Dancing with the Elephant: Contending with an Assertive Superpower in Trade and Global Diplomacy

Head Table Guests

Margaret M. Samuel, MBA, LLB, CFA, Enriched Investing Incorporated and Director, The Empire Club of Canada; Matt Davis, Grade 12 Student, North Toronto Collegiate Institute; The Rev. Vic Reigel, Christ Church, Brampton; Heather MacTaggart, Executive Director, Classroom Connections Inc.; Marketa Evans, PhD, Executive Director, Munk Centre for International Studies, University of Toronto; Jean-Michel Halfon, President and CEO, Pfizer Canada Inc.; Diana Conconi, Vice-President, Fleishman-Hillard and Director, The Empire Club of Canada; The Hon. Barbara MacDougall, President and CEO, Canadian Institute of International Affairs; Bernard Courtois, Executive Counsel, BCE and Bell Canada; and Charles S. Coffey, Executive Vice-President, Government and Community Affairs, RBC Financial Group.

Introduction by John Koopman

Mr. Minister, Reverend Sir, distinguished head table guests, past presidents, members and guests of the Empire Club of Canada:

The title of Mr. Pettigrew's address is "Dancing with the Elephant." The United Nations has just finished a large international study on the elephant.

Each of the member nations contributed to the study according to its particular skills: The Scots in a joint effort with my fellow Dutchmen did a study on how much it cost to feed an elephant in a year, the Swiss made a study on how much money you could make off a properly exploited elephant in a year, the Americans did one on how to build a bigger, better elephant and the French naturally did a study on the love life of "ze Oliphant." The Canadian contribution--the elephant: a federal or a provincial responsibility.

Seriously, it is appropriate that the minister speaks to us about the elephant on our southern border. After the so-called "crash in Cancun" the future success of the Doha Round of multi-lateral trade negotiations can only be described as uncertain. However, 90 per cent of Canadian export dollars and 80 per cent of Canadian import dollars are governed by NAFTA so it is our relationship with our southern neighbour that is the larger question for the Canadian economy.

The United States of America excites our admiration and in equal measure stirs our anxieties like no other country. For example, the Empire Club Foundation has the full text of all speeches ever made to the club on our Web site at empireclub.org. In total there are about 4,000 speeches. All are wonderfully indexed. Search under Canadian-foreign relations and you will find one speech on our relationship with France, two on Germany, three on India and 50 on U.S.-Canadian relations.

The Americans play a much larger role in our consciousness than we do in theirs. In 1997 Gordon Ritchie, one of the architects of the Canada-U.S. Free Trade Agreement, published a book describing the negotiations that led to the signing of this agreement.

The differences in approach were striking. Prime Minister Mulroney staked his government's future on these negotiations and appointed a trade dream team. At various times Simon Reisman, Konrad von Finckenstein, Derek Burney. Allan Gottlieb, Pat Carney and Michael Wilson all eventually played important roles. On the American side Clayton Yuetter, the U.S. Special Trade Representative, appointed a relatively junior man named Peter Murphy. Simon Reisman had direct access to Prime Minister Mulroney. Ritchie states that early on: "it became obvious Peter Murphy was not plugged into the power centre of the American system."

From the very first meeting the Canadian media were in a frenzy and the American media seemed unaware the negotiations were taking place. Ritchie describes wild scrums taking place on the steps of the USSTR (U.S. Special Trade Representative) at the close of each day's negotiating session. The crush of reporters was often so dense the front entrance was impassable. Only once was an American spotted in the melee.

The title of Mr. Ritchie's book is "Wrestling with the Elephant," and as you know the title of Mr. Pettigrew's address again is "Dancing with the Elephant." If we have gone from wrestling with the elephant in the Mulroney years to now dancing with the elephant under the current government we can only assume that, notwithstanding softwood lumber, a mad cow, and a spate of injudicious remarks about the American president, our prime minister is correct when he states that relations with our neighbour are better than they were 15 years ago.

We can only hope to relive the halcyon days of the late '60s when Professor Dale Thompson, the Director for the Centre for Canadian Studies for the John Hopkins University, addressed this club on this same subject and the title of his address was "Sleeping with the Elephant."

We are not in bed with the elephant yet, but I am anxious to hear from the Honourable Minister where this dancing will lead us.

