press kit

Report of the Standing Committee on
Foreign Affairs and International Trade

PARTNERS IN NORTH AMERICA
Advancing Canada’s Relations with
the United States and Mexico

Bernard Patry, M.P.
Chair

December 2002

For immediate release

NEWS RELEASE

FOREIGN AFFAIRS COMMITTEE CALLS FOR CANADA

TO ADVANCE STRATEGIC NORTH AMERICAN VISION

Ottawa, December 12, 2002 - The House of Commons Standing Committee on Foreign Affairs and International Trade today tabled a major report, Partners in North America: Advancing Canada’s Relations with the United States and Mexico.  The 300-page Report containing 39 recommendations calls on the Government of Canada to meet the challenges of managing these relations through a proactive, comprehensive and coherent strategy as part of a distinctive foreign policy that promotes the values and best interests of Canadians.

The Report’s release, coinciding with the first anniversary of the Canada-U.S. Smart Border Declaration, follows a year-long study that included extensive public hearings across Canada as well as meetings in the United States and Mexico.  It also follows a preliminary report released in December 2001 in the wake of the September 11 terrorist attacks.  Among the many aspects of continental relations addressed are:

• the overall adequacy of existing policy instruments for dealing with North American ties and evolving national and regional realities;

• the future of security/intelligence and defence cooperation;

• ongoing cross-border issues;

• the management of the increasingly complex, integrated North American economic space emerging in the decade since the signing of NAFTA; and

• diplomatic, institutional and other means for successful realizing Canadian goals, both bilaterally and trilaterally.

In addition to focusing on Canada’s crucial bilateral relationship with the United States, the Report gives attention to developing relations with Mexico and options for enhancing trilateral dimensions of cooperation.

Acknowledging serious concerns about impacts on sovereignty and democratic process, the Report calls for intensified public debate and parliamentary engagement in regard to closer relations among North American partners.  It also urges deeper study of North American issues and the impacts of integration, along with a strengthening of Canada’s international capabilities so as to ensure the successful assertion of an independent and respected foreign policy. 

The Committee contends Canada can and should exercise its “capacity for choice” in determining the best options for building sound relations with North American partners, on a basis of sovereign Canadian interests, reciprocal gains, and mutual respect.  Those relations will not be improved through taking negative or passive approaches; nor will ad hoc, reactive responses suffice in strengthening Canada’s ability to meet North American challenges and achieve important policy objectives, especially with the United States. 

The Report’s framework aims to advance a confident, pragmatic agenda of Canadian priorities in the North American context.  The Committee’s early recommendations that the Government seek ongoing public input on a North American strategy paper, and consider creating a special Cabinet Committee on North American Relations, also indicate that sustained, engaged political leadership is required.  As stated by Committee Chair Dr. Bernard Patry: “How well Canada manages its relations with North American neighbours is not only a crucial matter in its own right; it is also key to Canada’s effectiveness in asserting its own influence in the world.”

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For more information, please contact:

Standing Committee on Foreign Affairs and International Trade

(613) 996-1540

Electronic version can be found on the Committee’s website at:

http://www.parl.gc.ca/InfoCom/CommitteeReport.asp?Language=E&Parliament=9&Joint=0&CommitteeID=3272

In December 2001, the Committee released a Preliminary Report, Canada and the North American Challenge: Managing Relations in Light of the New Security Environment, based on a series of hearings held in the aftermath of the September 11 terrorist attacks on the United States. Members of our Subcommittee on International Trade, Trade Disputes and Investment also focused specifically on Canada-U.S. border issues in a November 2001 report, Towards a Secure and Trade-Efficient Border, and made a number of recommendations to which the Government responded in the spring of 2002.

More than a year after the attacks on the World Trade Centre and the Pentagon, the Committee continues to have concerns that relate to both security of borders and trade. We are also acutely aware of the enduring impact of the consequences of those attacks, including an understandable preoccupation with guarding against possible future terrorism, on regional and global developments and as well — and above all — on American public policy and opinion. At the same time, as indicated in our December 2001 report, Canada’s management of these critical issues needs to be seen in the larger and longer‑term context of how Canadians want North American relationships to evolve. What is the overall strategic foreign policy vision that should guide Canada’s course of action in the coming years?

Prior to September 11, 2001, the Committee had already been planning a study of key questions involving Canada’s relations with the United States within the North American Free Trade Agreement (NAFTA), as well as looking to the future of continental ties including those with Mexico. Some of these questions have become more pressing; none has disappeared. In the December 2001 report, we stated that “the Canadian national interest in the “North American project, whatever it turns out to be, is still to be defined.” We emphasized that the next phase must be to listen to the ideas of Canadians across the country and to raise these matters with our partners in North America. Canada must set its own goals and priorities for future relations, but these are unlikely to be realizable without a sound appreciation of developments in the United States and Mexico, among the factors shaping the North American policy context.

The Committee has followed through during the first half of 2002 with an extensive series of public hearings and panels. Beyond the eight that were held in Ottawa, the Committee undertook 16 days of hearings in 12 other centres across Canada. A first round of regional hearings took place in the Atlantic provinces and in Québec in late February. A second round was held in the four western provinces and southern Ontario in early May. In each case, for reasons of economy and efficiency, these hearings were combined with parallel consultations on the G8 Kananaskis Summit agenda. Prior to the hearings, a series of staff discussion notes with questions was posted on the Committee website in order to stimulate response to policy options; these questions proved very successful in eliciting witness reactions and recommendations.

