Home The Ambassador Speeches and Statements October 28, 2005

Frank McKenna, Canadian Ambassador to the United States

Ontario Economic Summit
Toronto, Ontario
October 28, 2005

Well thank you, thank you very much Bob [Rae] and thank you to the organizers for inviting me. The line up you have is just world class -- the people, world class visionaries, people who I’ve respected for a long, long time. I felt very, very humbled to be included amongst them. I just think it’s a wonderful thing that’s being done and it’s a situation where, I must say, we tend to say more south of the border than north of the border where citizens whether it’s in philanthropy or whether taking control of the destiny of a community, where citizens are starting to become much more engaged. It’s a wonderful thing.

It’s a real treat to be introduced by Bob Rae. We have been fellow travellers for a long time. We’ve fought a lot of battles together and as a result I have the respect of Bob that you can only have for somebody that you’ve been in the wars and trenches with. I respect him enormously. I think Ontario and Canada are extraordinarily privileged to have somebody who never turns his back when asked to stand up and be counted.

You know, it would be just so easy to walk away and say: "Look, I’ve given at the office, I’ve done my share. I devoted a lot of my life to unpaid public service virtually and I’ve got other things to do." He never does that, federally, provincially and I truly mean that. I think we’re very privileged and blessed.

Just to say a few things, first of all, I’ll just tell you that normally when I go anywhere, I usually get asked at least two questions that I try to answer before I even get going because it’s what people care about most. First of all, they always ask me: Do you like the job? I haven’t been at it long enough to know if I really like it but generally speaking, yes I do. I feel honoured to be asked. You know, the privilege of representing one’s country is something that you don’t know how you’re going to react to until you’re asked to do it.

So when you’re asked, you feel a great sense of pride. And when you represent your country, if your country is Canada and you represent it abroad, you have no idea of how inspiring it is and just how prideful it is. So I feel a great sense of pride. It’s also a fast-moving city. The mix of issues, of personalities, the complexity of it, just makes it a very, very rich environment for somebody who likes policy and politics and I like both of them, so it’s very intriguing. The challenge is managing time. We’re just literally going, Julie and I, all the time and we could be going literally even more if we had another hour in a day.

From time to time you just wonder if you really are taking enough time for yourself and your family. I came home last night and Julie said,"Well, I’m just sick and tired of you working all the time. I want something for us. I want you to take me somewhere that is expensive and interesting." I said, "Well I don’t know about the interesting but expensive I can do, that’s easy enough." I took her down to the corner gas station.

Actually we went someplace interesting last weekend, just part of our education. We went down to Monticello, the home of  Thomas Jefferson and spent some time in the community and got to know more about the man. I came away understanding more about American history and just how impressive some of the Fathers of Confederation were.

One of the things disconcerted me a little bit about Jefferson though. We saw some of his work. One of his letters, he wrote to the secretary of state (and he was a previous ambassador so we kind of knew the life that he’d led), in the letter to the secretary of state he says, "We’ve heard nothing from our ambassador in Spain for two years. If we do not hear from him this year, let us write him a letter." I just can’t imagine Paul Martin having that conversation about me. He might like to but I don’t think he’s ever having that conversation.

The other question that we’re asked a lot is: How is the Canada-US relationship? My answer might surprise you a little bit? I think it’s good. I think it’s very good, but it’s kind of an interesting phenomena because it depends on who you ask. If you ask a Canadian, they'd say, well we’re really kind of angry right now. We’re really ticked about the softwood lumber so, you know, we’re not very happy. We’re really into quite a fight with the Americans. But the question to you is: Is it a fight if the other side doesn’t know you’re fighting with them? Because the Americans are singularly oblivious to the fact that we’re just as mad as hell and aren’t going to take it anymore.

So we’ve got this curious phenomenon where I talk to Canadians and they really do unload. They’re pretty concerned about this issue and so on. But in the United States of America, they don’t feel any sense of animus to us or towards us. When I was on the Hill yesterday and met with senators and congressmen, they all stopped by to say it’s such a privilege to be part of this wonderful relationship. We really like you people. We think it’s great that you’re our northern neighbour. We’re happy with the relationship.

Hurricane Katrina. Canada deserves a lot of credit. We recognized our neighbour in need early on. We were in quickly and we were in responsively and it’s appreciated from the President all the way through. Everywhere we go, people stop and thank us from the bottom of their hearts for being there and helping them with respect to Katrina. So the bottom line is, in the United States, the relationship is really at a very good level where I’d say, they’re happy with their northern neighbours. Of course, we have our own challenge on this side because of that issue.

