Statement to the Senate Standing Committee on Foreign Affairs and International Trade

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Imogen Hutchinson
5 years ago
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1 Regarding opportunities for increased trade and investment in North America Eric Miller, Vice President, Innovation and Competitiveness

2 Madame Chair, committee members, thank you for the invitation to appear today to discuss the potential for increased trade and investment in North America. The is a non-profit, non-partisan organization composed of the CEOs of 150 of Canada s largest enterprises. Member companies collectively administer $6 trillion in assets, have annual revenues in excess of $850 billion, and are responsible for the vast majority of Canada s exports, investment, and private sector research and development. The future of North America and the prospects for deepening trade and investment in the region are key priorities for our members. Almost all of our member companies have major operations in the United States and many have significant operations in Mexico. The supply chains that underpin the North American neighbourhood have created significant wealth in Canada, the United States, and Mexico over the past twenty years. We nonetheless have significant work to do if we are to ensure continued prosperity in the future. There has been a vigorous debate in Canada about a bilateral vs. trilateral path toward the future of North America. This as a false choice. A better course of action would be to adopt the principle of subsidiarity: the countries of North America will address issues at the level at that makes the most sense. The Canada-United States relationship is deep, complex, and long-standing. The Canada-Mexico relationship has intensified over the past two decades, but has the potential to go much deeper. Yet, by virtue of our integrated supply chains, shared geographic space, abundant energy reserves, and regional economic synergies, there are an array of issues that are optimally addressed, wholly or partially, on a trilateral basis. I will address both tracks in my testimony. 2

3 Canada s Trade and Investment Relations with the United States The United States is Canada s most important export market. Having a dynamic market of 318 million people on our southern flank makes its draw irresistible. Even with Canada s declining relative dependency on the U.S. export market, no other country comes close. In order to be effective in the U.S. market, Canada needs a large, adequately resourced network of representatives throughout the country. These officials contribute enormously to growing Canada s trade with the United States and to counteracting protectionist proposals when they surface. Much of the energy in the bilateral relationship these days is directed at Keystone XL, the Detroit Customs Plaza, and COOL. While Canada needs to work vigorously to achieve positive results, we cannot let these issues define the whole relationship. A key area of collaboration is on the border. We need to push hard for full implementation of the Beyond the Border Action Plan. Key to its success will be completion of a full preclearance agreement and the conversion of the trade facilitation pilots into permanent border methodologies. We should also seize on the expressed interest of the U.S. to begin planning for Beyond the Border 2.0. We can finish 1.0 and lay the policy foundations for 2.0 concurrently. As we look ahead to Beyond the Border 2.0, we should be bold. For example, let us: Reimagine cargo security by exempting firms from customs penalties when they deploy monitoring technology and big data methods in their supply chains and share the generated data in real-time with the governments; Significantly expand the use of onsite customs clearance at high-volume facilities so that cargo is not unnecessarily delayed at the border; 3

4 Set up a Trade Facilitation Advisory Board to monitor and report on whether Customs and other agencies are applying all of those technical rules in a manner that encourages trade; and Convene a group to identify innovative financing options for border infrastructure rather than solely financing plaza and bridges through appropriations and fees. Canada s Trade and Investment Relations with Mexico Under the visionary leadership of President Peña-Nieto, Mexico has become one of the most dynamic economies in the world. Its transformative energy sector reforms will catalyze economic growth for years to come. Mexico also has a growing manufacturing base due to a favourable policy environment, strong transportation linkages, and labour costs that are an estimated 4% lower than China. Canada s stock of foreign direct investment in Mexico was $5.5 billion in Mexico s stock of FDI in Canada was well less than $150 million. While Mexico s firms are increasingly internationalizing, they are not investing in Canada as often as they could. Why is the investment relationship so one sided? A key part of the story is that we make it hard for Mexicans to come to Canada and they make it easy for us to go there. The visa, which Canada introduced in 2009, has hurt our relationship with Mexican government and private sector leaders and undermined our brand in the country. The best thing that the federal government could do to improve Canada s economic linkages with Mexico is to establish a path to eliminate the visa. Mexican businesspeople often cannot travel to Canada because it takes too long to get a visa. This is not helpful. Sadly, it would appear that we are leaving considerable sums of money on the table in a fast-growing market to defend a highly untargeted policy instrument. 4

5 The Trilateral Relationship At the North American Leaders Summit in Toluca in February, the three leaders committed to developing a roadmap for regional competitiveness. There is much to be done to make North America the most competitive and dynamic region in the world. For example, on the infrastructure front, Canada should join the North American Development Bank and work with the U.S. and Mexico to transform it into a trilateral border infrastructure bank. We hear regularly about the difficulty of getting people into Canada for training. Companies hosting a training session should be able to submit a list of North American employees to be trained with assurance that the government will give them a response to their entry request within five working days. The three governments should also update the NAFTA Professionals List. Canada should convene a meeting of the dormant Temporary Entry Working Group to kick-start the process. Finally, border thickening has hurt Canada s auto sector. The Center for Automotive Research notes that a shipload of 4000 vehicles assembled outside of North America is subject to a single customs inspection. For 4000 vehicles assembled in North America, they will be subject to some 28,000 customs inspections. The associated compliance costs of add some $800 to the price of the vehicle. Next year is the 50 th Anniversary of the Auto Pact. Canada, the U.S., and Mexico need a new competitiveness agreement for today s auto industry. They should look holistically at the sector with a view to ensuring that compliance costs for North American assembled vehicles are competitive with the costs incurred by importers. Canada s auto industry will face significant challenges if we cannot minimize the impact of the border. Trilateralism could be a useful instrument for advancing this. Thank you. 5

Intervention EU Head of Delegation at the event: Poland Gate to European Commission Mexico-Poland Economic Forum 2 October 2012

Intervention EU Head of Delegation at the event: Poland Gate to European Commission Mexico-Poland Economic Forum 2 October 2012 Dear ladies and gentlemen, First of all I would like to thank my colleagues