Wednesday, May 20, 2009
Burnaby, British Columbia
2009/33

Based on a Transcript

Address by the Honourable Stockwell Day, Minister of International Trade and Minister for the Asia-Pacific Gateway, at Business Creating Business Trade Show

Thank you ladies and gentlemen.

The World Trade Organization has recently issued a statement, which we’ve included in our statistical trade survey, where it is predicting for the year ahead a contraction of trade worldwide of about 9 percent in volume terms. Now 9 percent is very significant in and of itself.

Meanwhile, the International Monetary Fund is forecasting a global GDP contraction of 1.3 percent this year. And when you consider that it’s an average and that a nation like China is going to have about 6.5-percent positive growth—I was in China about a month ago for seven days, and it’s growing at over 6 percent, but the people there feel like they’re in a recession because of course they are used to double-digit growth—but you know that if China’s having 6.5-percent growth, there are a lot of countries that are going to be experiencing negative growth and some even significant negative growth.

So we’ll take a look at where Canada fits in that, and I’d like to just share with you briefly what we’re doing in terms of some initiatives to push back the effects of this downturn and make sure that Canada continues to stay well placed. I’ll share with you some of the strategic steps that we are taking and that we’ll continue to take.

It’s been somewhat gratifying, even during this downturn, to read what international rating agencies and economic observers say about Canada. It’s one thing if as a government we put out our own material—we do have a lot of good statistical data. But it helps when it’s an outside external third party that’s doing the evaluation.

And we can reflect on a number of those evaluations. The International Monetary Fund, the World Economic Forum and the World Bank have all said that Canada’s banking system is the most stable in the world. That happens to be fact, stated from an outside evaluation.

And as I travel on trade missions around the world, I don’t even have to tell people that. I meet with investors, government officials, business or NGOs [non-governmental organizations], and they all know that, because it’s very well publicized. It didn’t happen by accident. We’ve put provisions in place on our banking sector that put restraints on how much banks and financial institutions can lend out depending on what kind of capital base they have. Many countries around the world, notably the United States, do not have those particular restraints or restrictions in place.

We are not bailing out banks in Canada. We do not have to bail out financial institutions. We do not have a sub-prime mortgage problem because before all that hit, we put measures in place to make sure that even when it comes to mortgages there are certain guidelines, certain restraints. And so we’ve been able to avoid a lot of that. So number one, we have the most stable banking system in the world.

And then the OECD [Organisation for Economic Co-operation and Development] and other rating agencies looked at the weight of tax burdens in countries around the world. They’ve looked at our present tax situation, and at what we have put on paper in terms of commitments to the year 2012 because it’s important that you let investors, entrepreneurs and workers know what lies ahead for them on the taxation side. And the OECD and other organizations have said that our taxation system, both personal and business, is the most competitive among OECD nations and among the G8. That’s a good position to be in. That’s something that was planned, that’s something that’s in place, that’s something that is working for us now.

These are the types of things that are very important to send signals to investors and people here in Canada or people who are thinking of joint partnerships with Canadian companies, or in fact who are thinking of investing in Canada.

Even though our banks are the most stable in the world, all banks including Canadian banks are being very, I’ll use the word restrictive, when it comes to credit. They are looking even at long-term customers who have solid credit ratings and they’re looking very carefully. That’s a fact of life in this present downturn. And that’s why in our last economic or comprehensive economic action plan we empowered Export Development Canada, an arm’s-length agency, to actually expand its credit abilities.

And that’s a real plus when I’m speaking in other countries, whether I’m talking about a small business, a joint venture or something on the other end of the scale like the construction of nuclear reactors, as I discussed with government officials in Lithuania and Romania, and other places that are looking to expand their energy capacity but want to do it in a way that’s environmentally friendly. We’re seeing a huge expansion of interest in nuclear reactors for energy purposes—we’re talking about billion-dollar situations.

When you have a government of a country like Lithuania or Romania with limited resources, the fact that a credit arrangement can possibly be made with a Canadian company like Atomic Energy of Canada—which makes the CANDU reactors—and a partnership with another country, and that we can facilitate the credit and the financing, is a huge plus that we have to operate on that particular scale.

So this gives you an idea of some of the very clear advantages that we have. If there’s a silver lining in this somewhat dark cloud of global contraction that we’re in right now, it’s that it has forced governments at all levels to look at their own regulatory regimes. And to ask themselves which regulations are necessary, which ones overlap, which ones are redundant, and which ones are just causing headaches, bureaucracy and unnecessary red tape.

