CHECK AGAINST DELIVERY

NOTES FOR AN ADDRESS BY

THE HONOURABLE PIERRE PETTIGREW,

MINISTER FOR INTERNATIONAL TRADE,

AT THE 8TH ANNUAL

CANADIAN-AMERICAN BUSINESS ACHIEVEMENT AWARD AND

INTERNATIONAL BUSINESS PARTNERSHIP FORUM

THE CANADA WE WANT IN THE NORTH AMERICA WE ARE BUILDING

TORONTO, Ontario

October 16, 2002

I am delighted to be here before the Canadian-American Business Council. You have done much to lay the groundwork and to encourage Canadian and U.S. firms to partner across our shared border in a spirit of innovation and cooperation. This has produced tremendous business growth and prosperity for our two countries.

Canada in North America

About two weeks ago, the government set out its agenda for the coming years in the Throne Speech, entitled "The Canada We Want." For those Americans in the audience, our Throne Speech is much like your State of the Union address, when the government outlines its priorities for the year.

The government set out a number of ambitious goals on the economic side. We want to be "a world leader in innovation and learning, a magnet for talent and investment." And we want to "secure our place in North America and in the world, confident in who we are and where we are headed."

This, simply put, is my agenda. The Canada I want is a world leader and innovator, secure and able to profit from its place in the North American economic space.

Canada's economic prosperity is closely allied to our access to the U.S. market. And as Canada's Minister for International Trade, I can tell you that my foremost priority, day in and day out, is not just securing that access but also increasing it.

You all know that Canada is a trading nation. Over the last decade, Canadian exports as a proportion of total GDP have risen from 25 percent in 1991 to 43 percent last year. And much of this trade goes to the U.S. market--82 percent of our merchandise exports.

We are by far the largest trading partner of the United States. We buy more U.S. goods than all the EU countries combined, almost 25 percent of American exports. Thirty-eight American states have Canada as their largest market. This represents, in total, more than $1.9 billion in trade, day in day out, every day of the year.

So, the North American Free Trade Agreement [NAFTA] has been a tremendous success. From 1993 to 2001, Canada's merchandise exports to its NAFTA partners increased almost 95 percent; Mexican exports increased by 221 percent and U.S. exports increased by 86 percent.

But NAFTA has been more than a scorecard for trade. NAFTA has fundamentally changed the North American economic space. It has accelerated the pace of economic integration. The new opportunities and competitive pressures created by NAFTA have contributed significantly to the reorientation of Canada's industrial structure, as it has to those of our U.S. and Mexican partners.

To begin with, NAFTA has made all three partners more competitive. By strengthening the rules and procedures governing trade and investment on this continent, it has allowed trade and investment flows to skyrocket.

Magna, a Canadian auto supply company, has factories in Mexico; Bombardier has plants in Vermont and New York; and Hewlett Packard has major investments in Toronto. More and more, we have a North American economy.

So Canada's economic prosperity is tightly tied to the North American economic space. Some less confident people see this as a terrible predicament. I like it. In fact, I love it. I want more predicaments like this. I would be happy to double our market share in the U.S. This would mean more jobs and prosperity for Canadians.

But we are not ignoring the rest of the world. Our hemispheric agenda reaches beyond the U.S. The Free Trade Area of the Americas negotiations hold the potential to create the world's largest free trade area, with 800 million people and a combined GDP of nearly $18.5 trillion, more than one third of the world's economic activity and greater than the GDP of the European Union.

We are also working multilaterally to achieve greater trade liberalization and better rules governing global trade. Our success in Doha last year was an important step in a process to ensure a rules-based international trading system that fosters prosperity for developing and developed countries.

We intend to work with the U.S. administration, now thankfully strengthened with trade promotion authority, to promote our shared interests in trade liberalization.

A Strong and Competitive Economy at Home

But we must not forget that our bread is primarily buttered at home, in Canada and in the North American economic space.

We must not forget that we have to be competitive in the world's toughest marketplace --North America. And, more than that, we must make ourselves a leader in North American innovation and a magnet for investment and talent.

We have taken hard steps over the last 10 years to do just that. We put ourselves through a period of extreme fiscal restraint in the mid-1990s with a goal of vigorously eliminating the deficit and reducing our national debt. The crucial steps we took over those years represent the reason why the government has been able to balance budgets over the last six years and to slash our debt to GDP ratio. This year, we are the only G7 country to have a balanced budget.

At the same time we have brought in fair and competitive taxes. We are delivering on a $100-billion tax reduction package. Canada now has one of the most competitive business tax regimes in the world. By 2005, the corporate taxation rate in Canada will be five percentage points lower than the U.S. average.

The hard work at home has paid off. Don't just take me at my word. In an article last week entitled "Canada's Economy Grows Where Others Falter," the New York Times noted that "Canada is defying the slowdown throttling much of the world economy."

Canada leads the Organization for Economic Cooperation and Development [OECD] in job creation; the International Monetary Fund [IMF] predicts our growth rate will be the highest of all Western countries. And, we have received "Triple A" investment upgrades from Moody's and Standard & Poor's. These are all indicators of a dynamic economy.

Canada has thus cast its lot with North American prosperity and it is paying off. We are a pivotal player in many sectors of the new economy. Canadian companies are at the forefront of new developments in biotechnology, multimedia and fuel cell technologies, to name only a few.

Earlier this year KPMG released the results of a study entitled Competitive Alternatives: Comparing Business Costs in North America, Europe and Japan. Canada was ranked the leading cost-competitive industrial country. Not surprisingly, Canada attracted $42.8 billion of new foreign direct investment in 2001, a new record high, even more impressive in view of the marked decline in mergers and acquisitions from the year before. Two thirds of this investment was from the U.S.

