Ambassador to the U.S. Michael Kergin
Videoconference to Canadian Chamber of Conference in Winnepeg
Washington, D.C.
September 17, 2001

Thank you Gerry [Protti] for that kind introduction. I am grateful to be able to take advantage of technology imperfect as it may be to allow me — literally — to be in Washington and Winnipeg at the same time.

I had hoped to address you by video conference rather than in person because of the powerful reverberations following the heinous attacks of September 11th. Much as I regret not meeting and conversing directly with your members, my presence is required in Washington as our governments work together to overcome these tragic events.

Yet at the same time I was determined to find some way to connect with the annual general meeting of the Canadian Chamber of Commerce. Supporting your interests is a key part of my job here in Washington. And no individual or group can — or will be allowed to disrupt the fundamental interconnectedness of Canadian and U.S. society. We will be hard at work during the weeks and months to come to ensure that the impacts of this tragedy on all our lives are minimized. The world's largest trading relationship — indeed the world's closest neighbours and allies — are far stronger than any attackers, no matter how hateful they may be.

I didn't hesitate for a moment when given the opportunity to be here. You — the members of the Canadian Chamber of Commerce — are crucial drivers of Canadian industry and the Canadian economy; you are the principal creators and sustainers of our country's economic partnership with the United States — the world's largest; and you are my primary clients when it comes to tending bilateral commercial relations with our neighbours to the south.

The sustained success of your members as exporters has changed our country: you have tied Canada to the global economy — 45% of GDP is generated by trade — up from 25% ten years ago; you have transformed the structure of our economy — Canada exports almost half of all the goods we produce and services we sell. Your success in competing internationally has improved the lives of Canadians.

And as a result of these successes, you have given added meaning to my job. The role of Canada's Ambassador to the United States still includes the traditional practices of diplomatic representation — as a political interlocutor with the White House, Congress, and the states. But over time — in particular during the last decade, as the FTA has been implemented — the Embassy in Washington has taken on an increasingly important responsibility as steward of our remarkable economic relationship with the United States.

We have with the United States what I call an "intermestic" relationship. International because the United States is, after all, a foreign country for Canadians. Domestic because issues are frequently driven by local or domestic pressures... And friendships. But we must never forget that this integrated economy is governed by two quite different systems of government.

I will begin by dwelling on the unique characteristics of the U.S. system of government — and how these differences may affect Canadian business competing in the U.S. market. I will then briefly recall some of our successes and lay out some of the challenges in minimizing the impact of such differences on Canadian companies. Let me then conclude by listing a few immediate priorities that the Federal Government will be pursuing to further promote the interests of Canadian business in the United States.

This month marks the conclusion of my first year as Canada's Ambassador in Washington — it has been a remarkable and fascinating year inside the Beltway. The unique American political system of checks and balances can often seem quite obscure to Canadians — and Americans for that matter. But this exotic system of government rules over an economic market which is of overwhelming importance to Canadian business.

Let me list a few examples from the past year of those kind of events which have deeply affected the political climate in the U.S. capital, and which consequently have had a bearing on how our southern neighbour — and your largest export market — is governed.

Consider the transition of power between administrations after a presidential election, especially when there is a change in the party controlling the White House. The result is nothing less than a temporary vacuum in Washington. The process of identifying, vetting, and hiring the senior bureaucrats who are so influential in making or breaking our commercial relations, seems to take longer with each new president (the Bush process is still only half complete — and this after eight months in office!).

This transition period makes the resolution of bilateral irritants much more challenging and prolonged. During the early months, there is simply no one in place at the State Department, Commerce Department or USTR below the secretary (i.e. ministerial) level to take the call. And if you do manage to get someone on the line it is highly possible that they are too new to the files, or that they lack the mandate or authority to take appropriate action.

This combination of a "lame duck" election year, and a "transition&rquot; year, I believe, complicated the finding of a rapid resolution to the P.E.I. potato issue (which some of you may recall). Early work on the softwood lumber issue, as well, was certainly not facilitated by this phenomenon. In the end, this is simply a reality of doing business in Washington, D.C. every four or eight years.

The diffusion of power between the Administration and the two chambers of Congress is another example of political complexity. The shift of power in the Senate, when a longstanding Republican, Jim Jeffords, became an Independent earlier this year, increased the political volatility.

The impact of Jefford's defection has been profound. Senate committee chaimanships — such vital committees as finance, foreign relations, and appropriations — have changed hands as a result. Policy areas of key importance to Canada — trade, taxation, spending, environment, and energy — become subject to the individual views, and local interests, of a new group of chairs.

Such political trends mould the philosophies, ideologies and rationales of those who govern our largest export market; these changes also influence the strategies and strengths of your USA competitors, and they affect the decisions and choices of your customers.

Additionally the unpredictable nature of congressional action creates uncertainty for your business planning cycles and investment. This was the case with recently overturned immigration legislation — Section 110 — which would have threatened significant border congestion. Congressional rhetoric on softwood lumber has also increased the climate of uncertainty with devastating effects on small Canadian producers.

Members of the chamber are aware that congressional action on presidential trade promotion authority — or fast track — is an important component of the U.S. engagement to liberalizing world trade. As you know, fast track allows the president to negotiate trade agreements without direct congressional interference while the negotiations are in progress. Congress is limited to adopting or rejecting the entire trade deal only once it has been finalized.

