Good morning, Mr. Chair.
Mr. Chair, I would like to thank the committee for inviting me to appear again.
I have no idea how much time I have, but I am sure it will be enough.
So yes, from western Canada you will get an introduction and a welcome in French.
It is indeed a pleasure to be back here. There's a lot of ground to cover. There was a series of questions, so I'll once again endeavour—and fail—to keep my remarks brief. There's a lot out of Washington today. I don't know if you've heard, but the USTR is going to deliver the letter on NAFTA negotiations to the relevant committees: ways and means and Senate finance. I'll talk a little about that and the TPA process at the end.
Rather than address the nine points today, I thought I'd look at some of the previous testimony you've had on the subject, respond to some of the information you've had, try to fill in some of the gaps, and look to build upon what some of my colleagues in the think tank industry and some of the other analysts have done.
I note that I am once again in front of committee solo. I thank you for that. It's either a sign of great interest or a sign that my colleagues in the think tank community don't want to be sitting up here next to me when I testify. It could also just be dumb luck.
To start, I want to talk about three reasons for optimism, and the opportunities associated with that optimism, in our relationship with the Americans, particularly with the upcoming NAFTA negotiations.
First, I'm actually here as director of the centre for trade and investment policy at the Canada West Foundation. I'm sure that most of you are familiar with Canada West, so I won't go through the history. The foundation is 40 years old. We work for all four western provinces. Our creed is that a strong west makes for a strong Canada. The west is Canada's export engine. We have about 30% of the country's population but over 40% of the country's exports. The success of the export economy of western Canada is crucial for the entire country.
I also bring greetings from my new boss and your former colleague, Martha Hall Findlay. I'm sure some of you shared her as a boss in the past and many of you shared her as a colleague. I think that's really a symbol of how much the west is changing and how much Canada West is changing too.
I have three points for optimism and opportunity and what we can do about them with our relationship with the Americans. The first point for optimism is that when we talk about NAFTA, indeed, in the public discourse, in the media, even in the testimony you've had here at the committee, there's a conflation between North America and NAFTA. I think we need to be clear that North American integration and the larger North American projects or economies are not summed up by NAFTA. NAFTA is one component of North American integration. It's an important one, yes, but it is not the sole component.
This is important especially for us as we look to engage with this new administration. As your previous witnesses in particular Scotty Greenwood mentioned, some of the most important elements, the progress and the achievements that we've had, have not been part of the agreement. She spoke extensively about the Regulatory Cooperation Council. This is probably one of the most important assets we have for improving our ability not just to trade with the Americans but to make products with them and with Mexico, which we export in competition with other trade blocs, such as the EU, the Pacific alliance, and the factories of Asia—Vietnam, China linked to Korea, Japan linked to Vietnam, Thailand, etc. That is not part of NAFTA.
You can also look at our ability to move business people back and forth across the border through the NEXUS program. That was a huge advantage that we enjoyed uniquely for a while with the Americans before they expanded the GOES program. Again, it exists; it's not part of NAFTA.
What's interesting about these initiatives is that they are not subjects of discussion. They are flying under the radar. Not only are they flying under the radar, they're also increasing and strengthening. We're talking about tearing up NAFTA at the same time we're not just talking about but actually moving concretely to link the RCC with the U.S.-Mexico equivalent, to have one regulatory co-operation environment for Mexico. It's a huge competitive advantage for us, and this is proceeding despite the rhetoric coming out of Washington.
The administration down south is talking about building walls on the southern border, but at the same time we're talking about linking SENTRI, the U.S.-Mexico trusted traveller program, with NEXUS. We will have one trusted traveller program in North America heightening the movement of people at the same time we're talking about building walls. This is an opportunity for us if we can lift our eyes up from the text of NAFTA and look more broadly and think more creatively about how to advance our relationships.
At the Democratic National Convention last year in Philadelphia, there was a sea of anti-NAFTA signs—NAFTA in a circle with an arrow through it—and a sea of anti-TPP signs—TPP in a circle with an arrow through it—but I have yet to see there or at any NAFTA protest a sign held up with the words RCC in a circle with a line through it. I've never seen anyone holding up a sign saying down with the RCC.
