FAIT Committee Report

CONCLUSION: THE COMMITTEE’S VISION
FOR ADVANCING CANADA’S OBJECTIVES
IN NORTH AMERICA

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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