Pursuant to Standing Order 108(2), we are beginning our study towards the next North American leaders' summit.
Before we begin, I want to say a few words about the study and just thank my colleagues for engaging me—how does that sound?
Voices: Oh, oh!
The Chair: I appreciate that.
I do think that one of the most important works a committee can do is to be proactive when we're addressing issues, important policy issues, that certainly merit some increased attention and care and consideration. I think North America is certainly one of these issues with the whole issue of competitiveness and integration—I really do believe that—and being next to such a large neighbour.
I just think it's of paramount importance, given the fact that we have this yearly summit. As we continue, it will be one of the priorities of the North American region as it continues to grow and change. I think as a key contribution here as a committee, we can examine the importance of the cooperation and enhanced integration between Canada and our two neighbours in the economic, energy, security, environmental, and societal sectors. It's a privilege to have a very knowledgeable panel here over the next week or so, an intellectually nuanced panel of experts, on the issue.
I now want to introduce the individuals we have here today.
Maryscott Greenwood, senior adviser at the Canadian American Business Council, welcome. It's nice to have you here today.
Colin Robertson, vice-president and fellow at the Canadian Defence and Foreign Affairs Institute, welcome back to committee.
Carlo Dade, director of the centre for trade and investment policy within the Canada West Foundation, welcome. I know I saw you at the trade committee, on which I've sat. I'm not sure if I've seen you at this committee, but I could be mistaken. I've definitely seen you at both committees, for sure, but I'm not sure which one I've seen you at more.
The Honourable Michael Wilson, chairman of Barclays Capital bank, will be joining us at 12 o'clock.
I have a couple of things I want to mention before we get started. Maryscott Greenwood has to leave for a 1 p.m. flight, so she'll be leaving just before noon. If you want to interrogate her hard, it needs to happen in the first hour. How does that sound? We'll break very quickly at noon so that we can get hooked up for a video conference with Mr. Wilson.
We look forward to hearing from all our panellists. Then we'll go back and forth for questions, as we normally do.
Ms. Greenwood, the floor is yours.
Thank you so much, Mr. Chairman and members of the committee. Thank you for having me. It's an honour to be back in Ottawa.
I congratulate the chairman and the committee for taking on a really important topic. I'm really pleased to be here with you today. I'm going to read from my notes. I know we have seven minutes, so I'm going to fly.
I want to talk to you about a subject that covers nearly every aspect of modern life, everything we build and use each day, yet it's virtually never discussed in policy circles—standards.
What do I mean by standards? It’s the set of voluntary guidelines that everyone uses to create, manufacturer, buy, and sell everything from electrical outlets to shower valves to water heaters or zippers on blue jeans. These are things we take for granted in our daily lives that work perfectly well, and we have no idea how it all comes together. It's through an amazing web of voluntary standards set by public and private collaboration, which are set in every sector in every region, and which provide the map for how things get made.
Standards help ensure that a light bulb fits in the socket, that you can take money out of an ATM anywhere in the world, and that plugs for electrical appliances fit outlets.
In the U.S. alone, there are more than 100,000 standards at work across all industry sectors. These include standards for products, things like washing machines and banking cards; standards for performance, as in toy safety and greenhouse gas emissions; standards for certification of personnel, such as food handlers and crane operators; standards for construction of buildings and systems—for example, building, electrical, and plumbing codes.
Why am I raising the issue? Here in North America we have so many conflicting standards in so many areas that it is becoming incredibly expensive and inefficient to make things, and we are getting outsmarted by our competitors around the world.
I should just pause to say that these are the kinds of things we raise at the Canadian American Business Council. These are the issues we raise to the policy-makers attention so that you can look at them and shine a spotlight on them, because you have the power to do that and the ability to convene.
It’s a sleeper issue. People aren't really talking about it, but they should because it will impact our economic success in a major way in the years to come. I know that's important to this committee.
In the face of near economic collapse in 2008, along with a resurgent Europe and a growing Asia, it's imperative that Canada and the U.S. get our acts together when it comes to things that make us less competitive in the global marketplace. I know that's the subject of this committee. Canada and the U.S. have to become much more efficient in the way we build things together. In simple terms, we need to find better ways to build it here and sell it there.
How do we do that? What role can you as policy-makers play in enhancing the platform on which we in business conduct our business?
As you know, NAFTA was a cutting-edge idea at the time it was launched 20 years ago, but it is now outmoded. Our continent is at a competitive disadvantage with others in the world because of the way we don't collaborate on key issues, such as regulatory misalignment and the patchwork of standards-setting and conformity-assessment programs.
