I would like to recognize the Chairman of the Vancouver Board of Trade, Dan Muzyka. You’ve done a wonderful job leading this organization. I think everyone in the Vancouver area knows that this is the pre-eminent business organization in British Columbia, and you do a great job, you keep issues alive, you keep them focused. That’s a very, very important role, and our governments ignore you at their peril.

Mr. Muzyka spoke a little bit about the extraordinary economic circumstances we find ourselves in—here in British Columbia, and in western Canada these days. I think everyone knows that rates of growth have been stellar, housing starts have been red hot, the labour market is pathologically tight, if I can put it that way. We are on a roll, and it’s a roll that has been recognized at all levels and in all parts of Canadian society as one which is associated with the economic centre of gravity shifting west in Canada. It’s creating strains of course; it always will put pressure on the exchange rate. In Vancouver, it’s given rise to a period where you can’t drive down the street anymore without hitting a construction zone and the number of cranes that you see are in the teens I’m sure, and it is a very positive thing to realize.

And as Mr. Muzyka said, when you think about the fact that B.C. and Vancouver are right at the top of the pack in terms of economic performance these days, and juxtapose that with the 1990s, which we all came to describe as the dismal decade, it’s a pretty remarkable thing. And it’s of course helped by the fact that we’ve got 2010 coming up and that is an opportunity to not only realize infrastructural opportunities and legacies, but it’s an opportunity to show the world what Vancouver is all about, what Canada is all about, what British Columbia is all about, what we have done, and to show them as well what we can do.

I always look at these booms that we have had periodically through our history and I like to step back and remind people that the boom that we’re enjoying today, the boom that western Canada is enjoying today, has an awful lot more to do with some fortuitous circumstances in commodity markets. I don’t think it’s something that we can claim is the result of an aggressive program to create a competitive, strong, durable, sustainable economy. Commodity markets have been good to us and there’s been tremendous wealth created by that. But we also know that commodity markets that go through boom periods can fade and turn into busts as they have done in B.C. for over 100 years.

And so I think that this is an opportunity for us to look at our future, to look at our economy and ask ourselves how sustainable and durable our economic structure is today.

I think when you really look at it in a serious way, you’re going to realize that when the boom does fade, we’ve still got an awful lot of work to do in terms of creating a diversified, strong, sustainable, growing economy.

So today I want to talk about the Pacific Gateway in the context of competitiveness, because governments for as long as I can remember, and that’s quite a long time, have focused in B.C. and indeed in Alberta and other western provinces on what I call the “holy grail” of economic diversification. I don’t think that there is a new government that’s come into power anywhere in the West in the last 50 years that hasn’t had economic diversification as a single objective, and the problem is that nobody has quite come up with the golden recipe for economic diversification. And I believe they haven’t come up with the golden recipe because I don’t think the golden recipe is there for any one government to whip together. I think the golden recipe is more complex than that and indeed I think the golden recipe comes back to the question that Mr. Muzyka alluded to and I referred to and that is the competitiveness of the economy.

You will get industries that are not explicitly and directly tied to the rocks and the trees and the carbon in the ground if you have an economic environment that is competitive in the sense that it attracts investments that other countries are trying to attract, if it attracts the kinds of skilled people that other countries and other regions are trying to attract. Fundamentally, we’ve got to drive a competitiveness agenda and that’s going to be a broad-based framework agenda much more than it’s going to be government putting their finger into this industry or that industry. It’s going to be all about getting the basics rights in terms of what drives the economy and what drives competitiveness, because if we get that right, then the boom we’re enjoying today will evolve and transition into a period in which the B.C. economy is a highly competitive economy that can stand on its own, that can take the inevitable shocks and bumps of the global economy.

So I want to talk a little bit about competitiveness and the role of the gateway in competitiveness. But as we do, I just want to remind people that we are a small open economy. I never tire of saying that. A small trading economy. Our population base in all of Canada is less than that of California. We’re spread over a landmass larger than the continental United States. So we need to trade to generate prosperity, to generate jobs, to generate wealth. Trade is going to be everything for us.

