Foreign Affairs Committee on Feb. 11th, 2009

[Jim Abbott, Conservative, Kootenay—Columbia, BC]

Maybe it's because of our good environmental policies, but that's another thing, which brings me to the issue of climate change, where there has been an apparent shift. At least the words of the incumbent president are different from those of his predecessor. I realize this isn't anything directly to do with foreign affairs, but in a way it is. In your judgment, what areas of cooperation can you see on major issues like that or on energy? Again, this is all based on your research. Where do you see us being able to make a connection?

[Frank Graves]

Well, we have tested that explicitly, and we've tested it at different points in time.

We've found, for example, that when you ask Canadians, Americans, or Mexicans for that matter, should we have a bilateral or trilateral approach to various things, the environment has always been one of those things where people say, you know what, the environment doesn't respect political geography, species move across borders, and air and water moves, so it makes sense to cooperate on these issues—and more so than on other issues, on which they'd say, well, I'm not so sure I want to have a joint immigration policy.

What's interesting about the environment and climate change is that when you look at the issue of climate change and you blend it with issues of energy self-sufficiency—which is a much more attractive proposition for the United States, which would like to free itself from some of the geopolitically unstable regions where it currently goes to get oil, which they think increases their security risk—and when you factor in what's on the table for Canadians, and Mexicans for that matter, freer access to a less thickened border, for example, would be something of interest to us.

There seems to be a growing consensus among everybody that doing something about the climate and climate change is the single largest long-term challenge, not just in terms of social virtue, but as a real economic exigency, as people look at things like the faltering manufacturing sector and wonder how upper North American society is going to evolve to meet the challenges of a post-carbon society.

So when we blend energy, borders, and climate change together, we find that support dramatically increases in all three countries: Mexico, Canada, and the United States. That becomes a very attractive North American project.

I do hasten to point out that it's much easier to talk about things in a bilateral framework, but on some of these issues where you want to have the political emphasis behind it, perhaps this kind of a question is best framed as a North American issue, including Mexico as well. That's something that would take a little bit more time to get into.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Abbott.

We'll move to Mr. Dewar.

[Paul Dewar, NDP, Ottawa Centre, ON]

Thank you.

It's good to see you again.

I'd just promote the fact that some of us who are a little younger know well that Rich Little, as well as Paul Anka, is a product of Ottawa—like you. We're quite proud of that.

[Jim Abbott, Conservative, Kootenay—Columbia, BC]

Ah, it's because he's from Ottawa.

[Paul Dewar, NDP, Ottawa Centre, ON]

Absolutely.

One of the things we've been concerned about as Canadians are the effects of the downturn in the economy, particularly where they started from, south of the border by all accounts, with the sub-prime phenomenon and its trickle effect here. It turns out that we haven't been untouched by this, because we were actually investing in sub-prime mortgages too, as were Europeans.

When you look at regulation of financial markets—and put aside for a second the free trade component, which I will get to—have you done any polling on this since the collapse of the markets in the States and the ripple effect on us, the whole analogy of the elephant and us? Are people saying that they're concerned our economy is a little too connected to the States when it's in regard to financial markets? Certainly we saw that with the sub-prime issue.

[Frank Graves]

I have polled Canadians on their attitudes to the economy and integration since this has happened. I've also looked at American attitudes to some extent, but not since. But I do have Canadian attitudes.

For example, during the collapse of the whole technology sector, which was a similar sort of period, with a lot of carnage, particularly for Canadians holding Nortel stock, where Freedom 55 became Freedom 95 overnight, and that was my problem....

[Paul Dewar, NDP, Ottawa Centre, ON]

Slavery 95.

[Frank Graves]

Right.

But the answer is that Canadians disentangle questions of the economic integration of North America, which they largely support, unlike in the past, but they are very concerned and mindful about the different levels of oversight of the financial markets. There's very little support, for example, for any type of unified regulatory regime. Canadians don't want North American banks, they don't want a North American currency, and I don't think they'd support a potential North American potential pact. If there were some cooperative things that could strengthen and stiffen oversight in both countries, they'd support those. They're pretty well decided—and this has been a point of consensus for some time—that they'd like to reap all of the maturing business opportunities that go along with free trade, but that doesn't mean they'd like to go down the road of having common regulatory regimes.

There are some areas where they would now consider common regulatory regimes, but I don't think these would apply to the financial services sector. They would apply possibly to things like food safety, or maybe automotive safety and whether you should have daylight running lamps, for example. I think that people think Canadians and Americans have similar attitudes to health and safety, but when it gets to financial markets, I think there's still a desire to have a made-in-Canada approach.

[Paul Dewar, NDP, Ottawa Centre, ON]

Thank you for that, because I think people were concerned with the exposure we did have, notwithstanding that our banks were more highly capitalized and had stronger requirements. Nonetheless, it turns out that a number of our banks were investing in sub-prime mortgages. According to the document we were just given, we're talking about up to 5% of mortgages in Canada. That is a very low number, but I think it was a surprise to many that we were involved in that fiasco.