I should just pause and say Canada has really led the way on the U.S.-Canada Regulatory Cooperation Council. We can talk about that, but your own Bob Carberry, who's an official here in Canada, is the person who has driven both the U.S. and the Canadian regulatory alignment. That covers only government-to-government federal issues and isn't as comprehensive as what we in the U.S. would like to see.
The Standards Council of Canada, in its report last week on enhancing North American competitiveness, stated that standards and conformity assessment underpin economic growth and free trade, and that similarly duplicative standards, testing, and certification act as a barrier to trade and hinder productivity and competitiveness. It went on to note that differences in standards and regulations within Canada and between Canada and its trading partners can cost the Canadian economy billions of dollars per year, and exacerbates the price gap on consumer products between Canada and the U.S.
On the U.S. side of the border, according to standardsboostbusiness.org, the U.S. Department of Commerce estimates that standards and conformity assessment impact more than 80% of all global commodity trade—80%. From design and manufacturing to distribution and marketing, all the aspects of an industry’s products and services are affected at some point by standardization.
Let me give you a specific sense of what I'm talking about, the impact of it. The U.S. Department of Defense projected a $789-million savings, cost avoidance, in just one program by focusing on parts and process standardization. Another example is the fire safety industry, where the U.S. electrical manufacturers, the underwriters lab, and the fire safety associations worked to prevent more than 40,000 home fires, 350 deaths, and more than 1,400 injuries each year by collaborating on standards.
What's the current state of play between Canada and the United States? Only about 10% of standards are harmonized between Canada and the U.S.
Manufacturers of water heaters are another example. Seventy-seven per cent of their certification costs come from inspection for their products, as they must use 19 different testing bodies to comply with the requirements of the North American markets they sell to. As another example, the total cost of product testing and certification for the North American plumbing and heating industry is $3.2 billion to $4.5 billion per year. At least 10% of this cost is the result of duplicative requirements.
According to Michel Girard of the Standards Council of Canada—I was talking to him about this in detail in preparation for today—in Europe, by contrast, the standards system is more streamlined and better coordinated than in North America.
In Europe, if there is a need for a new standard, jurisdictions make the request through the European Commission. There's a presumption of conformity. All 28 member states must adopt the same standard. Competing or duplicative standards must be removed from the regulations of all member states. Therefore in Europe, there is one standard, one test, and access to a common market of more than 600 million consumers.
Here in North America we have different technical standards in Canada, the U.S., and Mexico for electrical, plumbing, gas, buildings, fires, bridges, etc., and most of them are in fact not harmonized. I would also say that in China standardization is now seen as a key to achieving national priorities. They are projecting a single market of 1.3 billion customers, following the EU model.
I have three recommendations for your consideration, and then I'll pause for your interrogation.
The first recommendation we'd like to make is that you as policy-makers and as leaders would decide that it is in our mutual national interest for Canada and the U.S. to work together to ensure that North American interests are advanced in international platforms such as the International Organization for Standardization and the International Electrotechnical Commission. That's the first recommendation.
The second recommendation we would like to introduce today is that you would consider creating a North American standards strategy. It would build on the first-ever national standards strategy for the United States that was created 15 years ago through a collaboration among many federal agencies, including the Departments of State, Commerce, Defense, and Energy, as well as regulators and standards-setting organizations.
This strategy would confirm Canadian and U.S.—and perhaps Mexican, if you want to make it trilateral—commitments to internationally accepted principles of standardization endorsed by the World Trade Organization. They are something that I think everybody can agree on: transparency, openness, impartiality, effectiveness, relevance, consensus, performance-based, coherent, due process, and technical assistance.
It is important for you as policy-makers to recognize that standards developers are experts who work cooperatively to enhance quality of life and improve the competitiveness of businesses that function in a globalized marketplace. I had the honour of meeting last week in Toronto with the Standards Council of Canada and its American counterparts to discuss North American alignment. The Canadian American Business Council is embarking on an effort to raise the profile of these issues. We believe they are extremely important yet little understood, and thus my testimony today.
Let me conclude with a statement from the American National Standards Institute, which I've modified a little bit to take into account the Canada-U.S. approach. Here it goes. It reads:
The decentralized, flexible, sector-based, and market-driven standards system is extremely responsive to changing market demands. It guides the energy of [North American] innovation and enhances the global competitiveness of business while at the same time improving [our] quality of life. It is an outstanding example of how a strong, dynamic partnership between the private sector and government can help the nation achieve its economic and societal goals.
Thank you very much.