In addition to the Committee’s hearings within Canada, members also held meetings with government officials, congressional counterparts, and non-governmental experts in the United States and Mexico. Our meetings in Washington, D.C., in March 2002 coincided with the six-month anniversary of September 11. Members then travelled to Mexico City, where the first formal joint meeting of foreign affairs committees from the two federal parliaments was held in the Mexican Congress on March 13. A number of prominent Mexican witnesses were also heard from in four subsequent panel sessions.

All told, the Committee has benefited from several hundred submissions in the form of oral testimony and written briefs. We are grateful to all those we have engaged in the process for sharing their time and putting their thoughts on the public record. The input received has been invaluable to our deliberations and is reflected throughout the report. Indeed, the diverse range of what we heard is highlighted by drawing from witnesses’ own words in the report that follows.

The report is divided into two main parts and five chapters. Part I, “Canada in North America: Meeting the Challenge”, introduces the key issues and factors to be taken into account in the development of a forward-looking Canadian policy. Chapter 1, “Towards a Strategic North American Dimension of Canadian Foreign Policy”, outlines options for North American policy approaches and gives an overview of the varied perspectives brought to bear by witnesses on key questions and choices. Often these related to concerns about Canada’s sovereignty and freedom to manoeuvre in the context of continental integration. This chapter also looks at the ongoing implications of September 11 on Canadian policy options for realizing both North American and wider objectives. The chapter culminates in a series of overarching recommendations for pursuing a coherent and proactive Canadian strategy for North American relations, one that builds the capacity for Canadian priorities to shape a bilateral and trilateral North American agenda.

Completing Part I, Chapter 2, “Understanding a Changing North America”, takes a more in-depth look at the evolving North American region. Beyond providing a detailed overview of growing economic linkages and integration developments within North America, this chapter also reviews other significant societal trends, variations, and persistent disparities within and across the three countries. Relevant findings are included from some recent research on national identities and citizens’ attitudes towards North American issues. Witness views on how North American relationships should be considered in relation to Canadian interests and values point not only to continuing divergences of approach, as noted earlier, but also to deficiencies in knowledge across the three countries. There is no obvious agreed path that North American relations should take; moreover, much remains to be done in developing a better understanding of the key issues and in positioning Canadians to respond to regional challenges in a rapidly changing North America. These realities should be borne in mind when considering which forms of North American partnership and specific policy directions could best serve Canada’s objectives.

Part II of the report, “Canadian Priorities for Advancing North American Relations”, contains the three core chapters dealing with Canada’s policy priorities in the North American context, beginning with those that have been most clearly affected by the aftermath of September 11. Chapter 3, “The Future of Security and Defence Cooperation in North America”, focuses primarily on Canada-U.S. security concerns, notably at air, land, and sea borders, and on defence arrangements. It also discusses how Mexico might be included in cooperative efforts. Among the more contentious issues addressed are how Canada should respond to major U.S. initiatives such as plans for missile defences and the decision to create a military Northern Command.

Chapter 4, “Key Issues in Managing and Advancing the North American Economic Relationship”, looks at ways to improve existing bilateral and trilateral trade and investment flows, at the border and elsewhere. While NAFTA is approaching its first decade of implementation, there is still much unfinished business, ranging from addressing trade remedies and dispute resolution mechanisms (including those of Chapter 11 on investment) to managing environmental and labour cooperation, to assessing the prospects for new institutions. While the longstanding Canada-U.S. dispute over softwood lumber is one of the most obvious ongoing irritants, the chapter also goes further to address the growing debate over managing broader economic integration trends. It discusses witnesses’ views and assesses both “top-down” and “bottom-up” options in relation to various proposals for potentially closer and deeper integration arrangements, such as a customs union, a common market, and a common currency.

Chapter 5, “A Canadian Agenda for Enhancing Bilateral and Trilateral Relations in North America”, looks at the major elements in developing effective political strategies for managing Canada’s North American relations. The introduction to this chapter focuses the need to consider what combination of bilateral and trilateral approaches might best serve to advance Canadian interests in the future. The first section then concentrates on the critically important Canada-U.S. relationship and on the challenge of strengthening diplomatic and other channels for Canadian influence. The next section affirms the increasing importance of relations with Mexico. It considers ways to strengthen this bilateral partnership and move beyond past limitations. One area in which Mexico is keen to work with Canada is in furthering trilateral forms of cooperation; ultimately, envisaging the construction of a “North American community”. This chapter’s third section reviews witnesses’ perspectives on the merits of promoting closer North American ties through trilateralism and the possible implications for democratic governance. It also goes further, to examine some ideas for pursuing trilateral approaches that could involve new institutional arrangements, more intensive intergovernmental and parliamentary cooperation, and practical measures undertaken jointly in particular cross-border policy sectors.

In view of the huge asymmetries of power and wealth among the three countries of North America, not to mention historical, cultural and other differences, it is not surprising that witnesses were sometimes divided on the merits of particular ideas and approaches. In furthering the North American partnership, the Committee believes that Canada must keep its options open while both pursuing elements of that partnership that are in the long-term Canadian interest and encouraging ongoing public debate over the available options.

