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- Published 08/22/2007
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David Emerson on FTA with DR
7 June 2007 - Ministry of International Trade, Canada
Notes from an address by The Honorable David L. Emerson, Canadian Minister of International Trade, on the occasion of International Trade Day
I’d like to thank everyone at the Canadian Chamber of Commerce for the invitation to speak today and for your ongoing advocacy work on Canadian trade and competitiveness. I’d like to pay a special tribute to Nancy Hughes-Anthony for her past nine years of leadership of the Chamber, and I wish her well with her new leadership role at the Canadian Bankers Association. This is International Trade Day. Canada is, has always been and always will be a trading nation.Everyone in this room knows that we Canadians cannot maintain our quality of life without a strong, prosperous and competitive economy. And you cannot build a solid economy without engagement in global markets, in terms of trade, investment and innovation. But it’s not enough for business leaders, policy wonks and analysts to know the fundamental economic reality of the Canadian market. There must also be a broad-based national consensus. Every Canadian needs to know that half of what we manufacture in Canada is exported—and that a fifth of all Canadian jobs are directly linked to international trade. Thanks to technology and increasingly open and competitive markets, the nature of international commerce has gone through a sea of change. Big companies are becoming integrated collections of smaller ones. Distance is dying and both trade and investment are now shaped by the development of global value and supply chains. Opportunity is everywhere and there is nowhere to hide from competition. The State of Trade: 2007 document, which Foreign Affairs and International Trade Canada is releasing today, includes an in-depth examination of global value chains. And it underscores the need for Canada to be deeply engaged internationally—through trade, through investment, through technology, through innovation and through the development of new products. Last year, I outlined my concerns about Canada falling behind in this race for global competitive positioning. I focused particularly on trade policy and trade negotiations. Even our closest trade relationship, with the United States, was being broadly undermined by the softwood lumber dispute—the longest-running, most damaging trade dispute in Canadian history. I also told you about this Government’s commitment to turn the corner. To re-engage with our partners in the U.S., Mexico and throughout the Americas. To develop strategies and negotiate agreements to give Canadians more and better access to markets around the world.
A look back…
We’ve accomplished a lot since then. We announced Advantage Canada, a strategic framework to make our country more competitive. Tax cuts, infrastructure investments, regulatory streamlining, and a Global Commerce Strategy are all central to Advantage Canada. We put in place the Softwood Lumber Agreement, which put over $5.5 billion back into Canadian hands. This at a time when poor markets are wreaking havoc on the industry. Just imagine the carnage that would have been brought by a new round of countervailing and anti-dumping duties in the absence of the Softwood Lumber Agreement. We signed a Foreign Investment Protection Agreement with Peru—our first such agreement in eight years. We added a chapter on procurement to our Free Trade Agreement with Chile, an agreement that is ten years old this year. We concluded or expanded “Blue Sky” air agreements with Portugal, Serbia, Croatia, the U.K., Japan, Algeria, the U.S., Ireland and Kuwait. We are investing over $1 billion in our Asia-Pacific Gateway and Corridors Initiative to position western Canada as the gateway of choice between North America and Asia. As part of our engagement with China, we signed a Science and Technology Agreement that will enable Canadian researchers and companies to tap into the aggressive innovation agenda that is transforming China at breakneck speed. While in China, I was accompanied by a delegation of top Canadian science and technology companies, as well as senior executives in transportation and logistics, there to promote the Gateway. My Parliamentary Secretary, Ted Menzies, led a mission to India, where we showcased Canada’s infrastructure expertise. I followed up with my own visit to further our trade and investment collaboration at the ministerial level. Next week, I will be meeting with India’s Commerce Minister, Kamal Nath, during his visit to Canada. We’ll be reviewing some outstanding issues with an eye to concluding a FIPA (Foreign Investment Protection and Promotion Agreement) this year. But reading the State of Trade document, you will see that we’ve only scratched the surface of what needs to be done.
