SPEECHES

October 23, 2006

TORONTO, Ontario
2006/16

CHECK AGAINST DELIVERY

NOTES FOR AN ADDRESS BY

THE HONOURABLE DAVID L. EMERSON,

MINISTER OF INTERNATIONAL TRADE,

ON THE OCCASION OF THE 75^TH ANNUAL CONFERENCE OF THE

CANADIAN ASSOCIATION OF IMPORTERS AND EXPORTERS

“CANADA’S INTERNATIONAL TRADE STRATEGY AND

 THE PACIFIC GATEWAY”

I’d like to congratulate the association and all of its members, past and present, on your 75th anniversary, an important milestone by all accounts.

For 75 years, your organization and its members have been an important voice on the role of trade in Canadian life.

There is not a person in this room that does not understand: Canada is a trading nation.

Our economy, our prosperity, our jobs depend on the world beyond our borders, and the way we engage that external world.

As business and political leaders, it’s our job to stay ahead of the curve. To anticipate what’s coming - threats, opportunities - and take proactive steps to be prepared.

Your theme this year, “Capitalizing on Global Change,” captures the point.

It reminds us of the massive tides of change that Canadian business has faced, and adapted to, over the decades.

It also reminds us of the requirement for hard headed assessment:

•         Where did we come up short?

•         What steps must we take to do better?

Let’s start with a quick check on where we are today.

We do enjoy a strong domestic economy:

•         Steady growth (uninterrupted for nearly a decade);

•         Low inflation; and

•         Low unemployment.

Much of our success has been commodity-driven, thanks to our natural resources and our position as an “energy superpower.”

And there’s no question that the first decade of NAFTA has underwritten a substantial amount of our commercial success.

Our economy is also diversifying:

•         Tremendous technology success stories;

•         Global leadership in some parts of the financial services business (insurance, some banking); and

•         Parts of manufacturing doing relatively well:

          •         plastics

          •         auto sector (in spite of tough adjustments)

          •         aerospace.

While we’ve benefited enormously from NAFTA [North American Free Trade Agreement] and a rising tide of commodity success, government policy has also played a role:

•         Lowering taxes;

•         Reducing debt; and

•         Good fiscal management.

Nevertheless, there are troubling signs out there, and they have been developing for some time.

Over the last five years, export growth slowed to 1.9 percent, from an average 8.5 percent from 1997 to 2001. Take energy and natural resources out, and we’re heading into negative territory!

On the investment front, our share of global FDI [foreign direct investment] is falling. And almost half of the growth in inward FDI has been in the resource and energy sectors.

And speaking of reliance, what about the United States? In terms of our trade and our investment, Canada-U.S. commercial relations remain the core of our success.

But a closer look reveals some worrying trends. Other countries, like Australia, are building links to the U.S. market, potentially threatening our commercial presence there.

China is chipping away at our position as the top exporter to the United States and will likely surpass Canada as the largest exporter to the U.S. market in 2007.

What about our non-U.S. trading relationships? We know building a competitive economy also means being more involved in more countries, in more sectors, building more Canadian links into global value chains.

Here again, we’re losing ground.

We haven’t pursued trade agreements with the same intensity - or success - as our competitors. Not just big ticket FTAs [Free Trade Agreements], but also air agreements, FIPAs [Foreign Investment Protection and Promotion Agreements] and other mechanisms for trade and commercial intensification.

With WTO/Doha [World Trade Organization] on “life support,” can we really afford to ignore the many smaller trade and investment initiatives that offer a decent payback for Canada?

In The World is Flat, Thomas Friedman worries about the opportunities for his kids in a world where the competition is becoming so formidable.

He wonders if well-established economies like the United States - I’m sure Canada would also be included - have become too complacent, too used to life at the top, to compete with countries like China, India and Brazil.

In an international economy of global supply chains - where different parts of the chain can be efficiently served from far-flung places around the world, the hungriest, the most focused and the most driven will take the game.

As supply chains and value chains morph into supply and value “networks,” more and more of what we do will be exposed to competition - unprecedented competition. There will be nowhere to hide.

Our Government believes it’s time - overdue, in fact - to take stock of our competitive position and act comprehensively and decisively to secure Canada’s future prosperity.

As has always been true for Canada - and always will be true - the essential, the necessary ingredient for competitive success and prosperity, is market access.

And that is what the Government’s Asia-Pacific Gateway and Corridor Initiative is all about.

It’s about strengthening our trade ties and our competitive position. And doing it by building globally competitive transportation and logistical linkages between North America and Asia.

The Gateway’s “roots” are already in place. Canada has unparalleled access to the vast North American marketplace.

We’re closer to many key Asian ports than our competitors. And we have an integrated system of West Coast ports, airports, road and rail connections that reach across Western Canada and into the North American heartland.

The Initiative is an integrated set of investment and policy measures to enhance the Gateway’s efficiency, and put Canada in a better position to benefit from it.

It delivers new public investment of $591 million, including $321 million in immediate projects.

It includes a “fast-track” process to decide where best to allocate funds over the next year.

And it sets in motion a process to define the long-term vision for Gateway development in Canada.

