April 22, 2009
Based on a Transcript
Address by the Honourable Stockwell Day, Minister of International Trade and Minister for the Asia-Pacific Gateway to the 18th Annual Conference of the Canadian Association of Importers and Exporters
Ladies and gentlemen, thank you for that warm welcome. It’s great to be here. Pardon me if I feel a little bit buoyant this morning, despite the early morning flight from Ottawa. But the Vancouver Canucks did accomplish a four-game sweep. And so what can I say?
I was approached by a [Toronto Maple] Leafs fan who said, “Can’t you help us out in Toronto?” And I said, “Well, how can I do that?” And he said, “Well, you’re the Minister of Trade, aren’t you?” So I said, “Well, I’m going to leave that to management.”
It’s great to be here, and thank you also to the [Canadian Association of Importers and Exporters] Board members. We had some time before this meeting, so they’ve tuned me in pretty clearly on some of the things that they see they’re running into, things that we could be doing better and helping you with. And even though one of the most fearsome phrases I ever heard when I was in business was, “Hi, I’m from the government and I’m here to help you,” there is some truth in that. But we get our best help and advice from groups like yourself and your representatives.
Mary [Anderson, President of the Association] is one of those who is incredible. Mary, I’ve never figured out how you find the time to do what you do, and run your own business and this organization and everything you do related to the CBSA [Canadian Border Services Agency] and EDC [Export Development Canada], and the 19 other letters of the alphabet. I just don’t know how you keep up.
Isabel [Alexander, President of Phancorp Inc.], your input is so helpful and I know you were very busy yesterday. The group yesterday commented on the value that you add to the SME Board [Foreign Affairs and International Trade Canada’s Minister’s Small and Medium Enterprise Advisory Board] and it’s much appreciated, and thank you for taking time out of your business. And frankly, I don’t know how you folks do it, with everything that you’re facing. You still have time to do the important things like this and keep us informed.
I’d like to take a few minutes to give you a little bit of background on what in fact we are doing in government to help you. We think some of it is effective, we think most of it is necessary. We want to continue, with your guidance, to do the things that are necessary, in our view, to open doors. I believe it’s not the government’s job to run your business or to tell you how to do that by any means. But we can, on the Trade side, open doors to make sure the pathway to your prosperity is as uncluttered as possible with government clutter. We all know that some taxes are necessary. We all know that some regulation is necessary, and we also know that, sometimes, these things in and of themselves can accumulate and make business very difficult for you.
So we’re on this constant quest to reduce your load, clear the clutter, open doors. And then, if you’re making decisions to be exporting or importing, you can do so relatively free of unnecessary encumbrances. That’s our goal.
What I’d like to do first of all is give you a thumbnail sketch of what we’ve done as a government in response to this global downturn. It’s a message that we’re sharing as we go around the world, to encourage people to think about Canada as an investment and import and export destination. And then let me give you an update on some recent initiatives that should help what you’re doing.
I’ll try and give you some highly confidential, secret, classified stuff so you feel your time is well-spent here. Do we have any of our friends from the media here? I’m going to say neither of them are here, but one is? Okay. Great to have you here. Well, I’ll still try, I’ll drop this secret, highly classified information and we’ll see if even the media can keep it quiet. I do appreciate your interest here. I say that sincerely.
A couple of things we’ve done—if I can take the view from 30,000 feet—with this time of downturn. We have packaged together, as other countries have, a stimulus package. It’s equivalent in value to about $42 billion; it has the effect of 2 percent of GDP, which is what the IMF [International Monetary Fund] was looking for as a response from countries. A few countries have gone beyond that, China being one. Most have not. But ours is in that range. Big focus on infrastructure, as you know. We took a list of future projects—necessary projects—that we saw stretching out over the next seven years and basically we’ve compressed those into two years, and worked with provinces and municipalities at what I have to say is an unprecedented level of cooperation. Because when survival is what it’s all about, it really does help you to focus.
