Beyond Free Trade – A Canada-United States Partnership for Security and Prosperity – An Address by Thomas d’Aquino

March 3, 2005

(To download the PDF version of this document, click here.)

The following text served as a basis for remarks to audiences in Dallas, Tucson, Phoenix, Cleveland and Buffalo between February 24 and March 3, 2005.

The audiences included the World Affairs Council of Greater Dallas; the Greater Tucson Economic Council; Arizona State University and The Garvin School of International Management, Thunderbird, Phoenix; the Cleveland Council on World Affairs; and Canisius College, Buffalo.

This five city speaking and consultation tour by Mr. d’Aquino is the first leg of a ten city initiative in the United States planned for 2005.

Mr. d’Aquino chairs the Canadian Council of Chief Executives’ North American Security and Prosperity Initiative launched in 2003. 

In 1988, Canada and the United States took a “leap of faith” into a comprehensive free trade agreement.  Almost two decades later, the fears of the skeptics have been demolished, and both Canadians and Americans have many reasons to be thankful that our leaders at the time — Prime Minister Brian Mulroney and President Ronald Reagan — had the courage and foresight to set our two countries on a new path.

Today, though, I believe the time has come to take a new leap together, a leap beyond free trade, a leap into an even closer partnership that will strengthen both of our great nations in an increasingly competitive and dangerous world.

Our current leaders, Prime Minister Paul Martin and President George W. Bush, already have set the stage for the next step forward.  At their meeting in Ottawa in December 2004, they signed a joint commitment to pursue a new partnership for common prosperity and common security. 

I believe that the time is right for a major new bilateral initiative, and today I want to share with you what I see as the critical elements of such a partnership. 

We live in a dangerous world.  We live in an increasingly competitive global economy.  We know from experience that reducing barriers between us leads to more jobs and higher incomes on both sides of the border.  We need to learn from this experience.  We need to build on this experience. We need to take our historic partnership to the next level.  We need to create a seamless economic space that is secure from external threats, one that will ensure our continent’s leadership in advancing human welfare and building a better world.

For those of you who are not familiar with the work of the Canadian Council of Chief Executives (CCCE), I should explain that the Council was the Canadian private sector leader in the development and promotion of the Canada-United States Free Trade Agreement during the 1980s and of the subsequent trilateral North American Free Trade Agreement.

We know that as a leading trading nation, Canada depends for its prosperity on the free flow of goods, services, investment, people and ideas across national borders.  As a result, we also have been tireless advocates in promoting freer trade and investment links globally: through multilateral institutions such as the World Trade Organization (WTO); regional groups such as the Asia Pacific Economic Cooperation (APEC) forum and the Free Trade Area of the Americas initiative (FTAA); and bilateral initiatives with both governments and our private sector counterparts in major trading partners across Asia, Europe and the Americas.

While Canadians and Canadian enterprises are active worldwide, the fact remains that our single most important relationship by far is with the United States.  And before I go into detail on what I believe our two countries can and should be doing together in the years ahead, I think it is important for you to understand just how far Canada has come over the past decade.

In the early 1990s, Canada was facing serious economic difficulties.  Government deficits were spiraling higher every year.  Combined with large trade and current account deficits, Canada’s foreign debt was climbing at an alarming rate, adding to inflationary pressures, pushing down the value of our currency and pushing interest rates higher.  Some international observers suggested that Canada was about to hit the “debt wall” and that we might need to call in the International Monetary Fund for a bailout.  And all this came just as Canadian companies were facing the immense new competitive pressures flowing from the free trade deal with the United States.

But in a remarkable show of determination, Canadians did not despair.  We put our heads together and built a national consensus on the kind of decisive action that was needed to overcome our challenges.  Governments attacked deficits with a vengeance and returned the country to fiscal health in record time.  Our central bank waged a successful war against inflation giving Canada a level of price stability among the best in the industrialized world.  Our enterprises and our workers took on the pressures of free trade and figured out how to win in the bigger North American market with competitive products and services.  All of these actions had serious short-term costs, but they paid off with amazing speed.