These are opportunities for us to engage the Americans. In this vein, we've been working with the Bush Center in Dallas on a proposal to create a North American infrastructure bank. The idea is the same: to address a specific problem we have with the Americans to which there are practical solutions, and for which there's a real need, and there's a need on the American side as well as the ability to get them to the table.
I actually did a presentation for the Canada-U.S. Inter-Parliamentary Group. I can talk about this more at length. This is a subject that merits some consideration. When Washington begins to look at its infrastructure problem and at solving it and at how broke the U.S. highway trust fund is, as well as at the inability of northern states to fund basic infrastructure, let alone infrastructure along the border, Canada showing up with solutions and Canada showing up with money may be the entree to solving some of our problems.
That's one point for opportunity and optimism: the quiet, behind-the-scenes initiatives that have sprung up to deal with real problems. Our one potential solution is an infrastructure bank. This is completely different from the Canadian infrastructure bank. There's actually a case to be made for this bank as opposed to, I think, the Canadian bank. There's opportunity and optimism.
The second point is that with all these anti-NAFTA signs, I've never seen at a protest someone carrying a sign saying “down with the Manitoba-Montana treaty on invasive species”, or “let's end the Alberta-Idaho agreement on co-operation on regulation for...” whatever.
The subnational level is hugely important for us. It's rich. It's deep. This is where we really have impact with the Americans. The ability to deal with state-level officials as colleagues, as friends, as co-workers, as equals is hugely important to us. It impacts our ability to influence Washington. As politicians, you know that if you get a phone call from a foreign ambassador or from someone in your riding who can deliver votes or sway an election, which phone call do you take? You take the call, if you're in Congress, from the speaker of the state house, from the governor, from the mayor, from the head of a local chamber of commerce. We have unique access to these people to be able to influence the agenda in Washington.
The U.S. Council of State Governments: Canadian provinces are members. The Pacific NorthWest Economic Region: Canadian provinces are members. We host meetings. We host U.S. state legislators in Canada. The U.S. Council of State Governments passed a resolution opposing country of origin labelling. That was the work of Canadian participation in that group.
I was with Cal Dallas recently. He's a former trade minister for Alberta. Cal was telling me stories about his ability to go to states in the U.S. and talk to his counterparts to actually arrive at solutions to problems before they reached the press. You don't hear about this for obvious reasons. It's a great story in the Edmonton Journal if Cal's able to convince California to do something, but it's an even “better story in the Sacramento Bee”. Let the Hansard show that I am using air quotes to indicate that “better story in the Sacramento Bee” is sarcastic.
This is an ability we've really underutilized in the U.S. The problem is that our current relations with the United States demand that it's an “all hands on deck” response.
It's an open secret that the Clerk of the Privy Council has gone to the premiers and asked them—pleaded with them—to do more in the U.S. to increase their contacts, to increase their outreach. However, we're asking the provinces to do this at a time when provincial budgets are strained—Saskatchewan, Manitoba, even Alberta. The feds have money and the provinces don't, yet we're asking the provinces to do more.
We have a couple of things on this. We have a proposal out to Western Economic Diversification to set up a fund to co-finance activities and U.S. engagement with the provinces, to augment and increase what they're doing, but to also serve as a point for coordination and information sharing, so we stop tripping over ourselves when we go down to the States. Manitoba bumps into Alberta coming out of a meeting in a governor's office, and the consul general and foreign affairs are scheduled five minutes later. Coordination and financing will enable us to use this vital tool.
Finally, the reason for optimism—I could spend some more time talking about it, given the news from today—is that we are exiting the period in the U.S. of trade policy by tweet, by idiosyncratic whim, by capriciousness on the part of the administration, by responding to every tweet at two o'clock in the morning, by every offhand comment that Secretary Ross makes on CNN or on Bloomberg. The administration is now running into the TPA. There is a set of rules and requirements for the administration to follow Congress's lead on trade. Article I, section 8, clause 3 of the U.S. Constitution, the commerce clause, states that Congress has the responsibility to regulate trade between the United States, between the Indian nations, and with foreign governments. This is clear congressional authority. They've laid out rules for how the administration has to negotiate and what has to be included in negotiations. They've stepped up the requirements not just for consultation, but for the administration to follow Congress's lead.