You mentioned that we should be focused and strategic, and Canadians probably want to see that as well. You mentioned the borders. I noted that the former foreign affairs minister, David Emerson, has been out talking recently. His thesis is that the thickening of the borders has really created problems, and he's talking about an approach that is different from what we have had in the past in this country, a kind of customs union.

Based on your research, is there any consensus about where Canadians would like us to be more engaged with the Americans when it comes to manufacturing and markets? You mentioned food safety as regulatory, but I'm talking in terms of working sectorally in our economies.

[Frank Graves]

Yes, I think there is a fairly clear hierarchy. Definitely auto and manufacturing are areas in which Canadians recognize that there are high degrees of interdependence, and these would probably be areas for which having common regulatory approaches would make sense.

Security is another area, and Canadians say this mindful of the problems of a border that has become increasingly less porous and more difficult to negotiate, and that has had a corrosive impact on trade. The figures are actually quite alarming if you look at the patterns over the last six or seven years. They work hand in hand with the rising protectionist--perhaps even isolationist--sentiment that's been present in the United States. I don't think you'd have to go much beyond those areas to identify some areas on which Canadians would like to see some attention focused. This is not necessary just at the Washington-to-Ottawa level. A lot of this is probably just as effectively, if not more effectively, handled at a sub-national, province-to-province, business-to-business level.

Right now I am concerned that we aren't in a position to make this case very forcefully. We hear a lot of spurious claims about what Americans think about Canada and its relative threat value and so forth. I think it would be really valuable to quickly, with key audiences, assemble the case that some of those perceptions are in fact inconsistent with what members of the American public themselves are saying.

[Paul Dewar, NDP, Ottawa Centre, ON]

Regarding the issue of the environment and cap and trade, we have a new president who not only agrees that there is something called climate change and agrees with the science--which is helpful--but believes that the way to deal with it is through this approach.

It's not clear at our end how we're going to deal with that. If we don't have a clear road map for cap and trade, from your data and the research you've done, what would the Americans do in that case? In other words, if we're not ready to dance with them, are they just going to go ahead and do it anyhow? And what will be the cost to us if we don't involve ourselves significantly with them?

[The Chair, Conservative, Kevin Sorenson]

Answer very quickly, please, Mr. Graves.

[Frank Graves]

I can only comment, mostly, although I do survey elites in Canada and the United States as well. The likely success of Canadian petitions rises as an issue becomes a bigger-picture item. If they see things as simply condominium issues from the complaining, hectoring aunt up north, then, yes, they'll be polite. But if you can come up with a bigger picture that frames these issues in terms of energy self-sufficiency, climate change, long-term goals, negotiating to a post-carbon economy, and dealing with the security and borders issues, then I think you have a nice big-picture North American project that would grab the interest of the public in both Canada and the United States and I dare say probably Mexico as well.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Graves.

We'll move to Mr. Goldring, please.

[Peter Goldring, Conservative, Edmonton East, AB]

Thank you for being here, Mr. Graves.

Looking at the charts here--and this one in particular about Canadian attitudes and whether they're favourable or unfavourable towards the United States--they seem to follow along roughly a fifty-fifty proposition--

[The Chair, Conservative, Kevin Sorenson]

There's just one thing, Mr. Goldring. This came from our Library of Parliament; it didn't come from Mr. Graves.

[Peter Goldring, Conservative, Edmonton East, AB]

This is from Mr. Graves.

[The Chair, Conservative, Kevin Sorenson]

Oh, you have that from his presentation? I'm sorry. Continue.

[Peter Goldring, Conservative, Edmonton East, AB]

Maybe not from your presentation, but from your website.

[Frank Graves]

From the earlier website, the report that we did, yes—

[Peter Goldring, Conservative, Edmonton East, AB]

Yes, from your website.

[Frank Graves]

—the North American part.

[Peter Goldring, Conservative, Edmonton East, AB]

It's just a general comment here that it seemed to indicate about fifty-fifty, other than a period of time that might have been associated with some rather anti-American rhetoric that went on here on Parliament Hill a couple of years back. But it's interesting to see that overall it's about fifty-fifty, and yet on another slide here, on what people view President Obama as being, whether he will fundamentally be a good thing for Canada, it seems to indicate 74% do feel that and 12% are a little negative.

So with such a high percentage of people, and understanding there's quite a bit of emotion involved in that type of a decision, can you tell us of any substantive reasons people might have to be encouraged to that extent for that large a number, what policy changes, what policy directions would lead people to think that? Would you know some?

[Frank Graves]

Yes, those are excellent questions.

I want to point out one technical point.

The 75% and 12% numbers you pointed to are only of those who think the relationship will be fundamentally different, which is about half of Canadians. Another half of Canadians say they think it's going to be business as usual. We're only looking at the very sizeable 50% of Canadians or so who think the relationship's going to be fundamentally different.

I'd be careful with the favourable and unfavourable. I believe those ratings, where now the plurality of Canadians have a favourable rating of the United States, are in fairly stark contrast to some of the other data, for example the 70-odd percent who say the United States is our best friend.