Sure. I'm joined today by my colleagues Martin Moen, the director general for North America and investment at Global Affairs Canada, and by Heidi Hulan, the director general of the international security policy bureau.
I'll make the opening statement touching on many of the issues that I think you are looking at. We were given a list of nine wider issue areas. Then my colleagues and I would be very happy to answer questions.
By way of preamble, I was going to say that working with parliamentarians is a critical feature of Global Affairs Canada's outreach strategy in engaging the Trump administration. In fact, the Canada-U.S. Inter-Parliamentary Group has been down in Washington, and the embassy there has been hosting a wide range of parliamentarians individually and in groups as we seek to forge new relations with the Trump administration. We believe that a cross-party, non-partisan approach is the best way to have an impact on American decision-makers and opinion leaders.
The first question in your study is about the overall priorities in Canada's relationship with the United States under the Trump administration. In a certain sense, this was the subject of the visit to Washington, D.C., on February 13.
The priorities are set out in the joint statement, which is a roadmap for future cooperation between our two countries. It includes five areas of focus, each with concrete commitments. I’ll give you some examples.
The first example concerns the growth of our economies.
When it comes to regulatory cooperation, the Treasury Board Secretariat is leading an ongoing dialogue with senior American government officials. The goal is for the officials to reaffirm the support of the new American administration for the efforts to continue the work and advance regulatory cooperation and alignment opportunities across key economic sectors.
has met with his American counterpart in Washington, and both parties are keen to push this agenda forward.
Another point mentioned in terms of growing our economies was the Gordie Howe International Bridge. This project is under way, and the winner of the call for proposals for the public-private partnership will be chosen in the spring of 2018.
The second area in terms of growing the economies was on promoting energy security and the environment. On energy security, as we know, the KXL pipeline has now received its presidential permit, and several other projects, either pipelines or electricity transmission lines, are at different stages of review in the U.S. process.
Another area mentioned was air and water quality. Environment and Climate Change Canada is working closely with the U.S., and broad co-operation continues on air and water.
Another area highlighted was keeping our borders secure. Part of this is the entry-exit question. Bill has been tabled and implementation is expected by 2018.
On pre-clearance, Bill is at second reading and is shortly going to committee. Implementation is still to be determined and we are now also actively exploring with the U.S. how to do joint pre-inspection for cargo.
Another area was working together as allies in the world's hot spots. NORAD was mentioned specifically. The next steps in modernization of NORAD will be tied to the government's defence policy review, which I believe will be coming out shortly.
On Daesh, attended a Global Coalition against Daesh meeting in Washington, D.C., hosted by Secretary Tillerson on March 22. As you know, Canada is a member of the 68-member coalition to degrade and defeat Daesh.
Finally, on growing our economies, there was the establishment of the Canada-U.S. Council for Advancement of Women Entrepreneurs and Business Leaders. This council is committed to removing barriers to women's participation in the business community and supporting women by promoting the growth of women-owned enterprises to further contribute to overall economic growth and competitiveness.
Let me now say a word about the government's overall engagement strategy with the new U.S. administration and the new U.S. Congress, as well as at the state level.
On January 20, the Government of Canada, provinces and territories embarked on an ambitious whole-of-Canada strategy of engagement and outreach toward the United States. This includes not only the Prime Minister's official visit to Washington in February, but also numerous visits, meetings and other exchanges between senior Canadian government officials and their American counterparts, as well as with political leaders at both national and state levels.
The Prime Minister, cabinet members, parliamentary secretaries, premiers, provincial and territorial ministers, parliamentary committees and other parliamentarians have completed over 70 visits, of which 40 were by 18 cabinet members and three parliamentary secretaries. These figures will continue to grow as senior Canadian government officials embark on outreach to the United States in the coming months.
Our strategy has been to engage with as wide a spectrum of interlocutors as possible from across the United States. We've developed an 11-state outreach program for cabinet ministers. Our goal is to bring our message to parts of the United States that often don't get national-level attention but are nonetheless critical to the success of Canada-U.S. relations.
Let me now turn to some of the pressing commercial issues. Given the administration's “America first” approach, several commercial issues have received media attention recently. We would like to provide you with an update on some of the key files.