Some would say that is evidence of a problem; the fact that they seem to be somewhat indifferent and somewhat insensitive to our need. I would say yeah, but I felt that way about Toronto when I was Premier of New Brunswick. It has nothing to do with the fact that Toronto’s insensitive or indifferent. I don’t, they’re not. I love Toronto but it’s a big place and it’s inwardly-focused and the rest of Canada isn’t as important to them as their own communities. In many ways they’ve got all the stimulation they need within their own four corners. So it is understandable. It’s a "size" thing.

We have to remember that there’s a dramatic difference in size. We think because we’re big geographically that we’re the same size nation as the United States. Well we’re not. They’ve got three hundred million people. We’ve got thirty million people. Ten times as much. Quite a difference. Our trade with the United States represents about 35% of our GDP. Their trade with us represents about 3.5% of their GDP, one-tenth. So we are not as important to them in that sense, In terms of scale, but also in size, they just have a lot of other preoccupations on the world stage. I think we have to understand that.

When you look at the ledger objectively, we really do have a lot of reasons why we should be happy with the relationship. There’s a lot of things that go right. Now the headlines of the newspaper never say two billion in trade went through the border today. Or the headlines never say, three hundred thousand people crossed the border today without incidence because that’s not the nature of headlines. But a lot of things work well. The BSE issue which was a big issue, has been resolved, in large measure because the administration weighed in with us in Canada on that issue.

Devils Lake which was a major issue involving the two nations has been largely resolved. We’re trying to finish that up. Afghanistan, we’re there fighting against the Taliban, trying to restore democracy to that country. It’s highly appreciated and respected in the United States; the fact that we are in Darfour, in Haiti, and all of these places where we stand arm-in-arm. It’s very appreciated.

The military expenditures on the last budget are well-known, and well-appreciated. It’s a fact I think, that even Canadians would accept that for a period of time we took our operational pause on the military side. We haven’t been carrying our same share of the load and now we’re back and it makes it an easier sell not only the United States but around the world. Just in the last several months, we’ve ended up winning important court cases, important wheat cases through NAFTA review panels. So I do know that that same NAFTA relationship which guides $500 billion worth of business each year, continues to work as it was.

We do have some high profile issues that come between from time to time and I’ll put those in context. Right now one of the issues on our radar screen is this Western Hemisphere Travel Initiative, which effectively will require passports or equivalent documentation for border travel in the year 2007. We believe that it will result in a lot of economic disruption if it goes ahead as planned. The Conference Board is estimating it could affect as many as 7.7 million visits to Canada, a loss of several billion in revenue if it goes ahead as planned. Only 20-23% of Americans have passports and we just don’t see the physical ability for hundreds of millions of Americans to get passports in the limited time available.

So we’re working at it but you know, this is not a "we-them" situation. The Americans are engaged on this as we are. All along border communities, they rely on us as much as we rely on them. You know, I just came through the Buffalo Airport. Thirty percent of their traffic comes from Canada. This worries them. Niagara Falls: people come to see the Falls. They see it from one side. THey see it from the other. So this issue concerns them. It concerns them in New Brunswick where they buy milk on one side of the border and their chicken on the other side within the same hour. All along the border communities, this concerns people. Like so many other issues, we’ll eventually work away at it until hopefully, we find a common, sensible solution as we usually do and work it out.

And then of course there’s softwood lumber the hearty perennial that everybody in Canada seems so insensed about. Let me put this in context. In 1789, the Massachusetts timber merchants persuaded the US Government in almost its first official act, to put a 5% tariff on the imports of New Brunswick timber. And here I am a couple of hundred years later coming from New Brunswick to try to solve the problem all over again. Something’s poetic about all of that.

Then, that lead to the legendary Aroostook Lumber War in 1839, again between Maine and the province of New Brunswick. No shots were fired but this was a big, big incident at the time, a far bigger issue probably than softwood lumber today because we have processes to manage it. We have fought the United States of America thirty times since then on softwood lumber. We would be better off in terms of the relationship if we just cut all the forests down. But thirty times since then, we’ve fought them on softwood lumber.

Even the free trade agreement had to exclude softwood lumber because there couldn’t be a deal based on the current understanding with respect to that. So I’m just trying to put it all in context. This is not something new. It’s been around for hundreds of years and we should get on with life. If you put it in the context with the rest of the relationship, you’ll realize just how small it really is. We have a relationship based on free trade alone that creates over 5 billion jobs in the United States, some 2 million in Canada; 500 hundred billion dollars a year, 2 billion some a day, 300,000 visitors every day, trucks every couple of seconds crossing the border.

Softwood lumber represents about 4% at most, of all that business. And guess what? There’s not a stick of softwood lumber that isn’t crossing the border. It’s still going across. It has a tariff on it. Yes. Is it painful to consumers in the United States and to our producers? Yes. Do we enjoy the same market share that we used to, about 34%? Yes. So we continue to run our mills. We continue to enjoy that large market share. We continue to send our products across the border. As we argue this out to the various tribunals, we continue to do business on softwood lumber.