Now we all know it’s a fact of life that some taxation is necessary. But taxation if it’s excessive can drive out business and stifle incentive. As I’ve said, we’ve got our taxes low, but the same thing can happen with the piling on of regulatory costs. And that’s why in this particular time we’ve done a very severe analysis of those. In terms of border regulations alone for the purpose of export, in the last year we’ve reduced the paper burden by 20 percent on businesses and we have eliminated, vaporized, evaporated some 1,600 different regulations that were sitting there.

In good times, people were sort of willing to put up with it all. Now as times get tougher and there’s a crunch on, people start to ask “What’s this regulation for? What does that particular one do? Why do I have to meet this federal regulation when there’s a same one on the provincial side and on the municipal side?” And so the economic downturn has caused a real crunching process to take place, and we’ve been able to purge not all regulations, but certainly a lot of the ones where we’re seeing redundancy and overlap.

Our view is to make sure that the load on the shoulders of entrepreneurs, investors, innovators and workers is as light as possible as they face the already present burden of this global downturn.

The other thing that we’re doing, and there’s a sense of urgency to this next item, is everything we can, not just to speak out against but to push back against the protectionist impulses that invariably grip governments, businesses and industries in a time of downturn. We know that protectionism is not the way to go. Canada is as prosperous as it is because it is an exporting nation and always has been. If we can’t export, we become very poor. And so we’ve always maintained the ability to work hard for freedom to trade and have a rules-based trading system.

We know that in 1929, when a global recession was beginning, the United States thought the way to protect its workers was to build up trade walls with the Smoot-Hawley Tariff Act and other trade actions that made it difficult for non-Americans to sell their products or services in the United States.

So naturally what happened was that other governments began to respond in kind in a retaliatory way. And that started a vicious circle that actually led into the depression. I compare retaliatory trade action to a group of people in a room having a dispute, and one takes a grenade and pulls the pin and stands there. Everybody gets hurt. It’s not the way to go. So we’re being very aggressive on pushing back against protectionism.

You saw this when the “Buy American” campaign came out. It was Prime Minister Harper who led the charge of world leaders saying to the United States “You must live up to your international trade obligations. Don’t fall into the trap of protectionism.” And it was just a few days after hearing that message that President [Barack] Obama came out saying “We will live up to our international trade obligations.” As a matter of fact, he insisted that a clause be inserted into the “Buy American” legislation, which stated just that—to keep this protectionist urge from taking over.

We have a problem with that, however. That was the direction coming out of the White House, or coming out of the U.S. administration. But then as you know, there’s Congress—the House of Representatives and the Senate. And we have seen creeping protectionism taking place within the way they’re now taking their stimulus package. We’re very happy with their stimulus package, it’s a huge amount of money going into infrastructure and a lot of other things, because that gives great opportunity for Canadian producers, builders and suppliers to be able to bid into those chains of activity.

But what we’re seeing in the United States at the congressional level is that it’s finding ways to put caveats on that money that’s flowing to municipalities and to states. And we are starting to see Canadian companies run into brick walls when it comes to bidding on those various projects.

And I won’t go into all the lengthy details on how we’re responding to that, but we are hitting hard at a number of different levels to get them to push that back because it’s going to affect trade in Canada, and it’s going to affect trade in other countries also.

We’re not just pushing back against protectionism; we’ve been very aggressive on the free trade front. We are promoting free trade agreements as aggressively as we can. As you know there’s the World Trade Organization with 153 different countries and believe it or not, we try within that organization to move along the reduction or removal of tariffs among all the participating countries.

That’s a pretty good process, but the Doha Round has gotten bogged down. And we can’t wait for the resolution of that round and we’re pushing hard to see that it gets resolved. We want to see movement there at the WTO. But while this massive group of 153 countries tries to work out various issues, we are pursuing bilateral or in some cases multilateral trade deals so that we can open up doors of opportunities for Canadian workers, investors and entrepreneurs, and have two-way trade developing between one country and another.

In the Americas, as you may have seen when Prime Minister Harper was at the Summit of the Americas conference, trade is the key topic. We already have free trade deals with Chile and Costa Rica. In the House of Commons, we have legislation working its way through for free trade deals with Peru and with Colombia.

We have now finalized a free trade agreement with the European Free Trade Association, which is composed of four countries: Iceland, Norway, Switzerland and Liechtenstein. So we wanted to establish first of all the benefits of free trade with those four countries. But we also wanted to use that agreement as a lever into something that the Prime Minister just announced two weeks ago to do with the broader European community. The EU has 27 countries; any country that can get a free trade deal with the EU can have access to all 27—a great opportunity.

