Address by Foreign Affairs Minister on the modernization of the North American Free Trade Agreement (NAFTA)
August 14, 2017 – Ottawa, Canada
Check against delivery. This speech has been translated in accordance with the Government of Canada’s official languages policy and edited for posting and distribution in accordance with its communications policy.
Good morning, and thank you all for being here. I’d like to acknowledge that we are gathered on the traditional territory of the Algonquin.
In his book about the war of 1812, the historian Alan Taylor describes how, at the height of the conflict between the United States and British Canada, the U.S. forces unaccountably held off trying to invade the St. Lawrence River valley.
Such an invasion might have dramatically changed the outcome of the war. But it never happened.
The reason, Taylor writes, is that American and Canadian merchants and farmers in the border towns of Ogdensburg, New York and Prescott, Ontario (about an hour’s drive from here) were enthusiastic cross-border traders. And some of them, on the American side, had influence in Washington.
Any actual fighting, these Yankee entrepreneurs successfully argued, would be bad for business. So they urged Washington to take care.
Taylor says the mood at the border was illustrated by a sign erected by the Canadians. It depicted an American eagle and a British lion with the slogan, “if you don’t scratch, I won’t bite.”
Now, as you can imagine, I like that story a lot.
It epitomizes one of the most important aspects of trade: It brings us into shared purpose across national borders, working to address common needs – even in the most extraordinary circumstances. Trade is an adhesive, working to connect people even when political differences may push in the other direction.
Canada is, and has always been, a trading nation. From the earliest commerce of Indigenous peoples, to the continent-spanning fur trade of the Voyageurs, to the agrarian farming economy of the 1800s, to Klondike gold in the 1890s, to the finding of oil at Leduc in 1947, then building to our present-day when we sell both our resourcefulness and our resources, Canadians are traders.
Exports are the bedrock of our economy, accounting for a third of our GDP. Imports supply our businesses, fuel our production, and satisfy our consumer needs.
Success in this endeavour has required a uniquely Canadian blend of grit, enterprise, adaptability and resilience. It is as much a part of our identity as coping with the cold, swatting black flies and mosquitos, and enduring long winter nights.
Our approach stems from one essential insight. We pursue trade, free and fair, knowing it’s not a zero-sum-game. When innovators on both sides of a border are free to produce and sell their best wares to a wider market, while also getting access to goods and services from the other side, everyone wins.
This brings me to the North American Free Trade Agreement – and the historic project on which we are embarking, with our neighbours, to modernize this landmark pact for the 21st Century.
Trade is about people. It’s about creating the best possible conditions for growth, for jobs, for prosperity for individuals and working families.
This is why we modernize NAFTA. This is why we are seized of this opportunity to make what is already a good agreement, even better.
It wasn’t obvious to anyone back in 1987, when the Canada-U.S. Free Trade Agreement was first reached, that this was a good idea.
The Liberal party of that era, then in opposition, was against it. My own beloved mother, who ran for the NDP in Edmonton-Strathcona in 1988, was against it. Prime Minister Brian Mulroney, to give credit where due, staked his prime ministership on getting free trade passed. And he was right.
Two decades on, in our country, that debate is settled because the results are plain. The North American Free Trade area is now the biggest economic zone in the world. Canada, the U.S. and Mexico together account for a quarter of the world’s GDP, with seven percent of its population. Since 1994, trade among the NAFTA partners has roughly tripled, making this a $19-trillion-dollar regional market, with 470-million consumers. Canada’s economy is 2.5 percent larger every year than it otherwise would be, thanks to NAFTA. (It is as if Canada has been receiving a $20 billion cheque each year since NAFTA was ratified.)
Thanks to NAFTA, the North American economy is highly integrated, making our companies more competitive in the global marketplace and creating more jobs on our continent.
Consider a leading Ontario company like Magna, as the PM noted in a speech last month to U.S. governors, which employs 62,000 Americans, 22,000 Mexicans, and 20,000 Canadians – building auto parts and components that rely on supply chains that crisscross the borders.
Consider an American company like Pratt & Whitney, a global leader in making aircraft engines. It’s headquartered in Connecticut but has thousands of employees in Canada, through its Canadian subsidiary. Just like Magna, Pratt & Whitney’s success is built on cross-border supply chains. For an engine part, there is no border.
Or, consider Alberta-based Precision Drilling, among the foremost providers of oil drilling services in the world, with a thriving business across Canada, the U.S. and Mexico. It started with three rigs in 1984. It now has more than 240 worldwide, with 9,000 employees across North America. For them, a thin border for trade matters a lot.
My point is that NAFTA has been an extraordinary success story. And, Canadians today largely agree with me in that assessment. A Pew Research poll in May found that 74 per cent of those surveyed think NAFTA has been good for Canada.
