Transcript of Prime Minister Paul Martin’s speech at the
Sun Valley 2004 Conference
July 7, 2004
The one thing I want to do is just to tell you a little bit about
But one of the items I’m going to be referring to in my conversation this
morning is the need for a dispute settlement mechanism in the North American
Free Trade Agreement. It sounds very complex, but it just simply is... it’s a
way of settling disputes that occur between our two countries, or between
industries in our two countries.
At the time that the agreement was negotiated under the administration of
President Reagan, the dispute settlement mechanism was actually the make or break
demand. And it looked like the demand was not going to be met -- it was going
to go down the drain. One of the Canadian negotiators called Senator, the
then-Senator Bradley, because the President had said: >look, if it can’t get
through the Senate it’s not going to happen’, called the then-Senator Bradley
and said: >look, the agreement is not going to happen unless you can tell us
that the Senate Finance Committee is going to pass this.’ And he said:
>well, look, give me the day.’ And that night, our understanding is that he
called the President and said it’s going to pass. As a result of that we got
it, the North American Free Trade, then the Free Trade Agreement, which has
been of tremendous, tremendous benefit to our two countries. So I’m really glad
to recognize Bill Bradley on that basis. I think, somebody told me that it’s
called a 50-footer through the hoop when the final buzzer is about to sound.
Now, it is my understanding that we’re to have a discussion this morning. It is
my job to set the table for that discussion by focusing. I was asked to do so,
on two of the highest priorities for our respective countries, that is to say
our prosperity and our security. So I’ll break the speech up into those two
components.
The point that I would make really under both cases, is how just a very small
shift in perspective could mean an enormous gain in both our prosperity and our
relative security.
Fundamentally, I think that Canada and the United States should see each other
as more than simply important partners, more than simply friendly neighbours, but I really do think that it’s time that we
understood our responsibilities as joint stewards of North America and those
areas where, at least, our common interests intersect.
For instance, I’ll give you a couple of examples. Underpinning the North
American economy is an increasingly integrated infrastructure of which our
common electricity grid is but one example. And we share a responsibility for
maintaining what is, in fact, the continental backbone of our economy. That is
to say the common electricity grid.
And while each of us has to maintain independent decision-making, we have to do
a better job between our two countries of maintaining our collective interest
here, including the strength and weaknesses of this system.
The best example I can give you, is, of course, last August when the lights
went out from
The other issue, to give you an example, of ways in which I think that we have
got to, I think, be much more sophisticated in our relationship is the fact
that we are joint stewards of the environment. The various eco-systems of this
continent transcend our borders. The Red River flows into
Air currents carry particular matter in both directions across the border. We
share in major fisheries. We share the
The same comment about the need to do a better job on our common infrastructure
applies to the way in which we deal with the environment.
But we have to cooperate much more extensively than we have on water quality,
on air quality and on the protection of migratory species, to simply give you a
couple of examples.
Now, the third example where I believe we must do a better job of managing our
joint and North American responsibilities has to do with our trading
relationships. And this one and security are the two that I’d like to spend a
bit more time on.
Let me begin with a few words of background on
Our debt-to-GDP ratio -- which was the second highest not that long ago in the
G7 -- is now the second lowest. And within five years it will be the lowest of
any of the major industrial countries.
In most cases, our corporate tax rates are lower than yours. Our inflation
rates are low and stable. Our investment is strong. And we have posted the
strongest growth in living standards of any of the G7 countries since 1995.
You’re all aware, I’m sure, that
But many do not realize that
Increasingly our companies, whether they are Canadian or American or indeed,
even Mexican, are operating continent-wide supply chains and distribution
systems.
The same is true with investment. I think that most people know that the
American investment in
And herein lies the problem that I would like to put
to you, and that is the lack of commitment, the lack of leadership to
respecting the results of the NAFTA dispute settlements, once requisite
decisions have been arrived at. Bill Bradley built well.
