Foreign Affairs Committee on Feb. 25th, 2009
Evidence of meeting #5 for Foreign Affairs and International Development in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was energy.
A recording is available from Parliament.
On the agenda
- André Plourde Professor, Department of Economics, University of Alberta
- Thomas d'Aquino Chief Executive and President, Canadian Council of Chief Executives
- Sam Boutziouvis Vice-President, Economics and International Trade, Canadian Council of Chief Executives
- David Stewart-Patterson Executive Vice-President, Canadian Council of Chief Executives
- Clerk of the Committee Ms. Angela Crandall
February 25th, 2009 / 3:30 p.m.
The Chair Kevin Sorenson
Bonjour, chers collègues. This is meeting five of the Standing Committee on Foreign Affairs and International Development, on Wednesday, February 25, 2009. Today we will continue our review of key elements of Canadian foreign policy.
On behalf of the committee, I want to begin by welcoming our guests and our witnesses today and thanking them for appearing.
As a witness in our first hour, we have, from the University of Alberta, André Plourde, a professor in the department of economics. He has served at the University of Toronto and the University of Ottawa. He spent a year as director of economic studies and policy analysis with the federal Department of Finance. During academic year 2003-04, Mr. Plourde took a one-year leave and was appointed associate assistant deputy minister for the energy sector at Natural Resources Canada. He has served on numerous advisory committees. His research interests have centred mainly on energy economics and on Canadian energy and environmental policy issues.
From the Canadian Council of Chief Executives, we have Thomas d'Aquino, chief executive and president. Mr. d'Aquino serves on boards and advisory committees in Canada and abroad. He has been considered one of Canada's most effective global business ambassadors and has been a regular commentator on radio and television and a frequent speaker in Canada, the United States, Europe, Asia, and Latin America. He is accompanied by Mr. David Stewart-Patterson, executive vice-president of the Canadian Council of Chief Executives, and Mr. Sam Boutziouvis, vice-president of economics and international trade.
In our committee structure, we look forward to an opening statement of approximately 10 minutes. Then we'll proceed into the first round of questioning, which is seven minutes per party, and into the second round, five minutes.
I'm not certain who we had decided would go first. Being a fellow Albertan, perhaps I would show my preference today to Monsieur Plourde from the University of Alberta. I should also say that in my riding of Camrose we have Augustana university, which is a great campus and part of the University of Alberta.
With that, Mr. Plourde, we look forward to your comments.
Professor André Plourde Professor, Department of Economics, University of Alberta
Thank you very much. Maybe the fact that I'm from New Brunswick will balance the presentation.
Mr. Chairman, ladies and gentlemen members of the committee, I want to thank you for your invitation to speak to you today.
President Obama's arrival in the White House marks a change in the dynamic of energy and environmental relations between Canada and the United States. The coming months will constitute an opportunity that the Canadian government must seize to influence major development trends in public policy on the links between energy and the environment at the North American continental level, so as to ensure that the interests of Canadians are represented and considered.
With your permission, I'll continue my presentation in English. However, I will be pleased to answer your questions in the official language of your choice.
Because of the absence of the requisite transportation infrastructure, the United States offers the only viable export markets for Canadian energy production, a situation that will prevail for many years to come. Access to U.S. markets is critically important for Canada's energy industry.
As you know, the energy independence and energy self-sufficiency rhetoric heard during the recent U.S. presidential election is nothing new. It is an old theme of U.S. energy policy, one that dates back at least to the middle of the previous century. However, it is as illusory now as it was then. The cost of energy self-sufficiency is so high as to make it an unachievable objective for the United States in the foreseeable future.
Since Canada is the most important provider of imported energy to the United States, the situation of mutual dependence thus exists between our two countries. Canadian energy producers need access to U.S. markets, and U.S. consumers need import flows from Canada to enhance the reliability of supply patterns and help keep energy-related costs relatively low.
In this context it would be unwise for the Government of Canada to use energy exports as bargaining chips in policy discussions with the United States. Simply stated, in the absence of viable alternative markets, the costs to Canada of curtailed U.S. energy exports are so high as to make the threats of policy-induced reductions in export flows not credible.