 

And the way we use this other deal that I just talked about with the four countries of the European Free Trade Association is this: here are four countries now where we have eliminated or greatly reduced tariffs on a wide range of products and services. That means those four European countries doing business with Canadians are going to have a competitive advantage over those 27 other countries in Europe. And that’s put positive pressure on discussions between Canada and the EU. And it was a great and historic moment three weeks ago to be in Prague with the Prime Minister as we met with the heads of the European Commission and signed the agreement to begin the discussing negotiations on a free trade deal with the entire European Union. We’re very excited about that.

But sometimes these trade deals take a long time to negotiate because of the number of sectors and the number of items that go into the hundreds of pages that you get agreement on to reduce or remove tariffs. The agreement I just talked about with those four European countries took ten years to complete.

We grabbed that agreement by the horns and moved it through and we’re very pleased with it. What I’m very pleased with is that the European commissioners have agreed that we’d like to see a two-year timeline on the discussions for the EU negotiations. That would be a record pace. But we’re all sort of gripped with the realities of this downturn. And that’s why the discussions are going to continue to move along.

India, where I was in early January, is growing economically. It has one of the fastest-growing middle classes in the world. Its need for a variety of goods, services, professional involvement, joint partnerships, nuclear reactors—it plans to build 30 nuclear reactors within the next 15 years—is surging. We’re talking about billions of dollars.

And so we have appointed officials and designated them—not quite as aggressively as with the EU discussions—but we’ve designated them to start the work, called the scoping exercise to get us to a place, I would hope soon, where we could get a formal agreement to start the actual negotiations to get an agreement like the one the Prime Minister announced in Prague with the EU.

As I mentioned, I was in China for seven days. Let me just share with you a few of the things that we accomplished there. It was a very successful mission. And how many people have been to China in the last, say, six months? Would you agree with me, is the growth phenomenal there or what? It’s unbelievable.

And we want to make sure that Canada is well placed. Clearly we’ve got some advantages. I’ve talked to you about the tax, investment and banking advantages. We offer over the United States the Asia-Pacific Gateway: among the various levels of government, we have invested over $2.6 billion in infrastructure to make sure that the ports of Vancouver and Prince Rupert, and our road and rail lines are integrated. We have built an amazing system of ports, roads and rail lines that really doesn’t get the kind of coverage that it should. People from around the world talk about our Asia-Pacific Gateway bringing goods to tidewater from western provinces and getting goods into Canada.

Of that $2.6-billion worth of projects, over 90 percent have been completed or are almost complete. So when we went to Japan and China earlier this year—there were people with me from a variety of businesses within the Asia-Pacific sphere, even competitors like CN and CP for instance—taking a message to the people in Asia who make shipping decisions that, first of all we offer a sailing time advantage, depending on where you’re shipping from in Asia, of up to four days to get goods to North America.

And then when those goods arrive in either the Port of Vancouver or Prince Rupert, with their deep-water capabilities and streamlined operations, the containers have a dwell time of only 24 hours, and then they are on road or rail heading into the major distribution centres in Canada or in the United States, such as in Memphis, Atlanta and Chicago. So we offer a very significant advantage.

In Asia, we were able to sign science and technology agreements, six of them with China. We were also able to sign a number of memorandums of understanding for working together. These are like mini trade deals, one about transportation, one to do with aviation and another to do with the sharing of logistics, which is very important.

There were also representatives of various companies travelling with me. At one place, the Canadian construction industry put on a seminar on what Canadian construction companies can do, because of course we know what it’s like to build in extreme climates—cold and hot, wet and dry. And a number of significant contracts were signed with 12 companies.

China is very motivated when it comes to anything related to emissions reductions, impact on the environment or energy saving. It is hugely motivated and looking for partnerships in those particular areas. And we were able to capitalize on that. A liquified natural gas company from Chilliwack was able to sign a multi-million dollar deal with China Gas while I was there. In one geographic location, China Gas will build 120 filling stations for taxis and buses to be fuelled by liquified natural gas all the way from Chilliwack. Vehicles in China will be able to operate in a more economical way in that competitive environment and have far less of an impact on the environment.

These are some of the things that are taking place. But until you have seen the phenomenal rate of growth and what is going on in China, you’re just not really prepared for it. Most Canadians don’t realize that there are over 30 cities in China that have over a million people, and many of those cities have over 10 million people.

When flying into Shenyang and driving in from the airport, just in the downtown area, I counted twenty-four cranes that were building high-rise apartments and condos. Twenty-four going up all around me. Some of the skylines in some of the cities in China—cities whose names most Canadians wouldn’t even be familiar with—would rival anything we’ve got in Canada in terms of sophisticated, modern, inspiring architecture. It’s fabulous.