On NAFTA, the U.S. administration has clearly noted its intention to renegotiate the agreement, but it has not yet notified Congress accordingly. Canada is open to discussing improvements to NAFTA that will benefit all three NAFTA parties but has not discussed the scope or objectives of any renegotiation. Should these negotiations take place, Canada will be prepared to discuss improvements to the agreement at the appropriate time, as the government has stated. Advocacy efforts are also under way in the U.S. to emphasize the importance of the Canadian market to U.S. exporters, and officials are working with provinces and Canadian businesses to coordinate messaging.
On softwood lumber, Canada continues to believe that it is in both countries' best interests to negotiate a new softwood lumber agreement. Minister and Ambassador MacNaughton are laying the groundwork with our American counterparts for the eventual restart of negotiations. Canadian negotiators stand ready to re-engage as soon as the United States is ready to do so.
While Canada is committed to negotiating a new softwood lumber agreement, we will not accept a deal at any cost. We want an agreement that is in the best interests of our industry. Also, although we would prefer a quick resolution to this dispute, the Government of Canada is also prepared to defend the interests of the Canadian softwood lumber industry, including through litigation at the WTO or under NAFTA, as appropriate.
Let me touch now on the border adjustment tax.
The concept is currently being contemplated by Republicans in the House of Representatives. We think the measure would be bad for both countries. It would impose extra costs on American companies and disrupt trade at our border. The government, through the Prime Minister, has been raising concerns and soliciting views from a range of stakeholders in the United States, notably in the business community, to help reinforce these points with members of Congress.
I'll touch briefly now on steel. The commerce department in the United States was asked back in January to develop a plan to ensure that steel for the construction, renovation, and enlargement of pipelines in the U.S would be sourced from within the United States. We are preoccupied with this for two reasons.
The first is that the steel industry in North America is extraordinarily integrated and runs on both sides of the border. The second reason that we are concerned about steel is that this is an attempt to determine procurement that is usually done via the private sector. This is not public procurement; this is the government telling private enterprises from whom they should buy. Those things are usually left to commercial considerations. We have made observations in this regard to the Department of Commerce in the course of its regular consultation process, which is ongoing. As I mentioned, my colleague Martin Moen would be pleased to answer questions on any of these commercial issues.
Let me now turn to trilateral relations, which are also a part of your study.
Canada, the U.S., and Mexico have a long history of collaborating as continental partners in the areas of security, commercial relations and competitiveness, the environment, and other areas. Since 2005 the three countries have been meeting for the North American leaders' summit, which is aimed at advancing common policy objectives in many of the areas I just mentioned. The last such meeting took place in Ottawa last June.
While there are uncertainties about the direction of trilateral co-operation since the election of President Trump, there are at the same time early signs that indicate a number of trilateral commitments from the 2016 North American leaders' summit here in Ottawa will continue. I won't elaborate on them—they have to do with the border, energy security, and regional co-operation—but I'd be happy to answer questions on those trilateral dimensions.
In addition, the annual trilateral energy and defence ministers' meetings are being planned for this spring. There's also been some talk of a trilateral foreign ministers' meeting. These meetings, along with the developments in the renegotiation of NAFTA, will provide us with signals as to the future direction of trilateral co-operation.
I'll now talk about foreign policy cooperation.
The Trump administration came to office with a very forthright “America First” approach to foreign policy. This approach overtly places the United States and its interests at the forefront. The approach focuses on economic nationalism, protection of American sovereignty and hard power.
This policy is in distinct contrast with the policies of both Democratic and Republican administrations that have led the United States since the Second World War. These policies emphasized American leadership in advancing democracy and human rights, promoting freer trade, building international institutions, and working closely with allies to advance these objectives.
At this point, it isn't clear how the overarching principles of “America First” will translate into day-to-day policies. Furthermore, many of the senior positions in the administration, such as in the State Department, haven't been filled yet. We're in a very early phase.
Intervening events, such as North Korea's missile test or Syria's use of chemical weapons on civilians, may significantly shape the Trump administration's foreign policy. Canada condemned the chemical weapons attack and fully supported the United States' response.