But support for trade promotion authority must be obtained from a wide variety of the congressional membership. It is readily apparent that the Bush Administration will be tempted to satisfy a daunting range of special interests from a diverse Congress in order to secure this authority.

And when one talks of special interests, it is time for Canadians to go on alert status — because our own trade commodities often become vulnerable: softwood lumber, steel wire rods, durum wheat, molasses, potatoes, hydroponic tomatoes, even mussels. (Seafood variety as opposed to the health club type!)

Also the change in control in the Senate from Republican to Democrat has complicated greatly the Administration's efforts to obtain speedy trade promotion authority.

I mention these anecdotal examples from my first year to illustrate the importance for Canada to promote our trade agenda with the Administration, with congressional allies, with public opinion and, yes, with U.S. trade associations like your own.

So in this context of a challenging economic and political environment, what do I intend to do? Let me suggest a number of priority areas requiring major attention.

First, the interests of both Canada and the United States — on this continent and globally — are best served by reducing the number of barriers to trade between our countries. Indeed, we have broken new ground in developing trade rules relating to such areas as trade in services, intellectual property protection and dispute settlement. Our agreements are benchmarks against which other trade pacts are measured — serving as working models not just for other nations' agreements but also for regional and multilateral trade negotiations.

The ongoing softwood lumber dispute provides a crucial case study of the importance for trade law to prevail over local political interest. As Minister Pettigrew said recently, "U.S. behaviour in this case shows the damage that politically motivated trade actions can have. And it shows how important it is that we can turn to a system of rules with which all members have agreed to comply." Canada will employ every avenue, including every legal measure possible under the WTO and NAFTA, to fight the United States softwood lumber action.

The abuse of trade remedy law for safeguards, anti-dumping and countervail has been made even more egregious with the introduction of new — and we believe illegal — measures created by the so-called Byrd Amendment. This amendment has the effect of allocating revenues from anti-dumping and countervailing duties directly to U.S. industry. Essentially this is a form of trade remedy ambulance chasing which adds further uncertainty to the international trading regime.

Such pandering to their special constituencies may provide short term political satisfaction to some congressional leaders. Nevertheless, the Embassy will continue in pointing out to the U.S. political leadership that shortsighted actions risk significant damage to the longer term North American economic interests situated in an interdependent global economy.

A two-track strategy will be deployed in this endeavour: legal action to obtain judicial settlement; political advocacy to counter the effects of parochial interests.

Second: I intend to persevere in finding ways to improve the management of the Canada-U.S. border through innovative bilateral cooperation. While trade liberalization has been an unqualified success, it has exposed some new hurdles. A primary goal of the FTA and NAFTA was to create an economic environment for our industries to remain competitive in the global marketplace. Seven years after NAFTA, we now have duty-free trade. But we do not always have cost-free trade.

In other words, while NAFTA has created the appropriate environment to increase trade, it has not always provided us with the necessary instruments to facilitate the actual transfer of goods across the border in the most expedient and lowest-cost way.

The average non-tariff border cost can represent approximately 5% of the final invoice price of a given product. And I understand that more trade-sensitive industries calculate the cost as high as 10-13%.

We need to move into the fast lane on border management. It cannot be denied that the recent tragedies in New York City and Washington will make this goal more challenging over the short term. Nevertheless, Canada and the United States will have to look cooperatively to a range of customs, immigration and security practices so as to work towards a more expedient border regime. In the weeks and months to come we intend to work closely with the U.S. Administration and business — on both sides of the border — to this end.

Finally, in order to ensure that Canadian businesses can fully take advantage of market opportunities in the United States, I look forward to supporting the Prime Minister as he leads the first Team Canada West trade mission to Dallas, Texas and Los Angeles, California from November 27 to 30. As you know, this Western Region Team Canada builds on two highly successful previous missions comprising the Atlantic premiers and led by Mr. Chrétien to Boston and Atlanta.

Regional Team Canada represents a new way of doing business with the emerging economic power centres in the USA. It is especially useful to SME's and first time exporters ready to take on larger, more distant markets. The regional Team Canada's provide high-level introductions and direct follow-up by our consulate network.

This fall's destinations, Texas and California, offer great opportunities for western Canadian businesses. Canada currently ranks as California's third largest trading partner, and Texas is now the U.S.' second most populous state.

The Western Team Canada trip will reinforce initiatives on behalf of Canadian firms in sectors such as energy development, agriculture and agrifood, education and culture.

In concluding, let me say that there is no denying that there are some real challenges facing us in the U.S.-Canada trading relationship. Some are induced by local politics — nothing new there; some will be affected by the economic climate on both sides of the border over the next several months; and some will result from the most heinous acts of last Tuesday.

But the economic interdependence of North America is an established and unalterable fact, much stronger than individual or transitional actions. I am confident that the priorities and objectives which I have laid out will help move us through some temporary choppy waters to a promising and productive future.

Let me once again thank the Chamber of Commerce for facilitating the arrangements to allow me to join you today via videoconference. This has been a trying week here in Washington — but it is truly a pleasure to have been able to speak to you today — even if I am a disembodied voice.

I would be pleased to answer any questions you may have.


©2001 Government of Canada.