The Global Economic Crisis and the Canada-Colombia Free Trade Agreement

November 19, 2009

Thank you for the opportunity to appear this morning to contribute to your study of Canada’s commercial relations with South America.  I will offer a few introductory comments and then my colleague Sam Boutziouvis and I will be pleased to answer any questions.

It is no secret that the Canadian Council of Chief Executives (CCCE) has been a strong and consistent supporter of international trade and investment liberalization.  We were instrumental in the development and promotion of both the Canada-United States Free Trade Agreement and the subsequent North American Free Trade Agreement (NAFTA).  More recently, we have encouraged multilateral trade liberalization as well as bilateral and regional economic agreements.

The reason we support trade and investment liberalization is simple: open markets are good for Canada.  Open markets create high-quality jobs for Canadian workers.  They open doors for Canadian exporters.  By supporting business growth, they also generate the tax revenues Canada needs for its public institutions and social programs.  In a very real sense, Canada’s prosperity depends on our ability to do business in both developed and developing markets around the world.

Our country’s most immediate opportunity in South America is quick implementation of the free trade agreement that Canada has negotiated with Colombia.  I therefore would like to speak directly to Bill C-23 and urge members from all parties to support prompt passage of this legislation.  This bill deserves your support for four major reasons.

First, enhanced international trade is vital to help our country recover from the global economic downturn.

At the moment, Canada is experiencing a lopsided economic recovery.  Domestically, there are signs that we are beginning to make progress. But our international trade performance continues to disappoint.  The strong Canadian dollar and weak demand in our largest market, the United States, have combined to make life difficult for many of Canada’s exporters.

We also are seeing a rising tide of protectionist measures such as the Buy American provisions in that country’s stimulus legislation.

And looking ahead, Canadians know from our own experience in the 1990s that the huge government deficits being run up in the United States create a real danger of prolonged weakness both in future American demand for our goods and services and in the value of the American dollar.

In this environment, it is vital for Canadian companies to continue to do everything possible to diversity their export markets.  Passing Bill C-23 would reinforce these efforts.  Conversely, further delays in passage of this bill would undermine the goal of improving Canada’s global trade performance and slow our return to strong economic growth.

Second, Bill C-23 will produce real benefits for Canadian workers, farmers, and companies. 

The agreement will benefit companies and workers across a wide range of industries, including the automotive sector, steel, chemicals, public infrastructure development, oil drilling, environment and engineering services, information technology products and services, agriculture, fertilizer, paper and other forestry products, copper products, textiles, apparel and footwear, mining and advanced manufacturing.

Equally important, Bill C-23 will help to level the playing field for Canadian workers and farmers.  It will stimulate growth in commercial relations, raise awareness and further open this dynamic and growing economy to Canadian know-how and ingenuity.  Upon implementation, the agreement will eliminate tariffs on nearly the entire range of Canadian exports to that country.

Colombia’s tariffs on Canadian goods currently range from 15 percent to 108 percent.  This currently represents a huge disadvantage for Canadian exporters.  Passage of Bill C-23 would erase that disadvantage and help Canadian workers, farmers and businesses to stay ahead of global competitors.

I have to add that Colombia is not standing still and waiting for Canada to get its act together.  Just this past week, President Uribe signalled his interest in pursuing a free trade agreement with South Korea, and spoke of working toward an enhanced relationship with Japan.  Investment talks have already started between Colombia and China.  Meanwhile, Colombia and the European Union are aiming to wrap up negotiations on an economic partnership agreement by next March.  And Colombia has already completed negotiations with member states of the European Free Trade Association.

By the end of 2010, the government of Colombia expects to have completed nine trade agreements representing 45 countries.  And in our view, it is only a matter of time before Canada’s number one trading partner, the United States, secures its own free trade agreement with Colombia.  At a meeting on June 29 of this year, President Uribe and President Obama instructed their teams to renew their efforts toward such an agreement.  President Obama in particular expressed confidence that a deal can be struck “that is good for the people of Colombia and good for the people of the United States.”

