International Trade Committee on March 31st, 2009

[The Chair, Conservative, Lee Richardson]

Good morning. We will continue our study of Canada-United States trade relations. This is the 12th meeting of this session of the Standing Committee on International Trade.

With us this morning, from the Canadian Council of Chief Executives, I see David Stewart-Patterson again—welcome—and Sam Boutziouvis; from the Canadian Manufacturers & Exporters, Jean-Michel Laurin, vice-president; and from the Canadian Trucking Alliance, David Bradley, chief executive officer, and Ron Lennox, vice-president, trade and security.

Mr. Bradley will begin this morning with a brief opening statement, followed by questions from the committee.

[David Bradley, Chief Executive Officer, Canadian Trucking Alliance]

Thank you very much for the opportunity, Chairman and members of the committee.

Very briefly, some background: CTA is a federation of the provincial trucking associations in Canada. We represent approximately 4,500 trucking companies from all provinces of all sizes, serving every industrial sector in Canada from manufacturing to retail, agriculture, forestry, high-tech, and natural resources. Our members are involved in all facets of the business from local pick-up and delivery to long-distance, cross-border movements. Our industry is the classic derived demand industry and one of the best leading indicators of economic activity there is.

Trucking is also the preferred mode of freight transportation in Canada. We haul about 90% of all consumer products and foodstuffs. In normal times we'd employ over 400,000 Canadians, and the industry's contribution to GDP is by far the highest of all the transport modes. Trucks aren't necessarily the cheapest mode of freight transport. It's our service that really sets us apart from the other modes: door-to-door, small shipments of time-sensitive freight. It's been said that the just-in-time inventory system and time-definite logistics have been built around the trucking industry.

For the purposes of today's discussion, it's important to note that two-thirds by value of Canada's trade with the U.S. moves across the border by truck. I am often asked the question about border delays these days. Before answering that, it is important to understand that North America and especially the manufacturing regions of Canada have been in a freight recession for at least two years now. Initially the reduction in volumes was a reflection of the impact of the appreciation of the value of the Canadian dollar and ongoing problems in the auto and forestry sectors, and that had a very negative effect on southbound shipments. What had been the trucker's head-haul and the major source of the industry's growth for the previous 20 years was suddenly drying up.

The onset of the financial meltdown last fall and therefore the worldwide recession has only served to exacerbate what had already been under way for some time. A significant reduction in truck traffic across the Canada-U.S. border has occurred. For example, figures from the Public Border Operators Association show that in February of this year the number of trucks crossing between Ontario and Michigan and New York continued its downward spiral. The declines at the three busiest crossings, compared to the same month a year ago, were: Ambassador Bridge, down 35%; Blue Water Bridge, down 28%; and the Peace Bridge, down 17%. Overall, truck crossings at the PBOA facilities in 2008 were 10% below what they were in 2001. According to information provided to us by the B.C. Trucking Association, a similar trend has occurred at the three major crossings in that province.

As I said earlier, southbound freight has been particularly impacted. It's no surprise to the trucking industry that Canada now finds itself in a trade deficit situation. In 2008, U.S. imports from Canada by truck declined by 6% over 2007, according to the U.S. DOT, whereas U.S. exports to Canada by truck were actually up a modest 2.4%.

The Blue Water Bridge reports that trucks crossing into the U.S. were down 32% in January 2009 compared to a year earlier. Overall, in 2008 southbound trucks were down by over 200,000, or 22%, since the peak of 2004. In 2007, for the first time in decades, the number of trucks coming into Canada exceeded the number heading to the U.S., a trend that continues into 2009. I can tell you there is virtually no indication that a recovery in freight volumes is on the near-term horizon.

So when asked how the delays are at the border these days, we're currently not experiencing to the same degree the kinds of extended delays that have at times plagued the border over the past several years. But that should not be taken as evidence that all is well.

We have information from Transport Canada—I will pass around the charts—that despite the drastic drop-off in volumes, border processing times have barely changed. They are still hovering in a very narrow range, whereas we've seen freight coming down. Moreover, the current slowdown in trade is masking some of the problems arising out of the thickening of the Canada-U.S. border that has been occurring for the past number of years, in large part reflecting the impact of a series of measures introduced by the Department of Homeland Security and the U.S. Department of Agriculture, all in the name of enhanced national security.

No fewer than a dozen major U.S. security programs have been introduced. Other factors have also contributed, such as infrastructure limitations—Detroit-Windsor being a prime example—inconsistency between U.S. and Canadian programs, staffing issues, and no doubt an element of U.S. protectionist sentiment.