So it’s a thorny issue which people should understand a little better. We do have a secret plan to solve softwood lumber. Nobody else knows this. I’m sharing it with you for the first time and I’m sure it won’t get out of this room. It’s based on something that we observed in 9/11 and it’s based on something that we observed during the Katrina disaster. It’s based on our observations of watching congress men and women, senators and congressional leaders. They all have the same thing in common, something that we think represents an Achilles heel; that we can exploit and settle this all instantly. We’re going to cut off a product made by Ontario. We’re going to cut off their Blackberries.

Unless they agree on softwood lumber, we’re going to cut off their Blackberries. I can tell you from Washington, that will bring them right to their knees so quickly. I shouldn’t joke because they may get cut off anyways. But seriously, the Blackberry technology from Ontario is, I think in the hands of every single legislator in the United States. Certainly it’s very strong in the business community as well.

Now, what I’ve talked about in terms of the relationship should matter even more to you than the rest of Canada. In Ontario, I’m sure you’ve talked about these numbers before; your exports were worth something like $58 billion in 1989 and it’s jumped all the way to $180 billion dollars today. So free trade has meant a dramatic increase in exports to you.

The figure that stunned me, absolutely stunned me is that 70% of your GDP in the province of Ontario, is exported to the United States of America. So that represents, and I’m sure people have come to that conclusion here in terms of all of your other strategies, you should be lighting candles to the ambassador in Washington every single day who manages 70% of your provincial GDP. No joking, it tells you that the border relationship is really important for you.

I know this forum is about Ontario. Outstanding speakers are talking to you about a lot of issues from immigration to energy costs, irregulatory and tax framework, access to capital, productivity. I wanted to circle back to productivity because I think it’s in terms of globalization that all things converge. Ontario’s agenda, Canada’s agenda and the agenda of the United States of America.

I’m a believer that globalization is an inextricable force and that may put me at odds with others but I just believe it’s like literally Niagara Falls down the road. It’s just a force that cannot be stopped whether it’s the age of the Internet or whatever. People know, they have access to so much information. They’re so mobile that I believe you just cannot put cordons around your community or your province. I also believe that it’s a net positive to the universe. Studies have shown in the United States that it’s a trillion dollars richer as a result of expanded free trade which is $10,000 per household. If the job was completed on a global basis, it’d be another half a trillion dollars added to the national wealth of that country and another $5,000 per capita.

The Institute of International Economics is estimating -- and this is what I think is a really intriguing by-product of globalization, that global free trade would lift 500 million people in the world out of poverty. Three billion people now live on $2 or less, that’s half the world’s population. Rich countries now are giving something like $50 billion dollars towards helping those poor people. Well freer trade, globalized free trade would add some $200 billion to that $50 billion. So the impact, if done right and fairly would have such dramatic consequences for the world’s poor that one has to consider that to be a major part of the campaign against poverty.

Now, inevitably, any time you talk about globalization today, especially south of the border, you end up talking about China because the United States is obsessed with China and Canada, has to watch that agenda very carefully because we risk the danger of being side-swiped by some of the measures that really are directed specifically at us. And I can understand why they’re preoccupied with China. Ever since Premier Xioaping in 1977 said to get rich is glorious, China’s been on the road to getting rich, and the numbers are absolutely mind-boggling. Largest consumers of steel, of meat, coal, grain, all of these commodities in the entire world. Doubling the number of PCs every 28 months, manufacturing 21% of the world’s PCs, 26% of all the goods on Wal-Mart shelves, 60% of global DVDs.

The World Bank reports that the number of people living in China in extreme poverty will drop from 375 million in 1990 to about 16 million in 2015. So this is a commercially, dynamic country where sharing in the wealth takes on somewhat of a whole new meaning. Here’s a stat in my view that should give all of us a nightmare in North America. China last year produced 367,000 engineers. The United States which is a prolific preserve of engineers grew only 50,000. And China’s not alone.

We shouldn’t forget about India with its billion people and 38% a year growth in the information technology sector alone. It’s rather instructive that after free trade came into place as noted in Thomas Friedman's book, after free trade, or the WTO entrance in China, an African proverb was placed on a Chinese factory wall that said this: Every morning in Africa a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death. So it doesn’t matter if you’re a lion or a gazelle, when the sun comes up, you better start running. So if that’s the way the Chinese are thinking, well we better start running.

And that brings me to the productivity agenda and I know you would have talked about it here at length from people who are far more knowledgeable than I am. I’m just absolutely obsessed with the idea that Canada could be... It’s within our means in serving the province of Ontario, to be a richer, and more competitive society than we currently are, even though we currently do very well by world standards.

