Canada-US relations

1. Canada-US relations • Extraordinary range of linkages exist at all levels • Bulk of relationship takes place “beneath the surface” • Largely non-institutionalized relationship • Strength of Canada-US relationship based on person-to-person networks • Working level cooperation transcends political considerations

2. Bilateral connections

3. Intergovernmental relations

4. Changes in U. S. Policy Environment • power shifts in the US - decentralization • generational shift • changes in regional balance/demographics • intensity of relationship - trade, security • September 11, 2001

5. Competing approaches •  'quiet diplomacy' •  avoid issue linkage •  central management •  transgovernmental- connections between similar government departments

6. Canada-US relations • http://www.cbc.ca/news/canada/story/2011/12/07/f-canada-us-border-by-the-numbers.html

7. Canadian trade overview • http://www.statcan.gc.ca/daily-quotidien/110407/t110407b1-eng.htm

8. Decline in exports to US (StatsCan)

9. Canada-US trade issues • Softwood lumber – ongoing dispute that keeps coming back • Detroit International Bridge Company – major infrastructure project derailed • Keystone Pipeline – the politics of cross border energy trade

10. Softwood lumber • Began in early 1980s • Has been through five different phases • Most recent concluded in 2006; this agreement has now been extended to 2015 • Reflects ability of US interests to pursue variety of means to challenge Canadian trade practices • Also reflects the limited capacity of international agreements to govern effectively in light of these interests • Costs in trade and litigation

11. Ambassador Bridge • Busiest international border crossing in North America as measured by commerce; more than 40000 commuters daily and over 25% of all bilateral trade crossed this bridge

13. Bridge proposal challenged under NAFTA Ch. 11 • Detroit International Bridge Company owns the bridge and affiliated services • Maintains that its investor rights have been unfairly compromised with the new proposals by Detroit River International Crossing for a new bridge to link 401 with 75 • One estimate suggested that cross border traffic has declined by nearly 40% from 2000

14. Energy exports • “We are an emerging energy superpower” Stephen Harper in China February 2012 • One observer (Paul Summerville) described Canadian policy: “The only thing driving Canada’s oil and gas strategy is to sell the most amount in the shortest period of time to the highest bidder. “

15. Economic and environmental impact • Debate over value of Canadian dollar; “Dutch disease”; McGuinty’s and Mulcair’s comments • “Environment Canada estimates that total carbon emissions from the oil sands will likely grow from 49 million tonnes today to 92 million tonnes by 2020. At that point the industry will surpass the emissions of Canada's buildings, agriculture or entire passenger car fleet. It will also exceed the carbon emission of more than half of 50 U.S. states south of the border.”

16. Keystone pipeline issues • Economic issues of the broader context in which this proposal takes place – Canadian energy security and costs • Economic issues of the specific project – exporting raw materials rather than additional processing in Canada and acceleration of production • Environmental costs related to land use; accelerated production and related environmental costs, and risks of pipeline faults

19. US political process • State, national and partisan influences • Economic and environmental concerns • Numerous groups accessing US policy making process • Environmental reviews have generated nearly 300,000 comments

20. US decision to deny • Republicans in Congress give Obama 60 days to decide as part of an amendment on a payroll tax bill; opts to deny the permit • TransCanada reapplies, launches new environmental review process

21. Canadian government looks west • Northern Gateway

22. Approving Northern Gateway • This too is subject to an environmental review process under a Joint Review Panel (between National Energy Board and Canadian Environmental Assessment Agency) that makes recommendations • Environmental issues on both land and coastal waters • Government can go ahead regardless, Alberta obviously on side, BC has taken a wait and see approach

23. Are new approaches needed? •  big ideas                      new institutions                    perimeter defence                    policy harmonization                    common tariff, customs union (Dobson)                    community of laws (Gotlieb)                    include Mexico? •  incrementalism - Barry

