadership—diplomacy on our part and leadership on the Prime Minister’s part—and then corresponding leadership in the United States, first with the House Leader and then with the President himself in saying we have to look at what is best in the long run. And we have to remain vigilant. This issue is not over, because constituent groups, quite rightly, are always meeting with us to share their concerns, and we try to work with them to see what is going to be best in the long run.
So, there’s a situation where diplomacy was put to use, but not because of a blindly ideological position, but because of an understanding historically of what trade does. It should be no surprise to Canadians that we are very focused on the trade agenda within our government. We are sort of saying trade deals are us. We’re pursuing these with vigour. We have one before the House of Commons right now with EFTA [European Free Trade Association]. It involves Iceland, Norway, Switzerland and Liechtenstein. It is moving along, and we believe it’s going to be passed. It’s going to be very beneficial to exporters, manufacturers and producers in Canada and in all those countries. It will also be useful as a lever into the broader EU [European Union] community.
We’ve presented our case to the EU presidency, which for the next six months is with the Czech Republic. I’ve gone to Prague and we’ve made the case there, so we have the EU Commission focused on what we are asking to do. We want to complete what’s called a scoping exercise and then hopefully be able to make a formal announcement that free trade negotiations are now moving ahead in a formal way. That’s our goal, and we think we’re getting close to it. The provinces and territories are onside. We understand there’s one province that is reflecting in terms of how best to make its position known, and the EU Commission is aware of that. We are convinced that the commitment level of the provinces is high.
We are doing something unprecedented with the provinces and territories in this particular trade negotiation with the EU. As we prepare for it, we are saying to the provinces and territories that we want them in the negotiation room with us. Now, clearly, there will be just one microphone, but we won’t go to that microphone until we have agreement with the provinces and territories that we are moving ahead and that the sector-by-sector analysis is going to be good for everyone in the long run.
When I was in India not too many weeks ago, it was with this same intent, to have a broader, more comprehensive trade agreement with, let’s face it, one of the largest economies in the world, with the fastest—up till the contraction of the last few months, anyway—the fastest-growing middle class in the world. Some amazing things are going on in that country. We have great relations, not only because of our own population and the Indian diaspora, which provides natural connections, but because we have great opportunities for the mutual benefit of our citizens. And we are pursuing those with vigour.
With China, since the beginning of the Harper government there have been no fewer than 13 ministerial visits to China. I’ll be there in April. We’ll be announcing the opening of six more trade offices. We are investing $2.5 billion in what’s called our Asia-Pacific Corridor, so that we can make the case for the most efficient transport routes from China and other parts of Asia to Vancouver or Prince Rupert, then onto the rail lines, and then into the interior and to the transport hub areas like Memphis and Dallas and others. So we are also looking to expand that particular relationship.
We are also very close to getting things finalized to have a deal with Panama. We will soon be tabling our completed trade negotiations with Colombia and with Peru. We have finished our negotiations with Jordan, and that agreement is just going through what’s called the “legal scrubbing,” when the lawyers get involved.
Our belief is that the expansion of trade and the opening of these kinds of opportunities, which is one of our key policies, will be, if other countries are also open to them, one of the factors getting us through this time of fiscal contraction.
When you go back in time and look at trade and the freedom of trade historically, you can see that those who are ideologically opposed to freedom of trade, I would suggest, don’t have a full comprehension of history. Because no system is perfect and no democratic system is perfect.
We always have to look at issues in terms of what would be the best policy overall, and freedom of trade is a better policy than not having freedom of trade. You’ll recall that Voltaire was once given two choices: prison, or exile in England. He looked at the choices. He’d already done time in prison, so he knew what that was about. And so he chose exile in England, where he was very impressed with the approach toward religious tolerance. Something he wrote about, that was particularly fascinating to him, was his visit to what was then the early stages of the London Stock Exchange, a coffee house on Exchange Street. He said how surprised he was at how people who in the broader world always seemed to be at war with one another, the Jews, the Christians and the Muslims, were peacefully and trustfully conducting business. This goes to show that when you have a bona fide interest, and you respect the interests of one another, you will do what you can to make sure those interests are not destroyed, for example by war. It’s been said that if goods don’t cross borders, then soldiers will.
And so I use his reflections, what he saw as quite amazing, as another component in our understanding that trade not only can benefit our economic lives but can benefit our lives in greater ways, because of the desire to see one another’s interests advanced. We do better when our neighbour does better. This is a common understanding. And so we are going to continue to pursue the openness of trade with as many countries as we can. And I unashamedly appeal to you to join us in that process, with the contacts you have around the world, if people are saying, “Well, give us some reasons to trade with Canada.”
One of the things that we are communicating is the evaluation of fiscal analysts from around the world who have said that Canada has the most stable banking system in the world. Other banking systems are doing comparatively well, and some are doing miserably. But in Canada, banks are not collapsing. In Canada, we don’t have that runaway foreclosure problem because of flawed mortgage policy and lack of transparency, in terms of derivative packages that were made available on a large-scale basis to people who felt the bubble would never burst.
We have a tax policy that is well on its way to being the most competitive of the OECD [Organisation for Economic Co-operation and Development], and our goal is to be there by 2011. We are considerably along that path right now. And we are making the case that if our banks are reluctant, and there is some reluctance right now in this credit contraction, we have certain abilities as a government to make credit more available. We also have a highly educated and motivated workforce.
And we don’t just pursue free trade agreements alone, which are important, but we look at science and technology agreements, at research and development investments, at open sky agreements. We are getting the message out on every level.
It is very important for us to have your cooperation, if possible, in getting our message out. It is a timely message, a message of hope. We are saying that those who wish to invest here in Canada will be successful. There will be the opportunity for positive results from investment. That’s why when I see all the experience that is here in this room, I am hopeful that we can share with you the mission of communicating our message.
We also have trade offices in about 150 cities around the world that are getting the message out. They are a place of landing, a platform, from which Canadian business people can reach out with economic activities. Whatever country it is, these offices are also a place where we can share the information that’s necessary and that’s positive. We have a positive message, ladies and gentlemen. We are in a time, however, of fiscal contraction. Now is not the time to become isolated and insular. It is the time to open up more.
Yes, there is some self-interest to this, but we believe that with all the capital that is out there, twitching to be invested somewhere, when people hear this message of what Canada has to offer, and as that increasingly begins to be written about in Canada and in other countries, economic advisers are listening. And as more investment comes into Canada, let’s say into our banks, then that increases their capability to expand their credit. And more investment comes into our businesses, and we then see opportunities in other countries open up for Canadians. We believe, in fact, that Canada and its policies and its example historically can be not just one of the factors in seeing Canada move through this very difficult time, but can be one of the factors in pulling the world along and seeing it move out of this downturn.
I’d like to close by saying all economic cycles move up and they move down. The way some people talk, you would think this is the end of history, that the cycle won’t move up. There was that famous [Francis Fukuyama] essay a couple of decades ago, when the cycle was moving high, about the end of history, claiming that the business cycle was over. Millions of people believed that, that the good times would never stop. And there needed to be a moderation of that message at that time.
Now we’re on the flip side of that, and there needs to be a moderation of the message on the other side. This is not the end of the world. It’s a tough time, and it’s especially tough for people who are losing jobs and whose businesses are closing. But in a global sense and even a national sense, what goes down will come up. We will weather the storm because of the policies we have in place. And we ask you to join us in the process of getting this message out. With proper policies, proper principles and an understanding of history, we will come through this time, and we’ll come through it wiser and better because of what we’ve learned in the process.
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