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<html> <head> <meta name="Generator" content="Corel WordPerfect 8"> <title>MINISTER PETTIGREW - ADDRESS TO THE SENATE FOREIGN AFFAIRS COMMITTEE - OTTAWA, ONTARIO"THE CANADA-UNITED STATES AND CANADA-MEXICO TRADING RELATIONSHIPS"</title> </head> <body text="#000000" link="#0000ff" vlink="#551a8b" alink="#ff0000" bgcolor="#c0c0c0"> 2003/1 CHECK AGAINST DELIVERY NOTES FOR AN ADDRESS BY THE HONOURABLE PIERRE PETTIGREW, MINISTER FOR INTERNATIONAL TRADE, TO THE SENATE FOREIGN AFFAIRS COMMITTEE "THE CANADA-UNITED STATES AND CANADA-MEXICO TRADING RELATIONSHIPS" OTTAWA, Ontario February 3, 2003 I would like to thank you for the opportunity to appear before the Committee. You all know that Canada's trade and economic interests span the globe, so the cornerstone of our trade policy continues to be the multilateral trading system. However, as you also know, by any criteria--movement of goods, investment, people, ideas--North America, and in particular the United States, is by far our most important market. So, securing and improving access to this market has to be our number one trade policy priority. The study that this Committee is currently conducting is therefore extremely timely and provides an excellent opportunity to seek the views of Canadians on priorities for future work. This work will allow us to build on the successes we have realized in the U.S. market through the Canada-U.S. Free Trade Agreement, and subsequently in the U.S. and Mexican markets through the North American Free Trade Agreement [NAFTA]. NAFTA: A Catalyst for Our Trade Relations with the United States and Mexico NAFTA has been a tremendous success in making North America one of the most efficient, integrated and competitive regions in the world. By strengthening the rules and procedures governing trade and investment on this continent, it has allowed trade and investment flows to skyrocket. From 1993 to 2001, Canada's merchandise exports to its NAFTA partners increased almost 95 percent. Our total merchandise trade with the United States and Mexico reached $584 billion in 2001. Through NAFTA, Canada has consolidated its position as the largest trading partner of the United States. We buy as many goods from the U.S. as do all the European Union countries combined--almost 19 percent of American exports. Thirty-eight American states have Canada as their largest market. This represents roughly $1.9 billion in trade, day in and day out, every day of the year. Mexico is now Canada's sixth-largest export destination and our fourth-largest source of imports, with two-way merchandise trade in 2001 reaching $14.9 billion. And Canadian direct investment in Mexico continues to grow--its cumulative value reached $4.0 billion in 2001. But NAFTA has been more than a scorecard for trade. The reorientation of Canada's industrial structure was encouraged by the new opportunities and competitive pressures created by NAFTA and by its predecessor, the Canada-U.S. Free Trade Agreement. NAFTA: The Way Forward As we approach the 10th anniversary of NAFTA, which entered into force on January 1, 1994, Canada's view is that the NAFTA framework is the best tool for further enhancing our trade and economic relations with the United States and Mexico. NAFTA, with its ongoing working groups and implementation commitments, is in many ways a living document, and it holds much scope for achieving market access improvements. All countries are committed to its full implementation. On January 1, 2003, for example, the final tariff reduction in the Canada-Mexico phase-out schedule was done. The Mexican administration showed its commitment to NAFTA by proceeding with the tariff cuts in the face of significant political opposition from certain sectors. Another good example of our commitment to trade liberalization through NAFTA is the amendment of rules of origin for certain products, including alcoholic beverages and petroleum/topped crude oil, which was implemented on January 1 as well. These changes make it easier for manufacturers of these products to qualify for duty-free treatment under NAFTA. In looking to the future, my NAFTA counterparts share my view that there are prospects for additional trilateral work in certain areas that could stimulate trilateral trade and allow the realization of a more integrated and efficient North American economy. On the investment side, for example, the NAFTA Commission directed experts to continue their work examining the implementation and operation of Chapter 11, including developing recommendations as appropriate. Experts are currently identifying shared priorities concerning the operation of this chapter. We believe that providing investors with protection from arbitrary and discriminatory actions is in our interest. It promotes a stable and secure environment for international investment, which facilitates innovation, productivity and prosperity both at home and abroad. Moreover, Canadian direct investment in the NAFTA countries has also increased. In 2000, almost two thirds of total foreign direct investment into Canada came from our NAFTA partners. The three NAFTA parties will continue to identify existing impediments to trade and investment and conduct the necessary work to eliminate them through NAFTA. We consider that our priorities within this context must be those activities that can have an important positive effect on business. The proposed study by this Committee also presents an opportunity to seek the views of Canadians and their Parliamentarians on Canadian priorities for additional trilateral work. I would welcome such valuable input into the process. The Canada-U.S. Trade Relationship With as much as 87 percent of our merchandise exports going to the United States, the trade relationship with our southern neighbour is, of course, paramount. This relationship and North American integration issues are increasingly the subject of discussion and analysis. Moreover, there seems to be a growing awareness by the public of the need to examine the way forward. Recent polls suggest that Canadians want even closer economic ties to the United States to raise their standard of living, and are increasingly confident they can compete on an equal footing with American industry. Many interest groups in the business community, such as the Canadian Manufacturers & Exporters and