May 29, 2009
Based on a Transcript
Address by the Honourable Stockwell Day, Minister of International Trade and Minister for the Asia-Pacific Gateway, to the Calgary Chamber of Commerce
Thank you, Lois [Mitchell, Chair of the Calgary Chamber of Commerce], for that kind introduction. I was thinking, as Lois was recounting some of my past, that one of the most memorable meetings I had—a combination Cabinet and caucus meeting—was back in 1993, when we looked at where we were going economically in Alberta under the leadership of our new premier, Ralph Klein. We had spent some matter of days, because we’d made a commitment that we were going to get rid of the deficit and the debt, and we looked at what we had to do and we said we were going to get rid of the deficit within four years and then start working on the debt. That was a bold and exciting thing, of course, to say when you’re out on the hustings, that we were going to get rid of the deficit.
And then when we came back after winning the election, we did the math and we said, oh my goodness, what have we said here? We looked at what would have to be done in terms of restructuring, reform and also lowering spending in some key areas. We mapped it all out. And I remember the Premier saying, you know, this is the plan and we’re going to stick with it. We’re not going to blink, we are going to get this done. We are going to do it in four years, but in doing so we may become so unpopular that we may not get re-elected. And he said, does everybody realize that? Are we all in this together? We are going to do the right thing, and if the people decide they don’t want us after that, so be it.
It was one of those few moments in politics where a decision was based purely on that being the total calculus: we’re going to do the right thing here (not that we ever would do the wrong thing), but we’re going to do the right thing here, even though we might not get re-elected. It was a very inspiring moment, but it also helps you to focus. Because, you know, when you’re driving along the edge of a canyon and you know that if you go the wrong way you’re going to go over the edge, it does help you keep focused. And it was an exciting time. We learned a lot of things through that. I think some of the lessons we learned there we were able to share with other provinces, and over the next few years after that most other provinces followed some of what we did and also saw deficits turn into surpluses.
And now we go back down memory lane again because we are in—I don’t have to tell you—a global downturn of incredible proportions. And guess what? At the federal level—and I’ll just speak to the federal level, but provincially you’ve got the same things to figure out—we have announced a deficit. It’s not something that we are excited about and it’s something that we clearly define as being temporary. Also, when we look at the deficit as a percentage of GDP, compared with the deficits of other nations—be it the United States, the United Kingdom, Japan or Germany—ours is significantly lower and much more manageable. But it’s still the “D” word.
And so we will see this deficit for two years, and then the plan that we’ve already begun will have us out of deficit five years from now. These are the challenges of the day, but it’s a little bit of “déjà vu all over again” as we go down this path. I know your premier and your elected officials here are wrestling with the very same things.
We know what would happen if we didn’t take some of the steps that we’ve taken. For instance, on the infrastructure side alone, federally, we took what we had planned out for the next seven years and compressed it into two. These are all things that need to be done, but instead of mapping it over seven years, which we could do without deficit, we’re going to cram it into two years. And that’s going to mean the work still gets done, jobs will be created, there will be an influence on the economy, but we’re going to incur this temporary deficit. So here we are again, and I’m glad that we have the experience, many of us having been here before, to do this in a way that is not Keynesian but in a way that’s Kleinian, if I can use that word, and will see us through this difficult time.
You have great MPs in this province. In our caucus sessions and in our Cabinet sessions, it’s the Alberta MPs who are aggressive. They are standing up and speaking about the things that matter most to you. Your Cabinet ministers, whether we’re talking about Jim Prentice or Rona Ambrose or Diane Ablonczy—and I know I’m leaving out all kinds of parliamentary secretaries and other great people—they are doing significant work with some of the most important files. And it’s really a joy to work with ministers and MPs from Alberta because it is great to work with people with whom I feel I have a kinship of spirit.
But I want to reflect on some of the things that we’re doing globally. Because of policies we’ve put in place federally, we are in somewhat of an enviable position globally. I’ll share with you some remarks that have been made about the federal government by international observers. When I’m in other places in the world, meeting with the elected people and leaders of business and banking—in China or Europe or South America—the meetings usually start with someone from the other country saying they understand that Canada has the most stable banking system in the world. We know that: that’s been the evaluation of the International Monetary Fund and the World Economic Forum and others talking about our banking system. We are not bailing out financial institutions. We do not have a sub-prime mortgage problem.