Since the beginning of this decade, Canada has led the G-7 nations both in the rate of economic growth and in the pace of job creation.  It continues to report a steady string of surpluses in its international trade and fiscal accounts. And it has produced the biggest gains in the G-7 in growth in the standard of living of its citizens, with a bigger jump over the past seven years than in the previous 17 years. 

Real personal disposable income has been growing at a compound annual rate of 2.5 percent since 1997.  As a result, retail sales have been growing by 3.7 percent a year, and 66 percent of households now own their own homes.  And Canadian investors have reaped gains from the best performing stock market in the G-7.

All this superb economic news has had a powerful impact on government finances.  Our federal government has now reported a surplus for seven years in a row.  Federal debt has plummeted from 68 percent of Gross Domestic Product in 1995 to less than 39 percent, and is on track to fall to 25 percent within a decade.   And as a country, Canada’s net foreign debt has been slashed from 45 percent of GDP to less than 14 percent.

When Canada signed the Free Trade Agreement with the United States in 1988, a flood of doomsayers predicted that Canada’s economy would be gutted and that the remnants would be swallowed up.  Now all but the most hardcore of the economic nationalists have been forced to admit that they were wrong.  And while we have indeed seen extensive new investment flowing into Canada from the United States, Canadian companies have been doing their share of the buying.  Recent examples include the purchase of John Hancock by Manulife Financial in the insurance business and of Tom Brown by EnCana in the oil and gas sector, bringing Canada’s total direct investments in the United States to more than US$130 billion.

My point is that our courage in accepting the challenge of free trade between us has paid off for both sides.  Canada now exports 48 percent of all the manufactured goods it produces to the United States, but Canada also is the single largest customer for 39 states.  As a country, we buy almost 25 percent of all of the goods that the United States exports.  That is more than Japan, Germany, Britain, Italy and China combined.  The Canadian province of Ontario alone buys more from the United States than does the entire country of Japan.  Add it all up, and trade with Canada provides jobs for some 5.2 million Americans.

Canada currently enjoys a substantial surplus in its trade with the United States, but much of that surplus flows from the resource sector, which provides a secure and well priced supply of products that play a key role in improving the competitiveness of American industry and the standard of living of American families.

Canada’s value to the United States is especially evident in the energy sector.  The United States is highly dependent on imported energy, and Canada is both its largest and its most secure and reliable supplier.  We supply 100 percent of your imported electricity and 94 percent of your imported natural gas.  We are your biggest supplier of uranium for your nuclear power plants, and we sell you more oil than does Saudi Arabia. 

What is more, at a time when overall production of oil and gas in North America seems to be peaking, Canada’s vast oil sands have moved from being a high-cost experimental technology to a highly competitive source of oil that is now rated as equivalent to conventional reserves.  This in turn gives Canada reserves that are second only to those of Saudi Arabia, and the only real limits on the expansion of production are regulatory processes and the supply of trained people and equipment.

Other resource products from Canada also support the growth of American companies and the wellbeing of American households, but the story has not always been a happy one. 

For instance, Canada sells more products to a single United States company, Home Depot, than all Canadian enterprises combined sell to France, and these sales of products like lumber play an important role in helping more Americans to build homes they can afford.  Yet the long running battle over softwood lumber is now in its third decade, a sad tale of special interest greed time and time again finding ways to twist the rule of law.  The United States lumber industry has become the poster boy for egregious abuse of trade rules.

Canada and the United States have become so heavily inter-connected that we simply cannot afford to keep fighting each other.  The kind of never-ending squabble that we have endured over softwood lumber adds to business and consumer costs on both sides of the border.  More ominously, it is threatening to undermine our ability to trust each other and to work together effectively across the broader trade relationship.  In one way or another, we have got to crack this nut, and the ideas that I want to put on the table today provide several options for doing so.

Old-style trade negotiations were based on trade-offs between the goals of each side.  The relationship between Canada and the United States has become too complex to be handled by zero-sum trade-offs.  Looking forward, we need to move beyond the calculus of trade talks to consider our shared interest in building a more competitive and secure North America.

Together, I believe we face two great challenges.  One of them is economic.  The other involves our security.

