Based on a Transcript
Around the table, there are so many of you I know, some fairly well, some marginally well, and there are a couple other faces that are somewhat new to me. This really does represent the incredible cross-section of the community. The things that you each do and the value, experience and insights you bring to the table: it’s really amazing. That’s why I’m a strong believer in local groups, local clubs like this, whether it’s Chamber of Commerce service organizations, organizations like this where you can get in a relatively unfiltered way a sense of what’s happening on the street, what’s happening on the home front and what’s happening in business. So I encourage you to feel free during our Q & A period to fire away questions or advice that I can take away and bring to discussions with my colleagues.
I’m happy to say that I’m coming in all the way from the Merritt Mountain Music Festival, which went fairly late last night. How many of you have ever been to the festival? All right, there are a couple of connoisseurs here. The festival is actually one of the hugest events in Canada of its type.
Recently, I finished up a trade mission to Russia. We were in Moscow and Sochi, where the 2014 Winter Olympic and Paralympic Games will be held. There were 33 different Canadian businesses there with me, and a number of them signed contracts, especially in Sochi. The Sochi Games will have some similarities with our 2010 Games because Sochi is a beautiful seaside community, and it doesn’t even get snow in the winter. But, similar to what we have in Vancouver, there’s a mountain drive up into some pretty fabulous scenic areas. A Canadian company is actually drilling a tunnel that will go through the mountain to take people up there. Another Canadian company is integrating the rail and road systems. Yet another one is implementing the entire logistical apparatus. It’s very exciting what’s going on for Canadian companies right now.
So I was over there, and then at the OECD [Organisation for Economic Co-operation and Development] trade-related meetings in Paris. Val came with me, and we took a week of holidays, which as she reminds me, I don’t take enough of. And we rented a car and literally did the Tour de France. We covered about 2,000 kilometres in seven days, so we went in to most major historic sights at about 80 kilometres an hour, waved at them and went on to the next one.
We recently finished what was a very productive parliamentary session, with 20 major pieces of legislation. There was fairly good cooperation, even with opposition parties. We moved a number of pieces of legislation forward, including environmental legislation, legislation related to our Arctic sovereignty, and the biggest piece of legislation, other than some of our climate bills, was the comprehensive Economic Action Plan—the Budget. That’s where I’d like to focus a bit of my remarks, speaking about what I see as some of the challenges and giving you some input as to what I’m hearing from people locally, nationally and internationally.
Nationally and globally, we are in the midst of probably the largest, most significant economic challenge since maybe 1929, since the Great Depression. We have responded with the largest-ever economic recovery package in Canadian history to deal with the effects of this challenge. It has resulted in a short-term budget deficit, which is unfamiliar ground with Canadians because we don’t like deficits. As you know, most countries around the world are now in a deficit position because they’ve made the difficult choice of going with a stimulus package in this time of economic downturn.
Our economic program is what I’m finding somewhat gratifying. Actually, what is very gratifying are the comments I hear in trade-related meetings. Invariably, whether in China, India or wherever, in almost every meeting I attend, my corresponding ministerial counterpart, the prime minister or the king—like in Jordan, where we just signed a free trade agreement—would start off by saying, “So, I understand Canada has the most stable banking system in the world.” I don’t even have to sell that.
As you know, that’s something that is talked about by the World Economic Forum, by the International Monetary Fund and by other international observers. It’s a nice way for a meeting to start off. Our banking, our financial system is regulated in ways that many others aren’t. Certainly, there are some real comparisons to be made with, or some differences to point out from the system in the United States. Our capital requirements and our regulations governing financial institutions are a lot more rigorous than those of most countries. Canada’s banking system used to be called very boring, and we’re trying to get out now that boring is the new exciting. And we are quite excited about that.
We do not have financial bailouts; we do not have bank bailouts; we do not have a sub-prime mortgage problem. This is because we had regulations in place prior to the downturn that prevent us form going in those directions.
The other part of our economic plan has to do with taxes. We continue to stay on track with the most competitive tax advantage of the G7 countries. Our tax projections go all the way through to 2012; we believe there has to be predictability for people in business and those who are investing. We have a five-year deficit retirement program in place based on the best projections. When we do ongoing projections as far as GDP and annual growth, we look to the private sector. We draw from an average of close to 30 recognized private sector financial forecasters. When we do this, we don’t just go in our little conference room and say we think everything’s going to be great; we look at a cross-section of projections.
The so-called stimulus package, which is in the billions of dollars, is based on the recognition that we are in a time of downturn and that we have to provide a stimulus to the economy. “We’re shovel ready” has become almost a catchphrase now, and it has moved into the social discourse. For 80 percent of the infrastructure projects that are in the comprehensive Economic Action Plan, the money is actually out the door, shovels in the ground. Things are moving and that is having an effect on our overall GDP, a positive effect.
People sometimes ask me what I think in terms of where we are at in this downturn. Are we midway? Are we moving up? There are green shoots, signs of recovery here and there, and people are trying to determine whether these green shoots are just popping up temporarily or whether they represent an ongoing trend. And I have a highly sophisticated response to you for that; I don’t know.
There is no question we are seeing upticks in some important areas, but I’m not getting into the business of saying whether this is going to be sustained, or whether there is consensus internationally that we’re at the worst of the worst, bottoming out, plateauing, that things aren’t dropping as precipitously as they could be. But you’re a better judge of that than I am. If it gives you any comfort, when I meet with groups like this internationally, such as at the World Economic Forum in Davos, Switzerland, in February, it’s a little bit unnerving. The Davos forum has plenary events, and I went into a session, really not much bigger than this, with heads of state, kings, World Bank representatives and heads of enterprise. And they talked about how last year they hadn’t seen the downturn coming.
