Excellent. Thank you very much, Mr. Chairman.
Thank you, committee, for putting up with another appearance by me and also the technological glitches. I hope I don't repeat too much of what Laura said. I heard her formal testimony but not the Q and A. Let me just say that she's fantastic. We've known each other since we were in grad school, and I'm a huge fan of her work and her analysis, so you can disregard everything I have to say. As long as you have her guidance, you're going to be doing just fine. But, since you did invite me, I'll have a little guidance of my own.
What I want to begin with is a kind of commonplace observation, but one that I think is very reassuring right now with regard to the relationship between Canada and the Trump administration. That is, the two countries—Canada and the United States—are friends, fundamentally because the people of Canada and the United States are friends. That guides everything, and even in a moment when American politics are very populist, Canada shouldn't worry because most people, including Trump voters, think Canada-U.S. relations should be good, constructive, not without their disagreements, but managed in a constructive way. I think that's really important because it's going to keep a boundary on just how chaotic or difficult relations with the Trump administration might be. We have no reason to think that the president has any animus against Canada either, but there are some concerns in the relationship now, and I'll echo some of what Laura said and try to cover the remit that was given to me by the committee.
First of all, in regard to the commercial relationship, we have a great trading relationship. Thanks to trade liberalization, thanks to regulatory cooperation, and thanks to security co-operation, we have been able to knit tremendous value chains together that allow firms with specializations on both sides of the border to work together to build products that are world class. This has kept the American economy as well as the Canadian economy going. Canadians create millions of good American jobs, and the United States economy helps to fuel the Canadian economy by creating jobs there as well.
The problem, however, is that the Trump administration has created a great deal of uncertainty about those foundations of the relationship. Specifically, he's talking about renegotiating NAFTA, which Laura addressed, and however that comes out, whether it's a tweak or a twerk, or something grander, I think the uncertainty over the trade rules is going to be bad for our business community in both countries. It's going to cast a doubt about whether we can continue to invest and expand on that economic activity. The sooner we resolve that, the better. There's no resolution like a final resolution. Even though we're going to keep hearing rumours, and tweets will fly, it's very important that we resolve this as quickly as possible.
Secondly, since the Trump administration has begun, and in part, since the Trudeau government has taken power, our vehicles for border security co-operation, the beyond the border working group, and regulatory co-operation, the Canada–United States Regulatory Cooperation Council, have all but disappeared from the scene. We don't hear much from them. They've been moved within the Canadian government, and they haven't been particularly highlighted in the U.S. government, not in the meetings between Trump and Trudeau, and not elsewhere. That work is extremely important because it provides a way for the economies to get closer that doesn't have to be managed by the president or the prime minister; it can be managed by officials on both sides. We need a green light for that to continue, and we can't afford to let that work split.
At the same time, I think that our approach to NAFTA renegotiation—and this something that, I think, Laura pointed to—has been remarkably defensive. Those of us who care about Canada-U.S. trade have gone into this saying we'd like to keep exactly what we have now, if possible. I think it's very short-sighted. We ought to be looking to expand labour mobility, particularly by, for example, treating business travellers as though they were tourists. Allow three months of visa-free, hassle-free visits to each other's countries in a row so that a business person can come up to a conference or a sales call in Canada, or vice versa, without being given the third degree at the border over whether they may or may not have a tax liability or who's paying them. We could open up business travel.
We could, similarly, maintain our good investment relationship. We could look at doing joint infrastructure projects as a way of heading off Buy American or Buy Canadian provisions in our government's infrastructure spending plans. There are a lot of things we might hope to achieve in NAFTA renegotiation if we have a bit of vision and ambition.
Let me add another thing I'd like to see us consider. I would like to see Canada and the United States negotiate a mutual recognition agreement of functional equivalency in regulatory standards and inspections, so that if a product has been certified as safe in Canada, it would be considered automatically safe in the United States and vice versa.
This is not to harmonize our standards to the exact same level, but to recognize that while there are some minor differences our standards are functionally equivalent. This would cut tremendous amounts of regulatory red tape on our businesses that operate on both sides of the border. I would argue that it is consistent with President Trump's commitment to cut red tape and ease the regulatory burden, especially on our small and medium-sized enterprises.
