Hell or High Water

by Paul Martin

  In March 2005, the NAFTA partners — President Bush, President Fox and myself — met in the morning at Baylor University in Waco, Texas, and then at the Crawford ranch. At one point during our discussions, President Bush said, “Hey, let’s hop in my truck and we’ll take a look around the property.” Besides just being hospitable, I assumed it was also a chance for the three of us to have a few minutes alone without our advisers. So we clambered into the truck, with George Bush at the wheel, me sitting in the front passenger seat, and Vicente Fox, who is a huge man, leaning over from the back of the extended cab. The Secret Service followed behind in their own vehicles, with some of our aides aboard. This seemed to me a perfect opportunity to raise the issue of the Arctic refuge again, especially with only Vicente Fox present. So, I said plainly that this was really a bad way to manage North American relations and set a terrible precedent for cross-border issues that would inevitably arise among us from time to time. I guess, in the informal atmosphere of the truck ride, I was a little blunter and less diplomatic than usual. And President Bush’s response was equally blunt and unyielding.

  When we got back from our tour, my executive assistant, Jim Pimblett remarked, “Well, you really went at him on the Arctic refuge, eh?” I looked at him, bewildered, wondering how on earth he could have known what we had talked about during the truck-ride. “My God,” I said. “Can you read lips from behind a moving truck?” At which point he told me that he had been riding in the Secret Service vehicle, and the entire conversation had been relayed in real time, with everyone listening in. So far as I could tell, this was standard practice — but entirely new to me. In any event, eventually the issue of the Arctic refuge went to Congress and the decision went the way we hoped: sometimes you win, sometimes you lose — but it’s better to win!

  The purpose of the morning meeting at Baylor was to set in motion the Security and Prosperity Partnership (SPP) between our three countries. The three of us recognized that important as NAFTA was, the pressures and opportunities facing North America required an agenda that went beyond NAFTA and that the three leaders should hold an annual meeting to discuss that wider perspective.

  It was President Bush who said that we had to work together more closely if we were to increase North America’s competitiveness in light of the rise of China and India. Both Fox and I agreed.

  We then asked our ministers to deliver a detailed work plan within ninety days. Anne McLellan headed up the Canadian team, and the work plan she delivered recommended that we ask business leaders from all three countries to meet on an annual basis. We agreed, and this led to the creation of the North American Competitiveness Council in March 2006, under the auspices of the SPP.

  The main issue for me was the Canada—United States border, where U.S. national security measures were becoming a severe non-tariff barrier to trade. Unfortunately the problem has become more acute of late, and I believe we must become much more active on the file. Clearly Canada must build the infrastructure required to facilitate border traffic, such as the bridge across the river from my hometown of Windsor to Detroit, for example. But no amount of infrastructure will compensate for a U.S. bureaucracy bent on protectionism under the guise of security.

  Our shared borders are becoming stickier and stickier, and we are seeing more and more unilateral decision-making by the United States. Dealing with this requires the forceful intervention of the Canadian government with the administration in Washington and an all-out effort with U.S. importers. The cost to Canada is huge, but it is no less costly to the Americans. Congress should be made to understand this. Who better to make the point than their own business community? Which is why the North American Competitiveness Council can be of great value to Canada.

  There is, of course, no politician more powerful than the president of the United States. Ironically, the president is much less powerful within his own political system than most other political leaders, who do not have to operate within the same system of checks and balances as the Americans do. I remember U.S. treasury secretary Rubin’s amazement when I told him that a Canadian finance minister’s budget normally passes intact within weeks of its introduction; in the United States, there are months of negotiations with Congress, which often leads to a much weaker result. These limits on executive power are especially important when it comes to many of the trade matters and border issues that Canada is most concerned about, where local interests can have a powerful impact on the attitudes of individual members of Congress. That’s why I made a point, on one of my early trips to Washington, of meeting with the key Congressional leaders such as Republican Speaker of the House of Representatives Dennis Hastert and his Democratic counterpart, Nancy Pelosi. I also met with the Republicans’ leader in the Senate, Dr. Bill Frist, and the ranking members of the Senate’s foreign relations committee, Democrat Joe Biden and Republican Richard Lugar. I was surprised how critical Lugar was of Bush’s handling of Iraq, and that he did not hesitate to repeat his criticism at the media scrum after our meeting.

  In short, the administration was not the only U.S. branch of government important to Canada’s trade interests. Congress was as well. This was why I implemented an idea brought to me by ministers Joe Volpe and Joe Comuzzi, to establish a secretariat in the Canadian embassy in Washington — under the aegis of Scott Brison, who was my new parliamentary secretary — that would support individual MPs and provincial governments in their interactions with Congress on the broad range of American legislative and regulatory issues that directly affect Canadians.