And people tend to think that those things happen by accident. But they happen because of clear policy decisions. We were making changes almost two years ago—in the Bank Act, for instance, which clearly delineated that banks can lend out so much money only if they have a certain capital and asset base. We put regulatory change in place that restricted what types of mortgages that banks could get into and how mortgages could be bundled up and sold, or not bundled and sold. And we took steps also to change legislation with Export Development Canada to allow for an expansion of credit if there was a contraction of banking. So these things, lessons learned from hard experience in previous times, were in place before this downturn hit. And it gives us that great financial basis on which to move.
According to OECD [Organisation for Economic Co-operation and Development] analysis, we also have the most competitive tax regime. We have the most competitive tax system among the G8 and OECD countries. That’s personal and business taxes. We’re also accelerating capital cost allowances, raising the threshold for small business, the amount of dollars you’re able to pull in before you even have to pay tax, that’s up to $500,000 now. And we’re removing the machinery and equipment tax. Some of you will remember that battle from provincial days, when we kept hearing from industry, “Get rid of that M&E tax. Provincially, that’s an inhibitor, and you’ll see business go up.” And we made a deal at that time—I believe Jim Dinning was the Alberta treasurer—we said to industry, all right, we will take that away, we’ll do it in stages, but we want to see a corresponding influx of investment as we get rid of the machinery and equipment tax.
And it was chambers like yours, and others on the policy side, who said all right, you lower it this much, you watch: you’ll see investment move up that much. And you know what? It did. It took us three years, I think, to get rid of it, but we did get rid of it, and investment increased and far displaced what we’d been getting in from tax. Which to me was one of the undergirdings of the economic theories I embrace. We proved in Alberta with the flat tax that if you have more people paying tax but at a lower rate, overall the revenues will be greater than when you were taxing people at a higher rate.
So we have recently gotten rid of that machinery and equipment tax at the federal level. We believe that it’s incumbent on governments to make sure that we are making the tax and regulatory loads as light as possible on you, the people who have to do business.
Something gets inculcated in our minds at an early age. I can remember very clearly in grade five—I think it an introduction to government and economics—we were told things like Canada sells furniture, Canada sells cars, Canada sells metals, Canada sells textiles. And I used to think, isn’t the government nice? Aren’t they nice people, that they sell these things all over the world to others?
And so I believe at an early age we begin to get, through misunderstandings like that, a bit of a wrong concept. Because you know that governments don’t sell those things. It is hard-working, risk-taking, entrepreneurial, innovative people like yourselves, who are willing to put everything on the line because you believe in your product, you believe in your service, you believe in your technology. And you think you’ve got something to offer the rest of the world, that it’s going to make the world a better place and that it’s going to help you to make some profits in the process.
Our position is to keep your taxes as low as possible, not duplicative and triplicative, so that you can do the things that you have to do. That’s the basic approach we’re taking. And that’s why we’re staying low on the tax side and low on the regulatory side, and we’ve expanded the ability for something like EDC to be there if the banks themselves are in a period of contraction.
Now moving into this era that we’re in, of global downturn, we think one of the antidotes to that, and there are a number, but one of the things that we feel we must be doing is aggressively promoting freedom of trade with other countries. That is, a reduction of trade barriers so that we can have an increase in trade back and forth and therefore, we believe, an increase in prosperity. Historically, Canada is a prosperous country. It didn’t happen by accident. We have been traders, and free traders as far as possible, since our very beginnings. We are simply hard-working enough and innovative enough and productive enough that we produce more than we buy. And so we have to sell. If we can’t export, if we can’t sell, we’re in trouble. And we’ve proven that.
At a time of downturn, the impulse can be for industries to be protectionist and to run to government and say, “Protect us from these people who can sell products from other places into our country in a competitive way.” Well, we’ll protect if those products are coming in illegally. We’ll protect if those products are coming in in a way that violates WTO [World Trade Organization] or NAFTA rules. But we can’t protect just because there’s tough competition out there. So we advance this cause of free trade agreements, and we’ve been aggressive on that in the recent past.