A much more promising approach would be to leverage this mutual dependence to position Canada as a secure source of energy supply for the United States and thus to highlight the possibility of mutually beneficial policy action. The key goal of such an exercise would be to aim for something that is consistent, at least with the spirit, if not the actual letter, of the North American Free Trade Agreement, namely to have Canadian energy production treated no differently from U.S.-based production from a U.S. policy perspective.
And we can go much further. Canada and the United States can act to develop a joint approach to managing the relationship between energy and the environment and thus address one of the greatest policy challenges facing us today. Granted, the development of new technologies aimed at reducing the environmental effects of energy production and use is an important objective, but it must be set in the context of a broader approach to policy, one that leads energy producers and consumers on both sides of the border to make energy-related choices that are more respectful of the environment. This is where a joint Canada-U.S. approach to policy can be quite attractive.
As you know, a key concern of Canadians in the policy debate surrounding climate change has been the possible deleterious effects on Canadian competitiveness that could result from a more aggressive policy approach being adopted in Canada than in the United States, by far our largest trading partner. The development of a joint Canada-U.S. policy approach obviates most, if not all, of this concern. A common policy approach would most likely result in effects on the cost structures of goods and services production that would be quite similar in both countries. Canadian producers would thus not face a policy-induced competitive disadvantage vis-à-vis their U.S. counterparts.
Where Canada and the United States would adopt a joint approach to climate policy, it would also be easier to ensure that all Canadian and U.S. sources of greenhouse gas emissions, including those related to energy production, are treated consistently and similarly in both countries. There would thus be no need to single out specific types of energy production, such as that from Alberta's oil sands, for special treatment. Such a policy approach could be designed to explicitly link the environmental consequences and the treatment extended to different energy sources and to do so in a manner that would be consistent and predictable from a policy perspective.
The time for the Government of Canada to act is now. Efforts need to be made, before U.S. policy directions are firmly established, to ensure that it is possible for the overall policy approach and the design of the specific instruments of implementation to be respectful of Canadian interests.
President Obama has recently signaled his interest in an approach to managing the relationship between energy and the environment that brings together all three NAFTA partners. Canada should be responsive to these stated U.S. interests, despite the challenges created by the fact that the agreement's energy provisions do not apply to Mexico. Despite these differences, Canada and Mexico may still have common interests since both countries produce a lot of heavy crude oil and export much of it to the United States. A common policy approach to managing the environmental consequences of energy production and use that would result in continued non-discriminatory access to U.S. markets could be quite appealing to both Canada and Mexico.
The Government of Canada needs to seize this opportunity to help shape the future of energy policy and of energy environment policy in North America. Now is not the time to threaten non-credible actions, nor is it the time to let others adopt policy approaches that could be damaging to Canadian interests without seeking to influence their decisions. Canadians from coast to coast to coast will best be served by a government that is engaged in the development of energy policy and energy environment policy jointly with our largest trading partner.
Thank you for listening to me so closely.
The Chair Kevin Sorenson
Thank you, Mr. Plourde.
We'll now proceed to Mr. d'Aquino.
Thomas d'Aquino Chief Executive and President, Canadian Council of Chief Executives
Committee members, fellow witnesses, ladies and gentlemen, it's a great pleasure to be before this committee again. We salute the hard and very important work you do here.
I need hardly remind any of you that these are very bleak times for the global economy. We're living through the first synchronized global downturn since the Great Depression, a crisis that is affecting families and communities around the world.
The global nature of this crisis clearly demands an unprecedented level of international cooperation. For that reason, I'm delighted that this committee has undertaken to review the key elements of Canada's foreign policy and, in particular, is examining Canada's relationship with our closest friend and ally, the United States. The fact that we are meeting here a few days after the first official visit to our country of President Barack Obama makes these hearings especially timely, and I want to thank the committee for inviting me and my colleagues to share some of the perspectives of the Canadian Council of Chief Executives.
The organization I lead has championed closer cooperation between Canada and the United States for some 30 years. We were the private sector leaders in the campaign for the Canada-United States Free Trade Agreement and the North American Free Trade Agreement.
The council and its member companies are also active globally. We were in the forefront of Uruguay Round negotiations on behalf of the Canadian private sector that led to the creation of the WTO, and we continue to support progress on the Doha development agenda. We've been active within regional trade initiatives such as APEC. Indeed, we hosted the first ever APEC CEO summit in Vancouver in 1997, and we have played a key role in launching bilateral initiatives such as the Canada-Mexico partnership, the CMP. The CMP is continuing to do good work in bringing together both our governments and our business communities to address important economic issues, but I believe that even more can and should be done to broaden and deepen Canada's relationship with Mexico. We are also devoting special attention right now to the efforts to forge closer economic partnerships with the European Union, China, and India.