On the economic front, the North American Free Trade Agreement (NAFTA) was on the leading edge of global efforts to liberalize trade and investment when it was signed in 1993 by Canada, Mexico and the United States.  Like the Canada-United States FTA, it has produced important gains for all three partners, but it also seems to have made us dangerously complacent.  While we in North America have rested on our NAFTA laurels, others in the world have learned from our example and are now passing us by.

The European Union has moved to a currency union and full labour mobility.  With agreement on a European constitution, it is moving closer to political union.  It also is growing in scale, bringing its membership from 15 countries to 25.

In Asia, the emergence of China and India as major economic powers is transforming patterns of trade and investment both within the continent and globally.  I would ask you to reflect in particular on the impact of China:

• China’s GDP has grown fourfold since 1978, and the country plans to multiply its economy by the same factor again over the next two decades.
  
  
• China has now moved ahead of Japan as the third largest trading nation in the world.  Trade has grown from 15 percent of GDP in 1980 to 33 percent in 1990 and 50 percent in 2002.  
  
  
• China is unquestionably the top destination in the world for foreign direct investment.  Its stock of FDI has grown 400-fold since 1990.
  
  
• China’s labour force is rapidly becoming urban.  More than 50 percent of its labour force has moved from agriculture into manufacturing and services, in the process lifting more than 100 million people out of poverty.

This amazing growth story has two strategic impacts for all of us in North America.  First, by using its disciplined labour and new machinery and equipment to establish itself as the world’s factory floor, China is setting the global pace in driving down the prices that consumers have to pay.  To illustrate, 12 percent of its total exports, one percent of its GDP, end up on the shelves of Wal-Mart. 

At the same time as it is driving down the prices of finished goods, China’s voracious appetite for natural resources to fuel its capital investment and factory production is driving up commodity prices across the board, from copper, aluminum and nickel to steel and plastics.  China’s total energy consumption has more than doubled since 1987, and in 2003, it accounted for 41 percent of the world’s total increase in demand for oil.  It is now prowling the world, looking for ways to invest in securing its future supply of strategic resources — including in Canada’s oil sands and mining sector.

The economic challenge represented by China and other emerging powers is formidable enough on its own, but we in North America also need to work together to confront a second major challenge, one that threatens our very way of life.  The terrorist attacks of September 11, 2001, ushered in a new era, and subsequent attacks aimed at citizens of other countries throughout the world have shown that it is not just the United States at risk.  Indeed, the ultimate target of these terrorists is the very spirit of democracy and the rule of law that represents a core value of all open societies.  In welcoming President Bush to Halifax in December 2004, Prime Minister Martin aptly summed up the threat.  “Today, the front lines of the war extend from the nightclubs of Bali to the schoolyards of Russia, through the train stations of Spain, and on into the avenues of Manhattan and the everyday lives of North Americans.  This is not a conventional war and the ocean is no longer a buffer.  We do not see the enemy.  He does not wear a uniform.  He seeks only to kill.  And thus, we must be steadfast and unrelenting in our vigilance.”

The danger posed by terrorism threatens more than the loss of life and property.  In the wake of the attacks of 9/11, we saw huge line-ups at the Canada-United States border.  Within hours, factories that were counting on just-in-time deliveries had to start shutting down production lines, and thousands of layoffs quickly followed.  One of the most effective ways for terrorists to undermine the world’s democracies is to disrupt the efficient flow of goods and people among nations, and nowhere is this danger more acute than along the 5,500 mile border that Canada shares with the United States.  If we cannot secure the landmass that we share from external threats, we put our existing standard of living as well as our lives at risk, and we will severely limit our economic potential.

In defence, as on the economic front, Canada and the United States start from a position of strength.  We have fought together in defence of democracy through two world wars.  Our mutual commitment to the defence of the continent dates back to the 1940 Ogdensburg Agreement signed by President Franklin Roosevelt and Prime Minister Mackenzie King.  For more than four decades, the North American Aerospace Defence Command (NORAD) has relied on a unique binational command structure to protect the skies of our continent from aggressors. 