the Coalition for Secure and Trade-Efficient Borders, have come forward with ideas on how Canada should proceed. Some have even called for a strategic or a "grand" bargain with the United States, while others have called for a common market or a customs union. According to poll results published last week in The Globe and Mail, more than four out of five--or 81 percent--of Canadian executives do not think Canada and the United States should form a union. And I agree with their view. But that does not mean inaction. Indeed, much can be done to build on existing achievements by advancing resolutely and with determination, step by step, with a clear eye on Canadian interests. In my view, there are six goals for Canada in this context: 1. To increase Canada's share of the U.S. import market. Canada typically supplies about 19 percent of U.S. imports, a trade weight well above our economic weight in the world. I believe Canada should aim to increase its share on a yearly basis. 2. To increase the flows of two-way investment, on which trade increasingly depends. Investment in Canada will bring technology, research and development that will help Canada achieve the innovation goals set out in the Speech from the Throne. 3. To advance an agenda of smart regulation. The Speech from the Throne committed the government to move forward with a strategy for accelerated regulatory reform, with a view to promoting health, encouraging innovation and economic growth and reducing the burden on business. In this regard, Canada must look at how its regulatory approaches fit into the North American economic space. We made great strides in this respect in NAFTA, but now we need to make further advances. There is scope for broadening and deepening regulatory cooperation between our countries by further cutting red tape and the regulatory hurdles to doing business with each other. Regulatory cooperation will facilitate intra-industry trade, reduce transaction costs for shippers and disincentives for cross-border investors, and restrict the scope for disputes over time. 4. To make a serious effort to bring trade remedy practice more in line with the growing integration of our shared North American economic space. For example, given the level of integration of the North American steel market, the use of trade remedies is counterproductive. The United States recognized this in March when it did not include Canada in its safeguard action on steel. Similarly, on the energy front, Canada and the United States have built a robust, mutually beneficial energy relationship, founded upon our joint commitment to a market-based energy policy. Perhaps there is scope to address these trade issues in ways that acknowledge our economic integration. We must work to ensure that the U.S. administration and Congress recognize this reality. 5. To eliminate the border as an impediment to trade, investment and business development and "move the border away from the border." In my view, governments need to keep pace with the demands and expectations of businesses on both sides of the border, who rely on just-in-time delivery and easy access to markets. Governments need to continue working to reduce transaction costs, make it easier for companies to do business and benefit from our integrated economies, and further facilitate the travel of business professionals across the border. We have had many successes through the Smart Border Declaration and its 30-point action plan signed by Governor Tom Ridge and Deputy Prime Minister John Manley in December 2001. For example, Canadian and U.S. customs officers pre-screen containers arriving in each other's key ports; the NEXUS program permits quick passage at the border for card holders; the FAST program allows low-risk trucks and drivers to have their manifests sent by transponders to the customs agent at the border before the trucks arrive; and new border infrastructure will be built in the Detroit-Windsor area. 6. Finally, we need to expand our advocacy program in the United States. Growing economic integration also means that an increasing number and range of U.S. federal, state and municipal issues and actions have a direct and powerful impact on Canada. The Department is working to improve its capacity to engage Americans at the local, regional and state levels, where the interests that drive congressional and administration policy are developed and articulated. We have been working hard on the advocacy front, something we plan to continue. In this regard, I am heading to Washington tomorrow with an all-party delegation of MPs and senators to promote Canadian trade interests, as well as to address a few areas of dispute, such as softwood lumber. Working toward these goals would indeed be beneficial to Canada in the North American context. While strengthening North America's economic space--and, more specifically, Canada-U.S. relations--is our top priority, we continue to push ahead on regional and multilateral fronts. Building on our successes in NAFTA, we have been encouraged to broaden trade liberalization through the World Trade Organization [WTO] and through economic integration within the Free Trade Area of the Americas [FTAA]. In addition to liberalizing trade in goods, the FTAA holds the potential to secure improved market access commitments in the area of services and to establish stronger investment protection measures throughout the hemisphere. Implementation will make the FTAA the world's largest free trade area. The new round of WTO negotiations launched in Doha last year will aim to strengthen rules that meet the needs of our modern economies and further liberalization by January 2005. Our participation in both the FTAA and WTO ensures that Canada is fully engaged in pursuing new market opportunities while protecting our interests under a rules-based system. Conclusion In summary, we know that the Canada-U.S. Free Trade Agreement and NAFTA have served us exceedingly well, but we must not rest on our laurels. We must continue to forge ahead. Trade in North America, especially with the United States, is vital to our economic health. We must do our part to continually broaden our thinking on ways to improve access in these highly dynamic and evolving markets. Thank you. </body> </html>

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Last Updated: 2006-10-30	Top of Page	Important Notices