Mr. Pettigrew was first elected to the House of Commons in 1996 and has since been re-elected twice. He has in the past served in cabinet as the Minister for International Co-operation, the Minister Responsible for the Francophonie, and the Minister for Human Resources Development prior to being appointed the Minister for International Trade in 1999.

Ladies and gentlemen, please join me in welcoming Canada's Minister for International Trade, the Honourable Pierre Pettigrew, to the podium of the Empire Club of Canada.

Pierre Pettigrew

I have decided to call my remarks "Dancing with the Elephant." When he was prime minister, Pierre Trudeau spoke of "sleeping with the elephant." That sounded somewhat threatening. Gordon Ritchie had to "wrestle with the elephant" in the Mulroney years, and that wrestling is now paying off. That is why I can now entitle my remarks "Dancing with the Elephant." Of course, there is still some wrestling to do over the softwood lumber issue, the Canadian Wheat Board and other disputes that we have had from time to time. But all in all, l believe that talking about dancing with the elephant is quite appropriate, because we have been developing an extraordinary partnership and relationship.

Having been in Cancun just 10 days ago for the World Trade Organization ministerial meeting, I am very pleased to have "Dancing with the Elephant" as a title, because in Cancun, I felt I had never loved the Americans more. The reason is very simple. When you see the setbacks we had in Cancun with the WTO round of negotiations, you have to realize that even if the cornerstone of Canada's trade policy remains the WTO, and however much our instincts in Canada point to the multilateral road, it is imperative that we take very good care of our trading relationship in NAFTA and, in particular, with the United States. That is why I turned to U.S. Trade Representative Robert Zoellick after the collapse of the meeting and said, "Am I glad we have that free trade agreement with you. Let's deepen that relationship even further. Let's trade with the people who want to trade."

In that particular context of the WTO Doha Round, talking about dancing with the elephant is very appropriate because dancing is fun. It is also a risky operation from time to time. If the elephant steps on your foot, it hurts and sometimes many Canadians get hurt. Just go into the softwood lumber communities and you will realize how difficult things are. But all in all, dancing is still a lot of fun. I have been International Trade Minister for over four years now, and I have had the opportunity to learn to waltz, to tango, and more and more often to do the two-step. The two-step is very popular in Texas!

Canada is a country of trade. We are the major trading nation on the planet. Canada exports over 40 per cent of its GDP, often 45 or 46 per cent, year after year. That is up from 25 per cent 12 years ago. We have moved exports up to well over 40 per cent of our GDP. You may think that, because of globalization, everyone has done that in the past 12 years. Not at all. The United States is exporting 13 per cent of its GDP Japan, a global economy of the 1980s, is exporting 11 per cent of its GDP That means that, proportionately speaking, Canada exports four times more than the United States and Japan. Every Canadian citizen buys twice as many imports as an American citizen. That means that of all the developed economies on the planet, Canada has the most open economy--in exports and imports. That is why we need a strong rules-based WTO institution. Since we do not have the clout of the European Union or the United States, it is important that we develop rules that apply to all of the membership.

This is why a country like Canada remains so dedicated to putting the Doha Development Round back on track. We will use all the energy that we have to bring back the Doha Development Round because Canada needs it. Our farmers need agricultural discipline to fight punitive subsidies. And it will be a lot fairer for farmers on the rest of the planet, for the cotton farmers of Africa and for people all over the world. We absolutely need that.

But we do have to realize one thing: the elephant very often sounds threatening and there are a lot of people who are agonizing over the United States. There are 190 countries in the world that would love to be in Canada's position. Being neighbours of the United States is an extraordinary opportunity, because in that country you have a market of individuals who really like to consume and who very definitely like to buy our goods. Being next to the United States is a privilege. There is no better place to be on the planet.

Canada and the United States are each other's largest trading partner. For 38 of 50 U.S. states, Canada is the largest export market. We may sometimes think that we are insignificant to them, and it is true that in the United States, they are very much centred on themselves. Margaret Atwood has a wonderful image; she says that the Canada-U.S. border is a bit like one of those see-through mirrors. We Canadians look at the mirror and we always see the United States. But when the United States look north at Canada, they see themselves. It is a good analogy, because Americans very often fail to see the difference between a Canadian and an American. Sometimes, that is good. Sometimes, it is challenging. But in any case, it is a reality that we have to deal with and consider. Every minute, $1.3 million of two-way trade in goods and services cross the border between Canada and the United States and you hear of very few problems. Of course, there are the softwood lumber and wheat difficulties, but all in all, it is an extraordinary trading relationship that works without difficulty more than 90 per cent of the time. That is what is important.