I applaud the work you're doing because I think this is really important as we prepare for North American leaders' summit this fall. Having the committee make recommendations that can help the leaders will certainly be invaluable.
By way of background I spent most of my professional life working on North American integration. I worked as a Canadian foreign service officer with the team that negotiated the Canada-U.S. Free Trade Agreement, and later the North American Free Trade Agreement. My foreign postings in New York and as consul general in Los Angeles, and then as head of the advocacy secretariat at our embassy in Washington gave me direct experience in advancing our interests in North American integration. I built on this experience through my work with McKenna Long and Aldridge, the Canadian Council of Chief Executives, my research with the school of public policy, and the Canadian Defence and Foreign Affairs Institute.
Last year, working with my colleagues at the Canadian Council of Chief Executives, Eric Miller and John Dillon, we drafted “Made in North America”. I recommend the paper to you. It's 44 specific policy recommendations to help achieve closer North American integration that cover supply chain and border management, trade-related infrastructure, manufacturing, energy and the environment, regulatory cooperation and alignment, trade rules and practices, skills and jobs, and North America in the world.
Based on this experience let me make some observations and recommendations. First, in terms of Canada's vital relationships, it is the United States and then the rest. We can't change geography, nor would we want to. The United States remains the preponderant power in preserving the international order that makes possible the globalization of trade and investment on which our prosperity depends. The United States is also the world's biggest market and we need to do all we can to preserve our preferred economic access.
Our relationship is asymmetrical. ln relative terms, the United States represents about 30% of our gross domestic product while Canada represents about 3% of the U.S. GDP. In trade terms the United States represents about 75% of our trade while Canada represents about 20% of U.S. trade.
Second, while 9/11 is now a decade away, security of the perimeter continues to preoccupy the United States. The Americans have to know that we have their back. The more our law enforcement agencies are able to share information about potential threats, the greater the mutual confidence that allows us to let legitimate movements of people and goods flow as fast as possible in both directions.
Our preferred economic access depends on doing our part to sustain the perimeter. ln practice this means careful scrutiny of the people and goods that enter our shared space. “Inspected once, twice cleared” is the principle behind Beyond the Border, that most important Canadian initiative now in its fourth year. When the U.S. asks us to inspect for counterfeit goods, respecting our shared commitment to the perimeter, we should accommodate them while reminding them that their secondary inspections of goods at the border does not conform with “inspected once, twice cleared”.
Otherwise, we give the foot-draggers, closet protectionists, and the security obsessed who stop our shipments at the U.S. borders another reason not to expedite the passage of people and goods across the border. This removes the advantages we have, especially for our west coast ports—Vancouver and Prince Rupert—because it is a faster route across the Pacific and then by truck or rail into the United States, quickly down to Chicago.
Third, it's still about the border and clearing away the barriers. Even though, as last week's report of the Beyond the Border implementation team illustrates, we have made good progress in easing many of the barriers to better border access for people and goods, we still have a long way to go. As parliamentarians, you can help by moving on the implementation legislation that will give effect to the recent landmark pre-clearance agreement. Congress will be introducing their legislation required for implementation next week. Let's not have U.S. carriers waiting for us to expand business and tourism opportunities into Canada.
Fourth, the regulatory cooperation council is another valuable initiative that needs to be made permanent.
Originally focusing on 29 initiatives the regulatory cooperation council should be given a more ambitious mandate. With its counterpart Office of Information and Regulatory Affairs in the White House, the two agencies should continue to converge standards on autos, agrifood, environment, and drug approval. The RCC should be made permanent, situated within the Privy Council Office, and work in tandem with the ongoing Beyond the Border initiative.
To further its work and give Canadian-made goods easier access to the United States we should emulate President Obama's executive order obliging U.S. regulators to work with free trade partners like Canada to reduce red tape and the tyranny of small differences that plague freer trade.
Fifth, we need a portrait of the North American transportation infrastructure, including our growing cybertrade in financial services, to identify our shortcomings and to help prioritize future investment. Our investment in our roads, rail, and ports both air and sea needs to be integrated into a commercial plan for competitiveness.
NASCO, the trilateral North American Strategy for Competitiveness organization, which is visiting Ottawa this week, focuses on supply chain, workforce, and energy. It has done excellent work with business and various levels of government in identifying the problems and practical solutions that now require attention and action by our leaders.
