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June 12, 2006
Address by the Honourable Jim Flaherty, Minister of Finance, to the
Canada-United Kingdom Chamber of Commerce
London, England
Check against delivery
My lords, ladies and gentlemen, it’s a privilege to be here. I’m
honoured to be at the Law Society. From my time as Attorney General of
Ontario I’m an honorary life member of the Law Society of Upper Canada,
and it’s wonderful to be in this surrounding, and thank you for the
invitation to be here. I’m thrilled to hear that our prime minister from
Canada has confirmed that he’ll be here a month from now, which is a
wonderful opportunity for all of you to get to know him.
I do want to introduce a couple of my colleagues from the House of
Commons in Canada who are here with me and were in St. Petersburg with me. I
would like to introduce a member of the New Democratic Party, who is the
finance critic, Judy Wasylycia-Leis, and the critic for the Official
Opposition of the Minister of Finance, who is the Honourable John McCallum.
I want to talk this afternoon a bit about what we’ve been trying to do
in the Government of Canada since we were elected on January 23rd, and I can’t
say enough to you about what a difference it is in Canada, the way it feels
in Canada, in Calgary and Vancouver, in Montréal, in Toronto, in the
Atlantic provinces. I know the opposition critics are looking at me. You can
get me next week in the House of Commons or Thursday, or whatever, at
Question Period. But let me say this about the optimism that there is in
Canada today about the reality of our sound economic fundamentals and the
direction that the Government of Canada has now, and the priorities that the
Government of Canada has now in terms of Canada knowing its way, of where it
wants to go and what it wants to accomplish, and I think we’ve been
successful in demonstrating that early on, that we have priorities and
direction not just for the government but for all Canadians.
People in Canada had grown weary of federal governments that overtaxed
and overspent and generally accepted the premise that the status quo was as
good as it gets. People turned to Stephen Harper and the Conservative Party,
insisting on action over rhetoric and, you know, in just over 100 days the
progress of our government has been striking. We are lowering taxes,
balancing the books, controlling spending, paying down debt, investing in
education and research, rebuilding our infrastructure. Being Canadian today
means being ambitious and innovative and confident and optimistic. It means
seeing ourselves and the world with new eyes and a new will to achieve more
than ever before.
From an ocean away here, it may be difficult to appreciate but there is a
new momentum building in Canada. We are opening the doors to greater
opportunity. We’re unleashing our country’s enormous potential and we
are improving Canada’s ability to attract global investment.
And a bit of recent history, if I may. If you just look back 20 years in
Canada, two decades ago, few would have believed that Canada could be
deficit-free. In fact, some of the elite in our society would have been
divided on the benefit of a deficit-free approach to fiscal policy. This
zero tolerance on the deficit has become the policy preference. It certainly
is heartfelt by Canadians. And the larger reality at the federal level, and
even most of the provinces now in fact, eight out of 10 Canadian provinces
have balanced budgets and small or more significant surpluses. Debt levels,
which peaked in the early 1990s, have declined steadily as a percentage of
our gross domestic product. They have contributed to an economy with
fundamentals that are as solid as the Rock of Gibraltar.
That reduction in debt and deficit spending has not increased
unemployment. Quite the opposite, and some of you may have seen the
employment numbers for Canada on Friday, which are remarkably strong.
Unemployment in fact is at its lowest level in more than 30 years. Last
month the economy added 100,000 new full-time jobs despite the softness
which we all see in our western industrialized societies with respect to
manufacturing. Those folks who are losing their jobs in manufacturing are
gaining jobs largely in the financial sector, which is strong in Canada.
As I talked to my colleagues of the G8 in St. Petersburg this weekend, we
are the only G7 country to record a budget surplus in 2004 and 2005. The
OECD projects we will be the only country to record a surplus this year and
next year. Real GDP in Canada is currently in its 15th year of expansion,
which is the second longest run in post-war history. Core inflation, which
is a concern, has remained below 2 per cent for over two years now and our
corporate profits are at record highs.
Now our government has some fairly definite views on priorities for the
economic and social infrastructure of Canada. Simply put, we have a few
objectives. We want to liberate the forces of investment, moderate the cost
of government and enhance the depth and capacity of our capital markets.
This will sustain not only an ever more sophisticated economic base in
Canada but also an ever more outward-looking Canadian economy.
Certainly the first budget I presented to the Parliament of Canada on
behalf of Canada’s new government underlined clearly our focus on
principles and priorities. On priorities, tax reductions across the board.