On September 11, it was a Canadian general at NORAD headquarters at Cheyenne Mountain, Colorado, who made the call to clear the skies.  Canadians across our country opened their homes to the 34,000 people on 225 aircraft that were diverted to Canadian airports.   A few days later, more than 100,000 of my fellow Canadians stood solemnly on the grounds of Canada’s Parliament in Ottawa to mourn the victims.  I was there.  And in cities, towns and villages across my country, this act of solidarity and respect was replicated.  Our forces have since served with distinction in helping to hunt down terrorists in the mountains of Afghanistan and to enable democracy to take root in that country.  Our ships have led patrols to control the waters of the Persian Gulf.  We have not chosen to fight everywhere that you do, nor do we have the capability to do so even if we wanted to, but we know who our friends are, and when the chips are down, you can count on us just as we count on you.

In this new era of global insecurity, the imperatives of economic security and physical security have become inseparable.  To guarantee the physical security of Canadians and Americans, we must guard each other’s backs.  To maximize the economic security of people in both countries, we must pool our strengths.

In the wake of September 11, our two countries moved quickly to sign a Smart Border accord, one that has laid out more than 30 ways for us to work together to keep our mutual border open for business and closed to terrorism.  Our respective governments continue to work closely in putting these measures in place, expanding them and improving them.  But as extensive as the Smart Border agenda is, it does not address the full range of challenges and opportunities that we share.

This is why, two years ago, my organization launched what we called our North American Security and Prosperity Initiative.  Without compromising the vibrant independence and distinct personalities of our respective countries, Canadian business leaders said that it was time to consider an integrated strategy for North America, one that would combine our plans for enhancing our continent’s economic advantages with those for strengthening its defences against external threats.  We suggested that an effective and comprehensive strategy should be based on five pillars:

• First, it must move beyond border management to the true reinvention of North American borders. 
  
  
• Second, efforts to smooth customs processing must be reinforced by a sweeping effort to reduce the costs and delays at the border caused by regulatory differences. 
  
  
• Third, and linked to regulatory issues, it must address issues in the resource sector to ensure that trade flows respect the twin principles of security of access and security of supply. 
  
  
• Fourth, it must recognize that all of the progress Canada desires on the economic front depends on a credible reinvigoration of the North American defence alliance. 
  
  
• Fifth, it must consider the development of a range of new institutions to manage the deepening of the Canada-United States relationship.

In April of last year, based on extensive consultations across business and government and on research involving some of North America’s top scholars, the CCCE produced a major discussion paper, New Frontiers: Building a 21st Century Canada-United States Partnership in North America.  This paper included 15 specific recommendations built on our original five pillars, and provided the foundation for our efforts over the past year to build support across the continent for the idea of a comprehensive approach to our shared challenges.

Based on what we have heard and on other developments over the past year, let me give you a summary of what I see emerging as the key elements of a new partnership between Canada and the United States.

First, under the concept of reinventing borders, we need to bring together our agendas for managing both trade and security.  On the economic front, we should aim for nothing less than a seamless market for trade in goods.  On security, we need to build on the Smart Border agenda to make this seamless market a practical reality.

What do I mean by a seamless market?  For starters, it is time to accelerate harmonization of the tariffs we charge to third countries.  These differences require costly rules of origin to be applied to trade under the duty-free provisions of the NAFTA, costs that are so high that many companies are choosing to ignore the NAFTA and simply pay the multilateral duty rate.  Our two countries already charge tariff rates that are either identical or within two percentage points on the majority of industrial goods.  Within five years, we ought to be able to agree on a common external tariff across the board, and perhaps even a formal customs union.

But when I talk about a seamless market, I also am talking about one in which we stop fighting amongst ourselves.  Protectionism within North America simply hurts people on both sides of the border.  Let us find ways to deal with our remaining trade disputes and agree on a better path forward.  At the very least, we should improve the current dispute settlement process, moving from ad hoc panels to a permanent panel that would enable professional full-time judges to be appointed and encourage faster and more consistent resolution of disputes. 

Let me suggest that we should go even further, and at least temporarily suspend the application of countervailing duty and anti-dumping rules against each other’s companies.  The number of such disputes has dropped steadily as our economies become more intertwined, and it is time to recognize that our shared interest in making North America more competitive should take precedence over the handful of grudge matches that are still being pursued in a few sectors.  As part of such an agreement, we will need to consider a joint approach to the unfair trade practices of other countries, one that might involve a common approach to competition policy.