Sixth, we should build on North America's diverse base of energy resources and make it a true comparative and competitive advantage. I applaud the work of the energy ministers who met in December and who in fact just put out a report yesterday, having met in Mexico, to map our energy needs and establish best practices on North American fracking standards, and now on methane. Greater collaboration on energy technology and standards, strengthening energy infrastructure, and realizing the potential of lower-carbon energy resources will help us move towards North American energy self-sufficiency and provide our citizens and businesses with reliable, cost-competitive, and environmentally sustainable energy.
Seventh, to protect our trade and investment from protectionist forces, we should have a Canadian representative in every U.S. state and keep an ongoing inventory of Canadian business and investment in each congressional district and of the jobs it supports. In recent years, austerity measures reduced our diplomatic presence in the United States. Reversing this trend doesn't mean following the traditional model of sending Canada-based diplomats. Rather, let's use the honorary consul route to recruit resident Canadians—there are well over a million living and working in the United States—and mandate our consuls to stimulate state-focused Canadian-American business councils, the work that CABC does nationally, to drive business-to-business trade and investment. To assist them, the Export Development Corporation should deploy a more strategic vision of assisting Canadian SMEs to integrate into U.S.-led supply chains.
We could model the consuls after our honorary consul in Arizona, Glenn Williamson, and the Canada Arizona Business Council. As an early objective, they set out to increase direct weekly flights from Canada from 10 to 100, recognizing trade and investment as a contact sport. Within a decade, it had achieved its goal, and trade and investment between Canada and Arizona has dramatically increased.
Eighth, we need to devote more time and attention to Mexico. It's not just a growth investment market for mining, banking, and manufacturing, and our third biggest trading partner, but an increasingly integral part of continental supply chains, especially in the production of cars and planes. We need to ensure convergence with work done in the parallel border and regulatory commissions between the U.S. and Mexico. Some issues are specific to one of the borders, but for others there's common work and we should be looking to common standards.
Security continues to be a preoccupation. Our ships and submarines help rid Mexico's Caribbean and Pacific waters of drug traffickers, whose product eventually winds up on our own streets. Our seasonal workers program with Mexico has served Canadian agricultural needs for more than 40 years.
We should be marketing Canadian universities and schools to Mexico's youth, because the ties generated through education serve us long into the future. But if we want Mexicans to visit Canada, we have to make it easier for them to get here. The visa imposition in 2009 was badly handled. It's a lesson in how not to deal with a friend and important partner. The inclusion of Mexico among countries eligible for the new electronic travel authorization starts the process anew. It should include all Mexicans, and we need a North American frequent travellers program.
Ninth, provinces and states are incubators and innovators, and we should encourage regional cooperation. Innovation at the provincial level, starting with Saskatchewan, was how we got our health care system. We are moving towards a national energy policy, addressing climate change and carbon pricing through cap-and-trade in Ontario and Quebec, through pricing in Alberta, or through tax in British Columbia.
The best-developed regional cooperation on issues including transportation, labour mobility, and invasive species is in the Pacific northwest economic region. Regional associations, especially those involving premiers and governors, solve problems, such as ensuring that Americans could visit our 2010 Olympics when then-premier Gordon Campbell and Washington's Governor Christine Gregoire came up with the smart driver's licence, which has since been rolled out on both sides of the 49th parallel.
In October, Canadian premiers and governors from the United States and Mexico will meet in Colorado Springs for the first-ever summit promoting economic development and trade through improvements and innovations in infrastructure, supply chain management, education, and energy technology.
Tenth—finally—parliamentarians must get to know members of the U.S. Congress in both the House and the Senate. Nothing is better than peer-to-peer relationships. I spent part of my diplomatic career working Capitol Hill, the source of protectionism and other legislation that, even if it's not aimed at Canada, often sideswipes us in application. Many of the issues that have the most significant impact on us come directly from Congress, because they are U.S. domestic issues and are driven by Congress, not the administration.
You can help prevent this by reaching out to your American counterparts early and often. These relationships need to be sustained and reinforced by regular contact, both directly and through forums such as the Canada-United States Inter-Parliamentary Group.
Like our national sport, Canada-US relations is about contact, being nimble and quick, taking the initiative, and knowing how to put the puck in the net.
Thank you, Chair.
Thank you very much, Mr. Chair.
Members of the committee, it's indeed a pleasure to be back in Ottawa and back in front of this committee and to see so many familiar faces and to see some new faces on the committee as well. I would like to join my colleagues in commending you for undertaking the study.
I imagine that every time you hold hearings, a witness says, this is the most important issue facing Canada today. Well, this is one of those cases, I think, in which the empirical data—the trade data, the numbers, our common history, the number of people we have back and forth, the sheer data—actually confirms the importance of the subject at which you're looking, yet it's one often overlooked in Canada. That which is closest to us, that which is easiest to us is often overlooked, and that bit of complacency has been one of the underlying themes, I think, of the Canada-North America, Canada-U.S., Canada-Mexico relationship.