Where we are
The good news is that 2006 was a strong year for Canada. Our exports reached an all-time high of $524 billion. In terms of investment, Canadian direct investment abroad reached $523.3 billion, nearly 14 percent above 2005 levels. Inward investment of $449 billion was 10 percent above the previous year. We’re also beginning to diversify our trade reliance beyond the U.S. market. Last year, exports to non-U.S. countries went up by 14.6 percent, a record high, and an increase of over 50 percent from just five years ago. In 2002, 87 percent of our exports went to the U.S. In 2006, this was down to 82 percent—not by shrinking our exports to the U.S., but by growing in other markets. But some of the news is not so good. We’re still heavily reliant upon natural resources, which are almost the sole source of our trade surplus. They’re the driving force behind the majority of new flows of foreign direct investment into Canada. Our manufacturing sector continues to struggle. They’re feeling the effects of heavy reliance on a weakening U.S. market, the soaring Canadian dollar and increased competition from low-cost countries. Despite the climb in our non-U.S. exports, we’re still losing ground. We’re losing market share in Asia, in Latin America, in Europe. Even here in North America, China is poised to overtake Canada as the top source of imports in the U.S.
The message is clear. Despite our progress, we’re being outpaced by our competitors. It’s not just fast-growing emerging economies like China, India and Brazil, but it’s also our more traditional competitors such as the U.S. and Europe. They are aggressively pursuing new trade relationships. We need to understand that it’s no longer simply a case of businesses competing with businesses. Governments are also competing with governments to position their economies internationally.
Consider market access. Since 2001, the U.S. has negotiated FTAs (free trade agreements) covering 16 countries, with agreements covering eight more countries in progress. Mexico? Four FTAs negotiated, covering five countries in the same timeframe. Chile? Eleven FTAs negotiated, covering 40 countries. Australia? Three FTAs—including one with the United States—with agreements covering another 17 countries, including one with China, in the works. This imbalance puts Canadian firms at a disadvantage. It reduces opportunities for trade, hurts our companies and ultimately costs Canadian jobs. Canadian companies can compete with the world’s best. But they need a level playing field. Today I can tell you that we are turning the corner.
A look forward
The WTO remains the single best avenue for trade liberalization for a small, trade-oriented economy like Canada’s. When it comes to trade, the 150-member WTO is the “great equalizer.” Its rules level the playing field for all. “Might” is not “right” under the WTO. Canada is actively working toward an ambitious, broad-based outcome to the Doha Round. Signals coming from our negotiators in Geneva are positive. The elements of that critical landing zone are beginning to take shape and with political will, success is within reach. Regardless of how WTO negotiations turn out, we cannot sit on the sidelines. We’ve been a spectator for too long as market share is taken by competitors with more aggressive trade strategies. So we’re pushing forward with a focused and aggressive strategy of our own. First, we will continue to strengthen our position in the North American marketplace. NAFTA allowed us to build on our history as neighbours and friends. We have created a powerful North American economic engine—the largest free-trade zone in the world, with a market of over 400 million people. We’re working on a range of initiatives to make NAFTA stronger. We’re working on a further package of rules-of-origin liberalization that will benefit exporters in all three countries. We’re also working on an initiative to remove trade barriers in key sectors, and reviewing our newer free trade agreements to see what improvements may be incorporated into NAFTA. Our goal is to make the NAFTA economies even more competitive. Our goal is an even more efficient and open platform that will draw more business to and through North America. Our goal is to reduce offshoring of North American jobs and to do it by leveraging the competitive capacity of the entire continent. Both the Security and Prosperity Partnership (SPP) and the work of the NAFTA Commission are focused on this goal. We’re also committed to reaching out to our friends and partners throughout the Americas. We will forge new trade and investment agreements that will re-energize our business relationships and build a hemispheric advantage.Today, I can announce that we are launching free trade negotiations with Colombia and Peru, and with the Dominican Republic. I’ve instructed officials to begin talks over the next few weeks. In addition, we intend to initiate free trade discussions with the Caribbean community (Caricom) and hopefully conclude negotiations with the CA4.But as we build a stronger and more competitive hemispheric platform, we’re also reaching out to our traditional partners in Europe.