The time has come for a new Senator Bradley to come forth in Congress to speak
for the public interest and the North American economy.
You cannot have, I mean, essentially, there has to be a way in which when there
is a dispute between two countries that you can come to a final solution. And
we thought that we had that. But as Bill Bradley has said, you are an extremely
litigious society, and you seem to be able to find ways around what were
supposed to be binding settlements. And I can tell you it is beginning to grind
and it’s going to hurt the North American economy if we don’t deal with it.
Let me put this in a broader context. The answer to outsourcing, the answer to
the cheaper labour costs in places like
Now the key to this is to come up with a better dispute settlement mechanism. A
better trade settlement mechanism to offset the inevitable protectionist
pressures which arise when, in fact, an individual company suddenly finds its
profits being gouged by a competitor outside of its borders.
Essentially, the view in
I am going to give you a couple of examples of what I mean. They are not
examples that necessarily apply to the high tech industries or to the media
industries that you are here, but they are two issues that are now uppermost in
Canadian minds.
For years, we have had -- and they are very important, by the way, here in
Now, the fact is this is an integrated North American industry, right from the
feed manufacturers through to the processors and we have virtually identical
science-based regulation to protect consumers and to protect the market.
But what’s happening is special interests in the
The problem is if this persists, decades of investment in an integrated industry
will simply unwind.
In the long run, it’s the
What Canada is going to have to do pretty soon if that market does not open is
start to build massive processing capacity in Canada and then when the market
opens, you’re going to have huge overcapacity in processing, a lot of it north
of the border competing with you here. If the border does not open, then that
processing capacity is going to go and start direct shipments to Japan and
In other words, the advantage of the North American market is that we have a
rational system and when you begin to tamper with that market, what you then do
is effectively hurt both of us.
So it simply seems to me to be common sense and good public policy to adopt a
continental perspective when dealing with BSE and the sooner the better.
Now, the second example, which is also very, very much the stuff of headlines
in
We're probably the most efficient producers of lumber in the world, primarily
because, not because of our wood supply because it takes so long to grow, but
because we have got these incredibly efficient mills. We supply over one third
of the
But a small group of US producers continues to use US trade law to prevent an
integrated industry from functioning effectively, and needless to say, the
effect on smaller Canadian communities is traumatic.
But neither is the
So again, the only point that I make is that we have to come up with a solution
that has agreed rules between us and a dispute settlement mechanism that cannot
be overturned by special interests.
The bottom line is that North American trade issues require North American
solutions, solutions that respect the differences in our sovereign countries
that also recognize the huge common interest and our profound interdependence
as neighbours on this continent.
There is no doubt in my mind that over the course of the next 20 to 30 years,
as the European market finally begins to get its act together, and as China and
as India come on, as the Asian common markets develop more and more, that the
degree to which we are efficient in North America, is going to have an enormous
amount to say on our standards of living. And it makes no sense, as far as I'm
concerned, for us to be putting blockages in the way.
Now, the last example that I would give you, where we should be constantly
examining our common interests, extends beyond
Rogue states, failing and failed states, international criminal syndicates,
weapons proliferation and terrorists who are prepared to act with no concern
for human lives, including their own. Once protected by our oceans, today's
front lines stretch, as you know even better than I, from the streets of
Our adversary could be operating in the mountains of
Now, in
Within
It is interesting that the
We are also establishing a much greater coordination between the different
levels of government in
We have developed a major action plan between our two countries to make the
border impermeable to those who would threaten us and yet open in terms of
trade. And essentially what we want to do, and we have talked to the Governor
about this, is we would like to take what has now become the Canadian-American
plan, which is now working very, very well, and we want to extend it as far as
we possibly can. Then we would like to take that plan, extend it to
The next area that we want to work with you on much more than we have is the defence of
Some of you may know that on September 11th, in fact, most of the planes that
were in
Finally, while effective defence is critical to
security, it’s not the whole story. If we are really going to protect
The motives of terrorist leaders are complex. There’s no one set of causes that
we can point to as the reason for their ruthlessness and their hatred of the
West. But we do know that their appeal is often strongest in countries that are
unable or unwilling to provide the most basic needs. These are normally
identified as health care, education, food and shelter.