This report is offered as a contribution to that necessary national debate, not as a definitive blueprint for the future of Canada’s relations with its North American neighbours. At the same time, the Committee is convinced that it is a matter of national priority to act now on developing a clear, concerted and coherent Canadian strategic vision for North America. The report’s concluding section on “The Committee’s Vision for Advancing Canada’s Objectives in North America” highlights in summary the key elements on which the Committee believes the Government must move in order to promote Canadian interests and values in the North America of the twenty-first century.

Events have moved quickly in the past year, and unforeseen challenges may emerge again as they did on September 11 last year. With the benefit of a public strategy for North American relations and the capabilities in place to implement it, Canada will be better prepared and positioned to advance its objectives, not only within North America but multilaterally and globally as well. In the Committee’s view, pursuing a sovereign and mature partnership within North America will best serve Canadians while commanding attention and respect on our own continent and beyond.

CHAPTER 1: TOWARDS A STRATEGIC NORTH AMERICAN DIMENSION OF CANADIAN FOREIGN POLICY

Recommendation 1

The Government of Canada should explicitly make Canada’s relations with its North American partners an overall policy priority. In that regard, and particularly in terms of defining the North American dimension of Canadian foreign policy, the Government should elaborate a coherent public strategy for advancing Canadian interests and values in the context of North America, including Mexico, beginning with its comprehensive response to the recommendations in this report. (p. 31)

Recommendation 2

The Government should address Canada’s diminished international policy capabilities in the next and future budgets, ensuring that sufficient resources are provided to allow the Department of Foreign Affairs and International Trade to provide leadership in developing and implementing a strong, credible, strategic framework for Canada’s relations with its North American partners. (p. 33)

Recommendation 3

The Government should also ensure that there is coherence and coordination among all federal activities in which significant North American relationships are involved. To that end, consideration could be given to creating a special Cabinet Committee on North American Relations. Such a high-level committee could be co‑chaired by the Deputy Prime Minister and the Minister of Foreign Affairs and could include other ministers with important responsibilities that relate to North American issues. (p. 33)

Recommendation 4

In order to encourage further public engagement focused on Canadian objectives in North America, the Government should consider convening national and/or regional roundtables on North American relations following the public release of an initial policy statement. Such a consensus-building process should be carried on as warranted by evolving circumstances. (p. 34)

Recommendation 5

Given the increasing involvement of non-federal actors in many aspects of North American relations, the Government should consider how best to take into account the interests of other levels of government — on a cooperative basis and through an established process of consultation with provinces, territories, and municipalities — within an evolving Canadian strategic policy framework for advancing these relations. (p. 35)

CHAPTER 2: UNDERSTANDING A CHANGING NORTH AMERICA

Recommendation 6

In order to better position Canada and Canadians to meet the challenges of a rapidly changing North American policy environment that includes Mexico, the Government should:

• foster increased understanding through knowledge generation and dissemination of North American research results to the public;

• work to increase support for North American studies and education in cooperation with provincial and territorial governments, expand public information programs, and enhance its own policy research initiatives;

• investigate the idea of creating a knowledge-oriented entity or centre of excellence devoted to analyzing all aspects and impacts of North American integration, and invite the cooperation of U.S. and Mexican partners in such an endeavour;

• explore other means of promoting networking and dialogue on North American issues, seeking to involve the broadest possible social participation. (p. 51-52)

Recommendation 7

The Department of Foreign Affairs and International Trade in particular should look at ways to deepen knowledge and understanding of Canada’s North American relationships, particularly with the United States and including those with Mexico. DFAIT should also promote public engagement in better defining and promoting Canadian foreign policy objectives in North America. For example, the Canadian Centre for Foreign Policy Development could be tasked with building links in this regard among foreign service professionals, parliamentarians, academics, other researchers, interest groups, and civil society organizations. Information technologies could also be used to improve interactive connections with the public at large. (p. 52)

CHAPTER 3: THE FUTURE OF SECURITY AND DEFENCE COOPERATION IN NORTH AMERICA

Recommendation 8

The Government of Canada should increase its bilateral security cooperation with Mexico. The Government should also examine means of beginning a trilateral dialogue with the United States and Mexico to explore common perspectives on security issues in North America. (p. 86)

Recommendation 9

The Government should produce an annual report to Parliament reviewing in detail the status of the “Smart Borders” process. The ministers responsible for the implementation of border security measures should also appear before the relevant committees of both houses of Parliament on the substance of that report. (p. 96)

Recommendation 10

While acknowledging potential legal restrictions, the Committee recommends that the House of Commons establish a Standing Committee on Security and Intelligence, with appropriate secure premises, dedicated and cleared staff and other requirements. In addition, the ad hoc Cabinet Committee on Public Security and Anti‑Terrorism should be replaced by a permanent Cabinet Committee on National Security. Further, the Government should institute a review of Canada’s intelligence services and report the findings to Parliament. Finally, the Government should also facilitate increased parliamentary oversight in this area by the new Standing Committee on Security and Intelligence recommended above. (p. 98)

Recommendation 11

The Government should make public all relevant agreements under which Canadian military planners will participate in the newly proposed planning and monitoring group to be co-located at NORAD headquarters.In order to allow for a full public debate over the group’s usefulness and broader implications, the Government should also prepare and table a report on the work of this new group before the next renewal of the NORAD agreement. (p. 106)

Recommendation 12

The Government should not make a decision about missile defence systems being developed by the United States, as the technology has not been proven and details of deployment are not known. However, the Government should continue to monitor development of this program with the Government of the United States and continue to oppose the weaponization of outer space. (p. 112)

Recommendation 13

Taking into consideration the forthcoming reviews of Canada’s foreign and defence policy, and recognizing the important contribution of the Canadian Forces in achieving Canada’s foreign policy goals, the Government should commit itself to substantially increased and stable multi-year funding for the Department of National Defence.
(p. 115)

Recommendation 14

In view of the changed security environment in North America since September 11, 2001, the governments of Canada and the United States should expand the mandate of the Permanent Joint Board on Defence to include relevant security issues and officials. The Government of Canada should also facilitate interactions between the Board and Canadian Members of Parliament, and encourage the Government of the United States to do likewise.

