New York, New York
June 24, 2005

Archived - Notes for Remarks by the Honourable Ralph Goodale, P.C., M.P., Minister of Finance, Canada, to the Canadian Association of New York

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Check Against Delivery

Good afternoon, everyone. It's a pleasure to be with you today.

I want to thank the Canadian Association of New York for providing me this opportunity to celebrate one of the most successful international relationships the world has ever known-while also highlighting some of the real challenges that Canada and the United States jointly face.

We have an interesting political situation in Canada these days. Our national elections almost exactly one year ago produced a "minority Parliament"-meaning that none of the four political parties represented in our House of Commons can automatically and all by itself carry a vote.

The Liberal Party (my party) holds the largest number of seats-and therefore we form the government-but in order to achieve a majority vote on any matter before the House, we have to obtain the support of at least some members of other parties and some of the Independents. So it makes for a rather lively democracy.

But in reality, it may not be all that different from the situation that quite usually exists in the U.S. Congress. Most measures that go through the American legislative process also require some degree of brokering to put together a coalition of support sufficient to win House or Senate votes, and some element of bipartisanship is frequently involved.

It takes skill and a lot of attention to detail to get the job done-on either side of the border. It also demands a clear understanding of what you stand for as a government, and what you want to achieve. You have to be flexible enough to earn support that sometimes crosses party lines, but you also have to be absolutely unwavering on matters of real principle.

This was demonstrated this spring as we moved our 2005 federal budget through the House of Commons.

The largest opposition party, the Conservatives, first said they would support it. But they actually abstained from voting. Then they said they would oppose the Government and voted to force an election. But they failed. Then, finally, they voted for the budget or at least part of it. No one could ever accuse them of consistency.

In the face of what was obviously an unpredictable situation, we had to put together some other configuration of support to give the budget-which was (and is) popular among Canadians-some decent chance of passing.

In those negotiations with other parliamentarians, made necessary by Conservative unreliability, we stuck unshakably to four principles vital to our government.

Number One: There can be no budgetary deficit. We must achieve ongoing surpluses. We're now working on our eighth in a row since we first balanced Canada's books in 1997. We have recorded the best fiscal record in all the G7 group of world-leading economies. And we will not allow that to be frittered away.

Number Two: There must be ongoing federal debt reduction to get Canada's debt-to-GDP ratio down from 68 per cent (where it was when we took office) to no more than 25 per cent (within the coming 10 years). We are exactly on track to reach that target. And we will not fail.

Number Three: Any new spending must be responsible and realistic, fitting within the existing flexibility that we previously identified in Canada's budget plan. And I am happy to say that this is, in fact, the case. Our budget negotiations resulted in only a 1-per-cent variation in spending from our original planning. Program spending as a share of GDP remains basically flat at around 12 per cent-compared to at least 15 and sometimes as much as 19 per cent under previous governments.

Number Four: We will continue our tax reduction plan to preserve and enhance a Canadian corporate tax rate advantage in comparison to the U.S. We built that advantage over the past five years and we mean to keep it. A variety of different legislative formats may be used to implement this commitment, but it will be done as promised and on schedule.

I make these points at the outset simply to reinforce an important fundamental. Even in the face of all the vagaries that naturally come with a minority Parliament, our government will not lose its nerve.

We will not overspend. We will not overtax. We will stick by the rules of discipline and prudence that have produced for us the best fiscal performance of any Canadian government since our nation was founded in 1867. And in doing so, we know we have the strong support of most Canadians, for whom a federal budgetary deficit is just not acceptable.

The benefits have been plainly positive. Since balancing our books in 1997, Canada has enjoyed record-setting debt reduction, high labour force participation and job creation, and more growth in living standards than in the previous 17 years. Our inflation and interest rates remain low and stable. And our credit rating is triple-A.

This robust situation has empowered us with the opportunity and the wherewithal to put our public pension system on a foundation that is now actuarially sound for some 75 years into the future. We have begun to renew and refinance our health care system. And our investments in university research and development have moved Canada up from sixth place to first place in the G7 for publicly sponsored innovation.

These statistics are fresh in my mind from the G7 Finance Ministers Meeting, which I attended just two weekends ago in London. Canada was happy to review its economic and fiscal situation compared to all the other member countries.

In our G7 examination of global conditions, we noted reasonably positive circumstances and prospects, but also some persistent imbalances which cloud the global horizon and cause future concern-not because they are actually unresolvable, but because sufficient progress has just not been made in getting on with the necessary solutions.

The world's biggest and wealthiest countries need to show more genuine movement in grappling with their respective challenges and responsibilities, or our collective prognoses may become less encouraging.

For the United States, that means coming to grips with those twin deficits-the budgetary deficit and the current account deficit. Sooner or later, these shortfalls are going to bear consequences, and the impacts will spill over to affect others too.