I'm concerned that when the economy bottoms out and we begin to see growth again, we will see a return to extended delays at the border. The proliferation of measures introduced in the name of security has driven up costs for trucking companies that move goods across the border. I'm referring to everything from supply chain security programs to new electronic means of submitting information to border agencies, to inspection fees for agricultural products, and to the cost of multiple security cards for truck drivers.

I'm not sure where the tipping point is, but we have to understand that if we keep heaping costs on transportation and trade, which the trucking industry inevitably passes down to its customers, there will be a serious threat to the competitiveness of North American-made goods and problems in attracting direct investment into North America. I think that's already been occurring.

Anything that impairs the efficiency, productivity, reliability of the North American supply chain will have a significant ramification for the Canadian economy, obviously, but also for the U.S. economy, given the high level of integration between the two. With the change in the U.S. administration, there may be an opportunity now to take a step back to see whether things may have gone a little bit overboard, or at a minimum, whether we can find ways to prevent yet another set of costly new requirements from being imposed.

Last week the new U.S. Secretary of the Department of Homeland Security made a number of comments regarding the northern border. Quite frankly, she didn't say anything that we did not already know: that there's a cultural change under way that will be reflected in the creation of a real border between the United States and Canada. Anyone who has been remotely involved in border issues since 9/11 knows that.

As Canadians, our concern should be what additional measures will be introduced on top of what already has been done over the past eight years to create that real border. The secretary's remarks would seem to indicate that what has been done to date is still not enough. She says that we should strive not to impact on trade, but not to “unduly” impact on trade. She talks about trying to avoid “an unnecessary division between our security responsibilities and our trade and travel desires”. What is “unnecessary”?

As I said a moment ago, and notwithstanding the above, the change in the U.S. administration still presents an opportunity for Canada. Is Canada well positioned to seize that opportunity?

In CTA's opinion, a new approach to U.S. border and trade issues is required. I do not for a moment underestimate how complex the matter of Canada-U.S. relations is. However, the Canadian approach of the past few years has in our view been too diffuse, and at times this has impaired our effectiveness in dealing with our partners to the south. Too many federal departments have had some stake or responsibility for some aspect of the border. We have found it a challenge just to find out who's who and to get the different people working together. We suggest that the federal government should consider the creation of a cabinet committee on the border and/or a specific ministerial or senior bureaucratic position with authority for all aspects of the border.

The results from the security and prosperity agenda and the North American Competitiveness Council have, in our view, been underwhelming. Perhaps the brightest period over the last eight years for advancing border issues arose out of the smart border accord of 2001; it was those few months right after 9/11. Perhaps what is needed now is a smart border accord 2009.

We should also be looking in the mirror and making sure, as Canada rolls out measures such as the electronic truck manifest, that we harmonize to the extent possible with the United States and don't impose new requirements that will complicate rather than simplify border crossing processes.

We know that the committee has an interest in the western hemisphere travel initiative. This program is but one of any number of programs that affect the movement of trucks between Canada and the U.S., and frankly, it is not the main one that causes me to lose sleep at night. The acceptance of the driver FAST card as a citizenship document was a very positive step.

The trucking industry has had ample opportunity to get the appropriate documentation. We've bombarded our members with information on the coming land border deadline, and there is absolutely no excuse, with the amount of material available from both CBP and CBSA, for a trucking company to claim it didn't know or didn't have time. Sure, there will always be those who refuse to listen, and I would not expect 100% compliance on June 1, but in terms of trucking industry readiness, I'm confident that we are well placed to meet our obligations.

Our concern over WHTI is what the impact on cross-border truck traffic will be if the general motoring public is not prepared for the new requirements. If the roads and highways approaching the U.S. border become clogged with traffic by unprepared motorists, then trucks will be stuck in the queue, unable to reach the commercial lanes and the border compounds. CTA has strongly encouraged CBP to put in place a contingency plan to address this eventuality in the days and weeks immediately following land border implementation. I can only hope that they've heeded our advice.

We've also consulted with the British Columbia Trucking Association, which has been closely following the preparations in B.C. for the 2010 Olympics. There's a common assumption that there will be high U.S. interest in attending the Olympics and that there will also be a short-term spike in cross-border truck traffic generated by higher demand for food and other products that the B.C. market obtains from the U.S.