Today, I’m very happy to announce that Canada has concluded free trade negotiations with the members of the European Free Trade Association (EFTA): Iceland, Liechtenstein, Norway and Switzerland. This is Canada’s first FTA in six years, and our first FTA with European countries. These are four sophisticated and wealthy economies in which technological innovation is a driving force. Taken together, they offer substantial market potential for Canada. Already, we have $11 billion in two-way trade and over $22 billion in two-way investment. In fact, the Swiss are the fifth-largest investor in Canada. This agreement will create opportunities for Canadian businesses in a wide range of sectors, including building materials, forest products, auto parts and agriculture—all sectors in which Canada has demonstrated strengths. Most importantly, this agreement is a major directional statement. It’s a statement that Canada is back in the game. For the first time in six years, we have an agreement that begins to level the playing field for Canadian companies by giving them preferential access to a key market. A lot of work went into reaching this agreement. Through the nine years of discussion and negotiation, we kept industry involved. The result is a deal that offers unprecedented flexibility. On ships in particular, the agreement provides for a generous phase-out of our tariff over a 15-year period, with a grace period of three years before any cuts begin. This will give the industry a significant period of time to adjust to the new market conditions. Our free trade agreement with EFTA also represents an important step toward trade and investment intensification with the broader EU market. The European Union is Canada’s second-largest trading partner, our second-largest source and destination of foreign investment, and our second-largest source of new technologies. Enhancing our commercial relationship with the EU is something many of you have been advocating. I share this goal. And I think the study to examine the costs and benefits of closer economic integration, which was announced at the Canada-EU Summit earlier this week, offers a solid basis from which to start. Responding to calls from the private sector in both markets to reduce red tape, Canada and the EU committed to concluding an agreement on regulatory cooperation as soon as possible. We also endorsed the Regulatory Cooperation Roadmap, which sets out an ambitious list of results-oriented sectoral cooperation initiatives.Also important is a comprehensive Canada-EU Air Services Agreement, which we will start negotiating this fall. We look forward to reviewing progress in these areas at next year’s Canada-EU Summit. Looking beyond the Americas and Europe, we’re moving forward on a robust Asian trade strategy. We’re pursuing free trade agreements with South Korea and Singapore—two vital links to the Asian marketplace—which we hope to conclude in the near future. We’re negotiating investment protection agreements with China and India. Exploratory talks with Vietnam and Indonesia are also underway. In the area of science and technology, we have cooperation agreements in place with countries like China and India. These agreements bring researchers together, and provide an important stimulus for commercialization of technology for the international marketplace. In spite of Canada’s innovation successes, the vast majority of new technologies will always originate somewhere else. These agreements provide tools to combine the innovative strengths of Canada with those of other countries—all in the interest of competitive success in the knowledge economy.
Finally, through our Asia-Pacific Gateway and Corridors Initiative, we’re building the transportation and logistics system that will lift pan-Pacific trade and investment onto an elevated trajectory.
Conclusion Unfortunately, you cannot pick up a newspaper today without reading the attacks of those who oppose such initiatives—those who think we can hide from globalization by turning inward, protectionist and parochial. Perhaps it’s fear—fear of the unknown. Fear Canadians cannot compete. I think they are wrong. Canadians can and must compete with the bes in the world. And not just because our economic interests are at stake. Free and open commerce is also critical to fighting poverty, famine, disease and environmental degradation. That is how prosperity and technology are diffused to where they are needed. Trade is not a zero-sum game. It’s a positive-sum game, where benefits are felt by all who embrace it. In today’s global economy, supply chains and technology have taken us well beyond the mercantilist notion of nation-to-nation exchange, where exports are good and imports are bad. Imports are as important as exports. Outgoing investment is as important as incoming investment. Services are as important as goods. What is critical is free and open flows—flows of technology, flows of expertise and flows of investment. Let us move beyond the sterile debates and tired, pejorative labels on the evils of globalization or on the perceived purveyors of global capitalism. Globalization is here. It won’t go away. It’s time to build Canada’s future by harnessing the powerful and positive potential inherent in international trade and commerce.
Future generations of Canadians are counting on us.