That's not a criticism of the men and women in Foreign Affairs or the people on the committees and groups that work hard on the relationship. It's a commentary about the broader context of the relationship and the dangers of our success, enuring us to the work that must be done to maintain the advantages we have in North America.
So I commend the committee. With that I will start my testimony.
You will notice that I have remembered the most important lesson about testifying in front of parliamentary committees: bring your own coffee. I'm never sure whether the coffee here is free trade or not; that's the issue.
What I'd like to do today is offer a bit of a fill-in for what you've heard from my two distinguished colleagues.
My background in working on Canada-US, Canada-Mexico, Canada-North American relations goes back more than a decade, but the unique perspective I can add to this conversation is grounding it in the regional perspective and also talking about the importance of the forgotten third leg of the stool in North America: Mexico and the Canada-Mexico relationship.
I ran a Canada-Mexico binational working group with the Canadian Foundation for the Americas and the Mexican Council on Foreign Relations. Some of the recommendations—not recommendations, I would not be so bold—but some of the suggestions and ideas I have at the end of the presentation come from that earlier work.
What I'd like to do today is talk a little bit about the importance of the Canada-Mexico relationship from the regional perspective and about where we are, why we've gotten to where we are, and how this has resulted in the need for a new framework to think about what's possible in North America, and then offer some specific ideas for improving the relationship, for this NALS or North American leaders' summit in particular, and then for the 2017 North American leaders' summit. I think we really have to begin work now to prepare for the next opening we have to work on North America, and that will come in 2017.
Speaking first on the regional perspective, from travelling around western Canada I can safely tell you that there is a growing awareness or re-awareness of the importance of North America. This stems partially from our outreach across the Pacific to Asia. There is no doubt in anyone's mind in western Canada that Asia—China, India, Japan, Korea—has hugely important markets. Japan's has been for some time, but as we deal more with these markets that are more distant and more difficult, we're reminded of what we have right here on this side of the Pacific.
We have privileged access to the fattest, richest, and easiest market in the world in the United States. In Mexico we have a market that is now majority middle class, in which that middle class is growing, and an economy that is slated to be the world's ninth largest by 2030 and sixth largest by 2050. We have huge advantages that we really need to look after on this side of the Pacific.
The feeling in the west is that we need to give serious attention and consideration and apply resources to defending market share in the United States and to looking to gain market share in Mexico as opportunities in that country grow. For the west, for wheat, pulses, canola, even companies such as Palliser Furniture, there are opportunities for us in Mexico, and we in the west feel that we can grow as Mexico grows.
The motto of the Canada West Foundation is a strong west in a strong Canada, and I think we've reached the point nowadays at which we can add a strong Canada in a strong North America as key to our future prosperity.
Again, I would just note that for every western province, more than one-half of our exports go into North America, obviously for Alberta, Manitoba, but that's also the case today even in British Columbia, which we think of as more heavily dependent on trade with China. Still one-half of the exports from British Columbia are going into North America, so the market is hugely important.
There is also the growing worry about North America and where we are right now with America in the west. There is no doubt, if you pick up the newspaper, there is almost unanimous consensus among all the analysts working in North America that the relationship is not well, and even though that hasn't started to have an impact on our relationship with Mexico, it has in the relationship with the U.S. There are irritants for products crossing the border, in terms of the hit of $1 billion a year to our beef industry, which really has western ranchers worried about the ability to access this market that is so important as we struggle to get into markets that are, again, so much more difficult, like Korea and other markets in Asia. We really need to make sure we have access to North America, a market that has done so well for our prosperity in the past.
Again, there is too much to talk about here, but I would just note that the issues with North America and the problems with North America, I would say, actually started about seven years ago with the new administration in Washington, D.C. Several of us were concerned about the lack of attention and concern of the Obama administration to North America, particularly the dismissiveness toward the special relationship with Canada. This would need to be the subject of another committee hearing to go into details, but from personal experience, having been in Washington and talked with foreign policy advisers in rooms in which there were no Americans, no press, only Latin American business leaders, time and time again we heard the same sentiments you see on YouTube nowadays expressed about North America, about the relationships in North America, and about NAFTA, by the Obama administration.
