Thank you, Madam Chair.
In the fall of 2005, I led our advocacy team at the Washington embassy. Softwood lumber was a top priority, and our ambassador, Frank McKenna, asked me when our troubles over lumber began. I called the Librarian of Congress. A couple of days later, he said their research showed that timber merchants in northern Massachusetts—what is now Maine—successfully petitioned Congress during the second administration of George Washington to impose levies—or tariffs, as we call them today—on New Brunswick timber sent to Boston to be used in shipbuilding.
The point of this story is to remind ourselves that Americans practising protectionism is as old as the republic, and it will never change. We are not usually the primary target of U.S. trade actions. A lot in the Inflation Reduction Act is aimed at countering China. However, the deeply integrated nature of our trade means we can become collateral damage, as we did with the Trump administration’s steel and aluminum tariffs.
Trade policy is even more complicated now, because it involves climate, human rights, labour and environmental provisions. In the wake of the pandemic and with the return of great power competition, national security is a dominant consideration. We must now secure and make resilient our supply chains through decoupling, nearshoring and friend-shoring. Security of supply now trumps comparative advantage.
We've witnessed the return of national industrial policies, complete with incentives and subsidies, like those in the IRA. For this reason—and this is my second point—our advocacy effort with the United States must be a permanent, ongoing campaign to remind Americans that reciprocity in trade and investment continues to benefit both nations. The U.S. is the market that matters most for all businesses, especially for people we are encouraging, like women and minorities.
Three-quarters of our exports—manufactured goods like auto parts, or resources like lumber, oil and gas—go to the United States. With trade generating over 60% of our economy, access to the United States matters. For 30 or so American states, the biggest market is Canada. Our trade and investment generates nine million American jobs. Parsing this by state and by congressional and legislative district, as I used to do, works because just as all politics in the United States is local, so is all trade.
Other witnesses have testified that a team Canada effort helped us secure a level playing field for the production of electric vehicles. Our ambassador, embassy and consulates play a critical role. Having done this both in Washington and at consulates, our success also depends on a Team Canada effort involving the Prime Minister, premiers, ministers and members of Parliament from all parties. All levels of government must be involved, as well as business, labour and interest groups.
To level the playing field on U.S. protectionism, we pursue various avenues. We will continue to protest their incentives on battery production as discriminatory and contrary to their CUSMA and WTO trade obligations, arguing, as we did in the case of the EV tax credit, that we should approach this on a continental basis. We will remind the United States of our right to respond to discriminatory behaviour with trade sanctions. The threat of targeted sanctions helped persuade the United States to lift the steel and aluminum tariffs.
However, imposing counter-tariffs also imposes a tax on our own consumers. As this committee knows, there is pressure to match the American subsidies with subsidies of our own. We have done this before, but the cost is borne by the taxpayer. Alternatively, we could agree with the United States on the use of incentives, as we recently did for solar panels. The ideal would be a continental industrial strategy that includes Mexico.
Regardless—and this is my third point—we need to get our own act together by making the sectors that matter most to us as competitive as possible. There is lots of useful research from business, government and think tanks to draw on. Two that stand out are “Restart, Recover and Reimagine Prosperity for All Canadians”, prepared by Canada’s Industry Strategy Council, and the Senate prosperity action group report “Rising to the Challenge of New Global Realities”.
To help implement and make practical their recommendations, we should reconstitute the sectoral advisory groups, or SAGITs, that served us so well during the Canada-U.S. free trade agreement negotiations. Composed of business, labour, provincial governments and civil society, they guided the negotiators with practical advice on what Canada needed, and acted as sounding boards on what we could accept in negotiations.
To conclude, advancing our interests with the United States is a permanent campaign requiring a team Canada approach with a clear focus on our objectives.
Thank you, Madam Chair.