Home The Ambassador Canada's chief representatives to the U.S. Michael Kergin Ambassador Kergin's Speeches September 18, 2002

Canada and the United States: Through Partnership to Prosperity

Address by Michael Kergin, Ambassador of Canada to the United States RBC Financial Group Distinguished Speakers Series at the Metropolitan Club

September 18, 2002
Washington, D.C.

Thank you, Gordon, for that kind introduction. I would also like to thank the Canadian-American Business Council and the Metropolitan Club for inviting me today. I feel honoured to be among such an impressive roster of speakers arranged by the CABC for its fall program.

It seems appropriate that my first public speaking opportunity following the anniversary of 9/11 is here, at home, in Washington. One year and one week ago, shortly after seeing the aircraft slam into the twin towers in New York, I watched, from my office window, in stunned silence, as black smoke rose from the Pentagon.

Prime Minister Chrétien phoned me shortly afterwards. His words were prescient: "It will be war, in a world which will be forever different."

These heinous attacks outraged Canadians. We grieved for our own losses, as we grieved for all the victims and heroes in the towers, the Pentagon and the aircraft. These were cowardly attacks on our freedom, on our shared values, on our system of government and, ultimately, on Canada itself.

Francis Bacon, the English philosopher and statesman, wrote in 1625 that, "The virtue of adversity is fortitude...." His words hold true today. Adversity has made us stronger and, we hope, wiser.

9/11 set in train a year of unprecedented levels of cooperation between Canada and the United States, between our governments, between our militaries, between our civilians and, of course, between our business interests.

Both countries are working together in unprecedented ways to safeguard the security of our people and to sustain the prosperity of our citizens.

Overseas, Canada is a significant contributor to the U.S.-led military coalition in the war against al-Qaeda and Taliban resistance. Our troops have seen action on the ground and our frigates continue to patrol the Persian Gulf.

Domestically, we froze terrorist assets and introduced legislation to impede terrorist fund-raising. We tightened refugee regulations to ensure improved compliance and surveillance. Landmark legislation has given Canada's law enforcement agencies additional tools to shut down terrorist organizations.

Canada is a steadfast ally in the war on terrorism and an essential partner in homeland security.

Let me report briefly on the meeting between Prime Minister Chrétien and President Bush in Detroit last week. From their first meeting on February 5, 2001, they have developed an excellent rapport.

Referring to the Prime Minister's frankness and sense of humour last week, President Bush said the Prime Minister would make a great Texan — high praise, indeed, coming from the former governor.

Their discussion was candid and wide-ranging. They agreed that Iraq represents a grave challenge to the international community. The Prime Minister expressed his view that any response should be through the UN Security Council. Three days later, he strongly endorsed President Bush's decision to do just that.

Canada's position has been consistent and clear: Iraq's continuing defiance is a threat to regional and international security; Iraq must comply with all relevant Security Council resolutions concerning inspection and destruction of weapons of mass destruction, return of prisoners and reparations.

The Prime Minister and the President met on our busiest border crossing — the Detroit-Windsor corridor — to celebrate recent important actions designed to improve security while ensuring that the border continues to serve as a conduit for our common economic prosperity.

And let there be no doubt: our border is the cornerstone of our economic partnership. Over 1.2 billion dollars worth of business crosses our border every single day. It is by far the world's largest trading relationship.

Following last year's events, quite naturally, border inspections became more intrusive. While that helped, psychologically, to alleviate some security concerns, it was not good for business, resulting in long delays at all the major border crossings. And it did not always provide the most effective additional security.

So, over the past year, both countries have worked hard to create what we like to call a smart border, using advanced technology and common sense procedures. The goal has been to materially improve our common security, but not by sacrificing the interests of legitimate businesses.

And as part of the border programme, the Canadian Parliament, last December, approved infrastructure works to the tune of $600 million.