Some commentators have referred to Canada’s trade agreement with Colombia as a “defensive FTA.”  We do not agree.  Rather, we believe that implementing the Canada-Colombia agreement quickly represents an opportunity for Canada to get out in front of our international competitors.

Third, Bill C-23 will benefit the people of Colombia.

Domestic policy reforms introduced over the past decade have served Colombians well.  Colombia experienced accelerating economic growth between 2002 and 2007, thanks in part to improvements in domestic security, rising commodity prices, and market-based macro-economic policy reforms.  Over that period, poverty levels declined by 20 percent and unemployment fell by 25 percent.

Naturally, Colombia’s economy has been hit by the global downturn, but the good news is that like Canada, Colombia has come through 2009 relatively well.  As the recession took hold, President Uribe’s government took many of the right steps: it cut capital controls, arranged for emergency credit facilities, promoted investment incentives and encouraged exporters to find new markets.

The Canada-Colombia Free Trade Agreement will signal Canada’s strong support for the pro-growth initiatives of President Uribe, and will further increase confidence in doing business in Colombia.  In doing so, the Canada-Colombia FTA will reinforce efforts to promote greater safety, peace and confidence in Colombia.

On the subject of security in Colombia, the facts are inescapable.  After decades of turmoil, violence has dropped to levels not seen in a generation.  Tens of thousands of paramilitary fighters have demobilized, and education enrolment has increased dramatically.

People around the world are recognizing this growing sense of security and safety.  One notable result: more than 200,000 cruise passengers docked in Cartagena in 2008, almost double the number in 2007.  Significantly, Colombia now attracts more than 1.2 million visitors each year – double the number in 2002.  Earlier this year, the Board of Governors of the Inter American Development Bank chose to meet in Colombia on the occasion of the bank’s 50th anniversary.  Also scheduled to take place in Colombia is the 2010 World Economic Forum meeting on Latin America.

Recent improvements in security in Colombia have had tremendous impact in attracting foreign investment.  Between 2005 and 2009, foreign direct investment into Colombia has averaged just over U.S. $9 billion a year.

Fourth and finally, the proposed Canada-Colombia Free Trade Agreement meets the highest global standards.

Officials at the Department of Human Resources and Skills Development have concluded that “the agreement signed with Colombia represents the most comprehensive labour agreement in the world today.”  Canada in fact has achieved labour protection provisions that go beyond those even being sought by the United States and the European Union.  The dispute resolution mechanism embodied in the Canada-Colombia labour side agreement will in a very real sense help to improve conditions for Colombian workers.

Officials at the Department of Finance, for their part, have concluded that “this free trade agreement tries to support corporate social responsibility, environmental laws and labour laws.”  In addition to its very strong provisions on labour standards, “the corporate social responsibility aspects of this agreement are the first time Canada has included such commitments” in a trade deal.  These provisions are included in both the investment and environment chapters of the Canada-Colombia FTA.

The Canada-Colombia Free Trade Agreement also will enhance the impact of Canada’s development aid programs in Colombia.  Certainly there is a case for more aid to support marginalized communities, women and indigenous groups, legal assistance and judicial reform.  But failure to implement our free trade agreement would instead undermine our ongoing development efforts to strengthen Colombia’s social and economic fabric.

Conclusion

To summarize, Canada should be doing everything possible to deepen commercial relations with developing markets such as Colombia.  Prompt passage of Bill C-23 would help Canadian workers and businesses of all sizes, both in stimulating economic recovery in the short term and building sustainable competitive advantage.  Implementing the free trade agreement also would benefit Colombia’s economy and society, and would signal Canada’s strong support for countries and governments committed to democracy, the rule of law, peace and security.

This is a deal that is good for Canadians, good for Colombians and sets an example for the world.  We should just get on with it.  Thank you.