  While I believe I am realistic about Canada’s relationship with the United States, and have no problem going toe to toe with the United States when I think it is necessary, I have no time for the anti-Americanism that sometimes infects Canadian politics at the margins. It is really just another form of prejudice, and it over-emphasizes the significant differences we have with our neighbours, as opposed to the much richer lode of similarities and common interests. That’s part of the reason that I simply could not tolerate the antics of Carolyn Parrish, a Liberal MP from Mississauga.

  On one occasion she was overheard on an open mike to say, “Damn Americans; I hate the bastards.” She later qualified her remarks saying that she was only talking about the Bush administration — not really a brilliant defence. She continued to mine this vein with rude comments about the U.S. electorate, and eventually went on a TV comedy show and stomped on a voodoo doll of President Bush. In the end, I dumped her from caucus.

  We Canadians are generally a civil and patient people. Still, who among us in the first decade of the new century would not have allowed a small sigh of frustration to escape their lips, when they heard the words softwood lumber or mad cow disease? The issues often grind on for years without a decisive resolution but with multiple negotiations, partial fixes, reversals of fortune and renewed campaigns, diplomatic and judicial.

  For example, take the issue of mad cow disease. The Canadian cattle industry is huge, supplying both domestic consumers and exporting large quantities to the United States. The United States placed a ban on Canadian beef after a single case of mad cow turned up in Canada. The same problem existed in the United States, and there was every reason to believe Canadian beef was every bit as safe, if not more so, than American. However unjustified, when the United States closed its market to us, we were in real trouble because we could not absorb the surplus here at home, nor did we have any major alternative export market.

  The U.S. departments of Agriculture and Health argued the border should be reopened early on, as did the large-scale American cattle operations. When I told President Bush that unless the U.S. market opened quickly, we would build new slaughter capacity ourselves, and were raising our standards well above theirs — making us a formidable competitor for them in their major export markets, such as Korea and Japan — he agreed the ban should be lifted. Unfortunately neither the president nor the large U.S. producers could prevent a small American cattle association called R-Calf from ob
taining an injunction that held matters up for months, then years. Eventually, the issue was resolved, but it should be a lesson to us about over-reliance on the American market.

  Similar issues have affected our other great ongoing trade dispute: softwood lumber. The softwood lumber industry in the United States — which competes with our own to supply American builders and homeowners — is powerful partly because it is so widely dispersed and has so many small operators involved. In the congressional system, this reality has a tremendous impact. To strike an analogy, the big car companies in the United States are certainly influential, but nothing like the car dealers, who operate their businesses in every town, city, and suburb in every congressional district in America. The American softwood lumber industry was so influential that it managed to get itself excluded from the provisions of the Free Trade Agreement and eventually NAFTA (though the dispute settlement mechanisms in those agreements do apply). Instead, the cross-border trade was regulated by a separate agreement that ran from 1996–2001 but was not replaced when it expired.

  There was certainly a time when the American industry had an argument. Canadian provinces, keen to have a busy lumber industry, sometimes allowed logging on Crown land for less than a fair market price. But that problem had largely resolved by the time I became prime minister. In 2002, the Bush administration imposed tariffs, which were nothing but an attempt to restrain trade and protect their industry against more competitive Canadian producers. Over the years, the Canadian industry had modernized, installing new plants and introducing new technology. The U.S. lumber industry, which consisted largely of many small inefficient timber companies that couldn’t compete, fell back on protectionism to stay in the game. Canada repeatedly took its case to the dispute panels set up under NAFTA, as well as to the World Trade Organization. We almost always won because objective observers could see that we were plainly in the right and the Americans in the wrong under anybody’s trade rules. Unfortunately, we could win case after case, but that did not stop the Americans from collecting billions of dollars in tariffs in defiance of these decisions. They could lose a thousand times in a thousand tribunals, but we still couldn’t send in the army to make them stop. If our producers wanted to sell their lumber in the United States, they had to pay when they crossed the border.

  Obviously, we needed to reach an agreement with the United States. The status quo wasn’t acceptable and we didn’t have the power to change it unilaterally. The problem was this: on the Canadian side, we have an incredibly diverse industry with divergent interests. In the Atlantic provinces, most of the harvestable timber is on private woodlots (as in the United States). In British Columbia, there is a huge, successful industry, harvesting mostly on Crown land, but suffering from pine beetle disease, forcing the harvest of larger quantities than would otherwise have been the case. In Quebec and Ontario, there is also a sizable industry working mostly on Crown land but more vulnerable financially.