Trading with the United States is a privilege, of course, and it presents both challenges and opportunities. But the volume of trade is extremely important. We have a huge trade surplus with them--a $90-billion surplus. Sometimes people ask me, "Why aren't you tougher with the Americans? Why don't you link the issues? Why don't we penalize them with other exports?" First of all, try to persuade Canadian auto makers that we will no longer sell the Americans cars because they do not buy our soft-wood lumber, or explain to B.C. Hydro or Ralph Klein's Alberta that we will shut the energy sector in order to strengthen our hand in softwood lumber. It is very difficult. The problem is not that we are not being tough enough. We have six cases against the Americans before the courts right now, and that is pretty tough. But at the same time, as those of you who are in business know, the client always has the bigger end of the stick. When they do not want to buy, we have to do all kinds of dancing steps, one step forward and two steps backward and then start all over again. Then, one day, it ends up working. That is very much the way I see it.

I have six very important goals for the kind of Canada I want in the North America we are building, and I would like to share them with you.

The first goal is to increase our market share in the United States. Canada supplies about 19 per cent of U.S. imports, a trade weight well above our economic weight in the world. I believe we must improve on this. Last year, I challenged the Canada-U.S. Business Council to increase our share of U.S. imports to 20 or 21 per cent. I am not among those who believe that we are already exporting so much to the U.S. that we should not think of expanding further. We should actually make sure that we expand trade even further.

My second goal is to achieve greater flows of the two-way investments on which trade increasingly depends. Investment allows Canadian firms to be more productive, and along with elements such as university research as Paul Martin noted in his speech in Montreal last week, it will allow Canadian firms to be the most innovative in the world.

The third goal is to advance an agenda of smart regulations. I do not mind regulations as long as they are smart. In many areas, our countries have similar regulatory systems that work toward 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. Let's broaden and deepen regulatory co-operation between our two countries by further cutting red tape and the regulatory hurdles to doing business with each other.

The fourth goal is to bring trade remedy practice more in line with the growing integration of our shared North American economic space. We have long held that in an integrated North American steel market, the use of trade remedies is counterproductive. The United States recognized this last year when it did not include Canada in its safeguard action on steel. In Washington, there is a certain openness to tackling concerns about trade remedies and I must commend my good friend and colleague, Mr. Zoellick, for having put trade remedies on the table at the WTO Doha Round of negotiations. Ideally, the United States would accept more discipline with respect to their domestic trade law, which is often in conflict with WTO rules and has led to long-term conflict over softwood lumber. Were the United States to signal a greater willingness to have their domestic trade law supplement the WTO, I suspect it would be easier for Canadians to accept deeper integration.

The fifth goal is to eliminate the border as an impediment to trade investment and business development. It must be a smart border. North American governments need to keep pace with the demands and expectations of businesses on both sides of the border that rely on just-in-time delivery and easy access to markets. We should examine ways to make further improvements in technical areas such as NAFTA rules of origin. In an era when trade in services is expanding, we need to further facilitate the travel of business professionals across the border. We know that our two countries have faced a number of challenges over the past few years, in particular those posed by security measures in the aftermath of September 11, 2001. We must unquestionably address the public security and homeland defence concerns that are now a daily preoccupation for the United States, precisely because our prosperity and common security are linked.

Finally, my sixth goal is to enhance our representation in the United States. Last week, I announced the opening of new consular offices, bringing Canada's total number of offices from 15 to 22. We have new consulates general in Denver and in Miami. Consulates will open in Anchorage, Houston, Phoenix, Philadelphia, Raleigh and San Diego. We will be appointing 20 honorary consuls in the next six months across the United States. These new offices and honorary consuls will help our efforts to advocate on behalf of Canadian industry in the United States, and to go beyond Washington to reach members of Congress and senators in their own regions. It is important that they hear what we have to say on their own turf. Washington is such a noisy city that it is very difficult to be heard there. Some people say, "Let's have a delegation to Washington." Well, thank you very much, but no. About 22 countries will be there at the same time. What we have to do is to make sure that the Canadian message is heard all over the United States. I can tell you that the senator who hears what we have to say from the person selling him his milk in the grocery shop has a lot more influence than a lobbyist in Washington.