Thank you.
7 June 2007 - Ministry of International Trade, Canada
Notes from an address by The Honorable David L. Emerson, Canadian Minister of International Trade, on the occasion of International Trade Day
I’d like to thank everyone at the Canadian Chamber of Commerce for the invitation to speak today and for your ongoing advocacy work on Canadian trade and competitiveness. I’d like to pay a special tribute to Nancy Hughes-Anthony for her past nine years of leadership of the Chamber, and I wish her well with her new leadership role at the Canadian Bankers Association. This is International Trade Day. Canada is, has always been and always will be a trading nation.Everyone in this room knows that we Canadians cannot maintain our quality of life without a strong, prosperous and competitive economy. And you cannot build a solid economy without engagement in global markets, in terms of trade, investment and innovation. But it’s not enough for business leaders, policy wonks and analysts to know the fundamental economic reality of the Canadian market. There must also be a broad-based national consensus. Every Canadian needs to know that half of what we manufacture in Canada is exported—and that a fifth of all Canadian jobs are directly linked to international trade. Thanks to technology and increasingly open and competitive markets, the nature of international commerce has gone through a sea of change. Big companies are becoming integrated collections of smaller ones. Distance is dying and both trade and investment are now shaped by the development of global value and supply chains. Opportunity is everywhere and there is nowhere to hide from competition. The State of Trade: 2007 document, which Foreign Affairs and International Trade Canada is releasing today, includes an in-depth examination of global value chains. And it underscores the need for Canada to be deeply engaged internationally—through trade, through investment, through technology, through innovation and through the development of new products. Last year, I outlined my concerns about Canada falling behind in this race for global competitive positioning. I focused particularly on trade policy and trade negotiations. Even our closest trade relationship, with the United States, was being broadly undermined by the softwood lumber dispute—the longest-running, most damaging trade dispute in Canadian history. I also told you about this Government’s commitment to turn the corner. To re-engage with our partners in the U.S., Mexico and throughout the Americas. To develop strategies and negotiate agreements to give Canadians more and better access to markets around the world.
A look back…
We’ve accomplished a lot since then. We announced Advantage Canada, a strategic framework to make our country more competitive. Tax cuts, infrastructure investments, regulatory streamlining, and a Global Commerce Strategy are all central to Advantage Canada. We put in place the Softwood Lumber Agreement, which put over $5.5 billion back into Canadian hands. This at a time when poor markets are wreaking havoc on the industry. Just imagine the carnage that would have been brought by a new round of countervailing and anti-dumping duties in the absence of the Softwood Lumber Agreement. We signed a Foreign Investment Protection Agreement with Peru—our first such agreement in eight years. We added a chapter on procurement to our Free Trade Agreement with Chile, an agreement that is ten years old this year. We concluded or expanded “Blue Sky” air agreements with Portugal, Serbia, Croatia, the U.K., Japan, Algeria, the U.S., Ireland and Kuwait. We are investing over $1 billion in our Asia-Pacific Gateway and Corridors Initiative to position western Canada as the gateway of choice between North America and Asia. As part of our engagement with China, we signed a Science and Technology Agreement that will enable Canadian researchers and companies to tap into the aggressive innovation agenda that is transforming China at breakneck speed. While in China, I was accompanied by a delegation of top Canadian science and technology companies, as well as senior executives in transportation and logistics, there to promote the Gateway. My Parliamentary Secretary, Ted Menzies, led a mission to India, where we showcased Canada’s infrastructure expertise. I followed up with my own visit to further our trade and investment collaboration at the ministerial level. Next week, I will be meeting with India’s Commerce Minister, Kamal Nath, during his visit to Canada. We’ll be reviewing some outstanding issues with an eye to concluding a FIPA (Foreign Investment Protection and Promotion Agreement) this year. But reading the State of Trade document, you will see that we’ve only scratched the surface of what needs to be done.