This is a remarkable consensus. It extends across the political spectrum. It is reflected in the high caliber of the people who recently joined our NAFTA Council – people such as Rona Ambrose, Brian Topp and James Moore. These people set partisan politics aside to work to pursue the national interest. I am grateful.
So, our mission is clear. We are in this effort for all Canadians – and beyond that, for the broader North American community. Because if we get this right, the working people of all three countries will benefit.
Now, as we extol the benefits of global trade, we shouldn’t be under any illusions that we have perfect trade deals, or a perfect economy. We do not. That is what makes this such an important moment.
Too many working people feel abandoned by the 21st Century global economy, and have voted accordingly, abandoning the modern liberal vision of trade and growth and openness to the world. Too many towns and too many lives across the industrialized world have been blighted by factory closings and precarious work.
Though income inequality is not as extreme in Canada as in some countries, it is a concern here too. There are too many communities in our prosperous nation where people do not feel prosperous – where they instead feel left behind by an economy that is increasingly divided between the wealthy one per cent at the very top, and everyone else.
If we don’t act now, Canadians may lose faith in the open society, in immigration and in free trade – just as many have across the Western industrialized world. This is the single biggest economic and social challenge we face. Addressing this problem is our government’s overriding mission.
That makes it essential that we do two things.
First, we need to avoid scapegoating the ‘other’.
Because although economic globalization has put pressure on some of our jobs, automation and digitization have been far greater factors. The nature of work has undergone a revolution over the past twenty years, driven by profound technological change. And we’re poised to see even more dramatic shifts with the rise of Artificial Intelligence. These innovations are broadly positive and can make us all more prosperous.
But, and this brings me to my second point: That can only happen if the gains of trade are fairly, broadly shared.
We must share the fruits of trade so that the wealthiest pay a bit more tax and everyone else, a bit less. We must support pensioners and families, and invest ambitiously in education and training. We must provide a generous Canada Child Benefit, one of the first moves this government made.
This is the all-important, connecting piece, the tie between free trade and equitable domestic policy: If the second is missing, the first breaks down. And if the first is missing, the second is unaffordable. They need to advance together, in tandem.
These historic NAFTA negotiations are to begin in two days. We are keen to get to work, not least because we know uncertainty is never good for our economy.
You might think, based on media reports, that we’ve been preparing since February. In fact, we began planning as soon as NAFTA emerged as an issue in the U.S. Presidential campaign.
At that time, in the summer of 2016, I directed trade officials to begin putting in place a plan in the event the agreement were to be re-opened, or re-negotiated. That set the stage for the strategy we’ve employed – which is to say a whole-of-government, bi-partisan, full-court press to preserve everything good about NAFTA for Canada, and also to find what elements of the deal can be improved.
We’ve explained to our southern friends, at every opportunity, that Canada is the largest export market for two thirds of U.S. states, and America’s biggest overall customer – by far. Indeed, Canada buys more from the U.S. than China, the UK, and Japan combined.
Our American partners have been listening. Today, they understand, as we do, that our relationship, the greatest economic partnership in the world, is balanced and mutually beneficial. To wit – in 2016 Canada and the United States traded US$635.1 billion in goods and services. That exchange was almost perfectly reciprocal. In fact, the United States ran a slight surplus with us of US$8.1 billion, less than 1.5 percent of our total trade. That is surely one reason why, in Rhode Island last month, Vice-President Pence said America’s intention is for a re-negotiation that is “win-win-win.” That was good to hear.
We have also been working energetically with our Mexican friends, including regular conversations between Prime Minister Trudeau and Mexican President Enrique Pena Nieto.
Most importantly, we have been listening to Canadians. As of today, the government had sought and received more than 21,000 submissions of Canadians’ views and concerns about NAFTA. That includes contributions from 16 academics and think tanks, 158 associations, and 55 businesses and corporations.
The Canadians objectives I will now outline are built on these extensive consultations. This process is just beginning. Our negotiations with our NAFTA partners will be informed by continuous consultations with Canadians.
Here, then, are some of Canada’s core objectives.
First, we aim to modernize NAFTA. The agreement is 23 years old. The global, North American, and Canadian economies have been transformed in that time by the technology revolution. NAFTA needs to address this, in a way that ensures we continue to have a vibrant and internationally competitive technology sector and that all sectors of our economy can reap the full benefits of the digital revolution.
Second, NAFTA should be made more progressive. We will be informed here by the ideas in CETA, the most progressive trade deal in history, launched by Conservatives and completed, proudly, by our government.
In particular, we can make NAFTA more progressive first by bringing strong labour safeguards into the core of the agreement; second by integrating enhanced environmental provisions to ensure no NAFTA country weakens environmental protection to attract investment, for example, and that fully supports efforts to address climate change; third by adding a new chapter on gender rights, in keeping with our commitment to gender equality; fourth, in line with our commitment to improving our relationship with Indigenous peoples, by adding an Indigenous chapter; and finally by reforming the Investor-State Dispute Settlement process, to ensure that governments have an unassailable right to regulate in the public interest.