If you look at what happened back on March 21, Secretary Ross and acting USTR Stephen Vaughn went to the Senate finance committee to talk about renegotiating NAFTA. During the hearings, they suggested that this will count as notification to the Senate to fulfill the requirements in the TPA. The response was a combination of being scolded and being laughed out of the room. Ron Wyden, the ranking Democrat, told them bluntly to go back, read the TPA requirements, and come back when they had prepared a written submission explaining their goals and how they address the priorities the committee laid out.
The next move by the administration was to suggest that acting USTR Vaughn could do this. Again, they were sent back, were laughed out of the room, were told that there was a process. That's why it's taken until today for the administration to actually be able to begin the 90-day period for negotiations with NAFTA.
I stress this because we're seeing Congress increasingly take control. You've had other witnesses who have looked 20 years back to judge how Congress will do and what power Congress has. I'm looking back a month and a half, and what I'm seeing then, what I'm seeing even today, is Congress really stepping up. It's not just that Congress has an advisory role. If you read the TPA, it says the administration has to respond to and make adjustments to trade negotiating policy based on congressional input. There are checks. They can look at the negotiating text anytime. They can look at what we submit anytime. You're going to see a heightened role for Congress and, I think, a rein on what the administration can do.
There are a couple of things on this, things that shouldn't surprise us. We know that tariff quotas were a big issue in the TPA legislation, and yet we were surprised when the Americans brought up supply management in dairy. Martha Hall Findlay has a new paper coming out on supply management. If you are not already familiar with her work, you will become so, increasingly—a great piece of work. We shouldn't have been surprised when dairy was brought up.
Another issue is localization of data. I would flag this for you. The position of the TPA is that trade negotiations have to fight against keeping data in the jurisdiction. The Americans should be able to have data. The data should be based anywhere. I think that's going to be a major issue if they really push it. Again, the point is that we know what's in the TPA. At the end of today, we'll know what's on the Americans' negotiating agenda, and we can stop jumping at every tweet, at every bit of noise that comes out of the White House.
Yes, there will still be surprises. Yes, the administration will still pull changes at the end. What I'm talking about is balance. We've had idiosyncratic tweets and responding to rumour as the only input. We are now getting something on the other side to balance that out. We are getting clarity and some degree of certainty.
Finally, I have one editorial note. We talk a lot in Canada about our most important relationship being in North America. The U.S. is our most important trading partner and political partner. North America is our most important trade bloc. There is a lot of talk about the importance of North America, yet you would be hard pressed—actually it would be impossible—to tell that by looking at our capacity and our ability to do policy research on North America in this country. Independent groups that can do research on North America and have deep, long-standing connections with counterparts throughout North America are the third track of diplomacy.
I can point to half a dozen centres in the U.S. and two or three in Mexico. I can't point to one in Canada. We closed the Alberta Institute for American Studies a few years ago, and with it, our last independent voice on working on North America. Our capacity on North America, strangely enough, exists in Washington, D.C. The Woodrow Wilson institute and Laura Dawson are probably our best asset in terms of work on North America. It's in Washington, D.C. It's not in Canada.
I think that an issue for the future is capacity: repairing the damage done by cutting the enhanced representation initiative and building up our capacity with consulates and consuls general in the U.S. Also, Canadian studies in the U.S. are a huge asset. We have consuls general who are trying to cover four or five states. Our consul general in Seattle has to go all the way to Idaho. Our poor consul general in Dallas—she's doing a fantastic job down there—has to cover Oklahoma, Louisiana, Arkansas, and New Mexico. If you're in the oil business, you're looking at this saying, “Wait a minute. Louisiana, Oklahoma, Houston, and Dallas, with one person? This is insane.”
It's also on the policy capacity side. We don't have one centre on North America here in Canada. How the hell does that signal this is our most important relationship, when the Americans have half a dozen and even Mexico has two or three?