I’m happy to say that Canada recently concluded a free trade agreement with four European countries [Iceland, Liechtenstein, Norway and Switzerland]: four countries that are not in the European Union. That agreement will work as a lever into the EU. So we opened the doors of opportunity. If you want to protect an industry, if you want to protect workers, then you open doors of opportunity. You don’t close them. You don’t build trade walls. When you build a wall up, economies come down. We know that historically.
We are also bringing to completion a free trade deal with Peru and one with Colombia. We are very close to having one signed with Panama. About three weeks ago we were in China breaking down trade irritants, agreeing on areas that we can work on to make trade work better. And in India we’ve signed an agreement to have officials specially designated to start work on a more comprehensive economic agreement with them.
We’re going to continue on that track. I’ve been saying to my officials, some of whom are here today, free trade deals are us. We’re being aggressive on that front. It’s part of a package, along with science and technology agreements, that we’re doing with other countries to keep the doors of opportunity open.
This is the advice that we’re getting, primarily from people like yourselves. Chambers of commerce are absolutely critical, and don’t hesitate to give this kind of policy advice to your elected representatives at every level: federal, provincial and, yes, municipal. It’s tough being in municipal government. But just as a federal government can, they can tend to get away from an understanding of what drives the basic economic health of a community. So keep meeting with us, keep holding our feet to the fire on the policies that you know are effective in helping small business move ahead. Because that’s how the majority of jobs are created.
It was very exciting about three weeks ago when I was in Prague with Prime Minister [Harper], when he and the European commissioners did the official signing for Canada to begin negotiations for a free trade agreement with the entire EU community. That’s 27 nations. And we basically agreed that we should press hard, that this deal should be wrapped up within 24 months, which is a very fast track. It’s somewhat innovative in terms of how we proposed to go ahead with the negotiations, but the EU is in agreement with that.
If we had a Canada-EU free trade agreement in place right now, increased two-way trade, according to a European study, would be €26 billion this year. That’s the type of opportunities that we see opening up.
So I’ve talked about the policy, I’ve talked about a strong antidote, and now I have to tell you we’re running into difficulty, and it’s with our great neighbour, the United States. The United States and Canada, we are best friends. When I travel around the world, people envy Canada’s historical relationship with the United States. They talk about the huge trade advantage being that close to the consuming power of the United States. And we value that trade relationship. NAFTA is hugely beneficial for us, and you folks have all the stats to show the increased trade, the increased jobs, the increased investments that have taken place because of our free trade agreement with the United States.
Relationships can be difficult at times, and it’s been the same with the United States. I was at a meeting yesterday and there was a U.S. representative there. And I said, you know, we’ve had our past differences, we’ve had our issues, but this is an incredible relationship. But now we’re running into a trade irritant, and it’s a fairly major one.
It’s called the “Buy America” legislation. When it first came out, that particular legislation caused the Prime Minister—and other world leaders then followed him—to say listen, obviously you’re sovereign, but the United States must live up to its international trade obligations. And it was only about four days afterward that President [Barack] Obama stood up and said he agreed. He said the United States would live up to its international trade obligations, and he even had words inserted into the legislation to recognize that particular principle—which is a very important principle.
Since then, the reality has not been the reality of the statement of the President. Once legislation hits Congress, it’s out of the White House, away from the administration. Then you’re dealing with people who have constituents who are coming to them and saying, hey, we’re facing severe competition. There are certain things being done to the stimulus bill (which is incredible in the United States: US$787 billion, about US$280 billion of which is going to municipalities and states) that are closing the door to Canadians’ ability to put in bids for the procurement of products and services at the municipal and state level, for infrastructure and other things.
We are hitting this aggressively and vigorously at every level: at the ambassadorial level with the diplomats, and at the ministerial level. I’ve met with the U.S. Trade Representative [Ambassador Ron Kirk], who has a great vision for the importance of freedom of trade, with the Secretary of Commerce [Gary Locke], and with the Chair [Charles Rangel] of the U.S. Committee on Ways and Means, which governs so many of the appropriations. We are engaging with business and industry associations and with chambers of commerce, in terms of saying, work with your U.S. counterparts, get the message to Congress, get the message to the administration that these particular applications are going to hurt the relationship and are even going to be cause for retaliatory action.