More generally, the Canadian Ministers of Foreign Affairs and National Defence along with the U.S. Secretaries of State and Defense — and other relevant Cabinet members as may be necessary — should meet at least once a year, alternating between Canada and the United States, to discuss mutual defence and security issues. These meetings should be coordinated with the Permanent Joint Board on Defence. (p. 116)

CHAPTER 4: KEY ISSUES IN MANAGING AND ADVANCING THE NORTH AMERICAN ECONOMIC RELATIONSHIP

Recommendation 15

The Government of Canada should resist the temptation to seek short-term gains through reactive, ad hoc solutions to trade problems with NAFTA partners. Wherever possible, trade disputes should be addressed through rules-based, institutional mechanisms, and the Government should use its best efforts to improve and expand such mechanisms on a continental basis. (p. 132-133)

Recommendation 16

The Government of Canada should work with Mexico to encourage the United States to agree to improve the rules-based foundation of the general dispute settlement mechanism in Chapter 20 of NAFTA. The final reports of arbitral panels should be made automatically legally binding on the parties to the dispute. In the event that such a change is not possible, the Government should strive to make maximum use of the multilateral dispute settlement mechanisms under the WTO for resolving disputes that arise under Chapter 20 of NAFTA.

In addition, the Government should work towards increasing the transparency of the dispute settlement process by releasing all documents relevant to a proceeding, without causing prejudice to companies. The Government should also work toward increasing the openness of the process by enlarging participation beyond the NAFTA states to interested third parties, such as provinces, non‑governmental organizations and others. (p. 136)

Recommendation 17

When a NAFTA binational panel finds that the final determination by a government agency to impose anti-dumping or countervailing duties was in error, all duties should be repaid by the domestic authority to the foreign exporter. The Government of Canada should therefore propose to its NAFTA partners a formal system for the repayment of all duties, retroactive to the date set by any preliminary and/or final determination imposing duties. (p. 141)

Recommendation 18

The Committee supports the ongoing use of the Chapter 19 binational panel review procedure — and, where appropriate, the WTO dispute settlement system — and recommends that the Government of Canada continue to pursue all possible legal avenues for the efficient resolution of current trade disputes, especially the softwood lumber dispute. (p. 144)

Recommendation 19

Taking into account similar negotiations currently underway in the WTO forum, the Government of Canada should vigorously pursue consultations with Mexico and the United States under Article 1907 of NAFTA in order to actively engage them in the development of a common North American anti-dumping and countervail regime.
(p. 144)

Recommendation 20

The Government of Canada should generally refrain from linking different trade sectors as a strategy for retaliation or dispute resolution. Canada should focus on addressing each dispute on its own terms, and within a rules-based framework. (p. 145)

Recommendation 21

In light of the United States’ recent policy change with respect to aspects of Chapter 11 of NAFTA, the Government of Canada should review as soon as possible with Mexico and the United States elements of Chapter 11 that have proved problematic, in particular the investor-state provisions. (p. 153)

Recommendation 22

The Government of Canada should discuss with its Mexican and American counterparts ways to ensure adequate funding and enforcement powers for the North American Commission for Environmental Cooperation created under the North American Agreement on Environmental Cooperation. (p. 155)

Recommendation 23

The Government of Canada should initiate discussions with the governments of Mexico and the United States on ways to improve the enforcement of labour laws and standards under the North American Agreement on Labour Cooperation (NAALC). Ensuring adequate funding for the NAALC Secretariat should also be discussed.
(p. 157-158)

Recommendation 24

The Government of Canada should initiate discussions with Mexico and the United States on the feasibility of developing a permanent North American court on trade and investment that would consolidate the existing NAFTA dispute settlement processes under a single trinational juridical body. (p. 162)

Recommendation 25

Given the critical need for new infrastructure at key Canada-U.S. border locations, the Government of Canada should accelerate its efforts to construct such infrastructure at existing border points and more actively encourage its American counterpart to do the same. (p. 170)

Recommendation 26

The Government should ensure that the number of customs and immigration officers at the border matches current requirements, given the new security demands imposed on these officials. Training and the equipment available to border officers should be enhanced. (p. 170)

Recommendation 27

The Government should thoroughly review the set of customs regulations currently administered by customs officials within the Canadian Customs and Revenue Agency, with a view to their modernization. Border officials should be fully versed in any resulting changes so that they can deal more effectively with today’s border realities. (p. 171)

Recommendation 28

The Government should undertake a thorough review of long-term options for the Canada-U.S. border and present its findings to the public. This assessment should include an evaluation of the European Union’s experience in easing the movement of goods and individuals between most of its member countries and an analysis of the implications of establishing a security perimeter around North America. (p. 171-172)