I am happy to talk about softwood lumber, supply management, and the news we're getting out of Washington this morning.
Thank you for bringing that up. This is an issue that's been troubling several of us. There has been one piece in the Canadian press on this, but I'm glad that it's coming to attention. You've read the recent piece we had on the Canada West Foundation blog about this.
This really is troubling for the North American negotiations. In Andrés Manuel López Obrador, AMLO, you have a candidate of whom to say he's anti-trade or critical of trade is an understatement. He has also hinted that some of the reforms that Mexico has undertaken may be rolled back under his administration. It's populist, the populism that we've seen in Latin America before and with which we're quite familiar.
This election in Mexico rolls out July 1. The entire Congress changes. There is only a single term in Mexico. The president will change. This election will take place, generally, starting three months before, so in May.
The earliest you can finish is not March 1, but August 28. Once the negotiations finish, the administration has to give Congress 180 calendar days' notice, so you're looking at the agreement not being signed. Even if you have negotiations that are six months long, the agreement can't be signed until August 28 unless Congress unilaterally decides to waive the 180 calendar days' notice, which is a possibility but I would discount that.
You're looking at the agreement coming out August 28, which is after the Mexican elections. Then you have the period where it has to be submitted for legal scrubs and other things. You're looking at implementing a bill in Congress on September 27. This is right during the lead-up to the U.S. mid-term elections.
You can imagine that you've had an election in Mexico where trade and NAFTA negotiations, because of Trump, are criticized. You've had NAFTA used as a stalking horse, whipping boy, or whatever you want to call it, in the U.S. mid-term elections, and you can imagine the rhetoric that's going to come out of the U.S. on this at the mid-term elections. Every congressperson is going to be fighting for their seat, throwing NAFTA under the bus and saying anything to get elected again. You're going to have a Mexican Congress that will be installed on September 1, in time to hear the debate in the U.S. mid-term elections about this, and which is not going to do anything until a new president comes in, in December.
Yes, I've used some colourful language to describe this before, but “cluster” begins to describe the sort of situation we're heading for.
You're looking, then, at having to wait until the new president is in power. He needs to been in for a while, so you're looking, at best, at the second quarter of 2019 for any real progress to come out. If you miss that deadline, then you're looking at maybe running into the next U.S. election in 2020 and Trump trying to run again, not having got NAFTA through.
The process, because of the election and the interaction between the elections and the timetables.... We're actually thinking about turning this into an interactive thing, where you can move the negotiations back and forth and take a look at different scenarios.
This is something we have to think about. The Mexico we know might not be the Mexico we have after the coming election.
I've done several call-in radio shows in western Canada recently, and when the softwood lumber issue comes up, the anger on the part of the people calling in—not just Danielle Smith's show, but also CBC—is real and visceral. People want to cut electricity. People want to cut oil shipping to the United States. People want to stop sending water down to the United States. Yes, people still think the Americans are taking our water. The anger is visceral, and it's understandable.
It's understandable that politicians would react the same way, but I think that sober second thought really shows that this is going to impact not just our relations with the United States but also with Alberta. The ban would not just include Wyoming and Montana, but also Alberta; so thank you very much for a move that would hurt western Canada.
This elicited a strong reaction in the U.S., but you look at our ability to retaliate: thermal coal impacts, as I mentioned, Wyoming and Montana, six electoral college votes. They're very important states in Congress—again, I'm being sarcastic—very important states in the trade negotiations. We're going to anger the Americans for inflicting no damage on them and not changing their minds, but look at what Mexico's done.
Mexico is the United States' largest customer for corn—70% of the corn. On the resolution that the Mexican Senate has on redirecting corn exports from the U.S., if Mexico decides to redirect corn imports from the U.S., that's a large swath of the Midwest, very important states, politically active. It's a signal of the wider damage that can cause.
If you're going to retaliate, you have to do it in a way that's serious. With coal, we're just going to bleep the Americans off for no impact. Mexico, with corn, is scaring the Americans, with impact. That's what you want to see. Unfortunately, we really don't have the same ability as Mexico has.
