Building a Strong Bilateral Partnership

April 29, 2004

Prime Minister Paul Martin’s meetings in Washington over the next two days with United States President George W. Bush and senior Congressional leaders come at an important time in the bilateral agenda.

Canada’s business leaders are not expecting the Prime Minister’s visit to produce miracles in resolving trade disputes in the short term. We do, however, hope they will reinforce American confidence in Canada as a respected partner in North America and lay the foundation that will be necessary if Canada chooses in future to advance bold new ideas for taking our bilateral partnership to new heights.

The members of the Canadian Council of Chief Executives met for two days in Washington last week, and talked with senior decision-makers such as Andrew Card, chief of staff to the President, Senator Hillary Rodham Clinton and General John Gordon, Homeland Security advisor to the President, as well as a wide range of senior officials, ambassadors, business leaders and top academics, economists and journalists. The depth and breadth of the working relationships between our two countries means that business carries on no matter what issues may divide our governments at any moment in time. That said, speaker after speaker said the tone at the top has a critical impact on how Canada is seen and on Canada’s ability to secure its interests within the U.S. political system. Several other key messages emerged from our discussions:

The polarized American electorate: Every issue in Washington today is being driven by both an intensely emotional battle between Republicans and Democrats and by an incredibly even split in voting intentions. As a result, the bulk of the campaign machinery and advertising will be brought to bear on the small percentage of undecided voters in as few as eight to 10 states. This is distorting both the selection and direction of political priorities even more than usual for an election year.

The economic outlook: Despite the bursting of the telecom bubble and the continuing war on terrorism, the United States and global economies are enjoying one of their best growth periods in decades. The question is how long this robust growth can last. Our economic commentators agreed that the United States’s fiscal and current account deficits cannot be sustained anywhere near current levels.

The “outsourcing” of jobs: The feeble pace of job creation in this fast-growing economy is undermining consumer confidence and has given the “outsourcing” issue a political momentum that vastly outstrips its real impact. As one speaker noted, public perceptions of the scale of outsourcing to other countries are more than 10 times greater than the total drop in employment over the past four years, and close to 100 times greater than most estimates of the actual number of U.S. jobs transferred overseas.

Trade protectionism: These perceptions have had a real impact in fuelling a political backlash against free trade and globalization. As one speaker noted, Canada has gained more from globalization than any other G7 country, and while no one expects the United States to rip up the North American Free Trade Agreement, there was unanimous agreement that progress on new bilateral and multilateral agreements will be impossible until after the election. Polling by The Business Roundtable has found that Americans still want to “work with the world” rather than retreat into isolationism. Nonetheless, there is a real danger that the election-driven protectionist attitudes could harden and poison the well for years to come.

Defence and security: There is no getting around the fact that while Canada’s bilateral agenda is focused on economic issues, the priorities of the United States are, as one speaker put it, “security, security, security”. Any proposals that Canada may make on the economic and trade front will be viewed first through a security lens. How Canada chooses to handle defence and security issues will affect its credibility across the board, and the national security strategy that the federal government announced earlier this week represents an important step forward.

Ballistic missile defence: In this context, however, Canada also needs to make up its mind soon on participation in ballistic missile defence. Several speakers told us that without a positive decision no later than June, NORAD will quickly erode along with the whole concept of a binational approach to continental defence. Politically, the advice we heard suggested that taking the bull by the horns, moving quickly and decisively, would maximize the positive impact both at home and in the United States without giving opponents any more political benefit than they already can extract from the current state of uncertainty.

Canada’s role in the world: We heard consistent suggestions that the best way for Canada to strengthen its influence on global affairs is to increase its credibility in the eyes of the United States. A strong bilateral partnership is essential if Canada wants to be effective as a bridge-builder between the United States and the rest of the world, especially Europe. Given recent signals that the United States has begun to back away from unilateralism, this is an especially opportune time for Canada to work with the United States in rebuilding support for multilateral institutions and processes.

The members of the Canadian Council of Chief Executives are more convinced than ever that a bold vision and a comprehensive strategy are essential to serve Canada’s interests in North America and the world, whether this strategy is executed through a single overarching set of negotiations or a series of dozens of inter-related processes and arrangements. Infusing the Canada-United States relationship with new energy and a renewed degree of mutual respect will be a vital step toward achieving our country’s global ambitions.

Thomas d’Aquino is president and chief executive of the Canadian Council of Chief Executives, composed of the CEOs of 150 leading Canadian enterprises.