BCTA has been working with the Vancouver organizing committee and the City of Vancouver on the Olympic transportation plan. Clearly, it will not be business as usual in the downtown area during the Olympics, but simple measures like advanced communication of road closures and greater use of off-peak pickup and delivery should help mitigate the impact. At the border it will be critical that construction at the Peace Bridge crossing be completed on time and that CBSA deploy the staff necessary to process increased volumes and conduct closer scrutiny of people crossing the border, which we assume will happen. All of this is still a work in progress and it will no doubt be refined as we get closer to February 2010. But at this stage the trucking industry is not in a panic over what might happen during that two- or three-week period.

Again, thank you for the opportunity of addressing you today. I'd be pleased to respond to any questions you may have.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Bradley.

We'll go now to David Stewart-Patterson, Canadian Council of Chief Executives.

[David Stewart-Patterson, Executive Vice-President, Canadian Council of Chief Executives]

Thank you, Mr. Chair, and thank you for the opportunity to appear before this committee again.

I think the invitation in this case is particularly timely because just a week ago we had some 50 of our member chief executives meeting in Washington, D.C., for two days. We covered an awful lot of ground over those two days. Our meetings included sessions with folks like Larry Summers, the chief architect of President Obama's economic policy. We had another long discussion with Paul Volcker, the former chair of the U.S. Federal Reserve, now chairman of the President's Economic Recovery Advisory Board, and we were also privileged to be the first foreign group to meet with the newly confirmed U.S. trade representative, Ronald Kirk.

On the Canadian side, in addition to Ambassador Wilson, of course, we were joined by Environment Minister Jim Prentice, and also by Bank of Canada Governor Mark Carney, who discussed the latest developments in monetary policy, along with one of his counterparts, Governor Kevin Warsh of the Federal Reserve System.

We heard perspectives from both sides of the political spectrum. Republican Senator Lindsey Graham from South Carolina, as well as former Vermont Governor Howard Dean, chairman emeritus of the Democratic National Committee. We had some extensive discussions with our business counterparts, including Tom Donohue of the United States Chamber of Commerce, John Castellani of the Business Roundtable, and also John Engler of the National Association of Manufacturers.

Obviously, we covered an awful lot of ground, because that's just the beginning of the agenda, and I'd be happy to share insights we may have picked up on any specific topics of interest to members of the committee.

Let me begin by offering some reflections on three key topics: the fiscal and monetary response to the current economic crisis, trade and protectionism, and defence and security.

Over the past week or so, we've seen a couple of major developments in the United States, one dealing with the purchase of the so-called toxic assets as a means of stabilizing bank balance sheets, the other proposing a sweeping new approach to the regulation of the financial system in that country. The Americans we met with, I have to say, and this covered business, government, and academia, all made it clear that they saw, still see, Canada's banking system as perhaps the best in the world, a shining example of both good management and sound regulations. The result is, as they contemplate regulatory reform, that this is one sector where American regulations are going to be moving in our direction.

The critical challenge for Canada I think is to ensure that the fiscal policy of both governments aimed at stimulating our respective economies turns out to be mutually reinforcing. Both governments, of course, have passed major stimulus packages that are beginning to have an impact on our respective economies, but I have to say the broad range of additional measures being included in the budget recently proposed by President Obama in the United States is generating some pretty extensive controversy there.

The fundamental argument in the United States is not about the short-term measures that are being taken. Rather it's over whether the need for short-term stimulus can justify extensive new spending that will permanently expand the reach and cost of government and do all that entirely with borrowed money. The huge deficits being created by short-term stimulus alone are going to have some pretty painful long-term consequences in that country, both on taxpayers and on future economic growth. I think it's fair to say that Canadians know from pretty bitter experience that large and recurring deficits require a growing share of the tax pie just to cover the interest costs on growing public debt. I think the downside of what's happening in the United States is that it's not only going to be costs that are borne by U.S. taxpayers, but the future impact on U.S. economic growth obviously will spill over and have consequences for Canadians as well.

In the short term, of course, the more immediate danger to Canada's export-oriented economy is that of rising protectionism. Beginning tonight, the leaders of the G-20 countries will be meeting in London to assess their collective progress in dealing with the global economic crisis. Last November, they pledged to refrain from raising new barriers, whether to investment or to trade in goods and services. This week, as they meet, they're going to be faced with evidence from a variety of sources suggesting that in the few months since, at least 78 trade-restricting measures have been introduced by countries around the world, including 17 of the G-20 countries.

Canada, of course, has already been forced to deal head-on with protectionism in the form of the “buy American” provision that was included in the U.S. stimulus legislation. Canada's government and business leaders both worked hard to dilute that provision, and, I have to say, we had no shortage of allies in the United States. Indeed, the American business leaders who spoke to us in Washington last week were unanimous in denouncing the “Buy American” policy as short-sighted and counterproductive.