Recommendation 29

To ensure that the Canadian economy remains competitive within an increasingly integrated North American economy, and to boost living standards in Canada, the Government should urgently implement additional measures to help reverse the Canada-U.S. productivity gap. Emphasis should be placed on providing tax and regulatory relief, working together with the provinces to eliminate barriers to inter‑provincial trade and generating investments in Canada’s labour force. (p. 174)

Recommendation 30

When evaluating measures to ease the burden that different regulatory systems can impose on companies undertaking business in North America and to avoid the drawbacks of regulatory harmonization, the Government of Canada, in consultation with the provinces, should seriously consider entering into agreements with its NAFTA partners to implement mutual recognition schemes for existing regulations. Under such arrangements, countries would recognize each other’s regulatory standards as appropriate, thereby facilitating cross-border commerce. (p. 191)

Recommendation 31

The Government of Canada should consider undertaking a two-track approach to North American economic integration. Identified barriers to more efficient conduct of cross-border business should be removed in an incremental manner in conjunction with Canada’s NAFTA partners. While the Committee has taken no position on the merits of a North American customs union, we believe it would be useful for the Government concurrently to initiate a detailed review of the advantages and disadvantages of the concept in the North American context. The review could include an assessment of the use of the integrated North American steel industry, among others, as a prototype for a broader customs union of some kind. (p. 194)

Recommendation 32

Given that certain vital preconditions to North American monetary integration (e.g., similarity in the economic structures of NAFTA participants, existence of labour mobility across borders, availability of a fiscal transfer system) are not presently met, the Government of Canada should oppose any current calls to abandon its existing flexible exchange-rate system. The Government should continue to carefully review its long-term currency options and, in so doing, assess the extent to which the Canadian economy is already dollarized and any associated impacts. (p. 209)

CHAPTER 5: A CANADIAN AGENDA FOR ENHANCING BILATERAL AND TRILATERAL RELATIONS IN NORTH AMERICA

Recommendation 33

The Government of Canada should increase both the number of DFAIT personnel resident in Washington and the number of Canadian diplomatic consulates in strategic locations elsewhere in the United States. It should also again increase the advocacy funds available to DFAIT, and consult with industry groups and others in the design of targeted and coordinated information campaigns. (p. 230-231)

Recommendation 34

The Government of Canada, using the new Cabinet Committee on North American Relations we have recommended, should identify specific areas of interest for enhanced cooperation. Specifically, the Government should encourage the United States to designate a high-level political representative and should pursue the model of cooperation that has been developed in the security field by the current Canadian Deputy Prime Minister and the current U.S. Homeland Security Director, proposed to become Secretary of the new Department of Homeland Security. (p. 232)

Recommendation 35

The Government of Canada should work to develop closer relations with Mexico, in particular through:

• increasing support for initiatives to deepen Canadians’ and Mexicans’ knowledge of each other, especially in policy-related areas that are becoming more important in North American terms;

• identifying on an ongoing basis specific aspects of North American relations that warrant the development of more strategic collaboration with Mexico in the Canadian interest, and exploring bilateral Canada‑Mexico collaboration that may include joint rather than separate dealings with the United States;

• expanding Canada’s program of bilateral cooperation with Mexico, and investigating the feasibility of increasing Canadian support for Mexico’s development efforts, targeting to areas of greatest need and including consultations with a broad range of non-governmental stakeholders;

• involving parliamentarians as much as possible in the deepening of the Canada-Mexico relationship and supporting more inter-parliamentary deliberations on major bilateral and North American policy issues and taking the findings into account. Consideration could also be given to the participation of Canadian ministers in inter-parliamentary forums where that is deemed appropriate by the parliamentary representatives to such forums. (p. 248)

Recommendation 36

Canada should approach the United States and Mexico with a proposal for a trilateral North American cooperation framework under which the heads of government of the three countries would meet at least annually, and preferably every six months, on a prepared, mutually agreed agenda relating to matters of shared North American concern. Under this framework, foreign ministers and other ministers as appropriate should also be encouraged to have periodic trilateral meetings. A small supporting secretariat could be supplied by the host country on a rotating basis. In addition, Canada should investigate further options for enhancing this level of trilateral intergovernmental interaction on a more permanent and sustained basis. (p. 265)

Recommendation 37

Consideration should be given to the following Canadian initiatives aimed at strengthening parliamentary cooperation on a North American basis:

• The leadership of Canada’s Parliament should, in the first instance, encourage interaction between Canada-U.S. and Canada-Mexico inter-parliamentary activities and encourage their consideration of the possibility of holding some joint meetings. Beyond that, Canadian parliamentary leaders should approach their counterparts in the United States and Mexico about the prospect of eventually establishing an overarching North American parliamentary group drawn from members of the continuing bilateral groups.

• Further to the creation of such a trilateral parliamentary association, the Canadian Parliament should propose to its two congressional counterparts that an inaugural North American parliamentary forum be held on the future of North American partnership. Such a forum could include participation by elected non-federal officials as well as incorporate an opportunity for dialogue with both government and civil-society representatives from the three countries. Based on that experience, the trilateral forum could be continued at agreed intervals with the venue rotating among the three countries.