Maintaining our Economic Security and Prosperity

But we must not stand still. We must not be complacent. Much like the bicycle theory of trade negotiations--as soon as you stop advancing, you stumble--the same is true for our North American agenda.

It is in the interests of Canadians to continue fearlessly along the route of economic security and prosperity in North America. We can no longer be seized with doubts about competing or about lack of confidence or identity. We know we can compete and we know we can win.

Now many in the business community have been calling for a strategic or a grand bargain with the U.S. Others have called for a common market or a customs union.

While there is always room for a healthy debate, and I encourage it, I do not think there is currently an appetite for such a grand scheme. 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.

Let me set out six goals for the Canada I want in the North America we are building.

First of all, I want to increase our share of the U.S. market. Canada typically supplies about 19 percent of U.S. imports, a trade weight well above our economic weight in the world. We should aim to increase our share on a yearly basis. Let us not be fearful of our trade with the U.S.; let us magnify it.

Second, I want to see greater flows of two-way investment on which trade increasingly depends. Last year, as I said earlier, we had a $42-billion inflow of investment. We should seek to achieve $50 billion in investment next year. With this investment into Canada will come technology, research and development functions to help us achieve the innovation goals so strongly set out in the Speech from the Throne.

Third, we must 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.

We must look at how our regulatory approaches fit into the North American economic space. We made great strides in this respect in NAFTA, but NAFTA is 10 years old and we need to make further advances.

Let's broaden and deepen regulatory cooperation between our countries by further cutting red tape and the regulatory hurdles to doing business with each other.

In many areas, our countries have similar regulatory systems that work for similar goals and produce similar results. Yet each country often demands that products imported from the other go through costly testing procedures to meet domestic requirements.

Why not acknowledge the similarity of our systems and agree that once these products are tested in one country, they are acceptable in the other? Can we not move to the principles of mutual recognition and the elimination of duplication?

We have started doing this in some areas, for example civil aviation safety regulations and biotechnology issues. We are harmonizing pesticide registration and sharing information on new industrial chemicals. And through NAFTA, we are working toward harmonization of land transport standards, including tire safety recognition, thus avoiding the necessity of double testing.

All these represent a good start but there is much more we can do.

We must move on biosecurity issues to ensure a coordinated and effective response to threats to the security of public health.

There is room for greater regulatory convergence in the transportation sector. We need to secure and maintain our access for the trucking industry, which generates 13 million truck trips across our border annually and 65 percent of all Canadian merchandise exports to the U.S.

We must reduce duplicative testing in the chemicals sector and enhance regulatory cooperation on the manufacturing of pharmaceutical and medical devices, which could save consumers a great deal in health care costs.

The fourth goal is a commitment to making serious efforts to bring trade remedy practice more in line with the growing integration of our shared North American economic space.

For example, we have long held that in an integrated 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 safeguard action on steel. Steel safeguard investigations in both Canada and the U.S. have underscored the need for us to work together to address these trade issues in ways that acknowledge our economic integration.

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. There is a North American energy market. We must work with Mexico and the U.S. administration and Congress to recognize and protect this reality.

We need to review the regulatory environment for trade in oil, gas and electricity to eliminate impediments to trade in energy commodities and to facilitate the development of a single North American energy market.

As a fifth goal, I want to eliminate the border as an impediment to trade, investment and business development and move the border away from the border.

We, as 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.

We should examine ways to make further improvements in technical areas, such as the NAFTA rules of origin. We have made some progress on liberalizing the NAFTA rules of origin for a number of products, making it easier to meet the NAFTA rules and qualify for NAFTA tariff preferences. We should accelerate work on this in an effort to further reduce transaction costs and make it easier for companies to do business and benefit from our integrated economies.

We need to further facilitate the travel of business professionals across the border.

We have accomplished much already through the Smart Border Declaration and a 30-point action plan signed by Governor Tom Ridge and Deputy Prime Minister John Manley last December. For example, Canadian and U.S. Customs pre-screen containers arriving in each other's key ports. We have created and expanded the NEXUS program that permits quick passage at the border for card holders. We have partnered with the U.S. on the FAST program for commercial traffic, which allows low-risk trucks and drivers to have their manifests sent by transponders to the customs agent at the border before the trucks arrive. The government recently announced $300 million for new border infrastructure in the Detroit-Windsor area.

Let us continue to build on this momentum.

Sixth and finally, I propose the need for smarter advocacy and representation in the United States. Once again, the Throne Speech recognizes the need for an increased presence in the U.S. to ensure and enhance our access and advocate our interests.

Our economic prosperity depends on the North American market. We need offices to promote trade, seek investment and technology, and advance the interests of all Canadian government departments, provinces and the Canadian private sector.

Growing economic integration also means that the number and range of U.S. federal, state and municipal issues and actions have an increasingly direct and powerful impact on Canada.

For example, at the federal level, we know the impact of U.S. trade remedy law, which many in Congress see as a cherished instrument of public policy. The 27 percent tax imposed on Canadian softwood lumber has led to thousands of job losses across Canada and has also harmed American consumers and the home-building industry. But the softwood action taken by the U.S. is the product of special economic and regional interests flexing their power.

Canada needs better intelligence and advocacy in the U.S. We need to engage Americans at the local, regional and state levels where the interests that drive congressional and administration policy are being developed and articulated.

Conclusion

The plan I have outlined today is my agenda for the next couple of years. It reflects the Canada I want in the North America we are building.

I congratulate you on your work and I am sure our paths will cross again as we work to secure economic prosperity in North America.

Thank you.