April 28, 2009
Washington, D.C.
2009/29

Based on a Transcript

Address by the Honourable Stockwell Day, Minister of International Trade and Minister for the Asia-Pacific Gateway, to the U.S. Chamber of Commerce

Ladies and gentlemen, I always enjoy being in Washington, and one of my favourite rituals is to do what I call my pilgrimage down to the National Mall, where I walk or run up to the various monuments, read the inscriptions and remind myself of what the basics of freedom and democracy are all about, and do my homage to those principles.

I also appreciate the fact that Canada and the United States share probably the most successful trade relationship in modern economic history, and of course NAFTA is an incredibly powerful relationship. This relationship between our two countries is unparalleled, you could say, in modern history; the fact that two countries could exist side by side as long as we have without going to war against one another is a model for the rest of the world. It’s been quite a while—1812, in fact—since you guys took a shot, and if you recall we won. That’s a long historical period for two geopolitical bodies to live side by side on friendly terms.

Having said that, any relationship has its challenges and difficulties, but it’s the transparent and vigorous pursuit of the settling of irritants, if we may use that word, that actually strengthens us. We see that in our trade relationship. Whenever we talk about the issue of irritants, I think we need to remind ourselves of the fact that we have with the NAFTA relationship, and with the relationship between Canada and the United States, a dispute settlement mechanism. So there is a referee on the ice, if I can use that analogy, and the thing about a referee is we all agree before we go out on the ice that if somebody is offside and the referee calls it, then whether or not we totally agree with the referee at all times we must live with the ref’s decision. That’s the process that lets the game continue. For example, take what just happened between the Boston Bruins and Montreal Canadiens. The referees decided that indeed the Bruins had won that series, and so, despite some disputes we may have with how it all played out, we’re going to live with that—and we’ll watch the Vancouver Canucks take it the rest of the way!

But these are just the realities of our relationship, and certainly our trade relationship. We have a situation where US$1.9 billion in goods and services is going back and forth across our borders every day, and more than 300,000 people cross our borders every day. These are staggering numbers. And they speak so well to the nature of our relationship—as individuals, as corporate entities and as political allies. The amount of foreign investment that came into Canada last year from the United States was about $239 billion: that’s three times what it was before we had this agreement in place. We Canadians ship about 80 percent of what we export to the United States, and over half of our imports come from the United States. And we are your biggest buyer—bigger than Mexico and Japan combined. So we’ve got this incredible relationship, and I think many Canadians and many Americans are not fully aware of what a powerful and positive relationship this is, and how well it functions, and how it really is the envy of the world in many ways. We want to see this continue.

So keep that image in mind, this very vibrant relationship—our Canada-U.S. trade relationship and the NAFTA—and to that add the image that we all face today of a global downturn. I won’t go into all the details here because each country is individually, and of course internationally, trying to address this downturn. We have our various stimulus packages and we hope that they work—in fact, there are already signs that they may be working. For those of you who are not fully aware, I want to let you know how independent analysts outside of Canada see Canada weathering this storm. I am very pleased that some of my colleagues are here today, some members of Parliament who are engaged in discussions about the relationship and how to keep it strong and how to keep it vibrant.

As elected people, we often produce material about ourselves, about our parties and about our policies. And when we do so, we avoid ripping ourselves apart and talking in negative terms; if what we write is usually fairly positive that’s because we are positive people. But the observations made about Canada that do not come from the Government of Canada’s communications departments—for example, the fact that our banking system has been hailed as the most stable in the world—are very significant. This view is shared by a number of outside agencies, including the IMF [International Monetary Fund], the World Economic Forum and the World Bank, among others. We are not bailing out banks; we’re not in a position where we have to do that in Canada. We do not have a subprime mortgage situation. Our banking rules, for which we have been criticized in the past, are fairly conservative. In fact, the word “boring” has been used about Canada’s banking rules—but now we’re finding out that “boring” is the new “exciting.” We’re quite pleased about that.