The Obama administration also clearly understands the importance of maintaining open flows of trade. I think we heard that from the President himself when he visited Ottawa. We heard it again, in spades, in Washington last week, but the White House cannot entirely contain protectionist sentiments amongst individual members of the United States Congress.

Protectionism, on the other hand, can and does trigger retaliation. The same legislation that included “buy American” provisions of concern to Canada cancelled a program allowing Mexican truckers access to the United States. This is an access that was originally guaranteed as part of the North American Free Trade Agreement back in the early 1990s and was delayed or restricted year upon year.

The cancellation of the pilot project that was allowing some access was incendiary for the Mexicans. Their government immediately countered with large tariff increases on a wide range of imports from key U.S. states. This, in turn, has touched off a political backlash in the United States. The Obama administration has already promised to take action within the next month to try to reverse that decision.

However, the pressure for protectionism, whether in the United States, here, or elsewhere in the world, is not going to go away. In hard times, people tend to turn inward. It's a natural reaction. But the lessons of the Great Depression of the thirties are clear: putting up walls between countries simply guarantees that the economic downturn will get deeper and go on longer. So when the G-20 leaders gather in London, we will certainly be urging them to renew and extend the pledge they made in November and take additional practical action to prevent, to expose, and to roll back new barriers to trade in goods and services alike.

On the bilateral front, the barriers to the movement of goods and people between Canada and the United States don't always flow just from commercial concerns, of course. Since the terrorist attacks of September 11, 2001, the resulting expansion of security measures has led to a significant increase in the time and money required to cross the Canada-U.S. border. The result of the 2008 presidential election in the United States offers an important opportunity to reshape that bilateral relationship and make some progress on this front, I think, but Canadians should not expect any sudden unwinding of the American security apparatus.

As my colleague here mentioned, Homeland Security Secretary Janet Napolitano has made it very clear. She made a speech last week: the very real threats that preoccupy the United States haven't disappeared and are not going to go away anytime soon.

Our neighbour's attitude towards security changed fundamentally on 9/11 and Canadians are going to have to continue to live with the consequences of that. The most immediate consequence, of course, is the western hemisphere travel initiative, which clearly will proceed on schedule at this point and will require the use of passports, even for land crossings, starting this June.

That said, I think our two countries do share vital interests in seeing our border work as efficiently as possible. I think that's why we've seen provinces and states working together to develop things like enhanced drivers' licences as alternatives to passports. It's why both countries are making massive investments in border infrastructure. The most recent announcement here in Canada, of course, was the Blue Water Bridge. As well, it's why Secretary Napolitano had such a productive first meeting earlier this month with Canadian Minister of Public Safety Peter Van Loan.

In my view, the most encouraging development to come out of that meeting was the agreement to take a new look at the concept of pre-clearance at land border crossings. When you put up a customs post at the inbound side of a choke point like a bridge or a tunnel, it can make a big difference in reducing the congestion that otherwise piles up when the lineup has to go through the bridge or tunnel.

Negotiations to launch the first pilot project of pre-clearance at the Buffalo-Fort Erie Peace Bridge fell apart last year. It looks like that concept at least is back on the table. We'll have to see how far and how quickly it goes.

In the longer term, progress in dealing with border management really depends on the extent to which our countries trust each other's will and ability to secure our own borders. I think Prime Minister Harper made this point very clearly during President Obama's visit to Ottawa when he said, “There is no such thing as a threat to the national security of the United States which does not represent a direct threat to this country.” That was a message that was very clear and went over very well in the United States.

I think President Obama was just as plain in his response at the time, when he said, “We have no doubt about Canada's commitment to security...”. In this context, it is important to understand just how much value Americans put on our broader military alliance and cooperation. During our Washington meeting, we heard repeatedly and consistently a very heartfelt appreciation for the sacrifices Canadian men and women are making in Afghanistan in particular.

When we're fighting side by side with Americans against the Taliban, we're defending values that we share, values like respect for human rights and the rule of law. That shared sacrifice in the defence of fundamental principles is a foundation for mutual trust and respect. It's that mutual trust and respect that, in my view, make dealing with some of the day-to-day irritants and the more practical concerns like border management a lot easier to deal with over time.

It also paves the way for deeper cooperation on mutual security, as Secretary Napolitano recognized last week when she invited thoughts on a vision for what we would like our shared border to look like 20 years from now.