In the case of the European Union, we and our counterparts in the European business community have called for a wide-ranging accord, one that would include the elimination of all remaining trade barriers, the opening of financial and other service markets, broader reciprocal access to public procurement, and an ambitious agreement on regulatory cooperation, among other elements. Government officials are currently sorting out what will and will not be included in the talks, and we are hopeful that formal negotiations will begin this spring. The importance of this initiative cannot be overstated. The 27 member states of the European Union represent the world's largest market in terms of GDP, and a broad Canada-EU accord would offer huge benefits to Canada across many sectors.
The time has come also, ladies and gentlemen, for a much stronger relationship between Canada and India. Last month our Minister of International Trade, Stockwell Day, and India's Minister of Commerce, Kamal Nath, agreed to begin exploratory discussions toward a comprehensive economic partnership. We at the Canadian Council worked with the Confederation of Indian Industry to develop a joint report last year on the potential benefits of such a partnership, a draft agreement that was seen by both governments at the highest level.
Now, underlying all these initiatives is our fundamental belief that global trade and investment liberalization are and will remain powerful forces for human advancement and social development. I say this knowing full well that in today's environment there are some, perhaps a growing number, who question the benefits of international economic integration. Some have gone so far as to argue that the global financial crisis exposes the failures of globalization.
In my view this analysis is wrong on two counts. First, it ignores the fact that the process of global economic integration has been going on for thousands of years and is propelled not by governments and elites but by the innate human desire to reach out to build and to interact. Secondly, it overlooks the countless ways in which open markets have contributed to human progress and democratization, reducing inequality and lifting hundreds of millions of people out of poverty. As former United States President Bill Clinton has observed, globalization is “the best engine we know of to lift living standards and build shared prosperity”. Or to quote a former United Nations Secretary General, Kofi Annan, “I believe the poor are poor not because of too much globalization, but because of too little.”
As I mentioned a few moments ago, the economic challenges we now face demand even closer cooperation among countries. The year ahead will be painful and full of surprises, but eventually fear will dissipate and confidence will return. The speed with which we return to better times will largely depend on sound policies, a willingness to accept transformative change, strong and principled leadership, and a commitment to both renew and strengthen the multilateral trading system on which prosperity depends.
In that context, I want to endorse Prime Minister Harper's comments at the conclusion of his meetings with President Obama last week with regard to the importance of the Canada-United States partnership. The Prime Minister noted that the ties between us are stronger than those between any other two nations on earth, and we need to continue our efforts to improve cooperation and to open doors of opportunity bilaterally, regionally, and globally.
Turning specifically to the issue of Canada-United States relations, my colleagues and I at the council outlined our immediate priorities in a statement a few days prior to President Obama's visit to Ottawa. In it we said that the global economic crisis makes it especially important to launch bilateral initiatives in three areas: the economy, energy and the environment, and defence and security. With your permission, I will briefly summarize our views in each of these areas.
First, Canada and the United States must work together closely to speed economic recovery. Governments should do their best to ensure that measures to support industry are complementary, and they should avoid any action that would impede trade between us or add to the costs of production. At the same time, our two countries should accelerate efforts to reduce the cost of doing business across our shared border, both by upgrading border infrastructure and by taking steps to eliminate minor but costly differences in regulation. In addition, we need to begin talking now about measures to strengthen our competitiveness once the recovery takes hold.
The second priority is the need to launch a bilateral energy and environment initiative. Both President Obama and Prime Minister Harper have expressed the desire to explore the potential for a North American market in greenhouse gas emissions, and we recommended that they launch formal discussions toward this goal. A coordinated approach to the management of greenhouse gases is essential to the ongoing competitiveness of our economies. Our countries are also natural allies in moving international climate change negotiations toward a sustainable and truly global solution.
Related to this, we recommended that Canada and the United States forge a joint strategy for improving clean energy technologies and expanding the secure North American supply and distribution of all forms of energy while reducing their overall environmental impact.