When Prime Minister Chrétien and President Bush met last week, they announced two new smart border programs:

First — the Free and Secure Trade (FAST) program to ensure a secure supply chain for low-risk goods. Importers and carriers can be pre-authorized for fast-track processing by following agreed procedures, such as strict security at cargo loading sites, spot-checks at production locations, security pre-clearances for drivers, and electronic pre-filing of inventories. This low-risk traffic will be able to use dedicated "fast lanes" at six border crossings as early as December.

Second — and for individuals that are pre-approved as low-risk, there is NEXUS. Citizens and permanent residents who are approved by their respective security services are issued biometric smart cards, allowing them to pass through dedicated fast lanes at the border.

NEXUS is already running at three border crossings, and we expect it to be at all other high-volume crossings by the end of next year.

A NEXUS-Air program will begin testing in airports in early 2003.

Other joint measures to improve security include:

• mutual recognition of higher aviation security standards;
• cross-stationing of U.S. and Canadian Customs officers in each other's ports, to identify and screen higher-risk container cargo before it arrives in either country;
• increased cooperation on refugee and visa issues, to help us control irregular migration to either country more effectively;
• strengthening the already excellent cooperation between our security and intelligence authorities.

These successes were attained because of the hard work of dozens of agencies and departments on both sides of the border and as a result of the input of hundreds of stakeholders — such as the Canadian-American Border Trade Alliance and the Canadian-American Business Council.

Let me also acknowledge a pioneer and key player in this achievement: the gentleman from Georgia, who introduced me a few moments ago.

As Ambassador to Canada for close to four years, he provided inspiration, creativity and patient perseverance in developing many of the techniques which have now formed the basis of the Smart Border Accord.

I believe that, taken together, these border measures can serve as a model of cross-frontier management for many other parts of the world.

Indeed, as a personal comment, I would argue that what has been achieved in this abbreviated period of time, complements our mutual success some thirteen years ago in negotiating the FTA. And rivals in importance, our more recent achievement of resolving the contentious Pacific salmon dispute.

But there are still improvements to be made and other issues to address. We cannot rest on our laurels.

Take energy, for instance.

Canada is the largest energy supplier to the United States — providing over 94% of natural gas imports, close to 100% of your imported electricity, and more crude and refined oil products than Saudi Arabia.

From a national security perspective, the importance of secure energy sources — especially from a friendly neighbour next door — cannot be overstated. Canada provides an unfettered, free market source that flows every day without political interference or cartel economics.

And we want to keep it that way. However, certain legislation in Congress threatens to have government intrude into the marketplace in ways which could have a negative impact on our energy trade.

Last week, the energy conference committee established a mandated route for bringing Alaskan natural gas through Canada to southern markets, effectively prohibiting industry from considering any other options, including those which may be more economic.

The conference committee is also considering a price subsidy for Alaskan gas, costing over a billion dollars a year.

By artificially distorting price signals on which investors rely to make their capital decisions, this price subsidy proposal could well retard North American natural gas development, both in Canada and in the rest of the U.S.

The Administration has come out against the subsidy proposal because it costs too much, because it will distort markets and because, they believe, it will have an impact on the Canada / U.S. energy relationship.

We hope Congress will ultimately conclude that it is the marketplace, not government subsidies, which will ensure Americans receive secure, clean-burning gas at the lowest possible price.

Let me turn to another important sector where Canada and the U.S. also share similar interests: agriculture. Both countries are important producers and exporters of food, and our agri-food industries are highly integrated. Since 1989, two-way trade in agri-food products has tripled to reach nearly $19 billion US annually.

Occasionally, where the U.S. and Canadian systems are different, tensions in agricultural trade can occur. The best example of this is wheat.

Once again the North Dakota Wheat Commission has filed a subsidy and anti-dumping action against the Canadian Wheat Board. This is the tenth complaint in as many years. It is, in my personal view, a clear case of harassment. Canada's wheat-trading practices have always been cleared upon investigation in the past.

Our farmers are kindred spirits. But measures in the new U.S. Farm Bill, such as subsidies and product-of-origin labelling requirements, end up driving us apart. They can also work against farmers in the long term.