A possible third element to creation of a seamless market would be to enable full labour mobility between our two countries.  We already have taken a number of steps through the NAFTA that make it easier for people to move between Canada and the United States for employment.  But taking that extra step, allowing any American or Canadian to work freely in either country, would improve labour market flexibility across the continent and help enterprises in both countries attract the skills and talent they need to compete most effectively on the global stage.

This reinvention of our border for commercial purposes through the seamless movement of goods and labour is linked to the second pillar of our North American strategy, that of managing regulatory convergence.  The fact is that our two countries share a strong commitment to protecting the environment and human health and safety, and that we both maintain high regulatory standards and effective enforcement mechanisms in pursuit of this goal.  But while our objectives are often very similar, the rules and processes we use can be quite different. 

Some of these differences are substantial.  Others are minor.  But all of these differences impose costs.  They can require separate production runs and separate labeling.  The resulting administrative burden is felt most heavily at border points, where it both adds to shipping costs and time and diverts border resources away from the more critical task of ensuring security.

There are many ways to tackle such differences and eliminate their negative impact.  We could negotiate full harmonization at the highest prevailing standard.  We could work together to develop new standards.  We could take the approach of mutual or reciprocal recognition.  And in some cases, particularly with respect to what has been called “the tyranny of small differences”, the fastest and most effective approach may be for one country to adopt unilaterally the prevailing rules in the other country.  Do Americans or Canadians really care whether “cheese-flavoured popcorn” has a maximum of 49 percent real cheese as in the United States or 53 percent as in Canada?

In some cases, we will find compelling reasons to keep doing things differently.  I for one do not believe that the Sarbanes-Oxley Act represents the best way to deal with issues of corporate governance and restore investor confidence in financial markets.  My organization therefore has worked hard to drive regulatory reform in Canada that adopts a different approach, one that will be at least as effective in preventing corporate malfeasance while avoiding what we see as key flaws in Sarbanes-Oxley such as the heavy costs it imposes on the smaller issuers that make up a much larger share of the Canadian market.

An effective strategy for managing regulatory convergence will require two things: first, agreement on some form of joint structure to drive the overall work program; and second, identification of some priority sectors for reform.  In my view the top two priority sectors should be transportation and pharmaceuticals. 

Transportation is obvious, because the time and cost involved in moving people and goods around the continent is critical to the competitiveness of companies in both countries.  I believe we should extend the 1995 open skies agreement for airlines and support an “open roads” agreement for surface transportation, deals that would enable companies based in either country to move people or goods between any two points within the continent. 

Biotechnology is the other obvious priority, and not just because of the differentials in pricing between our two countries.  New products in this sector are important because they have a major impact on the length and quality of life.  Developing and testing such products is both high risk and very expensive.  Both of our countries have the technology and the commitment to ensure thorough testing.  And agreement on some form of “tested once” principle would save both time and money, bringing valuable new products to Canadians and Americans sooner and at less cost, and also giving North American based companies a leg up in global competition.

Other aspects of regulatory convergence will reinforce progress toward the broader goal of a seamless market.  Regulatory differences lie at the core of some of our most persistent trade disputes, in areas such as lumber and agriculture.  Working out such differences clearly would make it easier to move ahead with some of the other suggestions I have made such as a mutual exemption from countervailing duty and anti-dumping actions.

This leads me to the third pillar of my Council’s North American strategy, that of resource security.  I already have described just how important Canada is as a reliable and secure supplier of energy to the United States.  And while overall North American production of oil and gas has begun to decline, Canada has the potential to increase its production significantly.  This capacity has the potential to fuel not only Canada’s own growth, but that of North America as a whole.

Canada and the United States already are committed to open investment and free trade in this sector, but there are steps that we could take to accelerate the development of this strategic resource.  To do this requires cooperation on issues such as the best route for a pipeline from Alaska and Canada’s Arctic.  It also highlights the potential for regulatory reform to speed approvals and encourage greater investment.  There is much that we can do together to strengthen Canada’s position as a secure and growing supplier of energy to the United States, a development that is in both of our interests.