The relationship between Canada and the U.S. has to involve more than just the prime minister and the president getting along and working well together. The president needs to hear from his senators and members of Congress. We have to reach more deeply into the United States. I am very proud that after years of hard work, we are finally able to open these posts in the next year.

The United States and Canada have built the best continent on the planet. We have built a North America full of opportunity, a prosperous North America--a continent where we have the highest level and highest quality of freedom and justice. This is an extraordinary achievement. We represent a light for the rest of the world and people are very excited by what we experience in North America. I see it as a great privilege.

But, despite all we share, we have differences in our political cultures. In Canada, our Constitution is based on "peace, order and good government." Boring, but that is it. That means that we have Crown lands for softwood lumber. That means that we have a Wheat Board and supply management for orderly marketing. The Americans have "life, liberty and the pursuit of happiness." That is fine. It is quite exciting. We have the RCMP in the West with nice red serge uniforms--the third most recognized symbol on the planet after Mickey Mouse and Coca-Cola. Not bad for a country like ours. With their outlaws in the West, the U.S. built a whole cowboy and Indian industry in Hollywood. That is "life, liberty and the pursuit of happiness."

Those are two very different concepts of what a country should be in terms of political culture, and as International Trade Minister, I have to live with that. Americans do not understand Crown lands very well, but they do understand a lot better than they did before. I must tell you that Grant Aldonas (U.S. Under Secretary for International Trade) and Ion Evans (U.S. Secretary of Commerce) have done the best possible job of trying to understand Crown lands and to realize what we are trying to do in Canada. We have made great progress on the soft-wood lumber issue in the last two years. It does not yet show for the industry, but I can tell you there is a better understanding in Washington and at the Commerce Department about how we manage our forestry resources than there has been in the last 25 years. A lot of the problem is based on these sorts of differences in political culture. I think that as North Americans, on both sides of the border, we have to accommodate one another's differences. I believe that it is very important that we make progress in that direction.

In light of Cancun, we are very privileged to be neighbours of the United States. We will see the United States becoming more active on the international scene. Some of you will say, "Minister, Zoellick is busy. Zoellick is identifying bilateral trade deals and the United States is becoming less confident in the Doha Development Round. It is going regional. It is going bilateral. What are you going to do?" Of course, we prefer the WTO. But you must realize one thing. Much of what the United States will be doing is playing catch-up. We already have a bilateral trade deal with Chile. Theirs will only begin on January 1, 2004. We already have a bilateral trade deal with Costa Rica. We are already negotiating with Central America. The United States will also be playing catch-up with the European Union, which signed about 30 or 34 bilateral trade deals, in the 1990s. Why? Because at that time, President Clinton, lacking the authority to promote trade, did not negotiate any trade agreements. You have to understand American diplomacy.

I know many critics will say, "Americans are turning their back on multilateralism." Well, what do you want? We could not get the momentum and impetus we wanted from the WTO Doha Round. This is a setback. In my view, we will succeed in starting the Doha Round again, because a lot of progress was made in Cancun. A lot of very valuable work was done there, but we were not able to seize the moment. We were not able to seize the opportunity, but look at the quality of the improvements that were achieved--Cancun was a lot better than Seattle, where things totally collapsed. In Cancun, following the Montreal mini-ministerial meeting that I hosted in July, we were successful in sending the European Union and the Americans back to the drawing board, and in getting an agreement on agriculture. We may find it lacked ambition and we may have wanted more in it. In Seattle, for example, the talks collapsed along east-west lines over agriculture because of a gap in ambitions, and along north-south lines over implementation and development issues. At least, in Cancun, the main difficulties were a lack of ambition on the part of the north and the south, or different kinds of ambitions in different places over the Singapore issues, such as trade facilitation and transparency in government procurement.

I want to let you know that I believe that Canada's negotiations will continue to be very active, both regionally in the Free Trade Area of the Americas and bilaterally with those who are interested in negotiating deals with us. We are very interested in deepening our relationship with the United States and the Mexicans in NAFTA Thank you.

The appreciation of the meeting was expressed by Charles S. Coffey, Executive Vice-President. Government and Community Affairs, RBC Financial Group.

Charles S. Coffey, Executive Vice-President, Government and Community Affairs, RBC Financial Group, Heather MacTaggart, Executive Director, Classroom Connections Inc., The Hon. Pierre S. Pettigrew, Minister for International Trade, Marketa Evans, PhD, Munk Centre for International Studies and Mark Romoff, President and CEO, Ontario Centres of Excellence Inc.