Where we are
The good news is that 2006 was a strong year for Canada. Our exports reached an all-time high of $524 billion. In terms of investment, Canadian direct investment abroad reached $523.3 billion, nearly 14 percent above 2005 levels. Inward investment of $449 billion was 10 percent above the previous year. We’re also beginning to diversify our trade reliance beyond the U.S. market. Last year, exports to non-U.S. countries went up by 14.6 percent, a record high, and an increase of over 50 percent from just five years ago. In 2002, 87 percent of our exports went to the U.S. In 2006, this was down to 82 percent—not by shrinking our exports to the U.S., but by growing in other markets. But some of the news is not so good. We’re still heavily reliant upon natural resources, which are almost the sole source of our trade surplus. They’re the driving force behind the majority of new flows of foreign direct investment into Canada. Our manufacturing sector continues to struggle. They’re feeling the effects of heavy reliance on a weakening U.S. market, the soaring Canadian dollar and increased competition from low-cost countries. Despite the climb in our non-U.S. exports, we’re still losing ground. We’re losing market share in Asia, in Latin America, in Europe. Even here in North America, China is poised to overtake Canada as the top source of imports in the U.S.
The message is clear. Despite our progress, we’re being outpaced by our competitors. It’s not just fast-growing emerging economies like China, India and Brazil, but it’s also our more traditional competitors such as the U.S. and Europe. They are aggressively pursuing new trade relationships. We need to understand that it’s no longer simply a case of businesses competing with businesses. Governments are also competing with governments to position their economies internationally.
Consider market access. Since 2001, the U.S. has negotiated FTAs (free trade agreements) covering 16 countries, with agreements covering eight more countries in progress. Mexico? Four FTAs negotiated, covering five countries in the same timeframe. Chile? Eleven FTAs negotiated, covering 40 countries. Australia? Three FTAs—including one with the United States—with agreements covering another 17 countries, including one with China, in the works. This imbalance puts Canadian firms at a disadvantage. It reduces opportunities for trade, hurts our companies and ultimately costs Canadian jobs. Canadian companies can compete with the world’s best. But they need a level playing field. Today I can tell you that we are turning the corner.
A look forward
The WTO remains the single best avenue for trade liberalization for a small, trade-oriented economy like Canada’s. When it comes to trade, the 150-member WTO is the “great equalizer.” Its rules level the playing field for all. “Might” is not “right” under the WTO. Canada is actively working toward an ambitious, broad-based outcome to the Doha Round. Signals coming from our negotiators in Geneva are positive. The elements of that critical landing zone are beginning to take shape and with political will, success is within reach. Regardless of how WTO negotiations turn out, we cannot sit on the sidelines. We’ve been a spectator for too long as market share is taken by competitors with more aggressive trade strategies. So we’re pushing forward with a focused and aggressive strategy of our own. First, we will continue to strengthen our position in the North American marketplace. NAFTA allowed us to build on our history as neighbours and friends. We have created a powerful North American economic engine—the largest free-trade zone in the world, with a market of over 400 million people. We’re working on a range of initiatives to make NAFTA stronger. We’re working on a further package of rules-of-origin liberalization that will benefit exporters in all three countries. We’re also working on an initiative to remove trade barriers in key sectors, and reviewing our newer free trade agreements to see what improvements may be incorporated into NAFTA. Our goal is to make the NAFTA economies even more competitive. Our goal is an even more efficient and open platform that will draw more business to and through North America. Our goal is to reduce offshoring of North American jobs and to do it by leveraging the competitive capacity of the entire continent. Both the Security and Prosperity Partnership (SPP) and the work of the NAFTA Commission are focused on this goal. We’re also committed to reaching out to our friends and partners throughout the Americas. We will forge new trade and investment agreements that will re-energize our business relationships and build a hemispheric advantage.Today, I can announce that we are launching free trade negotiations with Colombia and Peru, and with the Dominican Republic. I’ve instructed officials to begin talks over the next few weeks. In addition, we intend to initiate free trade discussions with the Caribbean community (Caricom) and hopefully conclude negotiations with the CA4.But as we build a stronger and more competitive hemispheric platform, we’re also reaching out to our traditional partners in Europe.