But there is another, and another that I believe is becoming more and more
problematic in the light of the unfolding of the world and that is the need for
political participation of citizens in these states in the affairs of their
country.
In short, just as companies have to improve their governance, so do countries.
Better governance within fragile, failing or failed states means building
effective public institutions. It is true that fragile states often require
military intervention to restore stability. You in the
Foreign aid is also crucial. But in both cases, the benefits are clearly
circumscribed when functional and accountable public institutions are not in
place.
We saw this in
The problem was that we left before the institutional structures were put in
place, and the institutional structures that were required if
The problem is that none of us, neither the States nor
So 10 years later, here we are, back with the same problem and the same mess,
but this time, we have got to stay until the job is done properly. In short,
the common thread to the successful rehabilitation of a failing state is the
same as that which brought about the stability of a successful state.
It is public institutions that work. There are 183 nations that are part of the
IMF. There are close to 50 which are deemed to be failed or failing. This is an
enormous international effort that is required and it is one, to be quite
honest, which I don’t think that we, as nations, have begun to face up to.
The other condition which is, I think, very important if failing or failed
states are going to turn around or in fact if any poor country is going to turn
around, is the presence of a vibrant private sector.
Last year, the former Mexican President Ernesto Zedillo and I co-chaired a
United Nations commission on private sector and development, which Carly Fiorina was on. In fact,
the example -- you may have seen the example that she gave in
The report recommends a number of issues, but running through our thinking were
two clear messages.
First, although foreign investment is required, certainly in the early stages,
an economy will not fly until and unless domestic investment and domestic
demand becomes the driver.
Second, the sine qua non of domestic investment is the same as it is for
foreign investment and that is confidence in the structures of public
institutions, private property rights, the rule of law that ensures stability
and freedom from corruption. It is estimated that the property held by the
poorest of the poor in the world exceeds by a factor by 200 to 1 all the
foreign aid that can be provided. The problem is that nobody has property
rights.
Some of you may have heard of the (inaudible) economist Hernando De Soto. What
Hernando De Soto has essentially said is if you could give property rights to
the people living in the (inaudible) to their property so that they could
mortgage it. In fact, what you would be getting, you’d get the beginnings of an
entrepreneurial society.
These are the kinds of changes which we believe that we’re going to have to
bring in. There’s another something that flowed from it which is really very
interesting -- the introduction of high tech into poor rural areas.
One of the things that we found in our commission is that there is rampant
corruption. I think we all understand that, in many of these countries,
certainly in rural
And I have got to say that I think that
Then the last area that I would deal with, in terms of international
governance, is the need to improve the way in which our huge international
institutions operate. There are many examples of this. The best known, of
course, is the current attempt, not going very well, to reform the United
Nations, but I think we now can begin to see some signs of optimism.
But there are other examples where reforms are needed. Most of our countries
look upon our health care systems as silos within which we all operate. The
fact is that when you look at things like avian flu or SARS or any of the
infectious diseases that are now running rampant. Of course, no country can
operate within a silo.
If you can get SARS on a Monday morning in some rural village in Asia and then
get on a plane on Tuesday, then you have got a pandemic in
We no longer can allow the health care systems of the rest of the world not to
be the same level as our health care standards if indeed we’re going to protect
the security of our own population. And so there are a number of areas which we
think we can, there are areas in which we can operate.
For instance,
In other words, we can no longer operate within the kinds of silos within which
we have all operated and still think that we can protect the security of our
people. Clearly, we need multilateral approaches in institutions that work but
our reform efforts are constantly being bogged down by bureaucratic lethargy
and essentially, by international leadership that is failing. It is within that
context that I’d like to simply put a suggestion to you, one that Bill Bradley
again referred to in his introduction.