When you look at the world economy today, it is going through a breakneck revolution. There’s the commercial or international commerce revolution that Thomas Friedman has referred to in his book The World is Flat—if you haven’t read it, you really should because it really does describe in great detail what’s happening in the global economy. In the global economy today, we know that anybody can reach anybody else, any producer can reach any customer, information can flow from almost anywhere, from almost anyone, to almost anywhere and to almost anyone.

So we’ve got a revolution that is driven by technology, but the implications in terms of competitiveness are very important because it means that borders are getting thinner. It doesn’t matter that much which country you’re operating in because indeed most companies, most industries are operating in the context of global supply chains where distance is essentially, if not dead, dying, and so you’ve got businesses that have got production in one country, maybe several countries. You’ve got research in other countries; you’ve got customer service centres somewhere else. So you’ve got a world in which industry and commerce operate on a highly integrated, global-supply-chain basis, and the global supply chain is globally distributed. It’s not at any one place.

Essentially, you have a world in which the old strictures of location theory—where the labour and transportation costs are lowest and you do these little calculations and come up with a fairly simple ranking of what is the optimum location for a given business—are changing dramatically. We’re into a world of mobility where financial capital is extremely mobile. Financial capital will go anywhere in the world where there is a risk-adjusted opportunity. Goods and services can be shipped or taken anywhere in the world today, and increasingly we’re into a world where people are mobile.

So people can go almost anywhere in the world today. Yes, there are immigration policy barriers, but for a country that has developed and become what we are on the strength of immigration, we need to be concerned because going forward on immigration is not going to be as easy a way to satisfy our labour market needs as it once was. I’ll bet every one of you know one or more people who came here, for example, from Hong Kong, and where are they today? They’re back in China, they’re back in Hong Kong or India.

The world is changing and we’re into a world where trade patterns and trade performance are going to be very closely related to the operation of global supply chains, and those are going to be deeply integrated chains, and they’re going to be globally distributed. In the world going forward, if you’re not managing a global supply chain, you are in all likelihood part of at least one global supply chain and you’re integrated tightly into it.

The other thing that’s happening in the world of course is the global realignment of economic power with the emergence of China, India and South Korea. Japan is making a strong comeback. Indonesia is starting to move ahead. The world is changing in a fundamental way and you only have to look at what’s happening in the WTO negotiations to see the strength and power of many of the countries where 20 years ago or 10 years ago it was the Americans and the Europeans and the Japanese and the Germans and the French who were calling all the shots.

It’s not quite like that anymore. The world is changing, the economic centre of gravity in the world is shifting toward Asia. That is going to have some very significant implications here in British Columbia and implications for the gateway.

We’re into a world of extremely stiff competition in all areas—for people, for investment, for business, for market share—and so we are into a world where that unforgiving competition is going to have to be tackled head on by us, and we’re not the United States, we can’t go out there and say well, we’ve got one of the biggest, most dynamic markets of the world, come and do a trade deal with us, and then do a trade deal that’s quite nice for the United States by dint of their bargaining power. We’re the small open economy, remember. If we are going to be competitively successful, we are going to have to do it from within. We’re going to have to become much more competitive, much more powerful and dynamic from within the Canadian economy, which then raises the question: what should government do to take us in that direction? And Mr. Muzyka alluded to the answer in his comments: get the framework right, get the fundamentals right.

I don’t want to talk at length about domestic issues of competitiveness; I gave many speeches about that with a strong focus on domestic policy issues in my previous role as Industry Minister, but you all know it’s about laws and it’s about competition policy, it’s about regulation, it’s about smart regulation, it’s about a tax system, all of which have to be arranged in such a way as to ensure that the Canadian economy is very competitive for highly mobile business and industry.

In the international sphere, which I have more to do with now, there is another dimension to the competitiveness puzzle. You all will be aware that international trade and our ability to compete in international trade is very heavily influenced and conditioned by there being a stable, predictable, reliable trade framework that we can work from and work through.