Business taxes, consumption taxes, big business taxes, small business taxes,
excise taxes, income taxes all were reduced—more tax relief than in the
last four federal budgets combined by the previous government in Canada.
Major long-term investments in our infrastructure including our trade
gateway to Asia on the west coast of Canada and in the United States, new
money for the infrastructure of civility like health care, public health
care and post-secondary education.
It is these types of investments that will increase the allure, we hope,
of what is already a monumental asset, which is Canada’s energy resources.
We are an emerging energy powerhouse in Canada—we’ve surpassed Saudi
Arabia as the largest supplier of oil to the United States. We also supply
our big neighbour to the south, the United States, with more natural gas,
more uranium, more electricity than any other country in the world. Canada’s
potential in the energy field is substantial and poised for further
acceleration in production and exploration. Approximately $45 billion in new
projects and expansions are expected in the Alberta oil sands by 2010, with
oil sands production to triple over the next 10 years. In fact, when one
looks at the cumulative investment in energy in Canada over the course of
the next nine years to 2015, it is projected to be about $400 billion, half
of which will be in conventional oil and gas.
So although we’re looking forward to the prospect of energy
investments, the real strength of the Canadian economy is diversification,
and we want to encourage investment and we want to make it clear to the
world that we’re a more attractive investment than to do business in the
United States in terms of corporate taxes. And we’ve done that in the
budget this year. We’ve made it clear that our tax advantage vis-à-vis
the United States for corporations doing business will be 5 per cent, and
that we will continue.
You know, you can do that in a particular budget and then another country
can lower their taxes. The advantage in the Canadian reality now is because
of our sound fiscal fundamentals, it’s sustainable for us over time, and
we will sustain that 5 per cent differential in favour of Canada over the
United States in terms of carrying on business in our country.
We’re seeing tremendous growth in a variety of areas in Canada—in
mining, in forestry, in finance and insurance, the pharmaceuticals business,
the plastics business and the auto sector, to name a few. As a result, a
wide variety of Canadian-made products, as you know, are available here in
London. The UK is Canada’s third largest export market worldwide and our
most important commercial partner in Europe. On the investment side, the UK
is Canada’s second largest source of foreign direct investment, and that
makes sense. In fact, it makes perfect sense given the history between our
countries. Our two countries have those historic ties and an international
outlook and a similar geographic advantage.
Canada’s proximity to the United States and Mexico makes us the perfect
launching pad for investors looking to expand into North America, given our
free trade arrangements with both countries. An advantage that is attracting
many to my home area in Toronto, where one out of two people were born
outside Canada, we have one of the most diversified, multicultural,
multilingual populations in the world in the Greater Toronto Area.
The UK is perfectly situated on its part as a launching pad into Europe,
as you know, and London is often described accurately as the world’s most
international centre. Clearly, the UK has become an important destination
for a contingent of Canadian banks, insurance companies, securities dealers,
law firms—some of you are here today. I encourage investors in the UK to
avail themselves of the possibilities that await them across the Atlantic
and to recognize that Canada is a country on the move. We are increasing
opportunities. We’re promoting enterprise. We are seeding a culture of
innovation that investors will not be able to ignore.
We are committed to encouraging global investment, as we are committed to
investing in Canada’s capacity to meet its obligations internationally as
part of our military alliances, our North American obligations and
partnerships and our international humanitarian commitments. We are
determined to be a government of practical progress on the crucial economic,
geopolitical and social infrastructure priorities that reflect our values
and principles as Canadians.
Now some people say that, you know, this transition in the Government of
Canada is a radical shift along the left-right spectrum. That is an
exaggeration, I dare say. It is rather, I think, a shift along a spectrum of
practicality, one that is both well-financed and effectively implemented.
And, with the greatest of respect to my opposition colleagues who are with
me today, what we had in Canada over the course of the past several years
was an undisciplined approach to governing with many, many, many priorities,
which meant there were no priorities at all. And what Canadians have
welcomed is the change to a directed, disciplined government with limited
priorities and a moderate horizon so that we can accomplish what we say we
are going to do.