The main limitation of the G8 is that it’s mainly a rich country’s club. The
main limitation of comparable groupings of developing countries, such as the
group of 77 poor countries, is just that. They exclude the main drivers of the
international economy.
The main drawback of the huge multilateral organizations where you bring all of
the rich and the poor together is just that, and that is that everybody is
there and the leaders do nothing else except read set speeches and there is no
dialogue, no conversation, no clash of ideas.
So what’s the solution? Well, we think it might be a leaders’ G20. That is to
say 20 major nations, along the lines of the G8, except extended, extended to
20, along the lines again of the group of G20 Finance Ministers that was
established at the time of the Asian crisis.
Let me just give you the background. What happened, this was the time when Bob
Rubin and Larry Summers were representing Treasury, and we as Finance Ministers
suddenly found ourselves with, you may remember, there was the Malaysian
default, the Indonesian default, the Russian default, the Brazilian default and
essentially, we felt, and the Mexican, a revival of the Mexican peso crisis,
the answer was pretty clear. It was transparency in financial statements. It
was far more openness and it was much better banking regulations.
So we thought we had the answer and to the greater glory of the G7 Finance
Ministers, we simply told these countries this is exactly what they had to do
and they told us where we had to go, because they had no part of the solution.
They simply said, “We’re not going to listen to you. You come up with a
solution for us. We want to be at the table when that is being debated.”
So what we did is we formed the G20 Finance Ministers, and essentially, that,
and along with some quite astute monetary policy coming out of Allan Greenspan,
essentially brought the Asian financial crisis to an end and has now given us a
much stronger financial system in terms of the kinds of regulations which are
required.
It is our belief that what we need to do is to reconstitute the G20 at the
leaders level, and that is to say bring together the regional powers
representing the different regions, South Africa and Nigeria, as an example
from Africa, the United States, Canada and Mexico, Brazil from this hemisphere,
the G8, Turkey, countries such as this. Countries who
are able to speak for their regions so that, in fact, on a smaller basis, the
leadership are able to make the leap of faith which is required to deal with
these kinds of problems.
Essentially what happens at an international meeting is that bureaucratic
papers are provided to you. You go there and you basically operate within a
very narrow set of limits and you’ve got to break out of those limits. The only
way in which you’re going to do it is if leadership, who can take the
responsibility for any decision that has to be made, is able to do it. What
we’re suggesting is that this worked well at the Finance Ministers level and it
ought to work well at the leaders’ level.
Now, I have had the opportunity to discuss this with President Bush and he has
shown interest. I have had the opportunity of discussing it with the Prime
Minister of Great Britain, with the Prime Minister of China, Presidents of
Russia, Brazil, Mexico, all of whom have shown considerable interest, and the
reason that I raise it here is that it seems to me that if the American
business community, in addition to dealing with the dispute settlement
mechanism, which I’d like you to do as soon as you leave this room, were able
to get behind the idea that the major emerging markets and the major developing
countries have got to come together to begin to provide some of the solutions
to which the world requires, if in fact we’re going to make further progress,
then I believe that there would be sufficient momentum to see the idea take
off.
The point is simply to get it started, to get it going, to
develop the habits of a pragmatic north-south kind of cooperation that is so
essential if the future of the world is to be as brilliant as some of us hope
and expect that is can be.
Well, that’s it. I began with the need to strengthen the stewardship of
All of this is part of the increasing connection between human rights and rule
of law on the one hand, and entrepreneurship on the other, between education
and women’s rights -- again flowing from the example that Carly
Fiorina gave you this morning -- between political
stability and public institutions, between security for the individual, and
security for the state.
None of us in
The same reasoning, I must say, and on this I will close, applies in this room.
We have achieved great things in our countries, the
When I look at the tremendous talent and experience represented by the people
in this room, it is impossible not to feel a great surge of confidence that we
can get there. And on that basis, I turn it over to you, but I thank you very
much for giving me this opportunity.