To conclude, Mr. Chairman, the global economic crisis has made it vital for Canada to work closely with all our partners around the world. In particular, I think it has created an important need and opportunity to strengthen our bilateral relationship with the United States. In assessing this opportunity, we do have to recognize that the new President has an awful lot on his plate. His hands are full. Therefore, it's up to Canadians, as friends, neighbours, and allies, to take the lead in proposing how we might take that relationship to the next level.

Thank you, Mr. Chair.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Stewart-Patterson.

For our final comments we're going to turn to Mr. Laurin from Canadian Manufacturers & Exporters.

Please go ahead, Mr. Laurin.

[Jean-Michel Laurin, Vice-President, Global Business Policy, Canadian Manufacturers & Exporters]

Bonjour.

Thank you, Mr. Chair.

Thank you, members of the committee, for the opportunity to testify on behalf of Canadian Manufacturers & Exporters this morning on your study of Canada-U.S. relations. We're glad we're able to provide input to your study.

Before I get started, I'd like to say a few words about the association that I have the privilege of representing.

Canadian Manufacturers and Exporters is the leading trade and industrial association in Canada. We represent manufacturing and exporting businesses in every Canadian province and industrial sector. Manufacturing and exports in Canada are the two major sectors of our economy. Manufacturing represents 16% of GDP and exports 21%.

In Canada, manufacturing represents $605 billion in annual manufacturing shipments. We're talking about an industry that occupies a very large position in the Canadian economy. Last year, we had $483 billion in export sales. That represented nearly two million direct jobs across Canada.

On the issue that's being discussed today, I think your study matters a great deal to us because Canada-U.S. trade matters a great deal to Canada, and obviously to our members who are responsible for the bulk of our trade with the United States. Some 39% of manufacturing production in Canada is sold in the United States. So almost half of what we make in our plants is sold in the United States. It's actually our main market. We sell more to the United States, more of our industrial production to the United States, than we sell to Canada. And 78% of Canada's goods exports are sold to the United States, so it's our main trading partner, as you know. If you exclude oil and gas, 72% of industrial shipments, industrial exports, are sent to the U.S.

In fact, our exports to states like Michigan, Illinois, New York, California, Washington, Ohio, Pennsylvania, Minnesota, and Texas, if you take them individually, to each one of these states, are greater than our exports to our second-largest trading partner, which is the United Kingdom. Not only do we export more to Texas than we do to the U.K., but we export more to New Jersey than we do to Japan, we export more to Tennessee than we do to China, we export more to Montana than we do to Mexico, and the list goes on and on.

But I think some stories need to be told. I think when we go to Washington and when our members go to Washington, the story we need to take across as much as possible is that Canada-U.S. trade matters a great deal for the U.S. economy as well. You know, Canada is a top destination for American exports. The U.S. sold $260 billion worth of goods to Canada last year alone. Actually, U.S. exports to Canada are $38 billion greater than American exports to Mexico and China combined. So we're talking about a pretty extensive trade relationship and a pretty important market for U.S. manufacturers and exporters.

Exports account for 13% of the U.S. economy, so it's still a large part of the U.S. economy, and actually, U.S. exports have been one of the strongest parts of the U.S. economy if you look at the last five years. They've been able to count on exports as a source of growth for their economy. You often hear about the growing trade deficit when you go to Washington, but if you look at U.S. manufactured goods and their trade with countries with whom they have a free trade agreement, they are actually a trade surplus. When you talk about countries like Canada and other countries with whom they have trade agreements, they're in a trade surplus when it comes to manufactured goods.

I think a key message we also try to take across is that Canada and the U.S. make things together. We estimate that approximately 70% of Canada-U.S. trade is within one industrial sector, and 40% approximately is within one corporation and within companies that are affiliated with one another. About a third of our exports to the U.S. are composed of goods that were previously imported from the U.S. In other words, we import components from the U.S. and we export finished goods to the U.S., and you can make the reverse argument as well.

Another story we can tell Americans is that when you look at American exports to individual provinces, they're often greater than countries for which...you wouldn't think there would be such a large export market. For example, American exports to Ontario last year were greater than American exports to China and Germany combined. So that's a pretty important market, and the list goes on and on. If you take Manitoba as another example, American exports to Manitoba are greater than American exports to Russia.

In terms of our priority issues when it comes to Canada-U.S. trade relations, I think obviously—and David alluded to this in great detail in his presentation—the U.S. government's response to the current economic crisis and the measures that are put in place to make sure the economy can recover quickly are certainly a priority issue for our members overall. When you talk about border conditions, which I know is an issue you're taking a look at more specifically, 79% of our members in our annual survey report that reducing regulatory impediments to shipping across the border is one of their policy priorities. So obviously this is a very important issue for us.