Now these are the top experts in the world saying they hadn’t seen it coming. And this year, there was no consensus on projections of how long it may or may not continue. So what do you do in a case like that? You stick to basic fundamentals.
I was somewhat encouraged at an event in September in Vancouver, to do with the extractive sector-with the Canadian mining sector. Bill Clinton was the keynote speaker. He spoke about corporate social responsibility in the field of mining. And before he gave his remarks on the extractive sector he said, “I just want to say something about this present government in Canada. I’d just like Mr. Day to convey a message to Prime Minister Harper.” I braced myself because there were about a thousand people in the room watching me. He said, “The Canadian government has got it figured out.”
And he said, “The government here, from my perspective, has basically got the fundamentals figured out: keep taxes low, keep the debt under control, have a pay-down plan in place and have a focus on the types of things the government is focusing on.”
In a 30- to 60-second message, President Clinton encapsulated what we believe is important. There are certain financial fundamentals that are important to stick to. When governments forget these, especially during the good times, there can be significant disarray when the economic cycle inevitably begins to trudge downward. And that’s what we saw happen in the U.S., and it spread to the entire world, resulting in some of the problems we’ve got.
We think, and the Economist Intelligence Unit hinted at this just a couple of months ago, that Canada is the best positioned of the developed countries going into this downturn, and we will be the best positioned coming out of it. Do we have problems? Yes. Challenges? Absolutely. As usual, I would rather be in Canada than in any other place in the world, not just for the obvious reasons but also for economic reasons.
Let me move quickly to a couple of challenging areas related to my portfolio. The one thing that I constantly hear about and that we are concerned about is protectionist activity raising its ugly head around the world, despite what the G20 leaders have said, and they’ve been very forceful. And again we’ve heard it coming out of the G8 meetings that are going on in Italy right now. Protectionism is like a virus that we do not want to see spread. If you want to open up opportunity for workers, business or industry, you do not close the doors of opportunity; in fact, you open them. And that means opening trade opportunities around the world.
We have some huge concerns with the “Buy America” legislation coming out of the United States. There is some very protectionist wording in that legislation, and we are facing a challenge with the U.S. over that particular piece of legislation. We’re doing a number of things to try to make some headway, to get legislators to turn it back, because they are excluding a number of Canadian companies from procuring contracts in the United States. We have a free trade agreement with the U.S. We say that legislation is offside and we’re concerned about it.
But this is why we’re being so aggressive on the free trade front. Canada is as prosperous as it is because this country is and always has been a trading nation. We produce more than we can consume. If we’re going to have any kind of level of prosperity, we have to continue to be able to market our goods, our services and our expertise. Up until Parliament broke in December, I was responsible for half of all the legislation that was tabled. Now, we only had two bills on the table at that particular time, but one of them was on trade, so it’s still half, right?
But since then, we have signed a free trade agreement with Peru. We’re very close to finalizing one with Colombia. We have signed an agreement with Iceland, Norway, Switzerland and Liechtenstein—the European Free Trade Association. A couple of months ago I was in Prague with Prime Minister Harper, where he signed the official beginning of negotiations on a free trade agreement with the EU—that’s 27 countries. The EU wants to see the agreement fast-tracked in less than two years, which is a huge opportunity for us. According to the numbers we got on this, if we had free trade with the EU right now, there would be an increase of $38 billion in terms of trade back and forth between Canada and the EU.
We just signed two weeks ago a free trade agreement with Jordan. One with Panama is just about completed. Where we can’t get actual free trade agreements, we look to expand the economic arrangements that we have. For instance, in India we are through a variety of memorandums of understanding; we are expanding our trade relationship with India. I was in China for a week about three months ago, and I announced that we would be opening six new trade offices there. We have entered into six new science and technology agreements—joint ventures—with a number of countries. We focus on countries where we don’t have actual free trade agreements. We start with science and technology exchanges mainly between universities and the private sector, and to have those we have to have in place what’s called a foreign investment promotion and protection agreement. So if you’re investing in China, you know there are certain laws in place regarding appropriation and that type of thing. These initial agreements lead to broader trade agreements. We’re being very aggressive on that end; we’ve signed a number of “open skies” air agreements with other countries so that we can increase choices for consumers from country to country, from Canada and other countries around the world.
We’re being as aggressive as we can to market Canada and the advantages in what we have. The Asia-Pacific Gateway works well for us. We’re being very aggressive in Asia, reminding shippers there-whether it’s Canadian Tire, car companies or others-of the shipping advantage they have from Asia to either Vancouver or Prince Rupert. Depending on where they are in Asia, it’s a three- to five-day advantage over the shipping time to the United States. Most people don’t realize that Shanghai is actually more than 1,000 kilometres closer to Vancouver than it is to Los Angeles. We have invested over $2 billion in the infrastructure in Vancouver and Prince Rupert. We’ve integrated the ports with road and rail, so that when containers land, they spend less than 24 hours in those ports and less than 100 hours in transit to the major shipping centres, such as Chicago, Atlanta and Omaha.
So we are pushing the Canadian advantage everywhere we go, using the 2010 Olympic Games, obviously, as a real highlight. And this is some of what I’ve been up to related to opening doors, trying to keep them open and creating opportunities. Our view is that, as a government, we are not the ones who should tell you, as business people, where to invest. But we should be the ones that make the playing field as level as possible. And we should be making the regulatory and taxation loads as light as possible, too. And we have to keep pushing hard to get those free trade agreements.