24. Options • NAFTA Plus - deepening and/or broadeningCustoms Union:    common external tariff    common trade policy    elimination of rules of origin    issues:       protected sectors       voluntary export restraints (VERs)       trade restrictions (enemy states)       trade preferences

25. Common Market: same as customs union, plus harmonization of regulations, standards, and other economic and social policies Monetary Union: change from the existing flexible exchange rate system experience of the Common European Currency (Euro) rate of conversion independent monetary policy (inflation monitoring) role of the Bank of Canada

26. Specific border measures Beyond the Border 2011 – referred to as the most far-reaching agreement since the free trade agreement Little action thus far and no demonstrated interests on the US side pushing for major reform

27. Progress to date • Regulatory commission has been set up to establish policy harmonization in selected areas • Working groups - http://www.trade.gov/rcc/

28. Diversifying trade options • Additional free trade agreements – Jordan and Israel; • Additional free trade negotiations being pursued – India, Japan, Korea, Morocco, Singapore, Ukraine

29. Diversifying trade options • CETA (Comprehensive Economic and Trade Agreement) – nearing completion

30. Diversifying trade options • Trans Pacific Partnership, proposed free trade zone for the Pacific Rim – http://www.ustr.gov/tpp • US has already turned down one request from Canada to join these talks; at 2011 APEC meeting Canada repeated the request

31. World Trade Organization • The WTO established in 1995 and continues to add new members to its complement – Montenegro and Samoa the latest bringing total to 155 • Canada used to be one of the key members of this club, but no longer – primarily because of the growth of other economies – Brazil, India, and China

32. Diversifying trade options • WTO – Doha Round - http://www.wto.org/english/tratop_e/dda_e/dda_e.htm

33. Poultry, patents and procurement • These 3 issues raise persistent problems for trade negotiators and Canadian interests • Supply management for dairy, eggs, and poultry protects 14,500 farmers, keep Canadian prices relatively high and make it difficult for negotiators to make concessions in negotiations • Pharmaceutical patent practices vary slightly, but Canadian negotiators have not set these rules and instead react to demands from others • Access to government procurements and public services have become a matter of great interest for some foreign firms

34. Managing the global economy • Bretton Woods Institutions – International Monetary Fund (IMF) and the World Bank • Informal organizations of the global economy – the G8 http://www.g8.utoronto.ca/ • A more inclusive global economy – the G20 http://www.g20.org/index.php

35. A G-zero world (Ian Bremmer) • emerging powers – China, India, and perhaps others such as Brazil and Indonesia – have the potential to render obsolete the old categories of East and West, North and South, aligned and nonaligned, developed and developing.  • Traditional geographic groupings will increasingly lose salience in international relations. • Competition for allegiances will be more open, less fixed than in the past.

36. Measures of Emerging Powers • Land area • Labour force • GDP/PPP • Exports • Imports • GDP/Capita • Military spending • Nuclear forces • Peacekeeping; contributions

37. Emerging power groups • BRICS-Brazil, Russia, India, China; South Africameet now in an annual summit and also as part of G8 through the Group of Five (Mexico) http://www.groupoffive.org/ • IBSA – India, Brazil, South Africa • CIVET – Colombia, Indonesia, Vietnam, Egypt, Turkey • Next 11 – Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, Philippines, Turkey, Vietnam

38. BRIC - Goldman Sachs 2003 Report • The ranking of the world’s largest economies will have shifted dramatically by 2050.  Only the United States and Japan will still be among the six largest. • By 2039, the combined BRIC economies will outweigh the combined G6 economies in U.S. dollar terms. • By the same measure (GDP in U.S. dollars), China will overtake all but the United States by 2016, and the United States by 2041. • In 2050, the world’s largest economies will no longer be the richest measured by GDP in U.S. dollars per capita • India’s economy will overtake that of Japan by 2032 to move into third place, and India also has the potential to achieve the fastest growth over the next three to five decades.