Let’s be clear. The Asia-Pacific Gateway Initiative is not a $600 million project. It’s many billions in infrastructure. It’s a series of border initiatives. It’s a supportive regulatory framework. It’s a focused approach to integrating the hundreds of disparate elements of an efficient transportation and logistical system into a practical and coherent strategy.

Because the Gateway is tangibly wealth-creating, government should not need to do it all. Private capital is already heavily committed. There will be much more to come.

Our job is to create the framework for further commitment of private capital. And to work in partnership with governments and private industry to drive a successful Asia-Pacific Gateway and Corridor Initiative.

Our goal is real action and real results in a relevant time frame.

Market access is also about the legal and regulatory framework with our trading partners, for example:

•         free trade agreements;

•         FIPAs;

•         air bilaterals; and

•         dispute resolution.

Here we have fallen behind our competitors: the United States, Mexico, Japan and Australia, for instance.

And every agreement our competitors sign gives them the advantages our exporters don’t have.

The bottom line: we’re losing business.

In a world of successful WTO rounds, we could mitigate the problem. But the Doha round is now on life support.

We have serious work to do!

We can start by strengthening the foundation of our competitive position: North America.

Through NAFTA, we’ve made immense strides toward building a prosperous, competitive and secure continent.

We’ve worked hard over the years to foster cross-border investment, innovation and technology partnerships that are strengthening our economy - as a country, and as a partner in the North American context.

But the rise of Asian economies and the deepening economic integration in Europe demand that we sharpen our competitive advantages, and do so as a continent.

If you think we’re going to have trouble taking on China by ourselves, you’re right. Absolutely right.

But we can build North America-rooted supply networks that achieve global levels of efficiency and competitiveness, as we are now beginning to do in sectors like autos, steel and new media.

In spite of the so-called “death of distance,” clustering and geographic proximity can and do create enormous competitive advantages - even cross border clustering.

But we have a lot more to do.

We need to continue to make our rules, regulatory frameworks and investment regimes more compatible and end the “tyranny of small differences.”

And we need borders that are impervious to security risks, but that are “thin” and non-disruptive for trade and investment.

Security and prosperity must go hand in hand. That’s why we have a Security and Prosperity Initiative, and it’s how we are dealing with the Western Hemisphere Travel Initiative.

We have to work closely and collaboratively with the United States from a strong North American foundation.

We need a much more aggressive strategy for trade and investment.

We must expand our:

•         trade agreements;

•         investor protection agreements;

•         air bilaterals; and

•         partnerships in areas like scientific research and technology application and commercialization.

Asia will be critical for us as the international “economic centre of gravity” drifts that way over the next few years.

China, Japan, Korea, India, Singapore and Indonesia must become more active focal points for trade policy attention.

We also need to give priority to the Americas, where there are “receptive” governments and potential gains for Canadian business.

And there are still significant unrealized opportunities for trade and investment intensification in Europe, Russia and the Middle East.

This fall, we will complete a review of key new priorities as we accelerate the conclusion of negotiations already underway.

Opening markets and protecting investments are essential, but it’s not enough.

Canadian companies are going to need support in forging linkages into the global marketplace.

Sometimes this involves identifying a market opportunity and helping you close a sale.

Much more important, however, will be the support you need to link into global value networks:

•         Where are the opportunities to leverage your strengths?

•         Where are the necessary sources of capital?

•         Where is the technology you require?

•         Who and where are strategic partners for you?

•         What other doors must we open?

•         What kinds of information and market surveillance do you require?

In today’s international economy, trade follows investment.

And investment must flow both ways.

The investments will largely be directed at forging essential linkages into global value networks.

There will be outsourcing. There will be investment in production capacity abroad. There will be investments in joint ventures and strategic partnerships.

If we don’t get into the game, we’ll be roadkill by those who will.

My department will step up to support you.

We have a strong foundation in place. We’re extremely proud of the work our team of trade commissioners is doing here in Canada and in the markets of the world.

But we need to commit more resources and we need to harness more private sector skill sets.

They’re working hard to connect our businesses with the opportunities that are out there, and to help smaller businesses grow and succeed on the world stage.

Today’s rapidly evolving global economy is challenging us to redefine how government and business work together in common pursuit of commercial value creation.

This means broadening our focus beyond traditional export-related assistance.

It means sharpening our position as an intermediary for Canadian business, helping them open doors that others can’t—as we do, for example, through the Canadian Commercial Corporation.

It means working with our partners like EDC [Export Development Canada] and the Business Development Bank of Canada to bridge financing gaps.

It means consolidating the vast “ecology of support” that exists for Canadian businesses, and ensuring that our exporters know what we can offer and can access it without a tangled, messy process that destroys the very value we’re trying to create.

It’s clear that Canada needs an aggressive, targeted trade and investment agenda: a strategy.

There’s much to be gained. The companies, investors and nations who will come out on top will be those that engage in the new world economy.

Every step we take to increase engagement - every Canadian company around the world, every Canadian investment dollar- strengthens our links to the supply and value networks driving global commerce.

There is a lot at stake. The young people of today, the leaders of tomorrow, are depending on us to make Canada more competitive for the future and more connected to the enormous opportunities the future will bring.

The Prime Minister and his entire government are committed to this goal.

But it’s not a goal that’s achievable by government alone.

We need you, we need your advice, and we need your capacity for action and success.

Thank you.