• Parliament and the Government should ensure that the development of trilateral inter-parliamentary cooperation is adequately prepared, and supported with the additional resources that will be required for this purpose. Future consideration should also be given to exchanges of parliamentary and congressional staff and to establishing a North American congressional and parliamentary internship program. (p. 267)

Recommendation 38

The Government of Canada should propose to the governments of the United States and Mexico the setting up of a small advisory high-level expert panel on the future of the trilateral North American partnership. The panel’s mandate would have to be mutually agreed by the governments, and it would have to be given sufficient time to consult widely within the three societies before making its findings public. Such a panel could be asked to conduct an in-depth examination of the feasibility and desirability — notably from the standpoint of democratic transparency and accountability — of options for new trilateral institutions, including:

• a more permanent secretariat or “commission” to support ongoing work through trilateral summits and other intergovernmental political cooperation;

• a permanent NAFTA court on trade and investment;

• a North American development fund or financing mechanism.
  (p. 269)

Recommendation 39

The Government of Canada should propose that the first formal North American leaders summit, on the model we have suggested, undertake to identify key sectors on which there is agreement to pursue enhanced trilateral cooperation as a matter of priority. On that basis, a framework for trilateral cooperation should be developed for approval at a future summit, and progress in its implementation should thereafter be reviewed systematically at each summit meeting. The expert panel that we have recommended be established to advise on the future of North American partnership could also be tasked with providing an assessment of policy sectors that show the greatest potential for strengthened trilateral cooperation. (p. 271)

Canada is a North American nation. That is an inescapable fact of geography reinforced by historic ties of friendship and international alliance. Given that Canada is neighbour to the world’s unrivalled superpower, moreover, its international role will be shaped to a large extent by how well it manages evolving relationships with continental partners. Canada’s ability to advance its relations with the United States, and increasingly with Mexico as well, will have an important bearing on its overall future success in pursuing a distinctive Canadian foreign policy serving Canadian interests and projecting Canadian values beyond our borders.

Getting North American relations right is therefore a key policy imperative for Canada. In the Committee’s view, it requires a proactive, strategic Canadian agenda, not merely reactive or passive responses to external events and ongoing phenomena such as economic integration.

That message underlies this report. At the same time, the Committee argues that Canada retains significant “capacity for choice” in determining the best options for advancing its relationships with North American partners on a basis of sovereign Canadian interests, reciprocal gains, and mutual respect. The challenges of North American integration are indeed many, and some of these have been intensified by the continuing security preoccupations since September 11, 2001. Nevertheless, we believe these challenges also present Canada with opportunities to make strategic choices that will be of long-term benefit to Canadians. We are confident that with energetic leadership by the Government of Canada, taking into account the views and values of Canadians, our growing North American interests can be managed to Canadian advantage.

None of this will come about automatically. It will require a forward-looking vision linked to positive and sustained action. In analyzing Canada’s present circumstances and debating the policy options, candid concerns and constructive criticisms are to be welcomed. The focus should not be on negative or wishful scenarios, however, but on what realistically can be done to bolster Canada’s influence and to achieve important Canadian objectives within the North American and wider international arenas.

With those goals in mind, the work of building a better North America for tomorrow starts today. The Committee’s 39 recommendations should be seen as steps towards achieving the kind of farsighted North American partnerships that will serve the interests and values of all Canadians. Furthermore, we believe these are pragmatic, results‑oriented steps in a direction that could also be attractive to policy-makers and citizens in the United States and Mexico.

While our report recommends action to be taken by the Government of Canada, we recognize that a North American agenda needs to reach beyond the national capitals. Within Canada, this means engaging non-federal and non-governmental actors as well as civil society generally. In North American terms, the process will depend on bilateral, and increasingly trilateral, forms of cooperation if we are to move ahead.

The first seven recommendations in Part I of the report underline the strategic priority the Committee is convinced must be accorded to our key North American relationships at a time of great foreign policy challenge, when none of these relationships can be taken for granted.

In defining an approach and giving a strategic North American dimension to Canada’s foreign policy, our recommendations in Chapter 1 call on the Government of Canada to:

explicitly affirm advancing our relations with North American partners as an overall priority and put forward a public strategy to that effect;

bolster our capabilities, particularly through the Department of Foreign Affairs and International Trade, to implement a North American policy framework and strengthen the coordination of federal efforts by considering establishing a Cabinet Committee on North American Relations;

encourage additional public consultation on an evolving Canadian strategy for North American relations; and

take into account the interests of other levels of government, working cooperatively and in consultation with them, in elaborating and implementing that strategy.

The Committee’s detailed analysis of the changing features of the North American policy environment in Chapter 2 indicates the powerful integration trends that have emerged within a continental economic space. That chapter also observes the persistence of important societal differences and of complex, shifting public attitudes in all three countries towards such trends. We conclude that deeper understanding and analysis is needed of North American issues if we are to better position Canadian policy to meet the full range of North American challenges. Those encompass the diverse aspects and impacts of North American integration, and while obviously centring largely on Canada-U.S. elements should include also the still underdeveloped Canada-Mexico relationship. Our recommendations therefore call for initiatives to build up Canada’s knowledge-based capacities with respect to North American relations, expand our means of foreign policy engagement, and promote the use of information-sharing and communications networks to advance public understanding and assist policy development.