United States Department of Agriculture studies, among others, show that price subsidies discourage adaptation, diversification and profitable business growth. At the same time, price subsidies encourage over-production, and that results in that most pernicious market distortion of all: a commodity whose production cost is higher than its selling price.

In Canada, we are following a different approach which aims to reinforce the working of the market. The governnment will emphasize the provision of income support. But, only if a farmer's income falls below a given threshold because of a drop in world commodity prices or drought. Farmers are encouraged to meet sudden changes in market demand and prices by crop diversification or better business management.

As American critics are the first to point out, the U.S. Farm Bill contributes to global distortions. Producers in developing countries have trouble competing in their own, and in world markets, against commodities subsidized by the West's deep pockets

And, agriculture is one of the few areas where developing countries have reasonable expectations for improving their economic condition through exports, thereby reducing dependency on our aid dole, lifting themselves out of abject poverty, and developing a population of consumers sufficiently wealthy to purchase our products.

I am pleased to say that with regard to changing international agricultural trading practices, Canada and the U.S. are on the same team. We strongly support Bob Zoellick in his recent challenge to the WTO for agricultural producers to eliminate export subsidies. This is a most welcome sign of U.S. leadership.

With the recently granted trade promotion authority, we are optimistic that we will see more of this kind of leadership. Our partnership in promoting open markets and a strong rules-based trading system has been rock-solid over the years.

Indeed, this shared philosophy resulted in the tremendously successful Canada-U.S. Free Trade Agreement and its successor, NAFTA. Canada and the U.S. are now setting their sights further afield by working closely together to liberalize trade and increase prosperity in the Americas through the establishment of the FTAA, Free Trade Area of the Americas.

Most of our trade runs trouble-free. Nevertheless, in a trading relationship as comprehensive as the one between our two countries, there are bound to be some areas of disagreement.

Canada and the U.S. have been embroiled in bouts of litigation on softwood lumber for decades, even centuries. In fact, one commentator has noted that, among legislation passed by the first Congress, was a tariff on Canadian softwood lumber. At that time, it was a five-per-cent tariff.

Currently, Canadian softwood lumber exports to the U.S., a seven-billion-dollar business, are facing a 27%-tariff. Put another way, U.S. home builders and owners are paying a 27%-tax on imported Canadian lumber. And, one-third of all the lumber used in the U.S. originates in Canada.

According to the Association of Consumers for Affordable Housing, this tax could deprive as many as 300,000 American families each year from the dream of owning their own homes.

Canada has appealed to the WTO and NAFTA that the U.S. is in violation of its trading obligations by imposing countervailing and anti-dumping duties on lumber. The recent preliminary decision by a WTO panel gives us confidence about the future of our case. But, while we are awaiting the outcome, much economic damage can be done.

It would be much preferable to negotiate a long-term resolution to this dispute. This will take political leadership, on both sides of the border, to avoid falling back on sterile accusations against our respective and distinct forest management systems.

In conclusion, let me cite the words of a very wise woman and prolific writer of letters, the Marquise de Sévigné, who, some 300 years ago, wrote "La grande amitié n'est jamais tranquille". True friendship is never serene.

If it is not always serene, I do see the Canada-U.S. friendship as wonderfully consistent and enduring. We may occasionally disagree on the "how", but we very, very rarely argue about the "what".

Our partnership is built solidly on personal relationships which transcend, by far, a cartographer's simple line, sketched on a map as a dividing point between our two countries. Rather, since September 11, the 49th parallel is being transformed into a border for the 21st century: a meeting place for business, for neighbours, for friends and for family. It will also be a place where citizens can be confident that their security will be safeguarded.

This remarkable partnership, special to our two countries, has responded to the challenge of this recent adversity, has tightened the ties that traditionally bind us and has rendered our common border, at once, more secure ... and more accessible.

Thank you. I would be pleased to take any questions you may have.