I would say this administration has effectively killed the idea of a larger vision for North America. It is not just this administration but the continued opposition to NAFTA. If you want to try to kill a trade agreement with the U.S. like the transatlantic trade and investment partnership, the U.S. agreement with the European Union, the best way to do it is not just to associate it with NAFTA but to rhyme it with NAFTA, so instead of TTIP, the agreement is being called, by its critics in Washington, “TAFTA”.
That one anecdote tells you what you need to know about the status of larger ambitions for North America. Instead, we've arrived at an era of what I would call “small ball”. We need work on North America that goes beyond the day-to-day management of the relationship, on which the folks at DFATD do an admirable job, to the issue of the day, the issue of the week, of keeping the Canada-United States Regulatory Cooperation Council alive, which is, I would note, probably the single biggest issue for western Canada after, obviously, pipelines.
The RCC would rank, I would argue, as the most important issue in western Canada. In talking to provincial governments before coming out I was asked to stress that to the committee.
In an era of small ball, what can we do? Well, there are several ideas.
The first is an issue that concerns me particularly is our capacity in North America. Colin mentioned this briefly with the honorary consuls, but the truth is the last time I testified at the Mexican Congress, the joint session of the senate and the chamber, they brought in one Canadian, yet they were able to produce three Mexicans who specialize on Canada, who work in institutions—not universities but public policy institutions—where they are resourced and funded to work on Canada.
In the United States there are centres that have experts on Canada. But in Canada, if you want to find an expert on Canada-U.S. policy or on Canada-Mexico policy, someone who is not a retired diplomat but someone who is full time and funded, as Colin is, to work on Canada-U.S. policy, or if you want to find someone equivalent to work on Mexico, you should pick up the phone and dial area code 202 for Washington, D.C. Most of our capacity to work on Mexico is in Washington, D.C.
The U.S. is undergoing the largest demographic change in its history. We've completely almost missed this in Canada. We don't understand the current U.S. The majority in Mexico are now middle class. This happened without our really being fully aware of what this means. So number one is capacity in North America. It is critical that we get to not the same level as the United States, but please, the same level as Mexico is not asking too much.
The second is the Trans-Pacific Partnership. It's a well-known secret in Washington, D.C. that the Americans intend to have the TPP replace NAFTA. If this indeed is going to happen, we need to prepare for this. We need to think about this, think about the implications, start having conversations, and start looking ahead at what to do about this.
This is going to be the single largest issue, I think, to face Canada. We've complained of North America being a table for three. What happens when that becomes a table for 13? I toss Korea in because for all intents and purposes Korea has privileged access to both markets. We need to wrap our minds around this. Mexico would welcome that conversation. It's something with which they are equally concerned and there really is no other country on the planet with whom we can have this conversation other than Mexico. At this meeting I'm thinking we probably need to look at working with Mexico. This meeting of the NALS is a great time for the Prime Minister to pull the Mexican president aside and start having those conversations to look to repair our relationship.
For this NALS in particular, there are four things.
One is the trilateral trusted traveller initiative. It's absolutely crucial that we do sign the MOU at this upcoming meeting. The department needs to make sure that MOU is ready. This is a signal to Mexico that we are serious about North America, that we are back at the table. My sense, from my last trip to Mexico, was that Mexico has essentially given up on Canada. That is not in the sense of giving up on Canada forever but giving up on taking the initiative, trying to get Canada to be proactive, trying to get Canada to engage. We need to change that perception in Mexico. Things like working on the trusted traveller initiative can be a step in the right direction, but this can't be the end. This has to be the start. We can't wash our hands of it and say, “Good, we've done this. We're done.” This has to be the beginning of a broader conversation and movement.
Just as a side note, we've actually seen some research recently quantifying the cost of visas to trade and investment. We've always had information in the academic literature on the cost to tourism, but we've never really seen information on the impact on trade and investment. The journal Applied Geography has done a study recently showing that there's a 25% hit on trade and investment when visas are imposed in a bilateral relationship and a 19% hit when visas are unilaterally imposed in a trading relationship. We haven't been able to run the numbers in Canada, but you can imagine they're just as high.
The second idea is the North American Development Bank. This is something we had back with the Canada-Mexico initiative, years ago. But this is an idea that, again, would be welcome in Mexico, giving the bank a new mandate to work beyond the Mexico-U.S. border and to deal with issues that we have with the U.S.—bribing the Americans to complete the Detroit-Windsor bridge, getting them to complete the agreements in Beyond the Border. A North American infrastructure bank could leverage private sector money and give us another lever with the Americans to move them on the critical infrastructure issues that we face, and it would be a hugely important signal to Mexico.