The global economy, if I may turn to the international scene for a
moment, has proven remarkably resistant in recent years, and my colleagues
and I in the G8 Finance Ministers were talking about this this weekend. The
last few years in particular have been especially strong in the global
sense. With the world economy becoming increasingly integrated, difficulties
in our own economies can have a ripple effect throughout the world. Canada
is working in concert with Britain and the U.S. to reform the IMF to ensure
it plays a key role in promoting global action through enhanced multilateral
surveillance, especially exchange rates. Over the years, key elements of the
IMF governance structure have gone awry due in part to the spectacular
growth of some emerging nations. This growth on the beneficial side has
lifted millions of people out of poverty and is clearly the dividend of
globalization.
These emerging markets have a valid complaint. For some, their position
in the IMF is inconsistent with their role in the global economy, and this
must be addressed. Having said that, our emerging market partners must also
recognize that the enormous benefits they receive from being a member in the
international trade and financial system entail obligations of their own.
With membership comes responsibility.
Canada, Britain and the United States are working together to encourage
the governance reforms that will give these countries their proper role in
the International Monetary Fund. We made substantial progress on this issue
at the meetings of the IMF and the World Bank in Washington in April, and
our goal is to get an agreement on a first round of reforms by the IMF
annual meetings in Singapore in September.
So in a world of potential global pandemics, terrorist threats and
changing economic relationships, the multilateral process is arguably more
important than ever, and meetings like we had this weekend in St. Petersburg
are very important. Yet the simple reality is that our bilateral
relationships with economic and geopolitical partners like the United
Kingdom and the United States will remain the foundation of our
international relations. Already, our prime minister has moved decisively to
improve our working relationship with the Americans, our largest trading
partner, which was vitally important to the economic health of Canada to
remove some of these unpleasant irritants with our American neighbours. One
of those was the softwood lumber dispute, about which there’s been way too
much written, and it became rather boring to everybody, but within 90 days
we were able to arrive at an agreement in principle with respect to
resolution of that irritant, that trade irritant with the United States.
We are playing a leading role internationally, at the same time making
progress on our domestic agenda. Canada has decided to step up to the plate
in terms of its own fiscal and economic policy challenges. Our standing in
the G8 around issues of debt, employment, inflation, fiscal imbalance is
largely unparalleled, something I re-emphasized during the meetings this
weekend at St. Petersburg. Our commitment to a strategy focused on
investment and growth is deep and pervasive. By engaging on issues as
diverse as fighting terrorism and encouraging democracy, economic
reconstruction in Afghanistan, a new fiscal framework for our
federal-provincial relationships at home, supporting Canadian agriculture in
transition during the present trade imbalances, especially in grains and
oilseeds, reaching an agreement, as I mentioned, with the United States on
that irritant of softwood lumber, we are tending to business as government.
And may I say that the kind of conservatives with whom I am working and
serving in Ottawa are the kind that believe in the organic linkage between
all aspects of a free economy—sound and moderate government, robust and
confident markets and an engaged and hard-working citizenry who benefit from
equality of opportunity and a fair regulatory and fiscal context. Public
health care is a key part of that and also lower taxes, moderate and modest
government that knows its place and discharges its obligations honestly, in
an accountable and direct way.
So the Canada that emerges from this is one that is confident and
prudent, idealistic and practical, impressive without being self-obsessed.
As a trading nation, with the longest coastline on three oceans in the
world, from coast to coast to coast, our perspective must be global and our
context deeply international. Being a trustworthy ally, dynamic trading
partner and fiscal example will require both discipline and focus as we go
forward, but that is the core of what Canadians voted for in January and is
what we are determined to deliver as a new Government of Canada.
Now we are in a minority Parliament so the ideas of other parties are
important, not that they aren’t always important, but they’re even more
pressing in a minority government. And we take all of that into
consideration as we go forward. Our prime minister is working hard to
provide Canadians with stable, balanced and effective government that is
focused and straightforward.
If I have one message to leave with you today, it is that the new
government is serving Canadians in a dramatically different way. Our
priorities are more focused and less numerous than the government that went
before us. Our fiscal stance is more precise and disciplined, and our
approach to attracting global investment is more open and determined. Our
desire to maximize our relationships on security, trade, economic and
environmental issues has never been stronger, and our stance as a reliable
international interlocutor and ally is clear. It is a different balance, a
different government and a more precise reflection of core Canadian values
about freedom, choice, stability, democracy and the virtues of community,
family and the values of a pluralist but grounded society. And that is a
good thing for Canada and for Canadians, and for all with whom we are
fortunate to be partners and collaborators worldwide, like people here in
the United Kingdom.
Thank you very much.
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