Given that overarching context, the Committee then turns its focus in this report to several major priority areas in relations with North American partners that must be addressed by Canadian policy in both the short and the long term. The ongoing emphasis on the security of North America, coupled with the strong assertion of U.S. global power made by the current U.S. administration, makes that aspect of Canada’s continental relationships one of the most crucial.

The recommendations in Chapter 3 envisage Canada contributing to the strengthening of security, intelligence, and defence cooperation in North America in ways that maintain sovereignty and policy flexibility and also enhance parliamentary and public oversight. We see merit as well in increasingly bringing Mexico into trilateral perspectives on these issues. With regard to security and intelligence matters, the Committee calls for the Government to establish a permanent Cabinet Committee on National Security and for the House of Commons to provide for increased parliamentary oversight through the establishment of a Standing Committee on Security and Intelligence. Turning to current Canada-United States border security and defence cooperation initiatives, the Committee calls on the Government to:

report annually to Parliament on progress in implementing the “smart borders” process issuing from the accord signed between the two countries on December 12, 2001;

make public any agreements subsequent to the creation of the U.S. Northern Command (NORTHCOM) that relate to Canadian participation in military planning activities co-located at NORAD headquarters, and to report on this subject prior to the next renewal of the NORAD agreement;

continue to monitor, but reserve taking any position on, the U.S. program to develop missile defences, while opposing the weaponization of space;

increase political involvement in the bilateral defence relationship, notably through an expanded mandate for the Permanent Joint Board on Defence, along with enhanced ministerial and parliamentary participation in this body.

In addition, the Committee joins many others in calling on the Government to commit to substantially increased and stable multi-year funding for the Department of National Defence, taking into consideration the forthcoming reviews of Canada’s foreign and defence policies.

Security will continue to be a dominant theme of cross-border relations, but these open up a much larger agenda of economic partnership issues that are addressed by the Committee’s 18 recommendations in Chapter 4. Given the magnitude of the North American economic relationship and its critical importance to Canada’s well-being, we believe the Government of Canada should take every opportunity to seek improvements in that relationship for the benefit of Canadians. That should include areas of unfinished NAFTA business, such as U.S. trade remedies that have proved particularly costly to Canada — the softwood lumber case being an obvious example.

The Committee reiterates its reservations, expressed in earlier chapters, about allowing policy to be driven by short-term pressures to resort to temporary solutions, “linkage” tactics, extensive policy harmonization, or sudden integrationist leaps of faith. These will hardly be a “bargain” if the risks outweigh potential gains. However, we believe there are opportunities in a number of areas to make progress on a more pragmatic, carefully prepared, and considered basis, while at the same time leaving policy development open to broader integration options wherever there are enough possible advantages to warrant a serious examination of Canadian interests.

It is now a decade since NAFTA was signed by the leaders of Canada, the United States, and Mexico on December 17, 1992, and it will soon be a decade since the agreement entered into force on January 1, 1994. Clearly, we should be looking at how NAFTA itself can be made better. We should also be open to exploring mechanisms beyond the present framework, with the aim of securing more predictable market access, shared prosperity, and sustainable economic development across North America.

With respect to better resolution of trade disputes, the Committee argues that Canada should work with NAFTA partners on reforms to NAFTA’s rules-based institutional mechanisms. Specifically, we call on the Government to:

seek improvements in the general dispute settlement mechanisms of NAFTA’s Chapter 20, including working towards increased transparency and openness in NAFTA dispute settlement processes;

institute a formal process for repayment of all punitive duties when that is indicated by a final NAFTA panel ruling, as could apply in the softwood lumber case;

vigorously pursue in regard to the softwood lumber dispute all legal avenues of redress under NAFTA’s Chapter 19, and at the WTO;

pursue consultations with the United States and Mexico under NAFTA with the goal of developing common North American rules on anti-dumping and countervail, while taking into account negotiations currently underway within the WTO.

This report also reviews the considerable problems that have been experienced under the investor-state dispute resolution procedure of NAFTA’s Chapter 11. We see an opportunity for Canada to pursue with the United States and Mexico further reforms to the operation of the investor-state provisions of Chapter 11.

Another area deserving attention is the weakness of NAFTA’s still minimal institutions, despite some achievements to their credit. The Committee recommends that Canada work to fortify and ensure adequate funding for both the North American Commission for Environmental Cooperation and the North American Commission on Labour Cooperation. More boldly, we believe Canada should explore with its NAFTA partners the feasibility of moving towards a North American court on trade and investment that could consolidate all of the NAFTA dispute settlement processes within a single trinational body.

Returning to the question of cross-border facilitation within the NAFTA area in light of new security demands, the Committee recommends improvements in critical infrastructure at key Canada-U.S. border points; quantitative and qualitative improvements in Canadian customs operations, along with reforms to modernize customs regulations; and a review of longer-term border options including an evaluation of the European Union’s experience and the implications of a continental security perimeter.

In regard to managing North American economic relationships, it is critical that the Canadian economy be in the strongest possible position to respond to the dynamic circumstances of an increasingly integrated economic space. The Committee therefore emphasizes that the Government should address domestic competitive factors with a view to reversing the Canada-U.S. productivity gap.