Mexico can also stop security co-operation with the U.S. If you think there's a crisis on the southern border now, wait until Mexico starts waving folks from Central America through to the northern border, or stops co-operating and banning folks from countries—Pakistan and elsewhere—from entry into Mexico, or stops checking that they have a U.S. visa before they let people in. Mexico has ways to retaliate that we don't because of the difference in our relationship.
We have to be very careful as we think about this. With softwood lumber, our best retaliation with the Americans is the fact that U.S. homeowners are going to be priced out of buying new homes. Every $1,000 that a U.S. home increases in price, prices 153,000 Americans out of the ability to buy a home. It also increases the price of everything in that home. Your box-spring set is made with Canadian softwood, because U.S. southern pine squeaks when you put it into a box set. Everything in that house, not just the house itself, is going to go up. We've seen that impact in Fort McMurray, with our duties on American drywall, and how those impacted the home-building industry. At the end of the day, our integration may be our best defence, not retaliatory measures.
Thank you for having me. It's always a pleasure to be here in Ottawa to speak to a committee.
We are talking about North American relations, ostensibly U.S.-Canada relations. I'll give you a little background on the automotive sector in Canada and how connected it is with the automotive sectors of the U.S. and Mexico.
In Canada the automotive supply sector ships 32 billion dollars' worth of goods a year, and we employ 96,000 people. Some of the companies you would know are Magna, Linamar, and Martinrea. There are, however, other companies that are ascendant and important in the new space. We have Ottawa-based companies like QNX, and companies that own the market on global infotainment. We also have companies like Valiant, which is a large Windsor-based tool company now in the midst of M and A activity with the Chinese, which is contextual here.
Canadian automotive parts companies employ 42,800 people in the United States in 150 facilities, as as well as 43,400 in Mexico in 120 facilities. Canadian interests in automotive supply cannot be described geographically to be solely within the borders of Canada, even though probably 95% of our domestic industry sits between Windsor and just east of Toronto.
When we talk about NAFTA and when we respond to cues by the American President about American interests, the commentary usually concentrates on American geographic interests and American companies. Big American companies, however, count on the Canadian parts supply sector and our assembly sector, including but not limited to the Detroit Three. Canada has big operations from the Detroit Three in that corridor, and our supply sector serves many of those facilities, including Toyota and Honda.
The Canadian interest in Mexico is not a reciprocal one. Mexican automotive investment in Canada is limited to Nemak operations in Windsor. Our Canadian automotive market is just short of two million vehicles, and growth as well as retraction is in single digits.
We make 2.4 million vehicles a year. That's down from a peak of 3.1 million vehicles in 1998. The growth market for my members and parts suppliers has been in new OEM investments in the U.S. southeast and in Mexico.
In 1998 we made twice as many vehicles as Mexico. Last year, Mexico made 3.4 million vehicles, and if the President's social media influence doesn't slow the number down, that number should go up to 4.8 million vehicles by 2021.
Mexico is a very important market for Canadian parts suppliers. We send product down the continent; we invest in Mexico, and we employ locals. The same can be said for the U.S. southeast. Traditionally, and very importantly, the parts sectors in Ontario and in the states that delivered the presidency are intricately connected. Ontario and Michigan together make more vehicles than Mexico. They make more vehicles than the rest of the Great Lakes states and more vehicles than the other cluster in the southeast U.S.
I provide this context because the signals we get from Washington from the President and the public exhortations stand in contrast to the interests of our commercial partners in the U.S. American automotive companies are telling their representatives in Congress, their governors, and the administration not to hurt them by thickening the border between Canada and the U.S.
Everybody likes to talk about how many times a part can go across the border. Not every part goes back across the border, but if you think about putting a bolt on an engine block that comes back into a car here and then goes to get finished in the U.S. and is then sold to a Canadian consumer, you start to see how important it is to make sure we don't put up visible or invisible barriers at the border. The same can almost be said on the Mexican-U.S. border, although there is no spot that, from a satellite, looks like Windsor-Detroit.