As I mentioned earlier, my colleague, Heidi Hulan, will be pleased to answer any detailed questions.
Let me end there. I've tried to give you a brief overview of some of the main themes in Canada-U.S. relations right now. We look forward to the committee's deliberations and the eventual report.
We would welcome your questions and comments. Thank you.
Thank you for that, and good morning to the members of the committee.
On the general point of our security dialogue with the Americans, I think the members of the committee are aware that this is both broad and deep, and it covers both continental defence and our shared interest in the Euro-Atlantic region and the stability of that zone.
With respect to ballistic missile defence, you've correctly captured the history of that. I would say that as the global security environment has evolved—and the North Korean missile threat is one that we are tracking extremely closely, particularly with respect to the pacing of their testing, which suggests advances in their capabilities—we continue to examine whether our current policy regarding participation in continental BMD addresses Canadian safety and security interests. You are correct that as part of the defence policy review, the defence department and consulted Canadians on this question. As you are probably aware, that review is currently being concluded, so it will be for ministers to decide how to pronounce on this particular issue. Among the things that we weigh for this issue are questions such as the nature and severity of the threat, the question of what Canadian involvement could bring to bear on that system, and, indeed, whether or not there is a request of Canada to make a contribution to that.
Could I say a few words on the dialogue that is ongoing with respect to defence spending more generally? You've raised it, and I know it's a subject of real interest in the public domain. The new American administration has taken a very strong view, as you know, with respect to the NATO target of 2% of GDP defence spending. Canada's view on this has been and remains that burden sharing, within the alliance and more generally, cannot be measured solely in the number of dollars that are spent on defence. How you spend your money is at least as important as how much money you spend. In that regard, we consider capabilities to be first and foremost, and our contributions to alliance operations to be the real measure.
On this front, Canada has, as you know, contributed to every NATO mission since the alliance was established 68 years ago. We're now taking a lead in Eastern Europe with the leadership of a battle group in Latvia as part of the enhanced forward presence in Eastern and Central Europe, and we are the sixth-largest contributor to the alliance. We feel the need to take the view that we have consistently shown our capability and readiness and willingness to assume a very large share of the NATO burden, both within the alliance and in its expeditionary missions, and that remains unchanged. I expect this to be a focus of discussion when leaders meet in May, and Canada looks forward to those discussions with allies.
The global disarmament environment is perhaps more polarized at the current time than at any period during my career. Strong views regarding the slow pace of disarmament by the P5 and others who possess nuclear weapons, obviously, have given rise to the current negotiations under way in New York on a nuclear weapons ban treaty.
Canada very much shares the frustration with the slow pace of disarmament. The prevalence and number of nuclear weapons—whose figures I have not brought with me today, so I can't quote them—is many times more than what is required for global security. Therefore, we have always supported the idea of global zero. We also support the movement, which has built up, regarding the humanitarian consequences of nuclear weapons.
However, our view of the current negotiations is that they are likely to deepen divisions between nuclear weapon states and non-nuclear weapon states in a way that is likely to make real disarmament in the future more, not less, difficult. Then we see in these negotiations the potential only for a declaratory statement. In this treaty to ban nuclear weapons, currently under negotiation, there will be no verification provisions, no targets, and no involvement by the people who actually possess the weapons, and therefore need to dispose of them. Therefore, the treaty is not going to lead to the elimination of a single nuclear weapon.
As a result of all of those dimensions—the practicality associated with it as well as the long-term impact on disarmament prospects—we've taken the view that now is not the time for that discussion. However, we remain convinced that earnest step-by-step negotiations with verification provisions toward nuclear disarmament are essential and cannot wait.
That is why Canada initiated a resolution at the UN General Assembly last fall, which I'm pleased to say passed with the overwhelming support of 177 member states, to initiate a preparatory group to lay the groundwork for the eventual negotiation of a fissile material cut-off treaty that I will chair for the United Nations. The elimination and restriction of access to fissile material, the material that gives nuclear weapons their potency, is almost universally regarded as the next step toward a world free of nuclear weapons. We believe it is possible to make progress. I'm very proud to say that Canada has led that effort internationally for 20 years now, and we will continue to lead that in the coming year.