Our third priority focuses on the need to enhance bilateral and international security cooperation. Canada and the United States are natural partners in promoting human rights and respect for the rule of law, and we remain firm allies in the worldwide struggle against global terrorism.
Closer to home, we recommend that Canada and the United States begin discussions on measures to improve joint management of our borders. In particular, we support the idea that the full NORAD mission of surveillance, warning, and control be extended to the land and marine domains to create a unified and seamless system for North American defence.
Let me conclude, Chair. As business leaders, we were pleased to see that significant elements of all three of these priorities were reflected in the statement released by Prime Minister Harper and President Obama after their meetings last week. In particular, we welcomed the President’s strong disavowal of protectionism and beggar-thy-neighbour policies that would only worsen the current global economic downturn. Of equal significance was the decision to launch a new clean energy dialogue that will address the energy needs of the 21st century as a key element of broader economic recovery and reinvestment efforts.
To sum up, we hope that last week’s meeting between the President and the Prime Minister will mark the beginning of a new era of cooperation between our two countries. Much more work lies ahead, but we in the business community are committed to doing our part to ensure that Canada and the United States overcome the economic challenges we both face and emerge stronger than ever from the current downturn.
By way of emphasizing the urgency of our efforts, I am pleased to report that my organization will be convening a Canada CEO summit in Washington, D.C., on March 23 and 24, during which our members will meet with a wide range of senior administration officials and key policy-makers.
Thank you, Chair and members of this committee. This concludes my opening remarks. We would be pleased to answer any questions you might have.
The Chair Kevin Sorenson
Thank you, Mr. d'Aquino and all, for being here.
We'll proceed to our first round.
Bob Rae Toronto Centre, ON
Thank you, Mr. Chairman.
It's good to see Mr. d'Aquino again. He and I have been around quite a long time together. I'm glad to see him here.
Mr. d'Aquino, my sense is that the border is getting a lot thicker, not thinner, and I wonder whether that's a view you also have and whether you would have some specific suggestions to make as to how we might be able to deal with that problem.
Chief Executive and President, Canadian Council of Chief Executives
Thank you, Mr. Rae. I'm equally happy to see you.
The thickening of the border is an issue that we've been deeply concerned about, really, since 9/11. You all know what happened and I won't review that--the fact that trucks that had taken eight to ten minutes to cross the border were taking 18 hours to cross the border. I'll tell you, that was a huge wake-up call to all of us, not just to those of us in Canada, because we ship so much across the border, but to the 39 states that consider Canada their most important market.
Ever since then, despite the smart borders initiative that was initiated by the former government, which contained many excellent elements to it--Mr. Manley and Mr. Ridge--and despite all the efforts since, this enormous apparatus called the Department of Homeland Security, which I'm told is larger than the entire public service of Canada, has developed a momentum of its own. It's a momentum where, I have to say—given that I attended two summit meetings involving the two Presidents and the Prime Minister, one at Montebello in 2007 and one in New Orleans in 2008 where this issue was squarely on the table—despite the strong assurances on the part of the President of the United States and strong efforts on the part of the President of Mexico and our Prime Minister to say, “Let's do something about it,” and the President in full view of those of us who are here saying to his homeland security secretary, “Let's get on with it,” the fact of the matter is that we are falling behind rather than going forward.
So in answer to your question, Mr. Rae, I think we have to push very, very hard. I know that Prime Minister Harper did so with President Obama. I think it's important that the two business communities continue to intensify their efforts. And it's not easy. We've been at this now for three or four years, really starting back in 2001-02, and often we run up against a brick wall with a lot of people, including congressional and Senate representatives who say, “We're on your side; we want to do it,” yet it doesn't happen.
Dealing with the inertia and dealing with it quickly, in our view, is crucial. This means taking infrastructure money on both sides of the border and improving the infrastructure access to border points. It means looking at the tunnel and the bridge, including a bridge that is privately owned—which, incidentally, greatly shocked the President of the United States, who couldn't believe that a bridge that was so important to our two countries was actually privately owned—but that we get on with the job of improving links that should have been improved even before the 9/11 attacks. Whether it's done under the umbrella of the security and prosperity partnership, which is now under a great cloud, or through some new intensified bilateral effort—although I think the Mexicans can help as well—we really, really have to intensify our efforts, set some clear goals, and get on with it.
