May 25, 2009
Based on a Transcript
Address by the Honourable Stockwell Day, Minister of International Trade and Minister for the Asia-Pacific Gateway, at Canadian Manufacturers and Exporters’ Global Business Summit and Forum for International Trade Training’s 12th National Conference
What I’d like to do tonight is just give you a couple of snapshots of how we see things on the issue of trade and then drill right down into some specifics of what we are doing and of some areas where we need your help as much as you need help right now.
I don’t think I have to convince anybody here that we Canadians believe in trade. Canada would not be as prosperous as it is if it weren’t for the fact that we learned very early on to be traders. If we didn’t trade, we simply wouldn’t be able to exist the way we do. Over the years, decades and centuries, we’ve developed the ability to be innovative and productive; we produce more than we can consume. And so we export to maintain a certain standard of living. And that’s a message that I take to schools and universities when I’m asked to speak on these issues.
There’s a bit of a misnomer that has gotten into our lexicon because of what we’re taught about trade as we grow up and as we’re in school. And we probably don’t get our views of trade really straightened out unless we actually become traders in our own business or unless we study trade-related issues in school or university.
I distinctly remember grade five; it was the three best years of my life. I think it was a well-intended idea to introduce into our thinking this idea of trade. But the misnomer was taught in those classes. We would read things like “Canada sells wheat. Canada sells clothes. Canada sells cars. Canada sells furniture.” We read this and as kids we thought, “Isn’t this a nice government: it sells these things to people all around the world.”
And it probably wasn’t until I got into the realities of running a small business myself that it really dawned on me that Canada doesn’t actually sell that stuff. Those things and those services are sold by hard-working, entrepreneurial, risk-taking individuals, groups and companies that believe they’ve got something that can be competitive and can be sold in some other part of the world.
And this thinking needs to be straightened out among large segments of our population. Many Canadians still don’t fully connect the dots between our health care program and your ability to sell your products and services. As you are successful, the government is there to tax you, and those taxes go to fund essential services and some other things. This link is something I try to impress upon Canadians everywhere I go. Exporting is absolutely critical to our economic and social fabric.
We are a trading nation. That is a driving force in our policy and so it shouldn’t surprise people that just before Parliament broke in 2008 for the end of the year, we had a short fall session, I was responsible for half of all the legislation before Parliament. I felt very good about that. Now there were only two bills, but one of them was mine. So that’s half.
Parliament recently passed that half. There’s much more legislation on the table in the House of Commons now, but one of those previous pieces of legislation was an agreement with the European Free Trade Association [EFTA], which includes Iceland and Norway, Switzerland and Liechtenstein. It’s completed now; the deal is done. With those countries, we looked at a variety of tariffs—some more than 100 percent—and either eliminated or reduced them because we believe that Canadian products and services that we export are looked at in a very positive way around the world. We can be very competitive, especially if we don’t have to fight a tariff wall, either a real one or a non-tariff barrier.
And so we’ve completed that agreement, which is good in and of itself. But the agreement is also in play as a lever that the Prime Minister was able to push forward two weeks ago in Prague, where we did the official signing to begin formal negotiations on a free trade agreement with the EU—27 more countries.
And the EU knows, since we took the first step with the EFTA, that our products and services and the products and services of those four countries actually have a competitive advantage now over many of the products in the rest of Europe because we’ve reduced or eliminated those tariffs.
That is what we’re doing. We are in a time of economic downturn, and now more than ever it’s important to be opening doors, not closing them. That’s why we’re being very aggressive.
We are members of the WTO. You may know that the Doha Round of WTO discussions is not exactly moving at high velocity, but rather more at glacier speed. This round has been somewhat discouraging. We’re committed to seeing it completed, but as the discussions have slowed down, the government can’t wait for an agreement to be settled. We have to vigorously pursue either on a bilateral or multilateral basis other trade arrangements that can open doors for the entrepreneurs, innovators, researchers, workers and producers who want to export into other markets.
And that’s what we are aggressively continuing to do. About three weeks ago, I was in China discussing trade potential and ways to reduce barriers. It’s our view that government should do everything it can to remove obstacles and to make ancillary burdens on you as light as possible. You have to take on the burden of competition. You have to take on the burden of being innovative and making sure there is demand for your product or the service in some other part of the world.