In Chengdu, I was taken to the top of a skyscraper, which, when it’s completed, will be the tenth largest in the world. The Sheraton Hotel will begin at floor number 60 and will go up to 102. It starts at the 60th floor. That is a phenomenal building. This particular skyscraper, which is just about complete, was erected at the rate of one floor every two days.

The rate of growth, ladies and gentlemen, is phenomenal. At Sun Yat-sen University where I spoke, there are 60,000 students enrolled. They have 13,000 faculty. In Canada, we have universities of 13,000 students, but this is 13,000 faculty. Things are on the move in China. There’s rail going in everywhere, which gives great opportunities for phenomenal partnerships with companies like SNC Lavalin, Bombardier and others.

China is going to build a high-speed rail between Shanghai and Beijing. I think it’s just about a thousand kilometres. The trains are going to travel at the rate of 340 kilometres an hour. A lot of our regional jets travel at about that speed. There isn’t a shovel in the ground yet, but the ribbon will be cut in two years. Now this just gives an idea of the magnitude of China’s capability.

I visited the city of Beichuan in Sichuan province. That particular area was hit by the [2008] earthquake. Beichuan was the city that was most devastated. Canada was the second-largest international donor to the reconstruction effort in China. We felt very good about that.

The people there told me that I was the first minister from another country to visit since the earthquake. I just had an amazing time. It was emotional and inspiring at the same time. In Beichuan, they’re basically going to leave a portion of the city untouched as a sort of memorial to what happened. It can’t be fixed or replaced. You can’t imagine it. It’s like a war zone.

We stood by the location of a high school where a thousand students were killed when that earthquake hit—a thousand students. You know the sadness that gripped Canada about a year ago when seven students died in a van in an accident on the East Coast—quite rightly we were all gripped by that tragedy. That was seven students; imagine a thousand. I mean there are parents working on the project at that location who will never see their children again—children who are still there. The parents can’t even dig through to them.

Ten million people were made homeless instantly. I told the Canadian media that were travelling with me: ten million people, that’s like the entire population of Vancouver, Toronto and Montreal instantly being made homeless. I mean we can’t even, we can hardly get our heads around that.

But the projects and the reconstruction and the rate of quality reconstruction that is going on is phenomenal. It was an honour to see the health centre, which they obviously still need in that area, that Canadian dollars had gone into building. It will have a parent centre for parents when their children are hospitalized. And to do the unveiling for a seniors’ housing project that is going to be built by Canadians with $8-million worth of B.C. forest products was very exciting, I can tell you.

What really struck me was the fact that rebuilding from this earthquake is a huge focus for China and for its government. And President Hu Jintao said a year ago that he wanted that area rebuilt within three years. Now you have to picture this, first there’s the city of Beichuan, which was devastated, but the fault line ran for over 200 kilometres roughly along the highway line, it goes sort of through the valley. We drove for almost three hours getting to Beichuan and everywhere there were damaged buildings. You have to try and picture that.

The exciting thing is that there’s not a stretch of land, there’s not a kilometre anywhere without piles of new culverts, bricks, rebar, or building material. If China wants to call the Guinness Book of Records, it could; I think it’s the biggest reconstruction project going on in the world.

While I was there, President Hu, who had just done a tour of the area, announced that China will be able to reduce that three-year reconstruction project by a year. It’s going to rebuild everything within two years. It’s absolutely stunning.

That spells positive opportunity for more partnerships between China and Canada. The opportunities are great. We have a natural advantage of 1.4 million people in Canada of Chinese descent, so there’s those national heritage lines that are there. We have business lines that have been built for decades.

There is much opportunity, but I want to tell you this: almost every other country in the world is at China’s doorstep also, helping with the huge growth that’s going on.

So the impression I have is that for people, businesses, government and even NGOs in China, yes, the doors are open. China’s arms are open to Canada. But you know what, the rest of the world is there too. China will move on with or without us. And that’s why you’re showing great foresight in making sure that you’re going over there, assessing the need and saying where can we work together to help one another and create these mutual opportunities.

And so I want to congratulate you for that, and congratulate you on this trade show. I’ll leave you with some of these thoughts to let you know some of the challenges we face worldwide. The clear advantages that Canada has and that we’ve created for Canadians so that we continue to be the true north and strong and free. We will live up to the prediction of the Economist Intelligence Unit last January that Canada was the country best positioned going into this downturn and will be the best positioned coming out of it.

Thank you for being a part of that success.