Nevertheless, we do have some significant restraints on our financial institutions with respect to how much credit they can make available relative to their asset base, and that has now proven at this particular time to be tremendously positive. So I would like to talk about that just in case there’s some investment decision being considered around your tables and you’re wondering where stability can be found.

Like you, we have put a stimulus package in place. In relative terms, the overall effect of our stimulus package represents about 2 percent of our GDP, given that we have a tenth of your population and that you can usually take a U.S. figure and divide it by 10 to arrive at a Canadian figure. All that to say, it’s relatively proportional. We’ve looked at infrastructure projects that had been planned for the next seven years, and we’ve compressed those into what would be about a two-year time frame. In other words, we accelerated the fund that would have been distributed over the next seven years, so that now a big portion of that will go out over the next two years. So you can see the hoped-for effect is obviously to stimulate a lot of activity, to build the necessary roads and bridges, and water treatment plants, and everything that infrastructure can possibly entail. As you can see, the infrastructure side of our plan is very important. So, here we have a very stable banking system, and a very vigorous infrastructure plan, which of course invites procurement possibilities from the United States and around the world because we are open when it comes to trade.

With that, we are continuing to maintain what the OECD [Organisation for Economic Co-operation and Development] says is the most competitive tax regime in the G8, and we have a long-term plan that is, we say it’s on paper, but it’s in stone in terms of how that’s going to continue to move downward on the tax side, both personal and business, into the year 2012. So we’ve got predictability of tax and predictability of the very competitive tax system. Add to that our very strong banking system, which is making credit more widely available through the arm’s-length credit agencies of our government, such as Export Development Canada, even though banks worldwide are in a period of some contraction depending on where they are and who their customers are.

And we are making that [credit] more available to the large industries—the auto industry, for instance—with a package, again, that’s relatively proportional to what you are doing with some of the same guidelines and conditions that we’re putting on the Big Three North American automakers. But we’re also making that credit available to the smaller businesses, the SMEs [small and medium-sized enterprises], because we recognize where job creation really does come from.

So, putting all of that package together, we believe we offer a pretty favourable investment environment for people to consider: we’ve got this great trade relationship here and you’ve got this great partner, us, looking very attractive on the fiscal and economic side.

And then we are very concerned, as is the United States, about the possible impulse of protectionism in countries around the world, particularly as we are now in a time of economic stress. Yes, some degree of taxation is necessary. Yes, some degree of regulation is necessary, but keep it minimal. Keep it as uncluttered as possible, reduce our regulatory burdens. I’m pleased to repeat the announcement we made last week that with our border agency we’ve reduced the paper burden over the last 18 months by 20 percent, eliminating some 1,600 regulatory provisions. It is our determination to be as streamlined as possible.

It’s something that we need to keep in mind as business-oriented people: that yes, there is a role for government to play, but let’s remember that we approach government from a business point of view that is focused on genuine concern rather than trying to limit competition. I know limiting competition would never cross any of your minds as business representatives because you want your competitors to be healthy and to spur you on to greater heights. Having said that, world leaders have come out with some very positive declarations—for example, the G20 declaration in November, right here in Washington. And more recently, the declaration made in London, which involved President Obama being among the clearest on the dangers of protectionism, along with Prime Minister Harper.

But we learn from history, and I know, and you as business people know, that we will move out of this economic downturn, even though sometimes the way it gets reported suggests this is indeed the end of civilization as we know it! Business cycles move upwards and business cycles move downwards. And yet I recall back in 2000 there were very intelligent people who were actually writing popular economic treatises suggesting that the business cycle was over, that prosperity would last forever. It was a very clear and articulate argument that many bought into. And that followed, if you recall, a very famous essay written about 10 years earlier suggesting that the cycle of history had ended too. It’s amazing that the good times can have such an effect on us, that we get anaesthetized to the reality that things move up and things move down. And we are going to come out of this downward business cycle. That’s a reality. It’s just a question of when.