It is my belief that we’ll never really have the political will to take on this so-called productivity agenda until we rebrand it. And if I were to rebrand it, I would call it the "quality of life" agenda, because there’s no place where the dots connect better than with respect to this agenda. I believe, a study that was produced by Roger Martin that I refer to a lot, I think it’s a fabulous piece of research in which he indicated that getting to the level of productivity of the United States of America, to generate, for government coffers alone, as much as seventy-five billion dollars for Canadians.

Just imagine what that amount of money annually in government hands would do. The ability to lower taxes or spend more, and improve services, better streets, better everything, better infrastructure, all of the above. That’s why I think the productivity agenda has to be recast as a quality of life agenda. If we get it right, not only will we be worldwide competitive, not only will we have more satisfying and challenging work for the men and women in our workforce, but we will also create more wealth which will create more revenue for governments to spend on better services for our citizens. That’s why I think we have to roll up our sleeves and get at it.

It seems to be the calculation that everybody accepts that our productivity is 19-20% less than the United States and some of the ingredients of the past are not as present any more. It used to be that government was a major contributor to the shortfall. But I notice now that in recent years that we spend about $11 billion in R&D; which has moved us from six to first in the G7. So governments are less behind the ball than they once were. The private sector is very much behind the ball in terms of their expenditures on R&D; and their expenditures on training in Canada for whatever reason.

We do know that Ontario’s level of productivity is higher than that of the rest of the Canada. The Ontario Institute for Competitiveness and Prosperity who I’m sure you’ve heard from over the last several days has talked about how much more disposable income Ontario could generate if it were to get this right. Now the good news is that Premier McGuinty gets it and I believe is investing in the right things, to move the yardsticks and to get there, largely because of the vision of Bob Rae and the commitment to the goals of higher education because that’s where I think a lot of the rubber is going to meet the road. To quote an old Chinese proverb: If you’re planning for one year, you grow rice; if you’re planning for twenty years you grow trees and if you’re planning for centuries, you grow men. And that is what we have to do.

The amount of knowledge that has to be managed these days is so extraordinary that we have to be at the very top of our game if we’re going to be able to compete with the rest of the world. So a recent study in Berkeley that says we produce as much new information every six months as was produced in the first three hundred thousand years of human existence. We know that the base of human knowledge doubles every two to three years. We know that we get as much information from satellites alone to fill nineteen million volumes of the Library of Congress every several weeks. And to be up-to-date in chemistry, one subject matter alone, you have to read two thousand new publications every single day.

So we know that we have got to spend a lot more effort at that whole area of education. And Canada, fortuitously, has the highest percentage of post graduate, post secondary graduates in the G7. The problem is that the United States seems to get a lot bigger kick out of its post secondary system than we do. The United States has something like 4,000 colleges and universities and this goes for the vision of the country. The rest of the world has less than 8,000. So they’ve got it and had it for some time with respect to education. And my humble submission in making a judgement on this, the United States gets a lot more juice out of their universities in terms of the economy than we get out of ours.

One thing, they’re not afraid to collaborate. Collaboration between universities and industries and government is not a dirty concept in the United States. In Canada, there is a certain amount of baggage that’s associated with the notion. They’re not afraid of that collaboration at all. In 2003, American universities reaped $1.3 billion from patents alone. MIT, one university's graduates claimed to have founded 4,000 companies creating over one million jobs. There seems to be a direct connection involving government, university and industry that is very, very dramatic in the United States.

Now Ontario has certainly no challenge when it comes to being at the top of its game, whether it’s Waterloo, with its legendary respect from Microsoft and from other employers and the work that it does or whether it’s the scientists at the Ontario Cancer Institute who first identified stem cells, whether it’s the Ontario investment of $6.2 billion in education under the Reaching Higher plan or the Mars Discovery project in Toronto or the Mars Discovery district in Toronto or the Beacon Project involving GM, the auto sector, the government, putting millions of dollars into that connection between manufacturing and higher education, research and development, with Ontario of course exporting more vehicles to the United States than Japan or Mexico and training more than the state of Michigan, or the fact that Ontario has some fifty major languages spoken which is always an asset in terms of attracting better and greater people.

So bottom line is that, in my view, Ontario has all of the big characteristics but we still do have a productivity gap to overcome. And whether that alone is enough to make us capable here and in the rest of Canada while facing global competition, I can’t tell you. I listened to the last speakers and it’s certainly going to end up being a big challenge and levelling the playing field will be part of that challenge. But I can tell you this it is reality that we live in a global world. It is reality that is not going to change and it is reality that we have to make the investment necessary to get us there.

That is serendipitously where the agenda for Canada, Ontario and the United States all come together. Because all of us face the same challenge and we probably should spend less of our time chasing distractions which are quite small in the great scheme of things and spending more of our time collaborating together and recognizing that in many ways, North America must be outward facing towards the rest of the world as a unified hope, because we are, if you look at it very long and very hard, we are all in the same boat and in the boat that we’re in, we better just paddle. Thank you.