For the Europeans and the Japanese, the challenge is structural rigidity and economic sluggishness.

For a big emerging economy like China, its financial sector reform, greater flexibility in exchange rates and the timely development of a true middle class with domestic purchasing power.

For Canada, while we have done many things right and our current momentum proves it, our go-forward imperative is greater productivity and competitiveness, which we must tackle more seriously than ever before.

Why? Well, given our strong fiscal fundamentals, the value of Canada's currency has jumped by 30 per cent over the past two years in relation to the U.S. dollar. This demands a big adjustment in an economy that is 45 per cent dependent upon exports, with 85 per cent of those exports going into the United States.

Meanwhile, determined, rapidly growing and low-cost economies like China, India and Brazil are introducing brand new pressures.

Plus, we are facing a huge demographic change just around the corner when the baby boom generation begins to retire, followed by smaller cohorts of workers and taxpayers coming along behind. There will soon be much more demand for medicare, pensions and other age-related social services, and a slower-growing workforce to generate the wealth to pay all the bills.

So what's the appropriate response? It all boils down to more rapid improvements in Canadian productivity.

Our productivity growth rates are, in fact, second from the top in the G7, second only to the United States. But that's not good enough. To improve-or even just to maintain-our global economic standing, a compassionate and equitable society, and a high standard of living, we need to do better.

We must aspire to be the most innovative, efficient and competitive economy in the world, bar none.

We should not and will not embrace the outmoded notion that increasing the productivity of Canadian workers means lower pay, longer hours and job cuts. That "race to the bottom" mentality will not succeed. Our sights must be set much higher.

Canadians need to embrace the productivity challenge with as much clarity and motivation as we mustered to triumph over chronic deficits and rising debt.

We must be resolved to keep our fiscal fundamentals rock-solid.

We must keep working in every budget to improve our competitive position on taxes.

We must reduce that Canadian tendency toward internal trade barriers-that is, the limitations on the free flow of goods, services and capital between and among our provinces.

For example-and I know most of you will find this very strange-Canada does not have a single national securities regulator. We have 13 of them. One for each province and territory. It is an outmoded, expensive and inefficient way to operate. And besides, in an era in which capital is truly global, fragmented provincial markets simply won't do.

We're working hard to fix this.

And beyond building an environment which encourages vigorous private sector activity, we also need to make those strategic public sector investments-geared toward enhanced productivity-which only governments are in a position to undertake.

Investments in modern, efficient public infrastructure-for transportation, communications, clean water, environmental protection, energy efficiency and the deployment of new enabling technologies.

In this connection, we need to think especially of the most desirable 21st century cities and communities. The places where people live and work. They need to be safe, interesting and attractive. And that contributes to productivity.

Investments in high quality human resources-from early learning and child care through higher education, skills training and lifelong learning.

We will succeed by the strength and creativity of our brainpower. We want all our kids to have at least the opportunity to experience the empowerment, the freedom and the fulfilment that flows from knowledge.

And investment in innovation-world-calibre research and development being done by the brightest people in the best facilities and with the most advanced equipment, to transform abstract ideas into new products and technologies and to commercialize them in the marketplace.

I mentioned earlier that Canada has risen from back in the pack to become the leading nation in the G7 for publicly sponsored R&D at our universities and research institutes. But our innovation gap is in private sector research. That's where the United States is way ahead, and Canadian firms have some work to do to catch up.

So these are the key issues on Canada's economic agenda for the period immediately ahead-fiscal prudence, balanced budgets and debt reduction; competitive taxes and smooth internal commerce; first-class public infrastructure, education and skills, science and technology. All for a more productive nation.

Let me turn now to a crucial topic that both unites and divides our two countries, and that is our common border. We both want it to be open and efficient for legitimate business both ways, but closed securely to terror and to crime either way.

On the commercial side of things, we have between us the largest and most lucrative business relationship of any two countries on earth. Our total two-way trade cashes in at about US$1.5 billion each and every day. It covers a vast array of goods and services. And most of it is virtually trouble-free.

One of the biggest trade winners, both ways, is energy.

The United States has a major preoccupation, and understandably so, with energy security. And Canada supplies this country with crude oil, natural gas, petroleum products, uranium and hydropower. In fact, your biggest source of energy is not Saudi Arabia. It's not Venezuela. It's Canada! Big time! More than $50 billion worth per year.

Beyond our still significant reserves of conventional oil and gas, Canada is moving more and more into frontier sources. The North Atlantic. The High Arctic. Heavy oils and most especially the Alberta oilsands. With new and better technologies, proven recoverable reserves are expanding, costs are coming down, and environmental footprints are becoming less problematic.