At the same time, it is important to recognize that the highly efficient and cooperative approach that prevails in the energy sector is not matched by the record in other resource sectors.  Improving trade rules and dispute settlement procedures may defuse some of the disputes we have seen in these areas, but another approach is to negotiate a broader resource pact, an agreement that would entrench the two principles of security of access and security of supply across all resource products, from energy, metals and minerals to the forest, agricultural and livestock sectors.

In other words, more than one path can lead us toward the goal of a seamless market. But as I said at the beginning, all of these efforts will come to naught if we fail to work simultaneously to enhance the security of our shared economic space.  It is not enough to eliminate commercial reasons for holding up traffic at our land border.  We also need to find ways to reduce costs and delays that flow from security.

What are the steps we need to take on the security front?  We need to start with the Smart Border agenda and achieve its full implementation as quickly as possible.  In particular, we need to move to extend full pre-clearance procedures at all land crossings.  Handling security clearance as traffic approaches the border is critical to preventing line-ups on the chokepoints created by the bridges and tunnels that actually link the border points. 

This leads to a second urgent task, that of expanding our border infrastructure.   Even before 9/11, the growth in cross-border traffic was straining the capacity of many of our existing links, and the additional burdens necessitated by stronger security measures means that we cannot afford to put off this task any longer.  The volume of goods crossing the border in just one place, between Detroit and Windsor, now exceeds total United States trade with Japan, and yet the road leading to the bridge on the Canadian side remains cluttered with traffic lights.  Trucks that have qualified for the preferred processing routinely are prevented from reaching the designated lane because it does not extend far enough.  Whatever we do to reduce the commercial and security burdens at the border, we still will face a need to expand the border facilities themselves.

To speed the movement of people as well as goods, we should build on another idea spawned by the Smart Border initiative, the AirNexus program.  Under this pilot program, travelers can apply voluntarily for an identification card that includes biometric identifiers.  Having gone through a rigorous security screening during the application process, possession of the card allows people to pass through border processing literally in the “blink of an eye” and as an added incentive gives them preferred access through airport security screening.  We need to take this idea and turn it into a comprehensive border pass, one that would be accepted by both countries for all movement across our mutual borders.

More generally, and to make possible the freer movement of workers between our two countries, we need to agree on common security procedures for handling immigrants and refugees.  I want to make it clear that this would not preclude either country from making its own decisions about what criteria it wants to use for determining who to welcome either as refugees or economic migrants.  All that we need is agreement on how to handle security risks within these flows of people from other countries.  This would involve measures such as joint watch lists and joint visa requirements.  As long as we have confidence in each other’s ability to prevent people who pose a threat from entering either country, we can feel much more comfortable about reducing the time and effort required to screen people moving between our countries.

Both of our countries have gone through a major reorganization of our government departments and agencies to reinforce our commitment to security.  But to achieve the most secure North America possible, our cooperation cannot be limited to the police forces, customs and immigration officials and other civilian links.  We also need to reinvigorate our unique military alliance.

As I already have mentioned, our alliance has a proud history.  We have not just worked closely in defence of North America.  Our men and women have stood side by side as we sent them into harm’s way, whether through the alliances of the world wars, the United Nations in Korea, or the North Atlantic Treaty Organization (NATO) in the Balkans.  Since 9/11, Canada has made important contributions to the war on terrorism, most notably in Afghanistan and in the Persian Gulf.  And now it is time to strengthen our alliance in the context of North America.

In part, to be frank, Canada has to get its own act together.  Over the past three decades, successive governments have allowed our military budgets and capabilities to deteriorate.  We need to do some major reorganization and make some large new investments in people, training and equipment.  Canada today is simply incapable of doing everything we should be doing both to protect ourselves and to contribute to global peace and security.

We are making progress.  The newly introduced federal budget promises a significant expansion of our armed forces, and an ongoing review of defence policy should provide additional focus for our efforts to increase the effectiveness of our military investments.