I'd be happy to speak more about it as that process unfolds, but for now we're at a very early stage.
Chair, I'll try to go very quickly.
Of course, we'll send the information you requested. Different statistics get batted around. It depends on whether you're talking about exports of goods alone, or goods and services, but we'll provide you with those statistics going back some time.
I have no new news on the appointment of a U.S. ambassador to Canada. There is a name, a woman from North Carolina—her name escapes me for the moment. We can come back to you on that. I don't believe a hearing has been scheduled.
On the trilateral agenda, as in my opening remarks, I tried to say that it's another area where it's too soon to tell. The key trilateral file is NAFTA. Depending on how NAFTA goes, I think much else will roll out. I did say that defence minister meetings are continuing. I think energy minister meetings are continuing, and there's a potential for a foreign ministers' meeting. On concrete files, work continues on a single-window approach to customs procedures. We're not quite to the point of “entered once, cleared twice”, but we're trying to get there, and that kind of trade facilitation measure continues.
I mentioned that borders and energy are two areas of continued co-operation between Canada and the United States, and that includes Mexico because it has recently liberalized its energy sector. That's an area where there's continued potential for trilateral co-operation.
On security, think of opioids; think of transnational crime, such as trafficking and human trafficking. On those kinds of issues, we can expect to see continued co-operation. Mexico and the United States in particular have deep and ongoing collaboration on security issues. There is the new U.S. Secretary of Homeland Security, Secretary Kelly. General Kelly's previous job was head of SOUTHCOM in Florida, looking after the military aspect of Central and South America. I think you'll see continued close collaboration between those two countries and Canada as well because of the spillover effect.
Then, finally, you will see regional co-operation continue for the same reason that I mentioned. Secretary Kelly is very interested in it. The northern triangle countries of Central America and the challenges they pose to the United States and to Canada in a wider regional security sense, continue. Canada, the United States, and Mexico will have an ongoing interest in collaborating on addressing those challenges.
Thank you so much. I've become the Quasimodo of witnesses here. Every time I sit down the bells start to ring.
Voices: Oh, oh!
Mr. Warren Everson: I am very pleased to be invited to this committee. This is my first appearance in front of the committee under this House. I'm very delighted to see your taking this issue to ken, as there's no more important issue for Canada's foreign relations than our relationship with the United States. I do believe we'll probably be back in one form or another in front of you before your work is finished.
I do want to commend staff here, Ms. Crandall and her staff, for preparing a list of questions. I think it was the first time that I've had a list of questions from the committee in advance, and it was very thought-provoking. Unfortunately, I'm confined to the economic issues of the chamber's mandate, so I can't wander off into all the other fascinating issues that were raised here, but I do appreciate it.
I also want to apologize that all of my remarks today will be in English. That's a first for me, but I screwed up my instructions to my translator, so tomorrow or the next day I'll have a perfectly lovely translation of my remarks.
We are all watching the U.S. situation with fascination and concern. There is an angry, almost violent quality to U.S. politics right at this moment, and threats emerging from all manner of different sources. But, in truth, there is no anti-Canada lobby in the United States. In the chamber, we're mobilizing our members and our own leadership to engage with U.S. business in their home districts, to remind them how valuable our relationship is and how damaging it would be to them if that relationship were disrupted.
Adriana Vega, to my left, is our international affairs director and will be one of the key actors in the chamber's campaign. Adriana is a polynational. She was born in Mexico. She has served with the Canadian embassy in Mexico and Beijing, has lived in London and worked with the U.K. India Business Council before coming and joining us. She just got back yesterday from Japan. I had a speech in Morrisburg recently, so that's cool, but Adriana will no doubt be called upon to answer some questions.
With regard to our relationship with the United States, we have a great story to tell Americans. We're just trying to find the best way to tell it. Millions of Americans depend on us for some part of their prosperity, and almost none of them know that. Over the next few months, our CEO and some of the key members of our industry groups will be participating in missions in the United States. We're working very closely with David Morrison and his team on this. Our first visits will happen in a couple of weeks when the President will be in Carolina and then back into the south again.