I echo what Laura said about Mexico. On a positive note, Mexico is a tremendous emerging market. It is a market with a middle class almost as big as the entire Canadian population. It is a huge business opportunity for Canada. Yet, since Canada was able to get access to the Mexican market in NAFTA some 20 years ago, I think a lot of Canadians have tended to overlook or take for granted their access to the Mexican market as they look to expand trade with China, India, and Europe. All this is good, but don't forget Mexico.
There's a huge opportunity. Laura underscored the energy component of this, and I would concur, but there are so many ways in which the Mexican market would be a good diversification of Canada's export portfolio and a great opportunity for Canadians. I think that's going to require some diplomacy, because Mexicans are feeling Trump's ire. They need a friend right now, and I think Canada can be that friend.
With regard to the security relationship, President Trump has brought burden-sharing front and centre in the NATO alliance. This is not a new concern for the United States, but it's one that he's made with a particular focus for the first time since the end of the Cold War. I think this has been translated by many people as meaning that NATO allies need to reach the 2% of GDP contribution that all of the NATO countries agreed to aim for at the Wales Summit. I think that's a reasonable benchmark. I would think, however, that Canada needs to have a wider accounting of security contributions than simply the military contributions it makes.
Our European allies have a tendency to throw in all sorts of things to try to make their figures look like they're closer to 2%—veterans benefits, contributions to diplomacy. They consider these things as contributions to security, and they count them in to make their numbers look better.
The problem is that Canada is too darn honest. Canada considers only military expenditures as contributions to collective security. In my view, given the deep integration between Canada and the United States, the RCMP together with Canada's efforts in intelligence gathering and border security contribute to the national security of the United States and should be counted in Canada's favour. When you add military expenditures to these domestic law and order expenditures, Canada is at 2%.
That doesn't mean Canada shouldn't resolve defence procurement and try to buy a new jet fighter. I think that it also would refound the relationship if the United States could acknowledge its dependence on Canadian contributions beyond the military in North America.
I would like to urge, as a concerned observer, the Trump administration and the Trudeau government to return to Ogdensburg. I think we need a new bilateral discussion, or statement, on the Canada-U.S. security partnership that incorporates domestic and traditional military contributions and that endorses these contributions within a strong partnership, just as Franklin Delano Roosevelt and William Lyon MacKenzie King did 70 years ago.
It's particularly important now because this year is the 60th anniversary of our NORAD agreement. It's also the 15th anniversary of the reorganization of American defence in North America, which created the U.S. Northern Command. In these anniversary years, it is particularly important for us to renew our commitments to the past in a forward-looking way.
On the rest of the world, you have given me a wide remit. I can say that I'm only an expert on Canada-U.S. relations, so my observations are going to be bit cursory, but I'm happy to discuss them at greater length.
The world today, partly because this has been Donald Trump's emphasis, has returned to great-power politics, something we saw last saw at the beginning in the last century. It is an uncertain time. Donald Trump has taken on as a global strategy the banner that Ronald Reagan brought forward of peace through strength.
He wants increased defence spending but he wants to maintain an international order by being a very international strong player. This has shown up since he's become President in renewed commitment to NATO. I think you'll see that underscored at the NATO summit coming up in May, which the President will attend, and you've seen it also in his direct challenge to Russia. Despite all of the media speculation about his relationship with Russia, he's been remarkably tough with the Putin government.
We saw it just this week with the invitation to Montenegro to join as the 29th member of NATO, with his willingness to challenge Russia over its claim that chemical weapons weren't used in Syria and to push back on that disinformation that Russia has put out. I think you will see it in the months ahead in a stronger commitment by the United States to Ukraine. I know that's very important to Canada, but I think it's also important to the United States. It wasn't where Trump wanted to lead, but it fits with the way in which he tends to remind countries how important the United States is to their plans.