In the meantime, I think we need to look at what we can do together to build on the existing framework of our alliance.  This week, Canada’s minority government, bent on political survival and pandering to vocal opponents both within its own party and in Parliament, decided not to become a full participant in the development and deployment of a ballistic missile defence system.  On the face of it, this decision does not undermine Canada’s continuing role in NORAD, which in effect acts as the eyes and ears for such a system.  In technical terms, Canada formally agreed in August 2004 to permit NORAD to provide Integrated Tactical Warning/Attack Assessment in support of United States Northern Command’s mission on missile defence.  This having been said, like many Canadians, I am greatly disappointed by the decision of my government to reject a course of action so manifestly in our national interest and so consistent with our long-standing commitment to the defence of North America.  It is my hope that this decision will be reversed by a future Parliament, by a Liberal-Conservative coalition if necessary, that will recognize the logic and wisdom of full Canadian participation and that will vigorously make the case for involvement to the electorate.

Well beyond missile defence, Canada and the United States need to keep working together to defend the continent against all threats, and this suggests that the time has come for a dramatic expansion of NORAD’s mandate.  Just a few months ago, the Canada-United States Bi-National Planning Group recommended that NORAD be expanded to a multi-service North American Defence Command, one that would extend the principle of joint command to land and naval as well as air forces engaged in the defence of all approaches to North America.  In my view, such a step would use an institution in which both countries have a high degree of confidence to strengthen our joint efforts to defend the continent, and I would strongly support this recommendation.

The question of the future of NORAD leads to the final pillar of the CCCE’s North American strategy, that of developing the institutions needed to manage the next stage in the evolution of our partnership.

Here, it is important to recognize that Canada and the United States already share a deep network of institutional links.  Last year, the Canadian government launched a research study in which 30 people spent six months counting all of the ways that we have found to work together.  In its conclusions, published early this year, it identified some 343 formal treaties between our two countries, backed up by literally thousands of informal arrangements or what it called “light institutions”.

North America is not Europe, and I see no point in trying to copy that continent’s move toward large supra-national institutions and big bureaucracies.  Between the two of us, we simply need to build on our existing network in two ways.  First, we should design a limited number of new institutions, where we see a need, with mandates to address specific issues.  Second, we need to ensure that the way our governments interact at the top is effective in providing consistent direction and energy to drive our shared agenda forward.

Before I conclude, I want to say a few words about the broader North American context.  The signing of the NAFTA in 1993, inspired by the Canada-United States Free Trade Agreement of 1988, launched a new era of trilateral cooperation in North America, one that has created real benefits for Canada, Mexico and the United States.  I have focused today on how to strengthen the Canada-United States partnership, but most of the issues that I have identified also need to be addressed at the trilateral level.  Issues such as the Smart Border agenda, regulatory reform, common external tariffs and dispute settlement all would benefit from the vigorous participation of all three countries. 

As we move forward, we must recognize that there are some important differences.  Mexico is not ready to participate in the kind of relationships I have proposed in terms of the defence alliance and resource security.  The extensive illegal migration of people across the United States-Mexico border makes the degree of labour mobility I have recommended between Canada and the United States infeasible in the short term.  The continuing development gap between Mexico and its two NAFTA partners requires a renewed determination to accelerate Mexico’s economic growth and domestic policy reforms to ensure that the benefits of a more open and secure continental market flow to every corner of the country.

Consistent with a strongly pro-Mexico policy developed over the past decade, we in Canada are determined to do our share to strengthen Mexico’s role in North America.  My own organization, for example, designated Mexico a strategic partner over a decade ago.  In October 2004, we co-hosted a Canada-Mexico Business Retreat that led directly to a formal agreement with our Mexican counterparts, the Consejo Mexicano de Hombres de Negocios, to work closely in pursuing an ambitious bilateral and North American agenda.

The Canada-Mexico Business Retreat culminated in a lunch with both President Fox and Prime Minister Martin. That same day, the two leaders signed a Canada-Mexico Partnership agreement, similar to the United States-Mexico Partnership for Prosperity, that calls for development of a detailed bilateral action plan by June of this year through a process involving government and business in both countries.  I am pleased to say that we at the Council contributed to the drafting of this agreement, and we are now part of a working group on competitiveness within the Partnership’s public-private process. The first meeting of the partners will take place in Cancun in early March. 