I think we have to be somewhat limited in our expectations. Americans don't need a big, long economic essay on their relationship with Canada. They just need to be reminded of it and warned that every time something bad happens in Canada, it will tend to rebound back into the economy of the United States, and people there will be victimized.
I think we shouldn't have a convention, or an annual meeting, or whatever at all this year in which somebody doesn't stand up and say, “Folks, we have a good relationship going with Canada. Don't let those—insert adjective here—in Washington screw it up.” That's almost all we need. As I say, there's no pent-up aggression towards Canada among Americans, to our knowledge.
I'll mention three key areas we're looking at, and then I'm anxious to get on to questions.
The first one is the renegotiation of NAFTA. Then there is the promised tax reform in the United States, which represents another big sprawling issue. Then, loosely, is a category called “everything else”, because as we all know, there are hundreds of other issues that might intrude.
Speaking as quickly as I can about NAFTA, we have renegotiated NAFTA a number of times, I think about 10 times, since the agreement was signed. The provision in the agreement is for the parties to reset definitions and to make small changes, literally the tweaks that Mr. Trump referred to a couple of months ago. That doesn't, however, appear to be what the Americans are now planning.
As recently as a couple of years ago, the Canadian Chamber of Commerce was advocating that NAFTA be reopened and renegotiated simply because it's an old agreement. It doesn't include a raft of things that are present in our economy such as e-commerce. It has very antiquated definitions of employment categories and the like. We thought it was a grand idea. Also, negotiators from Canada and other countries were showing us what could be possible in the CETA agreement and in the TPP, in which more ambitious and very interesting provisions were being included.
I don't think we would have chosen to open NAFTA in the current environment, but these are the cards we were dealt. I think all three countries can look forward to significant improvements in this agreement if the attitude of the negotiators is that it should be of mutual benefit. I agree that it's not obvious that's the attitude today.
The rhetoric by important Americans, most notably the presidential candidate Donald Trump, was far from having any suggestion of mutual benefit, but I do think Canada should enter these negotiations with the same hopeful and tough-minded approach that we bring to all negotiations. We will have to make some concessions. We will seek some advantages. We certainly have things to get from a new NAFTA. If the concessions we're asked to make are excessive, we'll have to be prepared to walk away from this agreement.
We should remember that the Americans didn't enter this agreement out of charity or any kind of favour to us. This was very beneficial to them. For those of you who noticed it, the draft letter that was prepared for signature to the Congress two weeks ago started with a report on how significant NAFTA has been to the U.S. economy. I don't think when wiser heads prevail that they will be cavalier about the future of the agreement.
We have a whole raft of offensive objectives here. We have an updating of our occupational designations. I mentioned that the enormous administrative burden around the current rules of origin should be lightened if possible. Your previous witnesses talked about the regulatory co-operation exercise. We're very strong supporters of that, and U.S. members of the Chamber of Commerce are also. That's been a bright spot in our relationship in recent years. We do think that should be enshrined in NAFTA as a chapter.
On the defensive side, we think Canada has to fight very fiercely against the most blatant protectionist measures that are being talked about, such as Buy American and country-of-origin labelling. We should remember that the whole purpose of the North American Free Trade Agreement was to expand trade and make it more free. We should be very hostile to the concept that we are negotiating a trade restraint agreement.
I was EA to the minister of trade at the time the negotiation was finalized, and we brought the legislation to the House. Chapter 19, on the countervailing duties dispute-settlement mechanism, was really the main reason Canada entered into the free trade agreement, to get away from this endless legal harassment. There is a big lobby in the United States to get rid of Chapter 19 and go back to the courts. It should be a very high priority for Canada to fight that. Chapter 19 is not working very well; it's all gummed up. But we know that the Americans who claim the issue is their sovereignty are really just anxious to getting back to using the court system essentially as a tool of trade harassment.
When we see the official notice to Congress from the administration, we'll have a better sense of what they are after and then we can start to calibrate what we have to gain and when.