The World Trade Organization is critically important for Canada. It is the one area where rules governing international trade and investment are international rules; they’re not the rules of any one country, they’re the rules that are negotiated by 149 countries. So that is one way in which size is not a liability, because there are an international set of rules in the WTO. So the WTO is an important framework. For Canada, NAFTA is an important framework because of the reality of the North American economy and the reality of the fact that we have and must continue to have a highly integrated North American economy.

But remember that NAFTA is not a perfect agreement. It’s got its strengths and its weaknesses, and we’ve seen this with softwood lumber, we’ve seen this with wheat, we’ve seen this in a variety of areas, but again it’s part of the international trading framework.

We also have bilateral arrangements that are either in place or are in development with other countries. We’re developing a strategic partnership with China. We’re developing a partnership, a deeper partnership with Japan. We’re negotiating a free trade agreement, as we speak, with South Korea. So there are a number of other pieces of that international trading framework that are coming together. But I have to emphasize that whether we’re protecting the investments of Canadian companies in foreign lands, whether we’re opening markets, we’re basically creating a framework in which we here in Canada can participate in global supply chains. If you don’t have the laws, if you don’t have the legal protections, if you don’t have a form of dispute resolution, if you don’t have clarity and transparency, you’re going to have a problem operating efficiently in the global marketplace.

And so that is something that is of great concern and priority to me. In my role as International Trade Minister, I am going to making a priority of the World Trade Organization. I am going to be making a priority of NAFTA. And our last meeting of the NAFTA Commission kicked off some new ideas and new approaches that will involve improving and enriching NAFTA, not rewriting it, but improving it from within through rules-of-origin enhancement and through linking NAFTA with some of the free trade agreements that NAFTA partners are developing. So there are all kinds of opportunities there again to strength and solidify the trading framework that will help underpin a surge in improvement in our competitiveness.

We’re also doing, as you know, bilateral agreements. I noted some of them. There are foreign investment protection agreements. We’re working on approved destination status, it takes a long time with China I must say. We’re doing air bilateral agreements that are critically important. We just signed one today with the United Kingdom. These are all part of a rules framework for international trade and they’re critical for our competitiveness going forward.

Now, when it comes to the Pacific Gateway, it’s all about transportation capability. It’s all about a transportation system that enables us to move goods and people with world class efficiency into the global marketplace. And indeed, it’s the transportation system that ultimately will underpin the global supply chains that Mr. Friedman talks about and that we are talking about.

We’ve got huge opportunities here in B.C. and you’ve been talking about them this morning. We’ve got great ports, we’ve got great rail systems, continental rail systems, road systems, our airport, all second to none. We’ve got the great advantage of location, being on the great circular route between Asia and economic hot spots of North America. That gives us a tremendous natural advantage.

And we’ve got alternative corridors. We’ve got the corridors through Vancouver and the lower mainland, airport and surface systems, and we’ve got a new incipient gateway corridor developing through Rupert across the northern part of the province and again eventually into the United States and into the rest of Canada.

But we are at a critical point when we talk about Vancouver and the gateway. And when I actually look at the data, look at the hard reality, it’s not really clear to me that we have yet begun to succeed as a gateway. We are a great conduit, there is no doubt about it. When you look at the freight and the cargo that comes in and out of the ports in Vancouver, we do a good business. In fact, it’s a burgeoning business. But a relatively small proportion of that freight is actually what I would legitimately call gateway traffic, because to me gateway traffic is not just the stuff that originates or is destined for Canada, it’s the stuff that’s going on to North America, to the United States.

And you can quibble about numbers. I’ve had discussions with some of the gateway people about this, but somewhere in the range of 8 to 20 percent of the containers coming out of the Port of Vancouver are heading for the U.S. market. Well, to me that is not gateway success. When you look at what’s going on in Seattle, when you look at what’s going on in California, when you look at the investments being made in a port in Mexico to compete directly with what we’re trying to do through our gateway, then you have to start to worry about whether we’re really succeeding at this stage in becoming a gateway. We have the potential, but we’ve got an awful lot of work to do to really score and get to where we want to go.