In terms of other issues, I know you're also looking at the western hemisphere travel initiative. I know our members are concerned about this coming into force this summer, or actually this spring. We're concerned this could mean longer border delays for our members. Depending on staffing levels and how much time it will take for travellers to cross the border, even though they might have larger staffing levels, we're concerned that the traffic will just build up on the roads leading to the ports of entry, and that could mean a very bad summer and maybe even a bad fall in terms of border delays. This is definitely an issue for our members, given that a lot of businesses operate on a just-in-time basis.

I think when you look at other issues that are upcoming in the U.S., our concern is that a lot of the new border security requirements are going to have a detrimental impact on North American supply chains. We've seen an increased number or increased proportion of inspections at the border, and my colleagues from the CTA alluded to that earlier. And that's happening despite the fact that our members have invested quite heavily over the last few years in the new trusted shipper programs, whereby if you invest in that program, if you qualify, if you're a partner against terrorism or you're a partner in protection, you should have lower inspections and your goods should have an easier entry into the U.S. market. Despite that, our members are reporting more inspections at the border.

I think another priority for us is making sure that, as much as possible, we work jointly with Americans at having a perimeter approach to security; in other words, do a better risk assessment of goods entering our ports and things that are entering the continent so that we can make fewer inspections at the land border.

We're also concerned about new mandatory cargo reporting requirements that are coming up in the U.S. because that adds to the cost of doing business. We're also worried about new border inspection fees, oftentimes originating from other departments than DHS but that are being administered by the Department of Homeland Security and Customs and Border Protection.

Finally, as I said earlier, border delays are certainly of great concern to us because they affect delivery schedules and our ability to compete “just in time”, and they always end up hurting Canadian businesses more than anyone else.

Another issue that needs to be raised—I don't think it's part of the agenda for your meeting, but I wouldn't be fair to my members if I didn't raise it—is the “buy America” requirements that were introduced in the stimulus package. We're obviously concerned with that. We're working very closely with Ambassador Wilson and the staff at the Canadian embassy in Washington. Our members have been feeding us information. Obviously, I think the issue has died down a little bit in the media because of some of the administration's comments, saying that this would not be in contravention with any of their trade agreements. On the other hand, a lot of the procurement that this stimulus spending will fund is going to be done by state and municipal governments, which are not covered by any trade agreements. So, actually, we're consulting with our members to come up with as precise information as possible to make sure we can feed that into our colleagues and allies in Washington.

Just to conclude, one of the key messages that I think we need to take across when we go to the United States is reinforcing the notion that Canada matters to the U.S., because we make things together. We're part of integrated supply chains. I think David rightly said that we're partners in security as well. Our defence industries are very closely integrated. Actually, Canada supplies a number of innovations and solutions to the U.S. defence sector that they wouldn't be able to access if Canada wasn't a key ally for them.

We need a better coordination of programs and policies. For example, both governments have developed new frameworks to look at product and consumer safety. I think in many cases it would make sense to have better integration of these programs and policies. I think we need more constructive dialogue, not only between governments but also between legislators. I do know the work of the Canada-U.S. Inter-Parliamentary Group has been pretty helpful in doing that, and I know some of your work will be very helpful as well.

I think it's important to coordinate with the Canadian embassy in Washington because they've organized a number of advocacy initiatives in the recent past that we've taken part in. I know some of my colleagues in other associations have as well, and I know some of our members that have plants and operations in the U.S. have been pretty active in driving across those messages to U.S. legislators.

Finally, I'd like to say that, as you complete your study, you can count on the cooperation of Canadian Manufacturers & Exporters. Actually, since very recently, we have an office in Washington. We have an adviser to our president, who's based there, who knows a lot of the U.S. trade associations, which, as David mentioned, can be key allies in driving across some of the messages we need to drive across in Washington.

That concludes my comments. I look forward to your questions.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Jean-Michel.

It was a great opening. I think that gives us a good basis for discussion.

I would just like to say at the outset that we do have other business to deal with today after hearing from the witnesses. We have a couple of motions before the committee. I think perhaps I'll suggest we try to get through the first round, that is the greatest number of members allowed to speak within an hour, and that'll leave about 15 to 20 minutes to deal with business at the end. I think that should do it.

So with that, I'm going to, again, thank you for the opening statements, and I'll turn to the vice-chairman, John Cannis, to begin the questions. And we'll try to keep them to seven minutes, with questions and answers. Thank you.

Mr. Cannis.

[John Cannis, Liberal, Scarborough Centre, ON]

Thank you, Mr. Chairman.