And in that process alone we’ve been able to clear some of the regulatory regime that would take, sometimes, two, three, four, five years to get a project approved. People talk about trying to get things done in China, you know, the party politics, this Communist regime, this heavily burdened bureaucracy. I’ll tell you what: things are moving faster in China on the regulatory side than they are in Canada and the United States, and not to the total abandonment of things like concern for the environment.
As a matter of fact, it takes me longer to get a permit to get a fence around my backyard then it does to get a high-speed rail project approved in China right now. So things are really on the move. But along with the stimulus package, the focus is on infrastructure, so that people are working, money is flowing out, all of the supply chain that would go to the building of roads and bridges and ports, which I’ll also talk about in a minute—we are moving that along at a much more rapid pace.
On the tax side, we’ve not only been aggressive, we’ve laid out the tax program on the personal side and the business side for the next five years so that there’s predictability to it. So when your customers are looking at things like capital cost allowances, they can see the grade, they can see it going down and they know that there’s predictability to help them with their longer-term solutions.
We have been told—and it’s great when you have other organizations from outside the country talking about your own programs, because they’ve been getting a lot of praise lately; and that sure helps us and we don’t have to use government propaganda—sorry, not that we would, we don’t have propaganda—we have facts and figures, but no propaganda—but it is a powerful thing to use when I’m in meetings around the world trying to work on opening trade doors, to be saying things like “we have the most sound banking system in the world.” And that’s the IMF, that’s the World Economic Forum, that’s the OECD [Organisation for Economic Co-operation and Development] making those types of comments.
Our requirement for banks, in terms of what they have to have in terms of capital assets before they start their loan programs, is very significant. More so, for instance, than in the United States. We do not and we are not bailing out banks. We are not bailing out financial institutions. We don’t have that problem. We do not have a problem with the subprime mortgage issue, which is really where this crisis began. It’s one of the roots of the crisis in which we are now: as far back as the 1990s in the U.S. they developed a policy, when it came to housing, of accelerating mortgages on the basis of “everybody has the right to a house, regardless of their risk assessment, regardless of their work environment.” And that really started bloating up Fannie Mae and Freddie Mac on the mortgage side to unprecedented levels.
Investors around the world saw this, without realizing there is an end to these types of unsubstantiated moves. And they began putting together all their credit packages, their derivatives, their credit swaps, and marketing those out and starting to build a balloon which could only do one thing in the final analysis, and that was at some point to burst. And, of course, it has—leaving everybody with these so-called toxic assets.
So our regulation and our legislation related to institutions and mortgages—we had no subprime mortgages, as I said—have kept us from the worst of that. And we’re going to continue along that particular path.
On the question of credit, even though our banks are stable, there is a concern about credit contraction. And banks are not as generous as many businesses would like them to be, as you’re probably hearing, even to businesses with a good record. And so we’ve significantly expanded the credit capacity of arms-length operations, EDC, BDC [Business Development Bank of Canada], CCC [Canadian Commercial Corporation] and other letters of the alphabet, to make sure that things like insurance, market insurance, insurance with the people that you are dealing with for suppliers, is in place in a more significant way than it has been in the past. We have not instructed these arm’s-length organizations to take unprecedented risk, but they are operating at a higher risk level than, let’s say, the banks. They’re still using business models, of course, in assessing those risks. But credit is being made available at a much greater rate to help through this particular time.
So those are some of the things that we have done on the government side to assist through this period of difficulty. Along with that, we’ve looked at the area of trade. And trade and freedom to trade, as you know, right now is falling into disrepute for some, unfortunately. Some international commentators do not understand that freedom of trade leads to prosperity; it leads to people being able to become upwardly mobile. History is very clear on that: when you look at countries that have resisted freedom and openness of trade, rules-based trade, then their economies suffer and the history is very clear. We often talk about—and it’s now thankfully a part of the lexicon of mainstream media—the 1929 [U.S.] Smoot-Hawley Tariff Act that was introduced as a protectionist measure. A recession was coming upon people, which was what triggered similar responses around the world, retaliatory legislation and actions which plunged the world into a depression, and most people get that now. They understand that and that’s why we have to resist protectionist impulses.