Within this coming decade, these Canadian sources of supply have the potential to alter the world's geopolitics-because North American energy security will be potentially more manageable on and within this continent itself. That could be very good for both of us.

Just to be clear-I am not talking about any type of North American energy "policy." But I am talking about huge Canadian productive capacity, growing U.S. demand, and the successful functioning of North American energy markets. All in the context of environmental sustainability-to discharge our responsibilities to future generations.

But while energy is a field of huge cross-border opportunity, there are three other trade topics of deep concern to Canadians at the present time. Indeed, they have been lingering for far too long-the live cattle industry, softwood lumber and grains.

These are multi-billion dollar enterprises. Basic economics and the normal functioning of the marketplace would say that cross-border trade should be flourishing in these fields under the terms of the North American Free Trade Agreement. But on the Canadian side of the border, businesses are being destroyed, jobs are being lost and livelihoods are being ruined-because the U.S. border is severely restricted.

Despite ruling after ruling after ruling in Canada's favour in these disputes-in the case of wheat, no fewer than 15 of them-the border remains an obstacle. Free and fair trade is stymied. Protectionism prevails. And in such cases, many Canadians see NAFTA as an example of "heads you win, tails we lose."

I know these problems sound very distant from New York City, but all Americans are paying more for houses, more for beef products and more for bread and pasta because Canadians are being blocked from the kind of market access the mutually agreed-upon rules say we should have. And that's not good in a healthy relationship.

With respect to the need for security and strong borders, there is no place on earth that feels more strongly about that topic than this great city. As your closest neighbours and northern friends, Canadians fully appreciate how crucial and sensitive a topic this is for all Americans.

No one could live through the trauma of 9/11 in the United States, no one could observe that horror and its aftermath from just a few hours north of here (across the border), and not be profoundly affected.

And no country, no person is immune to the scourge of terrorism. Canadian lives were also taken on September 11th. And just yesterday, we marked the 20th sad anniversary of the tragic Air India bombing off the coast of Ireland, which claimed the lives of hundreds of innocent Canadian citizens.

Over the past four years, the Government of Canada has invested billions of new dollars in national security. For more intelligence personnel. To strengthen border, airport, marine and cyber security. To better screen immigrants, refugees and visitors. To upgrade our protection of critical infrastructure and emergency preparedness.

We have acted, individually and multilaterally, against money laundering and terrorist financing. Like you, we have created a national security cabinet portfolio under the leadership of the Deputy Prime Minister. The Prime Minister's Office includes the post of National Security Advisor. Our security situation has been fully audited by Canada's Auditor General. And a formal National Security Policy has been prepared and published.

Canada will continue to work very hard with our American counterparts and with other countries to secure and protect all our citizens. That is every government's first obligation.

We will also continue to be a reliable partner and ally in the global campaign against terrorism.

Currently, we have a large contingent of Canadian troops in Afghanistan, serving as part of the international force that will help that nation make the transition to peaceful civilian rule. Canadian Forces are now making their fourth tour of duty in Afghanistan, and this fall our soldiers will move from their current base in Kabul to assume command in the Kandahar region.

Our top soldier, Chief of the Defence Staff, General Rick Hillier, served as Commander of all NATO forces in Afghanistan in 2004. I'm also pleased to note that his immediate predecessor, Canadian General Ray Henault, just last week took up new duties as NATO's most senior military officer.

Canadian personnel are also on duty in Sudan, Sierra Leone, Haiti and Bosnia-Herzegovina as part of other peace and security deployments around the globe. The ships of the Canadian Navy continue to patrol the Persian Gulf in conjunction with Operation Enduring Freedom.

To help ensure that we can continue to meet our international obligations (and expand them as necessary), my federal budget in February included the biggest new financial commitment to the Canadian Armed Forces and National Defence in the past 20 years.

We will expand the size of our forces in both regular troops and reserves. We will strengthen the basic military infrastructure underpinning them. And we will boost spending on new equipment, helicopters, trucks, medical facilities and our elite anti-terrorism unit.

Canada stands side-by-side with the United States in the battles against terrorism and to protect our citizens. We are determined to shoulder our share of the burden to promote global peace and security. And we are proud of the skill, professionalism and courage of our men and women in uniform-just as you are of yours!

One final point-and I refer again to that G7 Finance Ministers Meeting in London.

Our major topic was the crushing debt owed to multilateral financial institutions by many of the world's poorest and most heavily indebted countries. In the end, we agreed to cancel it-some $55 billion in old burdens now relieved. Close to 300 million people with a better chance now to survive.

For much of this past decade, Canada has led the world in both discussion and action on debt relief for the poorest of the poor. But a crucial stalemate between America and Europe on this topic was broken at that London meeting by the generous commitment of incremental funding from the United States.

I just thought somebody should say thank you!