I mentioned the RCC. Disaster response is another area where we should be able to work with our North American colleagues. Expand bilateral agreements; make them trilateral. After Hurricane Katrina, we sent a ship down to New Orleans. The Mexicans had troops massed on the border—and this time they were massed to actually come across to help, not to take back lost territory. But the Americans weren't prepared to take either one. If we want to re-energize the idea of North America, that we are something special, that we are distinct from the TPP, working on disaster relief should be an easy slam dunk. Each country has specialization and expertise, and it only makes sense to share that.
Finally, for the next NALS, look at the idea of broader energy cooperation. Here I'll toss out a truly crazy idea. Venezuela and Petrocaribe have fallen in the Americas. The countries of Carribean Central America are going to the U.S. for help to replace what they've lost in Venezuela. This could actually be a North American initiative. We can provide expertise in regulation, in energy efficiency. We can take the place in these countries to help secure markets for petroleum services countries, which are extremely interested.
Finally, North America is not just a job for the government. You will have many witnesses saying the government should do this, the government should set up a committee, and the government should fund. North America is a responsibility for all segments of Canadian society. The provinces have to be at the meeting in Colorado. The private sector has to step up and do more, in the case of Mexico.
This is being noticed in Mexico. It's being noticed in the United States, the lack of support by the Canadian private sector for the relationship with Mexico, and the silence on visas and other issues. It's not just the government that has to step up. It's all of Canada. We don't want Mexico giving up on us, and we certainly don't want the United States to do so either.
Thank you very much, Mr. Chairman. It's nice to be back. I'm sorry I'm not there with you in person. I will withhold judgment on whether it is really nice to be back until after you finish with me, but I'm sure that we'll have a good session.
The key message that I want to leave with you today is to stress the importance of the NAFTA relationship and the broader economic region that we live and work in, to encourage a more proactive set of efforts from the three governments to identify obstacles to growth and opportunities to develop, and to raise awareness of the importance of collaborating among the three governments to strengthen the region.
I'm sure you've heard from the previous witnesses on the importance of trade, energy, transportation, and national security. I'm not going to elaborate on that. The only thing I would say in addition to what has probably already been said is that you might also want to refer to the Zoellick-Petraeus report that was done under the auspices of the Council on Foreign Relations.
I think the broad conclusion is that we have a very strong integrated relationship. It's peaceful. There's a growing convergence and economic performance among the three countries. There are minor political tensions that have been discussed by earlier witnesses, but it's probably the best three-way relationship in the world, and certainly one of the strongest economically.
There's been good progress over the past 20 years. I think NAFTA itself has been a great success with a major increase in trade, investment, and economic integration. That is best seen in the NAFTA supply chain, which has allowed a number of our small and medium-sized companies to get much more engaged in the North American economy. Between the U.S. and Canada, with border management, the Beyond the Border agreement, the regulatory work under the regulatory cooperation council, national security cooperation, and the recent agreement for pre-clearances, another good example, I think it's a good relationship. Mexico is certainly of growing importance in trade and investment, banking, and manufacturing. A number of our companies are operating in Mexico.
But we have to step back and look at where we fit in the world. We live in a very competitive world today. The EU is quite coordinated both economically and politically. Asia, less so, but it is certainly a strong competitor, as are the non-aligned countries, particularly the BRIC countries of China, Russia, Brazil, and India. But as we've heard from others, there are headwinds in each of our countries. We have to try to deal with that as effectively as we can, with the potential competition growing as the years progress.
Let me just comment on a couple of areas of concern and then come to my basic conclusion. I think you've had some discussion this morning on the TPP and the conclusion of the EU agreement. On energy, we have the issues with the Keystone pipeline, but also with the shifting market fundamentals with the shale revolution and the potential of greater production from Mexico. How are we going to manage all of this in the most effective way? Just as I was tuning in on your meeting, there was some discussion on the tone from the top. I'm not going to point fingers here but I think each of our countries has contributed to a weakening in the commitment from the top.
I think the overriding consideration here is that we live in a fast changing world and much more has to be done in collaboration, I believe, to take advantage of this.
My basic point here is that we enjoy a strong position. We have many advantages now. The obstacles we're currently facing are certainly ones that can be overcome. The private sector is doing a very good job, but to maintain and to build on this, I believe we should have a proactive effort of dialogue and collaboration among our three governments, not just with the three leaders but with the key ministerial-level actors in the key areas, the important areas. This should also entail in-depth consultations with our private sectors.