We were pleased in November to see the G20 leaders speak very clearly and say, “We’ve got to complete the Doha Round, that’s a must.” And they sent out a very strong admonition against protectionist measures. They repeated it again at the London Summit in April in the clearest of ways.
It was Prime Minister Harper who took the lead among world leaders when the United States came out with its “Buy America” clause, which was buttressed with all of these protectionist measures. We stood up and very clearly blew the whistle on that. The Prime Minister stated publicly that the United States needed to respect its international obligations and its trade treaties, regardless of what “Buy America” was doing. And I do believe [U.S.]President [Barack] Obama is a student of history, I do believe he gets that because it was only a few days after our pronouncement that he came out and said the stimulus package will have protection and amendment that forces it to comply with international obligations and trade treaties. That was a great step forward.
It’s one thing to say that, it’s another thing to see it worked out in reality. And here’s the problem, folks. As elected people, we get besieged. A funny thing happened on your way to the marketplace: when things are going well, businesses quite rightly say, “Yes, stay out of our face. Get out of our way. Let us do what we can do and let us do it best.” And so we’re quite willing to be compliant and say, “Let’s do that.” And then in the United States, which is often heralded as the place—or should be the place—that champions entrepreneurialism and the laissez-faire approach, and free capitalist system, those champions of entrepreneurship are often the very first ones to turn and run to their elected officials and say, “Protect us. Now we would like some legislation.” It’s a bit of an irony, but it’s called survival and it happens and we understand that. But we have to continue to aggressively push against that.
As I was sharing with your Board members this morning, it’s very important that we marshal the energies of business associations in the United States speaking to not just their elected people, but their newly appointed Cabinet people to make sure that they resist these protectionist urges. Because you can wave a free-trade flag and then underneath that you can bring in all kinds of protectionist armour which actually inhibits free trade. And they need to understand that in a very clear way.
If we now have these policies in place which we believe open doors, and lessen your load, lighten your load, we’re also speaking and dealing to our own agencies, like the CBSA. You probably saw the announcement of a couple of days ago where the CBSA said they’ve done a review over the last year and have reduced the paper burden by 20 percent. They have eliminated over 1,600 different rules and regulations. There are still thousands out there that you’re dealing with every day, and we need to hear more about what those are and how we can minimize the effects of those, how we can really sort out which ones are needed for safety and health and other reasons, and which ones we can either harmonize or get rid of. But they’ve been aggressive on that front.
That then takes us to the area of promoting, seeking and pursuing free trade agreements with more countries. The WTO process is a very good process, ideally, if it’s working. When it starts to bog down then we have a challenge, because you’ve got 153 countries moving along with this fairly large process. I mean, you can imagine the magnitude of the challenge of trying to coordinate one or two businesses: you can imagine trying to coordinate 150-some countries in terms of the regulations related to trade. But it is important that process moves along.
However, when it slows down, as it has been, then we need to look for bilateral trade agreements between Canada and other countries and start to build and accumulate those in an aggressive fashion, and we have been doing that. I’m happy to say that before the last legislative break I was personally responsible for half of all the legislation in the House of Commons. We had two bills and one of them was mine. So that made me feel pretty powerful.
And that bill has been reintroduced, that’s the European Free Trade Association [EFTA] agreement, with a limited number of countries. And that particular legislation is in the Senate right now, it is moving and we hope to see it continue to develop. Iceland, Norway, Switzerland, Liechtenstein are the countries that are involved there. We’ll be removing tariff barriers to Canadian products, some as high as 128 percent. So on a number of very important fields for Canadian marketers, those barriers will be gone very soon.
We’ve also have bills in the House of Commons, free trade bills, where the negotiations are all completed with those countries—it’s just a matter of getting them through the House—with Peru and with Colombia. Very significant bills, not just in agricultural products but in machinery and equipment, by the way, to show that we believe in free trade. Another thing we do with our budget was we eliminated the machinery and equipment tariff, as you’re probably aware. That’s about a $440-million hit to our treasury, but we believe that that’s necessary to help Canadian manufacturers in their particular business. So we’ve got Peru and Colombia there, we are facing some opposition on those, but we think they will go through.