What we've been seeing and hearing in our in-person visits to American automotive capitals and to American political capitals is that everybody should take a breather. I think the gentleman who spoke earlier talked about a NAFTA process. This will be a long process and the outreach by this government, and—I'll give credit where it's due—the bipartisan approach to that outreach to the U.S. are working in keeping the temperature down. Of note is that in Mexico that temperature is not being kept down. The Secretary of Economy has issued challenges a couple of times, and of course the political tensions between the two countries are different from ours. While they're ready to throw down the gauntlet, I think what we're doing is right and that is to provide the time for industry sectors like ours to go speak to people in Lansing and to go speak to people down in Pulaski, Tennessee, who then go back to Washington and say, “You know, you're going to hurt me if you hurt Canada by hurting Martinrea.” Martinrea doesn't employ any Canadians in Tennessee; it employs Tennesseans.
I'll leave that here. It's a very complex matrix, but the automotive interest.... This isn't 1998 or 2002, and we can't unwind what the result of NAFTA is. NAFTA works for automotive, and we're generally optimistic that the facts will work in this case, because the facts support the American interest.
Mr. Chairman, thank you for the opportunity to meet with this committee as our bilateral relations with the U.S., in the context of its new administration, have jumped to top of mind.
The chemistry industry that I'm representing today is an invisible but vital component of Canada's economy. As my friend next to me was talking about back and forth, we're looking at a couple of $4-billion investments in Alberta that will produce the raw materials that become auto parts, and lightweight auto parts specifically, to reduce CO2 emissions. The value chains get longer and longer and better and better.
Chemistry is pretty invisible as a component of Canada's economy, but it's the fourth largest manufacturing sector with $53 billion in shipments. I've left each of you with an information package that shows our size, our regional characteristics, and some of our subsector characteristics.
Forty billion dollars of our production is exported each year. That's second only to transportation in the whole manufacturing sector. Not many people know that we're the second largest exporter. We import $50 billion. In the Canada-U.S. situation, three-quarters of our exports and two-thirds of our imports are with the U.S., to or from. We're about balanced. It's in the range of about $30 billion to $32 billion each way, and it varies from year to year. Every one of our members trades. We know what trade is about.
Our sector is proud of its highly skilled workforce. Thirty-eight per cent of our 87,000 employees are university graduates. That's second only to the IT sector. Our average salary at just over $80,000 is about one and a half times the manufacturing average.
In my brief time with you today, I want to share several key messages on behalf of the chemistry sector, but before I get to some of the points, I want to get to a couple of the conclusions.
With the U.S. system and the tactics we're observing, let's just agree to understand the terrain. I think you do, from what I heard earlier, but I'd better be on the record. The President and the administration have a role to play, and frankly, an important but sometimes deliberately distracting one. It's well worth separating tactics from lines of authority. There are some rather murky checks and balances in the U.S. governance system, and they're there regardless of what the social media say. Our discussion with key Congress and U.S. Senate leaders suggests that they know their jurisdiction, and they're not about to cede that jurisdiction to this or any other president, past, present, or future.
That said, there's considerable disagreement over the real power and executive authority. Just look at TPP for one example of that. This is not an area where we have expertise, but I just want to say that our concern regarding commercial relations is that we not take our competitiveness for granted. While the new administration is focusing on winning, on facilitating winning, and on reductions of regulatory burdens, what are we focusing on? There's one thing that needs to be obvious to all Canadian policy-makers at the federal and provincial levels, and that is that we can't afford to take for granted our competitive position and our trade relationship with the United States.
The United States administration is deliberately engaging in one of the key tactics in the book The Art of the Deal; it is keeping the other side off balance. While it's impossible to attribute motives and tactics, the only thing new is the tendency to talk win-lose in the media, and seriously, is that really new? This is our neighbour. We know them. We know their tactics and we know how they work. It's the job of leadership here to fight for Canada, for investing here, and growing our economy and breaking us out of this anemic sub-2% GDP growth band that we seem to have slipped into.
Let me turn to the specific opportunity from a commercial relations perspective as we look specifically at NAFTA.