39. The BRICs: Growth Rates Source: EIU January or February 2011 Country Reports

40. China (*imports and exports are reversed on this chart) Most Promising Business Sectors: Agriculture, Food and Beverages Information and Communication Technology (ICT) Automotive Aerospace and Defence Metals, Minerals and Related Equipment and Services Bio-Industries Source: Global Commerce Strategy and DFAIT Office of the Chief Economist, based on statistics from Statistics Canada

41. Responding to China’s growth • Increasing prices for commodities, natural resources and energy based in large part on growing Chinese demand. • Increasing trade and investment volumes with China accompanied by a growing trade and, at least in the short term, investment deficit.  • The increased volume of trade poses major issues for air and port infrastructure and has the potential to affect the course of deeper North American integration. • Increased pressure for Chinese professional and business people to emigrate to Canada and to press for more flexible visa, taxation and citizenship rules. • The level of human interactions is destined to grow, perhaps dramatically, with significant implications for new opportunities in connecting immigration, education and tourism. • Increased opportunity, and need, for working with Chinese officials on virtually the full spectrum of Canadian diplomatic and developmental priorities.

42. India Most Promising Business Sectors: Agriculture, Food and Beverages Service Industries and Capital Projects Information and Communication Technology (ICT) Oil and Gas Equipment and Services Electric Power Equipment and Services Aerospace and Defence Source: Global Commerce Strategy and DFAIT Office of the Chief Economist, based on statistics from Statistics Canada

43. “India shares much with Canada: Commonwealth ties; strong democratic traditions; the use of English in much of its commerce. The Indian diaspora in Canada is one of the world's largest, around one million strong, which can further trade ties. For Canada, India can be a springboard to the rest of South and South East Asia. For India, Canada is an entry point into the American market.” http://www.theglobeandmail.com/news/opinions/editorials/free-trade-with-india-is-a-new-silk-road/article1798650/

44. Brazil Most Promising Business Sectors: Information and Communication Technology (ICT) Environmental Industries Oil and Gas Equipment and Services Electric Power Equipment and Services Arts and Cultural Industries Source: Global Commerce Strategy and DFAIT Office of the Chief Economist, based on statistics from Statistics Canada

45. Russia Most Promising Business Sectors: Oil and Gas Equipment and Services Metals, Minerals and Related Equipment and Services Agriculture, Food and Beverages Agriculture, Technology and Equipment Building Products and Construction Source: Global Commerce Strategy and DFAIT Office of the Chief Economist, based on statistics from Statistics Canada

46. Overview of changing trade relations • Canada’s trade with emerging economies http://cidpnsi.ca/blog/portfolio/what-does-canada-sell-to-emerging-economies/

47. Changes Canada’s environment • global economic power appears to be shifting towards them and away from the [current] members of the Organization for Economic Cooperation and Development (OECD) and the G7.

48. Government’s response • “… we recognize that emerging giants, such as China, India and Brazil, are already making their presence felt.  Their growing influence – particularly in the economic realm – carries significant implications for Canada. …If Canada stands idle while the world changes, we can expect our voice in international affairs to diminish.  Instead, we will reach out to these emerging powers, both by developing new bilateral ties and by reforming how countries work together across regions to accommodate their needs.” Government of Canada, Canada’s International Policy Statement:A Role of Pride and Influence in the World, “Overview,” April 2005

49. Emerging Powers approach to global governance • Support for multilateralism • Not always in agreement with traditional institutions • Regional alternatives allow for emerging powers to assume more influence/responsibility • IBSA (India, Brazil, South Africa) and South-South cooperation – non-members of the Security Council

50. Canadian Diplomacy and Emerging Powers • Brazil and South Africa stand apart as major regional players in areas of some significance for Canada • Have assumed prominent roles in WTO negotiations that used to include Canada • Have been promoting South-South cooperation through IBSA created in 2003 • Strong working relationship with these governments will be critical to wielding influence in the region and in multilaterals