The concern is with the possible moves to protectionist activity while we go into that cycle—and we know what happened in 1929. We remember legislation like the Smoot-Hawley Tariff Act, which was vigorously protectionist, and which caused retaliatory action around the world—all factors that turned a bad recession into a depression. I believe we’ve proved, or at least I hope we’ve proved, the old saying wrong, that “the only thing we learn from history is that we learn nothing from history.” I hope we’ve proved that wrong and we continue to resist the protectionist urge.

Having said all that, one of the key items we discussed when I met yesterday with U.S. Trade Representative [Ron] Kirk, U.S. Secretary of Commerce [Gary] Locke, and [Charles B. Rangel]], chair of the Committee on Ways and Means and chair of the subcommittee on trade, was Canada’s concerns related to the provisions of the Buy American Act and how we see this act being manifested. When it first came out, Prime Minister Harper, as you know, raised concerns and encouraged the United States to live up to its international trade and international law obligations, its treaty obligations. We certainly appreciated when, only a few days after that, President Obama came out with a very clear statement, right along those lines, that the United States would live up to its international obligations and trade obligations, which he has since reiterated, and that was very positive. As you know, attached to the legislation were basically his sentiments that the working out of that stimulus package, and the way the dollars would flow, had to in fact recognize international obligations. But what we are finding in the working-out process—and this is not just with Canadian businesses, but with significant U.S. businesses and business associations as well—is that specifically with U.S. municipalities and states there are provisions being put in place that are effectively closing the door to procurement from Canadian companies, suppliers and producers.

For example, one Canadian company that we met with, whose annual revenues last year were in the $800 million range, are now looking at revenues in the $300 million range because they’re not able to participate in some of the economic activity related to the needs of U.S. municipalities and states. And here’s the irony: because of the way so many businesses are integrated back and forth across the border, this particular company buys steel pipe from a U.S. supplier, and then much of that steel pipe finds its way back into the projects where this company could potentially be successful in the United States. What has happened is this: because of their loss of business, and their inability to get into an open procurement process, their purchases from that U.S. pipe company have dropped significantly. To me, that’s a textbook case of what happens when doors begin to close and trade barriers go up: economies go down. And the people most affected are the workers—the people out there on the front line doing the job.

So these are things that we have shared with the representatives that I’ve just mentioned to you, and they’re very open to the discussion. The chairman of the Committee on Ways and Means has actually invited me to come back and speak to the committee, which I plan to do. I think I will get a good hearing there. We sensed a genuine openness to seeing how these difficulties are manifesting themselves and indeed how they can be worked out, because if we take these three things—the situation of our overall trade relationship, which has been, and I hope will continue to be, very vigorous, and Canada’s situation vis-à-vis the world situation, and now this issue with Buy America—then we’ve got to bring these things together to avoid negative possibilities. I am going to mention one such possibility.

So often, one thing leads to another in trade disputes. For example, we have a municipality in Canada that recently passed a resolution that it wants to take to an annual meeting of the Federation of Canadian Municipalities. What this municipality is asking its federation to consider and pass is a resolution that no Canadian municipality would do business with any country—no names mentioned—that actively discriminates against, or shuts down procurement possibilities with, another country.

We don’t speak for the municipalities, so I have no idea if that resolution will pass, but these are the types of things that cause us concern, and so I bring that example to you today. We want to see the stimulus package in the United States continue to work for the U.S. economy; turning that around is obviously vital to the world economy. We want to see the stimulus package in Canada work. I was in China a little over a week ago; we want to see China’s package work. We know one of the factors to make these packages work is continued resistance to a protectionist impulse which can have cascading effects that in the long run would not be positive.

So I want to thank you for being part of a very positive and historical relationship. And more than that, I want to thank you for being willing partners in the future relationship—which I think continues to bode well, not just for Canada and the United States but, because of our example, for the world.

Thank you.