First, let's look at the larger global chemistry industry. It's large, fast growing, and deeply interconnected. Over half of world trade is intra-company. Annual sales in this sector are well over $5 trillion U.S., with growth rates well in excess of global GDP. To put that in context, we're 1%. We're about 2.5% in trade, but we're 1% of the global industry. Further, the sector does trade more than any other manufacturing sector, and there we're not number two. Globally, this is the largest trading sector, over $2 trillion, 40% of global production trades.
Free and fair trade in chemicals will remain a very important component of this industry if it's going to realize the contributions demanded from it in the decades to come. We are solution providers in a lot of areas of need-to-address issues.
My second point is that Canada's position within this highly integrated global sector is at an inflection point. I gave you the trade numbers. They are material. However, our relatively balanced trade in chemistry with the United States shouldn't be taken for granted. The availability of low-cost natural gas arising from the shale gas phenomenon has resulted in 300 global-scale chemistry investments, with a value of $250 billion in the U.S. in recent years. These projects are new capacity. They're export oriented and they're likely to displace significant exports from Canada as our biggest market becomes our biggest competitor.
We tracked or matched the U.S. for the last 45 years—I've put the data together—at roughly 10% in investments, but in the last five years, while the U.S. has surged with the $250 billion in new investments, we have sputtered to 1% from 10%.
At the same time, the new administration in Washington has purposed to embark on an aggressive round of reforms in areas like trade and taxation and regulation. We can't predict the outcome of those specific areas. They're going to tackle some things that they find have some local and natural inertias that are very difficult to overcome, but we know they are aggressively pursuing a more competitive landscape for their manufacturing sector.
Taken together, in the absence of an accord made in an appropriate response, we will be second in every investment decision in our sector, and there is no prize for being second. If we're going to retain and grow this valuable sector and our quality of life, we have to shape policy to win in Canada and make a difference.
My final point is that there are good reasons that we have developed strong trade ties with the U.S. I'll be repeating a little bit of what you have probably already heard. There are reasons that we need to make a focused effort to continue what we have in place.
Canada and the U.S. have the same lowest carbon chemical feedstocks in the world. For Canada to seize the opportunity and attract a fair share of significant investments and do it here rather than somewhere else, based on making the same thing from coal, with a carbon footprint eight times what it is making from gas, these are ways in which we can tackle global problems.
We need to respect, recognize, and focus in three areas. We have to be prepared to renegotiate a modernized and better NAFTA. Early in March, our sector, along with the Mexican and American chemical associations, delivered a three party statement to our respective governments on what we like about NAFTA and where we can go further to improve it. I shared a piece of paper on a press release. It's on our public website in both official languages. I apologize for not bringing copies with me.
NAFTA has facilitated the growth of complex supply chains. You've heard about that already. They allow products to cross our border multiple times, sometimes in ways that you might not have thought about. We are now pipelining pure ethane up from gas fields in the United States into Alberta and Ontario, converting it into polyethylene and other materials and shipping it back to the United States, so it's not just raw materials heading south. There are value chains that upset that classic vision.
Also, there are good business reasons for maintaining and growing NAFTA. We share many common economic, social, and cultural characteristics with our neighbour and trading partner.
Trading is easier with a closest neighbour. You heard that earlier. Cost of transactions, logistics, overheads are lower, profit margins.... Dealing with the United States, they pay their bills. We've dealt with countries where rule of law comes in kind of second. It's going to be nice to have a trade arrangement with some of our Asian partners, but let's not kid ourselves. A state-controlled economy is a state-controlled economy, and when urgency is set in place, there are going to be changes in what moves and why. We've had joint ventures where the electricity has been shut off for a week and we just had to deal with it.
I'll make a last point and then open it to questions. Federal and provincial governments have to pay attention to investment competitiveness. Sure, Canada reserves the right to pursue its own policy objectives, but it must take measures to maintain and enhance investment competitiveness overall at a time when competition for investment is, very simply, fierce. There is lots of investment happening. Do we want it to happen here? This isn't about another consultation, strategic table, study, or panel. This is about engaging to win investments right now.
I'll stop and welcome any questions.