But it is incumbent upon governments to make sure that on the tax side, on the regulatory side, the burden on you is as light as possible. We understand the need for some level of taxation. I think most of you agree with that. And I think you would agree that we need some level of regulation so that people are safe and certain trade-related rules are followed. But it should be the burning cause of every government to do everything it can to make sure that load is as light as possible for you, the people who do the selling.
That’s why when I go to other countries, I have a pretty good message to tell potential investors, those who may want to do joint ventures with Canadians or invest directly into Canada, and to those who could open doors for Canadian products.
We have a good message. External agencies have rated Canada, and in some of those ratings we do fairly well. It’s encouraging to go to other jurisdictions and say that the World Economic Forum, the IMF and the World Bank say Canada has the most stable banking system in the world. That’s a nice message to be able to tell.
It’s a message that comes from outside observers and outside rating agencies, and many times when I sit down with officials in other countries, they’re the ones to first say they understand that Canada has the most stable banking system in the world. We do not have a problem in Canada with sub-prime mortgages. We are not bailing out financial institutions. This is something that works to our advantage. Rating agencies that look at G8 and OECD [Organisation for Economic Co-operation and Development] countries say Canada has the most competitive tax structure—the combination of personal and business taxes, whether we’re talking large, medium or small business. So we have these advantages that are working for us that we can promote, and believe me we do so vigorously.
Whether we’re talking about the possible benefits for a small venture or—as I did about three weeks ago in Romania—talking about the sale of nuclear reactors, we’re talking billions of dollars now—we’re able to talk about the fact we have Export Development Canada, an arm’s length agency. Although I’m not involved in the credit decisions of that agency, but I am involved, with my colleagues, in decisions to broaden the capacity of that particular agency to do business in a time of economic downturn. And so we’re able to spread these various messages, which are all positive and all very necessary at this particular time.
Now that’s the broad look from 30,000 feet. Drilling down, we’ve got a major issue south of the border as you know. It’s ironic that everywhere I go around the world, I learn that Canada is envied for many reasons, and one of those is because we are joined at the hip with what is the largest economy in the world. People drool over the fact that we are so close to that particular country.
And yet, a difficulty has emerged. When the United States came out with the “Buy America” legislation, which actually had its original iterations as far back as 1933, before it was updated and strengthened a couple of times through the 60s and again in the 80s. When that legislation was proposed in its newest form not that many months ago, Prime Minister [Stephen] Harper was the first world leader to stand up and publicly say to the United States, “We hear what you’re saying about ‘Buy America,’ but you must live up to your international obligations and your trade treaties.”
And at the G20 discussions in November, and again this year in London, all of the leaders present agreed that countries must resist protectionism, and not add protectionist layers. Those were clear messages, and the Prime Minister publicly reminded President [Barack] Obama about that. And it was only a few days later that President Obama came out with a clear message saying to his own country, “We must and we will abide by our international obligations in our trade treaties.” And there was a cautious but collective sigh of relief that rippled through a lot of the world. I say cautious because we knew we had to watch to see how that was going to play out.
We have congratulated the United States for its stimulus package—US$787 billion is a fair chunk of dough. And US$280 billion of that was committed directly to municipal and state infrastructure. That’s a large amount to which Canadian producers, manufacturers, exporters and service providers would have generally had access. But now what we have seen developing is an interpretation of the “Buy America” provisions, because as you know municipalities and states, like provinces, are not subject to NAFTA. Through a variety of pressures and means, an interpretation has been able to be passed on to bodies like the U.S. Committee on Ways and Means, which does all the appropriations, saying that NAFTA must not apply. There should be a sign hanging out on some of these appropriation acts that says Canadians need not apply. We’ve seen that translated, interpreted through the Recovery Act in water treatment areas, and through one of the United States’ water acts. Canadian companies used to have access to fair and open bidding processes, but now officials at the municipal and state levels are getting huge pressure. They’re told they may not get stimulus funds unless they keep them for Americans and shut Canadians out.