Now, the first agreement that I mentioned, the EFTA agreement, that one we will use and we have been using to lever into the broader EU market, 27 countries: a huge, multitrillion-dollar economy when you add them all together. And we have just announced the successful completion of what’s called the “scoping exercise.” And if all goes well, the Prime Minister will be able to very soon announce the beginning of the official round of free trade negotiations with the EU. That’s going to be an exciting development. Don’t hold your breath: these things don’t happen overnight. Sometimes they take a number of rounds. But it looks like we’re ready to move ahead. That’s going to be an exciting one.
My most recent trade mission included Japan, mainland China and Hong Kong. In Japan, with my counterpart there, we have now appointed officials to get back to the discussion table about a comprehensive trade agreement with Japan. They obviously have some concerns, they’ve got some sensitivities, especially regarding agriculture. But we need to push ahead on that.
China, as I was sharing with your board: you can get all the briefing material that you need—and we do—you can read all the reports, you can watch the media, but, as you probably know, until you go there you really don’t have a sense of the enormity of growth that is going on in China. It is staggering. Most Canadians are aware that there’s a couple of big cities called, you know, Beijing and Shanghai. Most are not aware that there’s over 30 cities in China which are well over a million people, there’s several that have 10 million to 15 million, and it’s quite something to fly into a city—one that doesn’t get talked about a lot—and see it’s a city of over 10 million, and see over two dozen cranes building skyscrapers: two dozen.
I was in Chengdu, which has a skyline which is more dramatic then even some of the marvellous skylines that we have in Canada. And most people haven’t even heard of Chengdu. And going up to a near completion at the top of what will be one of the top 10 highest buildings in the world and realizing that it is being constructed with full construction regulatory compliance at the rate of two floors per day. To hear the projections of when they are going to cut the ribbon for the high-speed rail between Beijing and Shanghai: the shovel isn’t in the ground yet, and they’ll be cutting the ribbon in 2011.
To be in an airport hangar bigger than I have ever been in my life and see the construction of a whole new line of commercial jet airliners—with a Canadian component to it, I might add. They are building a city to accommodate what’s going to be happening at the airport, just in terms of production. And putting in a subway to the nearest city. Folks, it is staggering what is going on. And we want to make sure that you and your companies, as far as possible, have access to great opportunities there and there are a number of Canadian companies that are helping out on the infrastructure demands.
One of the most significant areas of demand that they have is in the area of anything related to alternative fuels, energy-saving, anything that’s affecting the environment. China is, regardless of past record, aggressively wanting to—and realizing they have a necessity to—integrate anything to do with green technology in virtually everything they’re doing.
We signed six science and technology agreements between universities in Canada and universities in China related to diverse fields of endeavour and research. Some unique research related to the HIV virus. Research related to state-of-the-art water treatment for sewage—a very important one if it’s not working. Research related to climate change and the effects on grasslands in an area in Tibet and an area in the Canadian Prairies. I mean, the projects that are being signed are as diverse as you can imagine. All with the goal of continuing these linkages leading to research, leading to product development. It’s going to hire people: it’s going to raise economic levels.
These are some of the areas and some of the issues that we are pursuing aggressively. We are negotiating sectoral trade agreements with a number of those particular countries. Some of them aren’t ready for a full free trade agreement. They still have sensitivity, especially in the areas of agriculture.
I was in India just two months ago with members of our nuclear industry. India is like China, growing at a phenomenal rate, and they want to have energy, or emissions-free energy production. They’re talking about building 25 to 35 nuclear reactors. Only Europe is ahead of them in that particular category. The opportunity for the Canadian industry there and all of the offshoots of that are huge.
We signed some significant agreements there. We signed some air agreements in those countries. We signed memoranda of understanding. We are doing everything we can, as I said, to keep the doors open, help you to catch the waves that are ricocheting around the world that we need to capitalize on.
Folks, that was a brief overview of some of the things we are doing to, as I said, open the doors, pave the way, to unclutter the playing field and make it as amenable to you as possible to do what you do so well and to work with the companies that you need to work with. Thanks so much for your attention and thanks for being part of making this economy grow even in this time of downturn.
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