If I may conclude, the reason we have to get on with it is that we have to thank our lucky stars that there has not been another major terrorist strike. We would have run into huge problems once again. Depending on the severity of the strike, it could be almost fatal to two-way trade. We're lying here hostage to the possibility that such a strike might take place, and we're still dealing with the thickness of the border.
The second thing we have to do is ensure that officials on both sides of the border, the border security people, utilize the smartest and the best technology to make the border work better. And you know what? That technology has been around now for a decade. It's just that we're not using it rapidly enough, and somehow there does not seem to be the sense of urgency to deal with it.
Smart card technology on dealing with the borders, which is being used in various forms of cross-border transportation, should be extended right across the board, and most of all, at the highest political level--and I think the Obama-Harper statement helped to do that, and I'm assuming that Mr. Ignatieff did the same thing—
Bob Rae Toronto Centre, ON
Chief Executive and President, Canadian Council of Chief Executives
Good. And we should acknowledge that the interdependence of these two countries and the jobs and the industries on both sides of the border means that need to get that border thinned out as quickly as we possibly can.
To use one little line that I think was used last week by someone cleverly, how many terrorists are we trying to stop—one, two, three, five? You know, last year, 220-odd million people crossed the border. We must not hold a huge relationship hostage to the fear of trying to catch a few people.
Bob Rae Toronto Centre, ON
I'm going to share my time with Mr. Patry.
The Chair Kevin Sorenson
Bernard Patry Pierrefonds—Dollard, QC
Thank you, Mr. Plourde and Mr. d'Aquino.
Mr. Plourde, in your statement—and this was repeated by Mr. d'Aquino—you said that the energy produced in Canada contributed to the national and energy security of the United States. It seems that, since his election, President Obama has wanted to proceed very quickly on the greenhouse gas issue. There could be a very credible energy policy approach by the United States very soon.
In your view, is there any danger that Canada will be outstripped by our southern neighbours in that thematic policy area? That would greatly harm our economy.
Mr. d'Aquino, in your second recommendation, you talked about launching a bilateral energy and environment initiative. How do you view what will be happening very soon?
The Chair Kevin Sorenson
Thank you, Mr. Patry.
Mr. Plourde, go ahead please.
I believe it is possible that Canadians may be overtaken by energy and environmental policy developments in the United States. That's clearly a danger that has been around for some time. We're seeing a different rhetoric and approach to these aspects of relations between Canada and the United States.
Canada must establish a policy on climate change that is perceived as credible because otherwise we could jeopardize existing relations on energy. That's why I advocate a joint or cooperative approach between the two countries. We must ensure that Canadian interests are defended in the development of U.S. policy and that the much broader issues are acknowledged in the political debates.
Chief Executive and President, Canadian Council of Chief Executives
Permettez-moi de répondre dans la langue de Shakespeare et non pas celle de Molière.
In a nutshell, Canadians and Americans are amongst the highest users of energy per capita in the world, as you know. You also know that our carbon footprint is amongst the highest in the world. We are two federations, and we therefore have to deal with what we have seen in both countries: American states moving much more rapidly in some cases than the government in Washington; a situation in Canada that has caused us great grief in the business community for quite some time, which is that instead of having a cohesive approach to fighting climate change we have provinces going off in different directions, we have members of various parties in Parliament very much at odds, and the result is that we've lost years.
I say years. When I think back to the 1990s, Canada was not only seen as a global environmental leader but also as being in the initial stages of trying to build a response to global climate change, in the work of the Brundtland commission. Even in those early days we were world leaders in terms of our voluntary efforts. We as an organization were the first business organization in the world to acknowledge the principle of sustainable development.
Since then, we've lost a lot of ground and a lot of credibility. I think we now have a marriage of both interest and opportunity—a new leader in the United States, a Prime Minister and a leader of the opposition who are certainly willing to work closely with the Americans—and we have to get on with it. It's crucial to our competitiveness. It's crucial to bringing together what is a natural alliance in the international forums that are dealing with the next stage in the fight against climate change, and bringing to those forums the joint technologies, whether carbon capture and sequestration or other forms of technology, that we in North America can be leaders in developing. The more quickly we do it, in conjunction with our American friends as part of a very closely integrated economy not only in energy but in industrial terms, the more credible and more influential we're going to be in the world.