Today, I’m very happy to announce that Canada has concluded free trade negotiations with the members of the European Free Trade Association (EFTA): Iceland, Liechtenstein, Norway and Switzerland. This is Canada’s first FTA in six years, and our first FTA with European countries. These are four sophisticated and wealthy economies in which technological innovation is a driving force. Taken together, they offer substantial market potential for Canada. Already, we have $11 billion in two-way trade and over $22 billion in two-way investment. In fact, the Swiss are the fifth-largest investor in Canada. This agreement will create opportunities for Canadian businesses in a wide range of sectors, including building materials, forest products, auto parts and agriculture—all sectors in which Canada has demonstrated strengths. Most importantly, this agreement is a major directional statement. It’s a statement that Canada is back in the game. For the first time in six years, we have an agreement that begins to level the playing field for Canadian companies by giving them preferential access to a key market. A lot of work went into reaching this agreement. Through the nine years of discussion and negotiation, we kept industry involved. The result is a deal that offers unprecedented flexibility. On ships in particular, the agreement provides for a generous phase-out of our tariff over a 15-year period, with a grace period of three years before any cuts begin. This will give the industry a significant period of time to adjust to the new market conditions. Our free trade agreement with EFTA also represents an important step toward trade and investment intensification with the broader EU market. The European Union is Canada’s second-largest trading partner, our second-largest source and destination of foreign investment, and our second-largest source of new technologies. Enhancing our commercial relationship with the EU is something many of you have been advocating. I share this goal. And I think the study to examine the costs and benefits of closer economic integration, which was announced at the Canada-EU Summit earlier this week, offers a solid basis from which to start. Responding to calls from the private sector in both markets to reduce red tape, Canada and the EU committed to concluding an agreement on regulatory cooperation as soon as possible. We also endorsed the Regulatory Cooperation Roadmap, which sets out an ambitious list of results-oriented sectoral cooperation initiatives.Also important is a comprehensive Canada-EU Air Services Agreement, which we will start negotiating this fall. We look forward to reviewing progress in these areas at next year’s Canada-EU Summit. Looking beyond the Americas and Europe, we’re moving forward on a robust Asian trade strategy. We’re pursuing free trade agreements with South Korea and Singapore—two vital links to the Asian marketplace—which we hope to conclude in the near future. We’re negotiating investment protection agreements with China and India. Exploratory talks with Vietnam and Indonesia are also underway. In the area of science and technology, we have cooperation agreements in place with countries like China and India. These agreements bring researchers together, and provide an important stimulus for commercialization of technology for the international marketplace. In spite of Canada’s innovation successes, the vast majority of new technologies will always originate somewhere else. These agreements provide tools to combine the innovative strengths of Canada with those of other countries—all in the interest of competitive success in the knowledge economy.
Finally, through our Asia-Pacific Gateway and Corridors Initiative, we’re building the transportation and logistics system that will lift pan-Pacific trade and investment onto an elevated trajectory.
Conclusion Unfortunately, you cannot pick up a newspaper today without reading the attacks of those who oppose such initiatives—those who think we can hide from globalization by turning inward, protectionist and parochial. Perhaps it’s fear—fear of the unknown. Fear Canadians cannot compete. I think they are wrong. Canadians can and must compete with the bes in the world. And not just because our economic interests are at stake. Free and open commerce is also critical to fighting poverty, famine, disease and environmental degradation. That is how prosperity and technology are diffused to where they are needed. Trade is not a zero-sum game. It’s a positive-sum game, where benefits are felt by all who embrace it. In today’s global economy, supply chains and technology have taken us well beyond the mercantilist notion of nation-to-nation exchange, where exports are good and imports are bad. Imports are as important as exports. Outgoing investment is as important as incoming investment. Services are as important as goods. What is critical is free and open flows—flows of technology, flows of expertise and flows of investment. Let us move beyond the sterile debates and tired, pejorative labels on the evils of globalization or on the perceived purveyors of global capitalism. Globalization is here. It won’t go away. It’s time to build Canada’s future by harnessing the powerful and positive potential inherent in international trade and commerce.
Future generations of Canadians are counting on us.
Thank you.