June 24, 2014
Archived - Speech by the Honourable Joe Oliver, Minister of Finance, at the Global Borrowers and Investors Forum 2014
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It is a great pleasure to be here in Great Britain, Canada’s close relative. Our countries share a history during peace and war, enduring values that go to the core of who we are, and ancient personal ties. We received from Britain many of the institutions and values we cherish today — our monarch, our parliamentary democracy, a passionate commitment to freedom, a paramount respect for human rights, an entrepreneurial spirit and a free market economy. Our friendship remains unshakeable.
So it is an honour to deliver the opening address to the Global Borrowers and Investors Forum. This conference leads the conversation on key trends in global financial markets. People in this room play a key role in shaping the world economy. Your investment choices matter.
John Maynard Keynes called Canada a place of infinite promise.
Indeed, there is no more promising place to invest than Canada, and that will be the case for many years to come. A stable democracy, operating under the rule of law, open for business, welcoming foreign investment, with low taxes and very attractive investment opportunities.
My friend and predecessor, the late Jim Flaherty, noted that in January 1995 the Wall Street Journal called the Canadian dollar the northern peso. Well, that was 20 years ago, and how things have changed. Today, the Canadian dollar is on the list of reserve currencies tracked by the IMF. And today, Canada stands tall among the world economies, thanks in no small part to Jim’s contribution, whose work I will continue.
Canada’s post-recession strength was not merely a happy accident. We needed a plan and the discipline to follow through. We call it our Economic Action Plan. It was our response to the Great Recession, and its effects are felt to this day. Many countries are still struggling to recover. For example, in the euro zone, growth is insipid. Deficit and debt levels are high, and inflation is very low, though there are clearly major differences between countries. The European Central Bank recently entered unchartered territory by imposing a negative rate on deposits, with more initiatives likely to come.
In the U.S., economic recovery has been weak, although recent signs have been more encouraging.
Growth in China has moderated with concerns about their shadow banking system. There is volatility in emerging markets and concerns raised about compromised credit standards in search of yield in a low interest environment.
In this environment, Canada, a great trading nation, cannot be immune. However, we have fared relatively well. The recession hit us later than most. We were impacted less severely. We recovered earlier, and we emerged in relatively better shape than most developed countries.
The reasons are several. Our banking system, the most stable in the world, according to the World Economic Forum, meant not a single Canadian bank had to be bailed out. Our strong natural resources were a continuing contributor to growth, and we pursued a bold, but prudent, fiscal policy. We launched a timely and targeted stimulus package to support jobs. At the same time, we cut taxes to Canadians and businesses to encourage a strong private economy.
As Canada recovered, we did the responsible thing, what Keynes would have done, not what those who cite and justify profligacy would have had us do. As a result, we are on track to return to balanced budgets in 2015.
I am encouraged to see Prime Minister Cameron and Chancellor of the Exchequer Osborne put a similar plan in place, and you are now reaping the benefits in private sector job creation and stability in the U.K. The plan is beginning to show results. A strong United Kingdom benefits all of us.
In Canada, as the deficit shrinks, we are expanding opportunity. One in five jobs in Canada is tied to trade, so our government is pursuing an aggressive free trade agenda. The crown jewel is an agreement in principle towards a Comprehensive Economic and Trade Agreement with the European Union. This is the most comprehensive free trade agreement in the history of my country. The EU market, with 500 million people and an annual economic activity of over $13 trillion, holds a continent of opportunity for Canadians.
With CETA, Canada will be the only country to have preferential access to the world’s two largest markets — the EU and the United States — giving us access to more than 800 million of the world’s most affluent consumers.
Industries across the economy benefit from greater market access, which is particularly vital for Canada’s natural resource sector — a sector of paramount importance to investors. Canada is poised to emerge as a 21st century resource superpower. We have all the ingredients to do it.
Canada’s energy infrastructure is booming. Hundreds of major resource projects worth about $650 billion in new investments are underway or planned over the next decade.
Resources drive Canada’s economy, accounting for 18 percent of our GDP, almost two million jobs and over half our exports. We are first in the world in the production of potash, second in uranium, and have the third largest proven oil reserves in the world of over 170 billion barrels. We have a world-leading mining industry and 37 trillion cubic metres of natural gas — enough to support domestic use at current rates for over 200 years.
Since our resources attract a lot of attention, I should tell you that 77 percent of Canada’s electricity use comes from non-emitting sources, compared to less than 50 percent in Europe and 33 percent in the United States. Our oil sands represent a minuscule portion of global emissions — just one one-thousandth. Furthermore, we reduced oil sands emission intensity by 26 percent over the last decade, and two years ago we banned the construction of traditional coal-fired plants. Canada is doing its part to address the issue of climate change.
This matters equally to the world, and we have significant natural resources to energy-demanding countries. Canada is a reliable, responsible energy supplier.
Just this month, over 500,000 barrels of Canadian oil sands crude reached the shores of Spain, the first major export of oil sands heavy crude to the EU.
With the right infrastructure, Canada can ship more oil across the Atlantic. We could become an energy source to our European friends — the kind of friend and partner you can rely on.
Ladies and gentlemen, I have outlined for you Canada’s advantage — lower taxes, balanced budgets, less debt, freer trade, abundant resources. And the results of our actions speak for themselves.
KPMG concludes the total tax costs of businesses in Canada were less than half that of the United States. Bloomberg ranks us as the second most attractive destination for business in the world. We have the strongest job creation record in the G-7 with more than one million jobs created since July 2009. For the sixth year in a row, the World Economic Forum rated Canada’s banking system the world’s soundest.
And Canadians have never been richer. A recent New York Times study found that after-tax middle class incomes in Canada, substantially behind in 2000, now appear to be higher than in the United States. In fact, the Canadian middle class today is among the richest in the world.
Our low-tax conservative plan for jobs and growth has created a new 21st century Canadian advantage. There is simply no better place in the world to invest, start a business or take risks. Canada is an economic success story, a model for other countries in the post-recession world.
Of course all governments have a responsibility to get their fiscal houses in order as economic conditions warrant. And as conditions allow, all of us must reduce our deficits and improve debt sustainability. All of us must pare down barriers to competition. After all, it is the private sector that creates jobs. Without a healthy, growing private sector, we cannot sustain prosperous societies.
Last summer, Canada’s suggestion that the G-20 commit to developing country-specific strategies was embraced. We agreed these strategies should aim to lift collective G-20 GDP by two percent above current trajectories.
This would be a game changer. It would add $2 trillion to the global economy. But this game changer requires reforms. And as we reform, we must reject calls to tear up the foundation the world has built together over the past five years. We need to build on our previous commitments, not abandon them, because those commitments — lower deficits, improving debt sustainability — mark the path to prosperity.
I look forward to the results of this forum and to hear continuing support and advice in the future as we work together to keep the global economy firmly on the road to a steady recovery and strong future growth.