Moving to what might be termed a “NAFTA-plus” agenda, the Committee argues that much could be done to enhance the efficiency and other benefits of the North American economic space through mutual-recognition approaches that would avoid the drawbacks of regulatory harmonization. Beyond that, the Committee favours a two-track approach that would see Canada continue to work with its NAFTA partners to tackle identified barriers to efficient cross-border commerce on a case-by-case basis. Concurrently, while taking no position prejudging the merits of a customs union of some kind, the Committee believes it would be useful for the Government to conduct a thorough review of the potential advantages and disadvantages of the concept in the North American context. Certain highly integrated sectors such as the North American steel industry could be among those included in an evaluation of possible prototypes for broader arrangements that might advance the mutual interests of the three countries.

As for the debate over a potential monetary integration, the Committee notes that there was little support among witnesses for the idea of a common currency and that key preconditions for such integration are not currently met within the existing North American context. We believe Canada should therefore maintain a flexible exchange-rate system for the Canadian dollar. However, we agree that the Government should continue to review its long-term currency options and that it should also assess the extent of dollarization and its associated impacts within the Canadian economy.

The recommendations in the report’s final chapter look at how channels and instruments of Canadian diplomacy can be brought to bear as effectively as possible on several simultaneous challenges: managing our dominant bilateral relationship with the United States; further developing our growing relations with Mexico; and fostering incipient trilateral relationships that will determine the future ambit and success of partnership undertaken at a truly North American level.

With regard to Canada-U.S. relations, the Committee calls for increasing Canada’s diplomatic resources both in Washington and at the consular level in key U.S. regions. We believe that increased resources for producing coordinated, targeted information and undertaking advocacy efforts, in consultation with the Canadian private sector, could also pay off in helping to get Canada’s message across to U.S. policy-makers, opinion leaders, and publics. The proposed Cabinet Committee on North American relations could consider future areas for enhanced Canada-U.S. cooperation, building on the achievements to date in security matters and “smart borders” through the working relationship that has been developed between Canada’s Deputy Prime Minister and the U.S. Government’s top official for homeland security, who is proposed to become a Cabinet‑level Secretary of a new Department of Homeland Security.

There is even more work to be done in strengthening Canada-Mexico relations, given that only since NAFTA have the two countries (respectively, the world’s eighth and ninth largest economies) really begun to know each other better. The predominance of each country’s bilateral relationship with the United States still tends to overshadow such efforts. The Committee calls on the Government to invest in improving Canadians’ knowledge of Mexico and Mexicans’ knowledge of Canada; to consider strategic areas for collaboration with Mexico on North American issues; and to expand programs of bilateral cooperation with Mexico, including those addressing pressing development needs, in consultation with Mexican partners and civil society. We believe Canadian support for, and ministerial attention to, more inter-parliamentary deliberations would also promote the development of Canada-Mexico ties.

Beyond these more or less established bilateral paths, it is clear that the advancement of North American relations as a whole will be held back without an increase in trilateral diplomacy. In this report, the Committee also makes clear that a positive evolution of North America, as a more closely integrated regional entity, will necessarily be very different, and more institutionally modest, than the experience that characterizes a still-expanding European Union. For many reasons — notably power asymmetries, identity, sovereignty, and democracy concerns — we do not envisage a grandly ambitious North American “community”, much less “union” in the European sense, as being either politically feasible or desirable in the foreseeable future.

Nonetheless, the Committee believes that creative ideas should be explored for more regular and intensive trilateral relationships among the three countries, and that Canada should lead in proposing specific steps that could be taken in the next few years to build up that trilateral dimension of the North American partnership. To this end, we recommend:

approaching the United States and Mexico to establish a more formal intergovernmental North American cooperation framework that would support meetings at the heads-of-government level at least annually and also more regular meetings of foreign ministers and other ministers dealing with matters of common North American concern;

considering a number of initiatives to further parliamentary interaction on a trilateral basis and, in conjunction, occasional forums for the public discussion of North American issues that would include, besides parliamentarians, a broadly representative range of participants from the three countries;

supporting the creation of a small, high-level expert panel on a trilateral basis to advise the governments of Canada, the United States, and Mexico on the merits of deeper forms of trilateral partnership, notably in regard to having a permanent North American secretariat to support trilateral political cooperation, setting up a permanent North American court on trade and investment, and establishing a North American development finance mechanism to address Mexico’s socio-economic disparities; and

promoting, on the basis of the formal trilateral political cooperation framework recommended above, an inaugural summit of North American leaders that would identify priority sectors for pursuing enhanced trilateral cooperation, with progress on such a mutually agreed North American agenda to be reviewed at each subsequent summit meeting.

The Committee certainly recognizes that some of our recommendations are far-reaching and oriented more to the long term. Ultimate success will also depend on engaging political interest in the United States, a task that is never easy or assured. However, we believe that advancing Canadian objectives in North America is in our long-term national interest, and that doing so requires political imagination, energy, and the kind of larger vision of North American partnership that we have tried to put forward in this report.

Shaping the kind of North America Canadians want is an unfinished agenda that goes well beyond addressing the relatively few key irritants that are bound to arise in such a vast, complex set of inter-relationships. Even among the many aspects of our relations with the United States and Mexico that are working quite well, improvements can be sought. In the North American integration context, other elements of partnership could be substantially strengthened, and further dimensions, especially of a trilateral nature, considered.

In the Committee’s view, Canada should proactively embrace North American challenges, not shrink before them. That is why we are urging leadership on a comprehensive and coherent strategy for North American relations, one that builds on Canadian values, looks to Canadians’ best interests, and seeks to advance a confident Canadian agenda for the future.