And that’s also starting to manifest itself in other areas. This is a direction with which we are not happy. We have now put in place a multi-level press to make the point to our American friends that, in the interest of free trade and strong economies, this is not the way to go. If you want to protect an industry, the best thing you can do is open up doors of opportunities for that industry. If you want to protect workers, as governments do, the best way is to increase opportunities for products and services to be sold abroad. And we use the history lesson of 1930 when a recession was grinding along and a protectionist act out of the United States—the Smoot-Hawley Act—set up a trade barrier.
What immediately began to happen was that other countries and governments came under pressure. Since their constituents weren’t allowed to sell their farm implements and machinery, and other types of equipment in the United States, then they wanted a law prohibiting U.S. products from entering their countries. And we all know what happened; this plunged the world into a global depression.
I believe that President Obama is a student of history. I believe that’s what motivated him to stand up after Prime Minister Harper rang the bell on the “Buy America” provisions and say, “We will live up to our international trade obligations.” But there has been a breakdown between the U.S. administration and Congress. I met with the Chair of the Committee on Ways and Means [Charles Rangel] about three weeks ago. I brought forward some points, and I believe he was sincere with me, that he was not fully aware of the implications.
So the Canadian government has developed a map that we have presented to the Chair and members of that committee. The map shows a state-by-state breakdown of two-way trade and sharing of services. It shows that if the “Buy America” provisions continue to be interpreted in a protectionist way workers in the United States would also be hurt. We know of Canadian companies that buy product from the United States, bring it back to Canada, reform it, and then use it in their bids for building or delivering certain products into the United States. When they lose those contracts, the raw product isn’t purchased from the United States, and U.S. workers lose out.
This is not a good situation to be in. And this is why we are aggressively pursuing solutions. This is why we need your organization and others to work with us collaboratively on a strategic approach to make this case strongly to our American friends so that we don’t see a downward spiral. People say we’ve learned from history, that Canada would not retaliate and start a circle of retaliatory action. However, a municipality in Ontario has passed a resolution that it’s going to take to the Federation of Canadian Municipalities, this month. That resolution states that no Canadian municipality should do business with any country that acts in a protectionist way. It doesn’t mention the United States, but that is what’s implied.
It’s a bold statement. And we’re actually using that example. In my discussions with the U.S. Trade Representative [Ambassador Ron Kirk], with whom I’ve had a number of discussions, or the U.S. Secretary of Commerce [Gary Locke], I’ve explained that it may be a small municipality that has come up with this resolution, but this type of thing spreads, and we don’t want to see retaliatory trade action. This isn’t just coming from Canada; other countries are also raising this issue.
We are continuing to vigorously address this issue to present possible solutions to the United States. We know there are issues, but elected representatives have to be responsible and explain to constituents that in the long run they’ll get hurt if the government bows to protectionist pressures. So this is the direction we’re taking.
I do know this though; any time I’m with a group of business leaders from small, medium or large enterprises, I like to end the discussion by going quickly around the room and asking for an approximate time when they think the road to recovery will begin to move upward unimpeded. And whether it’s a group of 12 or 20 around the table or a group of 50, everybody has a different idea. When I was at the Davos World [Economic] Forum back in January, it was amazing to hear from leaders—from banks and from some of the best-known businesses in the world—that the year before they sat there and rejoiced in what they thought was the end of the business cycle. They thought there would never be another downturn, that everything was good forever. And of course things came crashing down.
This year, everybody in that room had a different idea. But there are some principles that can help us to get through this time, principles that I’ve already mentioned, principles of government: low taxes, a competitive regulatory regime, available credit. It’s because of those types of principles that the Economist Intelligence Unit in January said Canada is the best-prepared going into this particular downturn and will be the best-positioned coming out of it.
So if you have to be anywhere, be in Canada. It’s clearly the place to be. If we have had good ideas, which I believe we’ve had, that have led to a fairly enviable status, it’s because in part we’ve listened to recommendations from you, your groups, your organizations, and put them in place. And that has resulted in a fairly stable environment. For being part of getting us this far and for being a very significant part of moving us into the future and getting us out of this time, I thank you for your input and thank you for your interest today.
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