Let me welcome you once again, gentlemen, as we move on to this study. Thank you. More so, let me thank you on behalf of all of our constituents, because they are asking us these questions as well, since their daily livelihoods and their jobs are dependent on what happens with the meetings.

For example, David, you talked about what happens with the truckers association, the manufacturers, etc. We need to respond to our corporate constituents as well, the small, medium-, and large-sized enterprises, who want not just to do well but to survive.

In listening to your comments, I was really puzzled, and I don't know what message to take back to them. I'm going to be all over the map here for a moment, only because there were several things that were mentioned here.

David, you talked about your most recent meetings in the U.S. It seems to me there's some wonderful messaging. The Prime Minister's message was positive on security, for example, complemented by the President's. It seems that's where it stops, because I don't think the Americans have come out of this 9/11-George W. Bush bunker mentality. We all welcomed the message.

I want to ask one question and get a quick response, please, if I may. We have a committee here in Canada dedicated to seeing how we can enhance, improve, support, whatever, this wonderful relationship we have. Is there such a committee taking such a study on? We hear statistics of “we are”, “they are”, “greater numbers”, and “greatest trading partner”. Are they putting as much emphasis on this relationship as we are? Could I have just a quick response to that?

[David Stewart-Patterson]

I think they are a much bigger part of our external relationships than we are of theirs. That's an imbalance that is inevitable, given their impact on the global economy and the broader global security situation. We're never going to be as big an issue in Washington as the United States relationship is here in Ottawa. That's the reality we have to live with.

[John Cannis, Liberal, Scarborough Centre, ON]

Okay.

You talked about Secretary of State Napolitano and her positive comments. I haven't heard too many positive comments. Maybe they might be positive, but they don't lead in a certain direction. When they talk about what our shared border would look like 20 years from now, that's so silly. If I take that back to my constituents, the first thing they're going to say, my dear friends, is can you address the problem today?

For example, post-9/11, I know that we, as a government, were very serious and very proactive to move forward with investments and new technology to create the smart border. We made a quantum leap forward. We were way ahead of the Americans. We know that. They weren't prepared. Yet again, we were getting the criticism that we weren't doing enough. Why is that, David?

[David Stewart-Patterson]

If I think back to those days, they were obviously shocked by what had happened to them. They were reacting very strongly.

The positive side of what happened in the immediate aftermath of 9/11 is that we did have very strong personal relationships develop at the top. I think that led to an extraordinary degree of cooperation through the original bilateral smart border accord. I think that's what there's an opportunity now to recapture. That's where I take some comfort from the words that President Obama and Prime Minister Harper exchanged in February. That's a necessary signal to start moving things in that direction. Trust is something that builds up over time. I think we do have a substantial record of cooperation over time in a variety of joint initiatives.

From a Canadian perspective, now is the time to try to push for the next layer in cooperation. We have an established record on the military side, a binational command through NORAD. We really need to explore the potential for a binational approach to managing our shared border. I don't think that's necessarily going to happen in a single go. It will take pilot projects. It will take a buildup of trust over time, but I think that's the concept we have to work towards in the short term. It may not achieve its full flowering for 10 or 20 years, but we have to start somewhere. That was the intention of the original smart border accord. You start with manageable chunks and you build up a stronger pattern of cooperation over time.

[John Cannis, Liberal, Scarborough Centre, ON]

We can accept that, and that's a great start. So there have been the positive comments by both leaders. Investments have been made. What would you say would be the third plank? There's probably a fourth or a fifth as well.

We have our leaders setting a guideline or sending a message to their nations. We have investments that are going in. I'll ask about the stimulus package in my last question. What would be the third plank, in your view, that would need to be done? We're down there. I know our committee is down there. Our Senate committee is down there. We're meeting people. We're engaging them. We're telling them what's factually true in terms of what we've done. Are we getting on first base with that?

[David Stewart-Patterson]

I think what you're talking about in terms of the relationship between legislators is an important part of that.

As a business community we've been very active with our counterparts in the United States, both in a bilateral and a trilateral context, but these days it's particularly important to link the fact that we both have a serious economic problem. We both face the same kind of challenge, and working together on issues such as security is going to be essential if we're going to make progress on bringing our economies back to a more competitive base and getting ourselves back into a growing, rather than a shrinking, situation as quickly as possible.

I think making that case to your counterparts by saying that we have to make the security work because it's essential to making our economies work is a very powerful argument right now, but it has to come from every level. It has to come federal to federal, state to province, and business to business. We all have to do our part on that.

[John Cannis, Liberal, Scarborough Centre, ON]

I think Sam....