What I would envisage here is a well-planned and comprehensive meeting of the three leaders on an annual basis, with a reporting of the activities in the key areas and agreement on a set of objectives looking forward. I would see this to be complemented effectively by our embassies and the six ambassadors we have within our three countries who can do very effective work on the ground.
But I think the important thing here is that we must develop a greater sense of where we stand as three countries working together to strengthen the North American region. We have the trade relationship to build on, but there's much more to be done to expand on the cooperation to strengthen our position in the world.
Now, I'm not recommending a common market or any limits on our national sovereignty here, but I do envisage a higher degree of cooperative activity in the key areas. We do have irritants among the three countries. There are the visa requirements—that was commented on just now—and KXL, obviously, and immigration issues. They're I think the three most high-profile ones. I don't deny that these exist, but I feel that if we broaden the dialogue, if we raise our sights as to what is important and what can be achieved among our three countries and do so in a very visible way, we can elevate the importance of this strong position that we hold collectively and hopefully pave the way for agreements whose positive results can raise our game and overcome these difficulties.
Let me close with some comments on this as it relates to the role of members of Parliament here.
I would encourage all of you individually to build relationships with your counterparts in the other two countries. Take advantage of the Canada-United States Inter-Parliamentary Group. I was involved in it when I was a member of Parliament, and I found it to be particularly useful both in the discussions we had at the IPG meetings and in my time as a minister, when I carried through with some of the relationships that I had there.
I'll mention just one. Bill Frenzel, a very prominent trade expert, was very helpful during the course of the free trade agreements between the U.S. and Canada and helped me in dealings with others such as Sam Gibbons, who was the chair of the subcommittee on trade.
These relationships I think can be very positive for you. I would encourage you to consider expanding the U.S.-Canada IPG to include Mexico, and if that's not possible, to develop an IPG as it relates to Mexico and Canada working together.
With that, Mr. Chairman, thank you very much for the opportunity. I look forward to any questions you have.
Thank you to our guests for being here today and for providing testimony. I think this is valuable input for the upcoming North American leaders' summit.
Your points are well taken, that we often take our relationships with the United States and Mexico for granted just because they're so present and so near and maybe less exotic than some of our other relationships. I'd describe our relationships with both countries as strong and very mature. I know we often focus on the irritants, but we do need to recognize that we have some tremendous strengths in terms of our relationships with these countries.
I'd like to comment on the Canada-Mexico relationship, for one. I happen to be chair of our Canada-Mexico Parliamentary Friendship Group. I've had recommendations similar to Mr. Wilson's, that a North American parliamentary group might be useful. Mexico is our third-largest trading partner—I think a lot of Canadians are unaware of that—and it doesn't happen by accident. It's because of that maturity, that relationship, things that Mexicans buy from us, things that we buy from Mexicans, and strong person-to-person ties between the two countries.
On the visas in particular, though, I've had frequent discussions with the Mexicans about that. In 2009 there were 10,000 refugee claims in Canada, which resulted in a tremendous cost to Canada. Some estimates put each claim at about $50,000 in terms of social services, health care, consular services, and ultimately some deportation costs. It ended up costing Canada about half a billion dollars in one year alone. In terms of the offset for tourism, it's hard to see where there would be much of an offset. We just need to understand the Canadian point of view. I know a lot of the Canadian media took the Mexican side in those discussions, and I think the Canadian side needs to be understood.
I do appreciate the recommendations about moving forward, accelerating the progress on the electronic travel authorization and the trilateral trusted traveller program, because that's really critical. Right now our embassies in Mexico can process a visa in less than a week, and it's $100. People, especially higher-end tourists who really want to come to Canada to ski at Whistler, let's say, will pay the $100 and continue to come. Ultimately, I think our goal is for the visa relationship to be similar to that of Chile, where we've removed the visa, but it's based on some very fundamental changes in Mexico around crime rates and socio-economic factors. That doesn't happen overnight.
I do have a question. I think NAFTA is stronger because it's a three-way relationship as opposed to two-way. I think a good example of that is country-of-origin labelling. I think Canada and Mexico had a very common cause, and we made our case very forcefully at the World Trade Organization. Even though that wasn't a NAFTA tribunal—it was the World Trade Organization—I think with our common cause we were able to have a certain influence over U.S. policy-making.
To all of our panellists, is NAFTA stronger because it's a three-way relationship rather than a two-way relationship? In other words, is it less asymmetrical? Can we get more things done in a three-way relationship than we could in the previous two-way relationship we had with the United States?
Perhaps I would start with you, Mr. Wilson. I know you were very involved in Canada-U.S. free trade. Can you talk about how things are perhaps stronger now that it's a three-way relationship?