Thank you very much, Mr. Chairman.
I brought a lot of folks with me in case anything goes to a vote, and we have more help behind.
Thanks for the opportunity to address Canada's trade relationship with the United States, which remains still the largest trade relationship between any two countries on the planet.
Let me start by saying a few words about the overall relationship. What we share with our American neighbours is a long-standing, deep, and enviable partnership forged by shared geography, similar values, common interests, deep social, familial connections, and powerful, multi-layered economic ties.
It's an impressively wide-ranging relationship, the dynamism of which can be seen every day in our people-to-people ties, our deeply integrated economies, and government-to-government dealings in a vast number of areas, ranging from our shared environment to our space programs. Over the years, it has become a model of a relationship that works.
Canada and the United States enjoy a unique economic partnership. Since the implementation of the Canada-US Free Trade Agreement in 1989, two-way trade in goods and services has more than doubled.
In 2009, our bilateral trade in goods and services stood at close to $600 billion, with $1.6 billion worth of goods and services crossing the border every day.
Canada has traditionally run a large merchandise trade surplus with the US, most of which is attributable to our standing as the lead foreign supplier of energy to the United States.
If energy exports are excluded, our trade with the United States is roughly balanced.
As you know, millions of jobs on both sides of the border depend directly on trade between our two countries. Ultimately, our economic partnership with the US is critical to the economic prosperity and standard of living in both countries.
Given the importance of the commercial relationship to both economies and the incredible volume of goods and travellers that cross the border every day, it remains a top priority to ensure that our common borders remain secure and open to legitimate commerce and travellers.
Last Friday’s declaration on a shared vision for perimeter security and economic competitiveness, and the ensuing action plan, will play an essential part in modernizing the border to address future security and competitiveness opportunities and challenges.
As trade officials, we're often required to focus on the problems in the relationship that attract public attention. This can obscure the fact that the overall trade relationship functions smoothly. I think they refer to me in Washington as the “assistant deputy minister, trade irritants”.
A relationship with the depth, complexity, and scale of the one we enjoy with our neighbour could not realistically be completely immune to occasional divergence of views. However, the positive aspects of our relationship far outweigh the negative ones and enable the two countries to work together to overcome them.
Where problems do arise in the form of legislative and regulatory measures adopted in the U.S., Canadian exporters or exports are often not the primary target of those measures. Canada is at times side-swiped, so to speak, by actions aimed at other exporting countries. A good example would be the recent proposal for a foreign manufacturers liability and accountability act, a policy that would have created additional costs and administrative burdens for Canadian exporters but in respect of Canada was completely redundant and unnecessary.
Another important consideration is that trade barriers enacted in one country inevitably impact on producers in the other. This is a result of the growing integration of production across the border, not least because of the NAFTA. Extended supply chains increase the competitiveness of industries in both countries; however, they are also subject to unintended effects when trade-restrictive measures are undertaken.
To put a point on it, U.S. government actions affecting Canadian exports can also impact the U.S. content suppliers of those goods, and vice versa. Approximately one-third of U.S. imports from Canada go into the production of U.S. goods and services, with a similar corresponding figure for Canadian imports from the U.S. The point is we make things together for the world market.
These are some of the general messages that we include in our exchanges with U.S. government officials, decision-makers, and industry. The level of integration of our two economies is not well known in the United States. Our objective, and most of you will be thoroughly familiar with it, is to sensitize our U.S. counterparts to the competitive advantages of an integrated North American market. Generally, they are receptive.
Turning to the NAFTA, the agreement is now in its eighteenth year. With tariffs almost totally eliminated, the trilateral agenda has increasingly focused on barriers behind the border—first and foremost differences in regulations that impede trade.
When stakeholders are consulted it is often the first element they identify as a barrier or cost of doing business in the US and Mexico.
This is a central issue for the ongoing agenda of the NAFTA Free Trade Commission, identified as regulatory cooperation. Current efforts are focused on identifying sectors and agreeing on priorities for action.
This is a complex and labour intensive process, requiring a high degree of consensus among stakeholders and provincial/territorial governments. Our regulatory cooperation work within the NAFTA framework compliments other bilateral efforts that we are undertaking with the U.S.