[Sam Boutziouvis, Vice-President, Economics and International Trade, Canadian Council of Chief Executives]

Mr. Cannis, this is a very important question.

We do need to add that President Obama's cabinet actually has two former border leaders as senior members in his cabinet. One is Secretary of State Hillary Clinton and the other is Janet Napolitano.

Janet Napolitano has indicated that she wants to learn about the northern border; she knows most about the southern border. Secretary Clinton knows about the northern border. There are tremendous opportunities here to take advantage of the presence of these two leaders in President Obama's cabinet to actually leverage where the Canada-U.S. relationship should go.

Second, with the greatest of respect, we do need to go in with ideas. Canadians do need to lead with respect to where they want the Canada-U.S. relationship to go. That is simply an axiom of Canada-U.S. relations that has developed over the 150 years since--

[David Stewart-Patterson]

It flows from the asymmetry of their being more important to our strategy than we are in their big picture.

[Sam Boutziouvis]

Again with respect, we had an opportunity. The Americans did suggest the idea of perimeter security in the early 2000s. We did not go down that route. At the time that idea was before us all. It was an idea we all considered. We recommended it as a business group to the government; we did not go down that route.

Now Secretary Napolitano is asking what our shared border might look like in 10 or 20 years. We should develop and marshal our arguments together. You should go out and consult and determine what we as Canadians think the border should look like within 10 to 20 years. Pre-clearance and shared border management are fundamental precepts or concepts whose meaning we should think about. We should be answering very tough questions about our relationship going forward.

[John Cannis, Liberal, Scarborough Centre, ON]

Thank you, Mr. Chairman.

We should invite Secretary Napolitano to Canada, then, and maybe engage that way.

Thank you, sir.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Cannis.

Go ahead, Monsieur Cardin, for seven minutes, please.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chairman.

Good morning, gentlemen. We've had the opportunity to meet with the Canadian Manufacturers and Exporters on a number of occasions, as well as the Chief Executives. This is the first time in a long while that we've heard from the Canadian Trucking Alliance.

Ultimately, you depend somewhat on the chief executives, manufacturers and exporters. The pace of your business has declined significantly; it's the border that's causing you major problems.

Has the process been quicker than previously since certain measures were implemented? How could the situation be improved?

[David Bradley]

That's a big question to answer. I would say that there has not been improvement. If I were to compare things with the situation on September 10, 2001, no. We've seen a definite thickening of the border, and this is having an impact on the trading relationship and our ability to compete, not only as a country but as a continent, with the rest of the world.

What to do about it is a complex matter. Obviously, we have to be marketing, trying to convince Americans that we are important to them—not as important in the economic relationship as they are to us, but that we are important. However, Americans at the political level as well as at the business level are rather pragmatic people. We tend at times—maybe it's a bit of our inferiority complex—to put a lot of our energy and attention into making them aware that we exist and that the border is important, and we don't go much beyond that. When we're dealing with Congress, when we're dealing with legislators, we have to bring solutions. A congressman is there to introduce bills and get laws passed, and we need to bring them something.

I don't know that we need to look very far. In the first iteration of the security and prosperity partnership, the game plan was to say that there are no silver bullets, so let's come up with a comprehensive list of things that need doing. None of these measures may appear to be particularly important, not the sort of thing that's going to catch headlines, but in combination these things will have a practical impact upon improving the situation at the border. What happened with SPP over time was that it was felt that we couldn't deal with 350 issues, even minor ones, and that we needed to come up with our top three or four. At that point, we lost focus. There is no big silver bullet, and we end up talking about things that may matter in the future, but we're all living with today.

I think we need to engage the United States on many fronts, but we need to put solutions, practical solutions, on the table. We've missed some of that, and we've tried to re-engage them by telling them how important we are to them.

[Serge Cardin, Bloc, Sherbrooke, QC]

I have one last question to ask before handing over to my colleague. Do you mean that there is no place for meeting and ongoing discussion to solve the trucking industry's problems at the border?

[David Bradley]

I think maybe that's part of the problem. There are all kinds of processes that are presently under way, all kinds of fora where these things are discussed. The problem is the coordination, bringing the departments together. In the last few years, I've had four or five ministers tell me they're the one responsible for the border, which means nobody really is. We need to have better coordination, a less diffuse approach and a plan of attack. I think the way to do this is to come up with an accord, as opposed to a process for the sake of a process.

[Serge Cardin, Bloc, Sherbrooke, QC]

I'll now hand over to my colleague.

[The Chair, Conservative, Lee Richardson]

Mr. Guimond.