We also have been taking action at the trilateral level.  In September 2004, the CCCE joined with the Council on Foreign Relations and the Mexican Council on Foreign Relations to launch an independent Task Force on the Future of North America.  This Task Force, co-chaired by former Canadian deputy prime minister John Manley, former Massachusetts governor Bill Weld and former Mexican finance minister Pedro Aspe, has now met three times: in Toronto last October, in New York in December and in Monterrey in February.  Task Force members are now working on their draft report, and hope to present their conclusions to the political leaders of all three countries this spring.

In summary, I think it is important to articulate a trilateral vision of North America as well as a strategy that involves coordinated efforts by all three countries.  We will not always be able to proceed at the same speed among all three countries, but whether we proceed bilaterally or trilaterally, we cannot afford to wait.  Our countries face the same daunting challenges and exciting opportunities in global markets.  We face the same threats against our democratic values and the efficient flow of people and goods within North America.

Whatever we choose to do on a trilateral basis, Canadians and Americans must move with greater clarity, determination and creativity to make the most of the amazing partnership that has been forged over the years between our two countries.  None other than Winston Churchill remarked on the uniqueness of our relationship when he said, “That long frontier from the Atlantic to the Pacific oceans, guarded only by neighbourly respect and honourable obligations, is an example to every country and a pattern for the future of the world.”  President John F. Kennedy offered his own memorable perception of the ties that bind us together when he said, "Geography has made us neighbours. History has made us friends. Economics has made us partners. And necessity has made us allies. Those whom nature hath so joined together, let no man put asunder."

Canada and the United States are proud and sovereign nations and we will continue to pursue independent agendas on many fronts in accordance with the wishes of our peoples.  Our destinies, however, are irrevocably linked and we both will be stronger if we acknowledge our common challenges and if we combine our unique strengths to shape a more secure and more prosperous North America. 
 

Thomas Paul d’Aquino
B.A., LL.B., LL.M., LL.D.

Thomas d’Aquino is a lawyer, entrepreneur, author, educator and strategist.  He is Chief Executive and President of the Canadian Council of Chief Executives (CCCE), an organization composed of 150 chief executives of major enterprises in Canada.  The Council is the senior voice of Canadian business on public policy issues in Canada, the United States and internationally.  A non-partisan and not-for-profit organization, member companies administer approximately $2.6 trillion in assets and have annual revenues in excess of $600 billion.

Under Mr. d’Aquino’s leadership, the Council has played an influential role in shaping the direction of fiscal, taxation, trade, energy, environmental, competitiveness and corporate governance policies in Canada.  In the international arena, Mr. d’Aquino has worked with his colleague chief executives on a wide range of North American and global issues germane to Canada and to Canadian enterprises.  He is acknowledged as one of the private sector leaders in the development of the Canada-United States free trade initiative and of the North American Free Trade Agreement.

A native of Nelson, British Columbia, Mr. d’Aquino was educated at the Universities of British Columbia, Queen’s and London (University College and the London School of Economics).  He holds B.A., LL.B., and LL.M. degrees, and an Honorary Degree of Doctor of Laws from Queen’s University and from Wilfrid Laurier University.

Mr. d’Aquino’s career combines experience in government, business, and law.  He has served as a Special Assistant to the Prime Minister of Canada and as the founder and chief executive of Intercounsel Limited, a firm specializing in the execution of domestic and international business transactions and in the mentoring of chief executives on public policy strategies.  He also served as an international trade lawyer and as an Adjunct Professor of Law lecturing on the law of international business transactions, trade and the regulation of multinational enterprise.

Mr. d’Aquino serves on numerous boards and advisory committees in Canada and abroad.  He has been referred to as one of Canada’s foremost policy strategists and one of the country’s most effective global business ambassadors.  A specialist in a number of public policy areas, he is the author of numerous publications, a regular commentator on radio and television, and a frequent speaker on platforms in Canada, the United States, Europe, Latin America, Japan and the Pacific Rim.  Mr. d’Aquino has addressed audiences in twenty-five countries and in over one hundred cities worldwide.

Mr. d’Aquino is the co-author of an influential book published in 2001, and titled Northern Edge: How Canadians Can Triumph in the Global Economy.