Let me just give you a little bit of an overview. I've been in the portfolio now for about three and a half months, and I think it's probably timely to give you a perspective as to what I'm thinking about in terms of priorities and Canada's trade position, where we've been, where we are, and some of the issues that I, as minister, and you, as a committee, need to turn our minds to over the next few months.
I would say, first off--and this will come out as part of an international trade report we'll be releasing on Thursday--that Canada's trade performance and our economic performance has been really quite good, if not stellar, the last few years. You'll see on Thursday that our exports are going to exceed $516 billion for the year 2005, which is a record. Our current account surplus is going to again be of record scale. When you look across the economy, we've seen a very strong macro-economic performance in Canada, whether you're looking at job creation, the unemployment rate, or the growth in investment in retail sales.
Generally, throughout the economy there has been in Canada a very strong economic performance, but I would caution members of the committee, and I would caution you in the following sense: that a lot of the economic strength that we have seen, both in terms of trade and in terms of the macro economy, has really been strength that comes from a couple of sources that we cannot be sure will be there and provide the same kind of momentum going forward.
First off, committee members will know that we've had very strong commodity markets over the last few years, particularly in energy, but extending to a variety of commodity products. That has created an enormous economic stimulus in Canada. It's a stimulus that is welcome, and it has provided all kinds of opportunities for Canadian companies that have the opportunity to participate in the natural resources play, but it also has some other implications. People will realize that the Canadian dollar has risen dramatically in the last three or four years. Indeed, I think we've seen something like a 40% appreciation of the Canadian dollar, and most analysts will attribute the performance of the Canadian dollar largely to what's happened in the natural resources economy. The rise in the dollar, then, has repercussions for the rest of the economy, the manufacturing sector in particular, so we've seen some of the ripple effects of the strong economy showing up in pressures on manufacturing. It starts to translate into regional pressures, because manufacturing tends to be regionally concentrated in this country. So we have had, on top of a stellar performance, some emerging frictions that we should talk about as part of today's deliberations.
We've also had a very strong boost in economic activity, employment, investment, and just general economic activity over the last eleven years pursuant to NAFTA. We entered into the North American Free Trade Agreement on January 1, 1995, I think, and over the last eleven years most would say that NAFTA has been very good for Canada. Unfortunately, in spite of 97% to 98% of our trade under NAFTA being very positive and trouble-free, we've also had some NAFTA-related frictions, of which softwood lumber is the most prominent.
Unfortunately, in the United States, in Canada, and indeed in Mexico, NAFTA has been seen by much of the public not so much in terms of the very positive aspects, but in terms of some of the trade frictions. Here in Canada we hear all the negatives about NAFTA in terms of the trade frictions, and on the American side of the border it is not any better. There are a lot of misgivings about NAFTA on the U.S. side, and the same applies in Mexico.
Looking forward, we're going to have to give a lot more attention to how we secure and improve and fine-tune the North American Free Trade Agreement to ensure that the opportunities NAFTA has created for Canada continue to grow in the future.
When you look around the globe and look at the context in which Canada will have to be a successful trader, we also observe that the process of globalization has fundamentally altered the international economic landscape. We're now in a world where you don't think so much about what to export to whom; you think in terms of global supply chains.
Global supply chains mean that we are often exporting and importing massive amounts between countries in the same industry. We're in a world where the global economy is served through supply chains, which entails investment, often in multiple countries around the world.
That creates a new world in terms of international trade and how Canada can continue to participate, going forward. Because it really means that for Canada, it's not good enough to focus only on exports or imports or the trade balance. We have to turn our attention to the flow of international investment. And it's not just the flow into Canada, which we clearly value and would like to see grow. It's also the flow of Canadian investment into other countries, because without that two-way flow, we are simply not going to see the trade performance or the development of efficient global supply chains in which Canadian companies and workers can participate.
Those are the kinds of challenges we're facing, going forward, and it really means for Canada that we have some serious work to do. When I say serious work, I'm thinking in terms of the architecture of our trade agreements.
We all know, almost by rote, that Canada depends on a stable, secure, rules-based trading system. That's really what allows a small trading economy like Canada to prosper in a global economy with giants like the United States and emerging giants such as China and Europe and others, and to participate in a reasonably fair and somewhat more equal way.
So we have to focus on the WTO, which is the framework within which rules-based trade is established multilaterally. It really is the only framework in the world where there is a genuinely international legislative framework that defines the rules of trade and investment.
NAFTA has been extremely important, as I said earlier. But we have to remember that NAFTA is not an agreement based on a transnational legislative framework. NAFTA is an agreement among the three partners, but disputes under NAFTA, as we know all too well, are adjudicated on the basis of domestic laws.
When people talk about chapter 19 and dispute resolution in NAFTA, what they're really talking about is whether the Americans are applying their own laws correctly. Those who would say, for example, with respect to softwood lumber, that we should fight it out, we should litigate, we should look for endless legal victories, and that will save chapter 19 of NAFTA are really kidding themselves. Because what they're really doing is creating an environment in which a protectionist Congress will simply start to look at its own laws and make adjustments, or pass new laws, and make it much more difficult to win chapter 19 and dispute resolution cases.
That's dispute resolution under NAFTA. It's not pretty, but it's what we have and it's better than nothing.
There are advantages to having NAFTA chapter 19, as I said the last time I was at the committee. It gives us an opportunity to recover duties after we win a dispute. But NAFTA needs some more work; it needs collaboration, and it needs good will among the partners in order to make it a more effective instrument in going forward. That will be a critical priority.
I would also point out that Canada has fallen behind over the last ten years in terms of launching bilateral free trade agreements with other countries. When you look at the United States and Mexico, you're looking at countries that have entered into a multitude of free trade agreements with other countries. The United States has 12 free trade agreements with 18 countries. Mexico has 13 free trade agreements with 43 countries. Australia has been aggressively forging free trade agreements. Canada has really only entered into one free trade agreement in the last five years, and that was with Puerto Rico,
If you believe, as I do, that Canada and our prosperity is going to be fundamentally driven by international trade, we have to re-energize and focus on a successful WTO round. We also have to hedge our bets and look at more aggressive negotiations of bilateral free trade agreements. The free trade agreements of our trading partners are creating advantages for our competitors in third country markets. We cannot sit back and simply allow Canadian companies to be discriminated against as a result of what has become a competitive proliferation of free trade agreements.
Perhaps I'll end on the general issue of competitiveness. People will realize that there's been a lot of talk about productivity performance in Canada in the last few years. Our productivity has not been great. Our competitive position, even though we've had a strong macro economy, has not been very strong and we've been falling behind the United States, not to mention some of the really fast-growing, high-octane economies in the world.
As part of our trade development program in going forward, we're going to have to focus on the nexus between trade and competitiveness. It will mean that we'll have to look at a lot of domestic policy issues running from taxation through to regulation, infrastructure investment, gateway transportation logistical systems, and infrastructure in terms of broadband and access to the information economy. All of those areas of public policy are going to be central to ensuring that Canada's competitive position is strong when going forward.
The bottom line is this. Canada is the most trade-dependant economy of the major industrial economies, which means our trade performance will cause us either more happiness or more pain when going forward, depending on how we do in relation to competitiveness and how we do in relation to evolving trade agreements. It will be a fundamental driver of the Canadian economy, wealth creation, our ability to fund social programs, and our ability to provide the kinds of employment opportunities that our kids and our grandkids are going to aspire to.
Thank you, Mr. Chairman.