One reason that these progressive elements, particularly on the environment and labour, are so important is that they are how we guarantee that the modernized NAFTA will not only be an exemplary free trade deal, it will also be a fair trade deal. Canadians broadly support free trade. But their enthusiasm wavers when trade agreements put our workers at an unfair disadvantage because of the high standards that we rightly demand. Instead, we must pursue progressive trade agreements that are win-win, helping workers both at home and abroad to enjoy higher wages and better conditions.
Third, this negotiation is a valuable opportunity to make life easier for business people on both sides of the border by cutting red tape and harmonizing regulations. We share this US administration’s desire to liberate our companies from needless bureaucracy, and this negotiation is a welcome chance to act on that goal.
Fourth, Canada will seek a freer market for government procurement, a significant accomplishment in CETA. Local-content provisions for major government contracts are political junk-food, superficially appetizing, but unhealthy in the long run. Procurement liberalization can go hand-in-hand with further regulatory harmonization.
Fifth, we want to make the movement of professionals, which is increasingly critical to companies’ ability to innovate across blended supply chains, easier. NAFTA’s Chapter 16, which addresses temporary entry for businesspeople, should be reviewed and expanded to reflect the needs of our businesses. Here again, CETA provides a model.
Sixth, Canada will uphold and preserve the elements in NAFTA that Canadians deem key to our national interest – including a process to ensure anti-dumping and countervailing duties are only applied fairly when truly warranted; the exception in the agreement to preserve Canadian culture; and Canada’s system of supply management.
In all these discussions, we will come to the table with goodwill, and Canada’s characteristic ability and willingness to seek compromise and find win-win solutions. But we are committed to a good deal, not just any deal. That will be our bottom line.
Canada, the United States, and Mexico have a powerful shared interest in reaching a mutually beneficial agreement. Strong economic fundamentals are a compelling argument for bolstering what works, and improving what can be made better. I am confident that this is a story with a happy ending.
But, and as I am sure Canadians appreciate, the path to getting there could well include some moments of excitement.
That is because, while the fine print of such agreements can be rather soporific, trade negotiations themselves tend to offer at least a few moments of drama.
It was during the initial FTA negotiations in 1987 that the late, great Simon Reisman walked out, pulled home by his PM over the Reagan administration’s initial refusal to agree to binding binational review of anti-dumping and countervailing duties. Our government will be equally resolute. Just as good fences make good neighbours, strong dispute settlement systems make good trading partners.
And I am no stranger myself to moments of drama in trade talks. We are delighted CETA has been signed and ratified and will be provisionally applied on September 21st. But before we got there, our talks with the Wallonian government in Namur broke down. I had to make the difficult decision to get up from the table, and go home.
So, I would like to say to Canadians today what I will say to our negotiating partners on Wednesday: Our approach in these talks will be in keeping with our national character; hard-working, fact-based, cordial, animated by the spirit of goodwill and the pursuit of compromise. We also know that there is no contradiction between being polite, and being strong. It is no accident that hockey is our national sport.
These negotiations are a deeply serious and profoundly consequential moment for all of us.
Trade deals always matter. Done right, they are a vehicle for helping to create more well-paid middle class jobs. But negotiating a new trade deal is a green field project – like building a treehouse for your kids or a shed in your backyard. It’s about creating something new and useful. If things should go awry, you still have your old house.
Modernizing an existing agreement – particular one such as NAFTA, which is so foundational for our economy – is more like renovating your house, while you’re still living in it.
The end result – a nicer kitchen, perhaps, or an energy retrofit – is terrific. But getting there can be a little messy and uncomfortable. And there are going to be moments, when walls are opened up, and pipes and wiring get exposed, that can be a little unsettling.
Preparing for these negotiations has already united us as a country. I have been astounded and moved by the extremely high level of support and collaboration I and my team have received from business, from labour, from civil society, from every level of government, and, from opposition politicians. Time and again people have told me how proud they are to be Canadian, and how committed they are to doing everything they can to help. Our top-notch bi-partisan NAFTA Council is evidence of this. And all Canadians are truly fortunate that in these talks we will be represented by the best trade negotiators in the world. Canada’s trade officials are internationally renowned for their prowess and it is a privilege for me to work with this outstanding team of Canadian public servants.
I would like to conclude on an optimistic note.
As I have said, these talks are consequential. There may be some dramatic moments ahead.
Yet I am deeply optimistic about the final outcome.
That is because of this fundamental reality: The Canada-US economic relationship is the most significant, the most mutually beneficial and the most effective anywhere in the world. We know that. And, particularly after six months of constant reminders from their friends in the North, our American neighbours now know it, too.
Good fundamentals lead to good results – and that is what we will achieve.
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