Let me talk historically for 30 seconds. Retaliatory trade actions do not work. Everybody gets hurt. In 1930, when we were headed for a global recession, the United States— aiming to protect certain industries—came up with the Smoot-Hawley Tariff Act, which caused a reaction first in Europe and then in other places, including Canada. Those countries said all right, you’re not going to accept our goods in this area, we’re not going to accept yours. And the trade wars began, and deepened, and plunged us into a depression.
I believe that the President is a student of history, and he understands that. And that’s why I believe he was sincere when he stood up and said the United States must live up to its international obligations. But it’s breaking down at the hard-core, raw political level as it moves to the House of Representatives. And we say, well, would Canada retaliate? We don’t believe in retaliation. But now we have first one municipality, and I think there’s a total of six or seven, that have come forward with a resolution they’re going to present in Whistler, B.C., at the national meeting of the Federation of Canadian Municipalities: a resolution that says no municipality should do any business with any country that is using protectionist activity and slamming the door on the procurement of goods and services. They didn’t mention the United States by name, but it’s like there’s a big unwritten “hello” in terms of where the resolution is aimed.
Now six or seven other municipalities have agreed to that resolution and are going to vote on it. This will be historic in terms of Canadians voting for protectionist activity. It’s a little bit like someone in a crowded room pulling the pin out of a grenade and standing there. Everybody gets hurt, but when you’re being hurt you sometimes have no response but to push back in the same manner. That’s what we see happening, and that’s one of the arguments we’re using very vigorously in the United States right now against these provisions that are coming into this particular legislation.
So I encourage chambers of commerce to work with their U.S. counterparts. We would like to see the President speak to this. We believe there are even provisions within U.S. law for an executive order to come out that would overrule it. That would be a great thing to see. It would also be great, at the congressional level, for them to see the danger of what they’re doing and get things back to where they should be in terms of freedom of trade.
That’s one of the concerns we have. And I’m going to close now with a bit of a pet mission here in one particular area that in microcosm shows how we can have non-tariff barriers that wind up hurting us. The EU, unscientifically and against WTO regulations, has put a ban on seal products from Canada. The seal trade, and the seal hunt itself, has moved along in great strides. They follow humane means of harvesting, just as they do with cattle and with sheep and with pork, and it’s done in a way that is sustainable to the environment. And yet the EU has come out with this ban.
The Governor General, just last week, as you may have seen, was in the North celebrating with people from that area, and they brought in for the dinner some large seals. (We do not, by the way, harvest baby seals in Canada. When you see those ads on TV with an adorable baby seal, that does not happen in Canada.) So the humongous seals were brought in, and the Governor General was offered some of the morsels. It happened to be the heart. A lot of people like beef hearts, and some people like seal heart. And so she ate some. That was a great step that she took to support those northern communities whose livelihood depends on the seal hunt. And she has been condemned thoroughly.
I’ve received all kinds of emails. Now listen, I am for freedom of speech. I am for vigorous demonstrations, but I think it’s time to speak out, to push back against this. For what our Governor General did, there’s a big campaign they’re pushing. I’ve had 7,000 emails on this in the last few days. They’re saying quit buying Canadian maple syrup; buy maple syrup from the United States.
Now, there’s nothing wrong with maple syrup from the United States, but you know what? Should you feel so inclined, if you think the Governor General did a good thing in terms of supporting the Inuit community, and if you don’t want to see Canadian maple syrup being hurt, go online and just type in “maple syrup.” A whole bunch of names will come up, of people who sell maple syrup. Buy some Canadian maple syrup, would you? Give that some thought. If you think it’s time to stand up for proper trade and support our own people, then buy some Canadian maple syrup and just kind of show the world that our Canadian maple syrup is the best in the world and we don’t get pushed around that easily.
Ladies and gentlemen, thank you for your attention. I want to close by saying that the things I learned in Alberta—you know that famous saying about “the things I learned in kindergarten”?—well, the same applies to the things I learned in Alberta. We’re in a time of downturn right now, and I’m able to share with my Cabinet colleagues what I saw take place through the years of the National Energy Program here in Alberta. I saw how people who weren’t getting massive loads of federal aid had to do anything they could to survive, had to abandon businesses, had to move to other occupations, had to take up training for other careers. And we had to literally do what had to be done to survive.
Alberta has not just the spirit to survive, but the spirit to thrive. Keep doing that, keep sending us those messages, those lessons of not just surviving but thriving. Alberta will continue to be strong, and it will help the rest of the country also.
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