Last Friday, Prime Minister Harper and President Obama reaffirmed their commitment to regulatory cooperation through the creation of a United States—Canada Regulatory Cooperation Council, which will build on and strengthen previous efforts as well as provide a solid basis for cooperation and continued collaboration going forward.
Another area of current focus in the NAFTA work plan is assistance to small and medium-sized enterprises seeking to enter international markets or expand the range of their exports. The U.S. in particular has promoted work on SMEs, reflecting the objectives in President Obama's national export initiative.
Government procurement is another sector where the Canada-U.S. trade relationship has recently been enhanced and where there may be scope for further gains. Under the bilateral agreement on government procurement signed last year, Canadian suppliers gained formal access to the bidding process in 37 states and U.S. suppliers secured similar access in the provinces and territories. In Canada’s view this should be a first step. The agreement provides for the possibility of broadening the scope of commitments, which would be in the interests of both countries.
Let me comment that what’s at stake is not just government procurement and not just the billions of dollars in U.S. stimulus programs, which involves public works and infrastructure projects. What's at stake is the bigger business relationships in supply chains. Once established, those relationships, if broken, are difficult to re-establish, and that’s what’s at stake in respect of policies like Buy American.
On softwood lumber, much attention has been directed to the arbitration under the softwood lumber agreement of 2006. This was the case recently with the request for arbitration against British Columbia’s timber pricing system and the result of the arbitration against provincial programs in Ontario and Quebec in support of their forest products industry.
It is worth noting that in the provincial programs arbitration, the U.S. initially requested $1.8 billion in compensation for circumvention of the agreement. However, in its final ruling the tribunal ordered an additional export tax of 0.1% for Ontario and 2.6% for Quebec to compensate for the programs not in conformity with the agreement. That would represent, in the view of the experts, something like 3% of the claim against Canada.
The arbitration mechanism is an element of the softwood lumber agreement, and should be seen as a demonstration that the agreement is working. It has given Canadian producers and exporters a predictable trade environment in a very difficult market for the past three and a half years. That's why it is broadly supported by provincial governments and Canadian industry.
One other issue of major concern that I would like to mention is the US Country of Origin Labelling requirements that affect the ability of our cattle and hog farmers to compete fairly in the US market. Canada has brought this issue to the WTO along with Mexico. A dispute settlement panel was established in November 2009 to determine whether the COOL measures are consistent with the international trade obligations of the US.
The first substantive meeting of the panel took place in September 2010 and a second in early December 2010. We expect the panel to issue its decision by summer 2011, and are confident that our challenge will be successful. However, Canada also remains open to further discussion with the US to resolve the issue outside the dispute settlement process.
Lastly, a word on a bilateral issue of very high priority for the United States: intellectual property--in particular, copyright and enforcement of IP rights.
In any meetings that you may have in the United States, you will no doubt be reminded of the urgency attached by the U.S. government to passage of legislation to bring our copyright law into conformity with WIPO standards in the digital area. They are giving considerable prominence to this issue on our bilateral trade policy agenda. As you know, a bill on copyright modernization has completed second reading and is currently before a legislative committee for review. Needless to say, all developments relating to copyright reform are being closely monitored in the United States.
In conclusion, I'd like to make a few remarks on Canada’s international trade negotiation agenda in the World Trade Organization and on the bilateral and regional side with countries outside of North America.
In the Doha round of WTO negotiations, we share some priorities and objectives with the United States; in fact, we share most priorities of the United States, the most important of which is an ambitious market access outcome in the round.
We are also engaged in an ambitious agenda of bilateral and regional free trade agreement negotiations with a growing number of partners. For example, our negotiations with the European Union on the CETA are well advanced, and we have recently launched negotiations on an FTA with India. These are comprehensive initiatives with major trading partners, neither of which are mirrored in the U.S. trade agenda. These and other negotiations follow on FTAs recently concluded or in force with the European Free Trade Association, Peru, Colombia, Jordan, and Panama.
We are making headway in our goal to diversify our markets. Our reliance on the U.S. market has decreased significantly, but it will remain our largest market and most important partner for the foreseeable future. Overall, it's a relationship that works very well, but its scale requires us to continue to manage it as a top trade policy priority.
I thank you for your attention and look forward to your questions.