I'll very quickly mention that in some ways I think the tax reform exercise is more hazardous for Canada, because there is no adult supervision. It's going to be a massive food fight in Washington, and as the parties horse-trade, they are not going to be aware of who is winning and who is losing, beyond the specific interest they are advancing. It does not appear—and this is my own comment—that the administration will hold a very tight rein on Congress and that they'll be able to dictate the terms.
We see these massive, sweeping proposals for moving the revenue sources of the United States very dramatically from state taxes and individual income tax to border taxes and payroll taxes and so forth. Those kinds of grand designs are hazardous, probably to them and certainly to us. I don't think we should panic at this point. Back in February—and this is my favourite quote so far—Senator Tom Cotton, a Republican, said in the House, when talking about the border tax, “Some ideas are so stupid that only an intellectual could believe them”.
Some hon. members: Oh, oh!
Mr. Warren Everson: I do think the fusion of protectionist sentiment with a desperate need to find new sources of revenue is a significant risk to Canada. Again, the only way to stop this is for Americans themselves to be on the watch for their own best interests, and if they see something that's will be very negative to Canada, and therefore destructive of their biggest customer, they might and could speak in their own defence and therefore help our situation as well.
I'm going to move on. I have a section called “everything else”, which would include all the other possible irritants and exacerbants that may emerge between us.
The most important threat we face from the United States is probably not any of these overt actions, but just as a result of a general gesture by the United States administration to improve the competitiveness of U.S. business. Regardless of whether we like what they're doing—cutting taxes, cutting regulation, deferring environmental spending, repatriating capital from other countries with a tax amnesty—and whether we think any of those things are good or not, they will have a very significant impact on the competitiveness of American business, and neighbours like us are going to have to respond to them. I think that is the biggest challenge we face—not any of the specific actions but the general improvement in the opportunities to invest in the United States and diminution of the attractiveness of investing in Canada.
The Canadian government so far has done a masterful job of engaging with the United States at the political level; we've seen everybody. From the moment someone is appointed and then is approved by Congress, a Canadian is waiting to take them for coffee. That's been very impressive. American diplomats are reflecting that to us, saying that they've not seen a campaign as effective as this, or at least as active as this.
But the next exercise is to get out of Washington and into the heartland where Americans are talking to their own legislators about their own interests and to make sure that Canada is seen as a positive for that, and that dangers to our relationship be avoided.
That, I think, would be a good place for me to stop, Mr. Chairman. I look forward to questions.
I have a couple of points. I agree with you, of course.
There are at least five or six significant tax reform plans being proffered about Congress right now. Mr. Grassley has one and Mr. Brady has another. Obviously, Mr. Ryan has been out early with his proposals. It's too soon to tell where this is going, but the Americans have a problem. Their tax system only affords the federal government five or six sources of money. They have corporate and individual income tax, payroll tax, estate taxes, and tariffs. There's not a hell of a lot else.
They've already pledged to get rid of the estate tax, which is 4% of gross tax revenue right there. Any significant saving on corporate tax, and some individual tax reductions as well, will put them into a gigantic deficit. They can't bring legislation to the Congress that proposes such a massive deficit, so they have to construct some sort of argument that they will make up the money somewhere else; hence, the word “adjustment” in the border-adjustment tax that Mr. Ryan put forward.
I think there's every chance that they will try to raise revenues at the borders, but I think this is all posturing at this point. I don't think any of the plans that I've seen really make a lot of enduring sense. Yes, you will get a lot of money in the first year when you put a huge tariff in place; then there's nothing in the second year. How is that going to affect them? How fast can Americans repatriate money, build new facilities, and drive up the payroll tax revenues for the government? This is a very tricky situation for them.
I don't want to waste your time, but during this administration's mandate, I think there will be some push-back from Americans, because protectionism is very expensive. It's expensive to the producers. They are trying to export their products. They have to use higher cost inputs and it's expensive for the consumer.
At a certain point, probably at some annual meeting of some megacorporation, I do think that investors are going to stand up and ask, why exactly are we moving the facility into a high-wage jurisdiction when we were in a low-wage jurisdiction and still getting a very fine product? I don't think they're going to be immune to that debate.