  Of course I raised the issue every time I met with George Bush. I cannot truly say how he felt about it. He did not show the same empathy as he had in the case of mad cow disease, and we were told that some senior White House staffers were strong allies of the U.S. lumber interests. Usually, he would shrug and say that Congress was the problem, something I wouldn’t deny. Interestingly, in a conversation I had with the head of the U.S. Chamber of Commerce, Tom Donahue, he told me: “You have to understand, Americans are a disputatious people; you have to come down here and argue your case.” Part of what he was saying was that not everyone in the United States liked the tariffs; after all, they drove up costs for the consumers of lumber. And so we set about raising the profile of the issue. I gave a speech and answered questions from a very large and influential business crowd at the Economic Club of New York in which I laid out Canada’s case, saying that the American position was “nonsense” and a “breach of faith;” it was very well received. I made my case on CNN and in other American media. As ambassador to the United States, Frank McKenna, with his acute political antennae and capacity for pungent language, was able to raise the profile of the issue in the press. Behind the scenes, he and the embassy staff were very successful at building links to domestic American constituencies, such as homebuilders, who had no interest in paying a premium on Canadian lumber to protect the American softwood lumber industry.

  That Frank McKenna was prepared to take on the role of Canadian ambassador was a stroke of good fortune. His knowledge of politics and of business made him ideal for the job. It also represented a sacrifice for him and his wife, Julie, for which I was very grateful to both of them.

  One of the most effective arguments I was able to make on softwood lumber was around the principle of free trade, which I had always espoused (even, as in 1988, when my party opposed the original Free Trade Agreement). In the fall of 2005, a Summit of the Americas was held in Argentina. It proved to be the scene of a showdown between the United States, which wanted to use the summit to promote hemispheric free trade, and an emerging anti-American movement in Latin America, led by Hugo Chavez, the president of Venezuela. Nestor Kirschner, the president of Argentina, had deliberately set up the event as a venue for Chavez’s populist anti-American rhetoric by arranging for Chavez to address a crowd in a soccer stadium in parallel with the leaders summit.

  President Bush took all this in good humour. All the leaders drove to the summit meeting through crowded streets, where they either cheered or booed depending on the flag flapping on the hood of the limousine. When Bush arrived, I was talking to a couple of the other leaders. He came over, and I asked him how it had gone. He had received a great reception, he said, “but you know Argentinians wave in a strange way — they only use one finger.”

  Latin America has always pulsed with conflicting sentiments toward the United States and the developed world. During the 1990s, the economic doctrine of the Chicago School, with its emphasis on market mechanisms and free trade, swept through much of the region. There were many successes, such as Chile. But there was also, inevitably, a great deal of social and economic disruption associated with that change, and many individuals, regions, and even countries suffered from it. Chavez was the leader and the product of the backlash. George Bush knew that he had very little credibility in South America, especially after the invasion of Iraq, which most people in the region viewed as an imperialist war. So when Condoleezza Rice came to Ottawa in her first trip to Canada as secretary of state, just prior to the summit in Argentina, she urged me to take a lead role in defence of free trade in the hemisphere. At it happened, when Anne McLellan and I met her for dinner at 24 Sussex, we sidetracked her when we got into a set-to over what we felt was the U.S. responsibility for the flow of guns, often bought legally in the United States, then smuggled into Canada. But I understood where she was coming from on free trade. Vicente Fox, among others, had also asked me to step up on the issue at the summit.

  Soon after the summit began, President Kirschner, as chair of the meeting, gave Chavez the floor. Using the classic rhetoric of anti-imperialism, Chavez spoke at great length of the suffering of the poor, which he laid at the door of the United States. However the other leaders may have felt about the substance of what he said, in many cases they knew that it resonated with large constituencies in their own countries, so Chavez was having a palpable effect in the room.

  After he had spoken for more than half an hour, I jumped in with what is sometimes called a “two-handed” intervention — asking Kirschner if I could interrupt Chavez to say a few words of comment. I talked about the social concerns Chavez had raised: poverty, illiteracy, housing, and lack of medical care. I said that I shared those concerns. As rich as Canada is, I said, we had similar issues in our own country, which we were struggling to address. As a developed country, I said we also had a duty to help those in the developing world to find the resources and expertise to address their challenges. I acknowledged some of the mistakes of international institutions such as the International Monetary Fund
in pushing developing countries too hard, too fast toward a new economic model, sometimes at the cost of great suffering.

  I could see that I was making considerable headway in the room. Some of the leaders who had been nodding approvingly as Chavez spoke were nodding now in agreement with me. And then I said very directly to Chavez that while I agreed with his identification of the social problems the Americas faced, I had to reject utterly his analysis and proposed solutions. The region would never lift itself out of its poverty, I said, by deliberately shutting itself off from the largest and most dynamic market in the world, which also happened to be its geographical neighbour. I said that the challenge was to embrace the opportunities free trade offered to harvest the wealth that was potentially there for them, but to do so in a way that permitted their people to adapt and enrich themselves in the process.

  As a leader, at these heavily prepared summits, it is not often that you feel your words have an impact. (It is a bit different among finance ministers as the debates are more free-wheeling.) But on this occasion, I could feel the room move. By the time it came to agree on a closing statement, Chavez was relatively isolated — certainly the leader of no more than a small minority among the nations represented there.