What do we need to do? Well, you will have talked about it this morning, but at a high level the infrastructure has got to be there. We know that we’re bursting at the seams, we know our container capacity is already maxed out. We know that Delta Port is trying to expand and they’re trapped in an environmental review process and all kinds of issues are emerging that threaten to delay that project. And this is at a time when we’ve got severe competition to the south. We cannot delay, we have to have the capacity, and we’re going to have to have the container port in Rupert, and we’re going to have to have expansion in the Port of Vancouver, and the Vancouver International Airport Authority is continuing to expand.

So on the infrastructure side, we’ve got billions of billions of dollars that have got to be directed in strategically to critical infrastructure priorities, and it will cover all modes of transportation in one way or another.

But I want to highlight one more thing, and that is the transportation gateway is not a collection of projects. It’s a transportation and logistical system, and if the system isn’t working right you can spend billions and billions on infrastructure projects that don’t deliver the result that we want from the Pacific Gateway.

And I think you all know that the gateway in effect is just another supply chain, and in any supply chain it’s only as good as the weakest link. So if you’ve got a problem where too many at-grade crossings are slowing down the movement of cargo through communities in the Fraser Valley, that is defining the capacity and the competitiveness of the gateway. If you’ve got border-processing delays, you could have the greatest airport or the greatest port with the most respectable capacity to get the job done, but if you hit a bottleneck and it can’t move or it moves slowly, you’re failing.

I used to always talk about how important it is to tackle complex problems with what I call the 80 percent solution. Get the thing 80 percent right, then we’ll go back and fix the other 20 percent up later. Well, in the modern world of global supply chains, that logic breaks down because it can be a minute piece of the puzzle that actually undermines the value and competitiveness of the whole system. And so that’s where we’re going to have to do an awful lot, and that’s why I’m so pleased that the new government is committed to the Pacific Gateway.

The province of British Columbia has stepped up in a spectacular way in terms of commitment and money. We’ve got business people on the Gateway Council, we’ve got WESTAC [Western Transportation Advisory Council], we’ve got the individual operators and people involved. We are all going to have to make sure that we launch an endless series of programs to identify the weakest link. We’ve got to find the weakest links and we’ve got to fix them, whether it’s a border-processing issue; whether it’s a security issue, whether it’s a project-approval process that takes so long that you might as well invest somewhere else, these are all the little pieces that don’t show up on the screen of billion-dollar projects and facilities.

So we’ve got work to do, but the Government of Canada is committed, and I know the Government of B.C. is committed. We are going to get it done, and we are going to get it done when it comes to improving and enhancing our trade policy framework. We will put the necessary emphasis on it, we will be more aggressive negotiating trade agreements, commercial agreements that will give us the kind of framework and stability we need. We will be very careful about selecting the priorities for government funding, and it won’t always be the billion-dollar items that are going to drive this system.

But if we work together, if we work in collaboration—because that’s what global supply chains are all about: hundreds if not thousands of different commercial partners participating in that supply chain in a deeply integrated way, creating customer supplier relationships that are very unusual, that are far-reaching, with people planning five and 10 years ahead and doing joint research—that’s the kind of thing that we’re going to be doing in terms of the gateway.

So I’m looking forward to working with all people that are involved in gateway activity in one way or another. It is going to be fundamental to driving our competitive success going forward. If we have an open trading environment, if we have an efficient gateway transportation system, that will go a long way to creating a competitive base here in British Columbia for economic diversification to grow and flourish. And so the extraordinary economic opportunities we’re seeing today will transition to permanent, sustainable, durable, robust opportunities for the future, and our kids can find the opportunities and the jobs they want right here in British Columbia. They’re not going to have to go to California.

Thank you.

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