We saw this particularly with China, where the President reached out to Taiwan, took a phone call from the Taiwanese President and rattled Beijing. The President has also said, with regard to China, that he wants China to step up on the North Korean peninsula issue and help discipline North Korea. I think that's tremendously important. We've seen China at least moving somewhat in that direction, because it challenges China as a rising power to act like a rising power and to take some responsibility for security in its own neighbourhood.
I think this is an important pivot for the U.S. and not unrelated to the U.S. action in Syria, showing that the U.S. is willing to act in a proportionate way, but in a decisive way in defence of international security and norms. At the same time, China knows that the United States is very committed to resetting the trade relationship between the United States and China. There's some peril for Canada in this, which is simultaneously reaching out to China and trying to establish a bilateral investment treaty, and also a trade treaty.
If there's daylight between Canada and the U.S. on China, it will be potentially an issue between the United States and Canada. I think it's important for our two governments to come together on a common approach and in a way be a Team Canada-U.S. with regard to China, rather than having the Chinese try to play on our differences and perhaps use Canada as its access point to the North American economy, raising issues for our trade officials as well as for the President.
The Middle East is an area in which we're both involved in fighting the Islamic State. The President has a strong commitment to Israel but a desire to play a more secondary role in the Middle East, not get drawn into its conflicts and its chaos. I think it's a very difficult thing for the United States to do. We can't just withdraw and expect peace and security. The President is also very skeptical of the Iran deal that was put together by the Obama administration.
I do not think that the Trump administration is going to break the Iran agreement, but I do think that the Iranians will break it for him. I think they've already pushed the limits of what the agreement has required of Iran. I suspect that we'll see, in the next month or so, the administration publish and fully disclose the details of the Iran deal so that the media and others can scrutinize compliance. I think the administration will impose consequences on Iran for its violation of the deal.
As with Syria, we hope those consequences are proportionate and fall well short of war. But interestingly, this week the former president of Iran, Ahmadinejad, has stepped back into politics suggesting that Iranian politics themselves may be an issue. I think that's a vulnerability for Iran that the U.S. will put pressure on to try to change Iranian behaviour. This could be a moment for an opening, but I think the administration takes Iran very seriously. In this regard, the Iranian situation is going to be tied to the situation in North Korea.
The U.S. attitude on non-proliferation has become much more assertive with regard to North Korea. I believe it will be equally assertive with regard to Iran, and it's important, I think, for the United States to have Canada in its corner on that.
Lastly, there was a question that the committee raised regarding multilateral institutions, and in this area I only want to say the funding cuts that the President's budget proposed need to be taken in the context of funding cuts in the U.S. domestic economy.
We've seen that Laura's organization, the Woodrow Wilson Center, was zeroed out in the President's budget. It's not the President who decides where funding goes; it's Congress. The President's budget is a suggestion like the budget of the Prime Minister. This is illustrative and sends a signal, but is not the final word. I don't think Laura is going to lose her money, but more importantly I don't think multilateral institutions will be zeroed out or cut as drastically as the President has suggested. But it's a shot across the bow; it's a challenge to those organizations to reform; and it's difficult to reform an organization like the United Nations or its parties. It's going to be difficult to reform the World Trade Organization, the IMF, and the World Bank. By signalling a willingness to step back from those organizations, the U.S. is finally active on its concerns of the past and said they expect change or they will change their posture. This will put pressure on every one of those organizations to reconsider the trajectory they've been on.
Resolutions condemning Israel at the UN are really not constructive for either the UN's reputation or the UN's relationship with the United States. As those organizations try to recalibrate their position, re-establish the trust and conscience of the United States, and address problems in their organizations, they can have no better friend than Canada, which is a committed multilateralist with a professional diplomatic corps that has helped it make those organizations as successful as they have been. Canada's commitment on multilateralism is not at odds with what the U.S. is doing, but may enable the U.S. to get what it ultimately wants, which is functioning international institutions. The U.S. role as such a big country is to threaten funding perhaps, but Canada's role could be to take that, translate it into reform that can make, if you like, the United Nations great again, and all these other organizations more functional and more supportive of the international order.
With that let me stop. I'll be happy to take any questions, and maybe now I can hear Laura if she jumps in too.