Check Against Delivery – June 9, 2016
Thank you, David [David Dyment, President of Canadian International Council], for that introduction, and thanks to the Canadian International Council’s National Capital Branch for the invitation to join you tonight.
It’s always a pleasure for me to speak to groups such as yours, both to share my enthusiasm about the U.S.-Canada relationship, and also to get a chance to listen to and learn from others, talking about interesting topics with accomplished and knowledgeable contacts whose insights are so valuable.
I just got back from an amazing Arctic trip organized by the Canadian government for foreign Chiefs of Mission – 15 locations in 9 days! Now, I have traveled all across this great country of yours and loved every place I’ve been, but WOW, the Arctic is something else. I hope some of you followed my social media posts from the trip. If not, please do.
The Arctic is actually a good starting point for me to talk about the vast and productive U.S.-Canada relationship — the most comprehensive commitment to shared prosperity in the history of the world. We are both Arctic nations and committed global leaders on Arctic stewardship. In March, President Obama and Prime Minister Trudeau announced a new partnership to embrace the opportunities and to confront the challenges in the changing Arctic, with Indigenous and Northern partnerships, and responsible, science-based leadership. The United States took over the chairmanship of the Arctic Council from Canada last year and we are building on your great work with a focus on addressing the impacts of climate change; Arctic Ocean safety, security, and stewardship; and improving economic and living conditions. Of course, the Arctic is just one of the huge number of areas where we cooperate to advance our shared goals and values.
I had the privilege to be at the White House as President Obama hosted Prime Minister Trudeau’s official visit to the United States. It was a remarkable event — the first State Dinner in honor of a Canadian Prime Minister in almost 20 years and only the 10th State Dinner the President had held. Witnessing firsthand the incredible reception Prime Minster Trudeau and his family received upon their arrival, seeing the streets of Washington filled with Canadian and U.S. flags flying side by side, and attending the very warm bilateral meetings between our leaders in the Oval Office offered moving proof of our close relationship.
In about three weeks, we look forward to having President Obama here in Ottawa, where, in addition to trilateral meetings with the leaders of Canada and Mexico, he will address a special session of Parliament, further reinforcing our strong friendship.
If you have been to the U.S. Embassy here in Ottawa, you may have seen quotations by four of our former presidents from their addresses to the Canadian Parliament:
“Here, on this continent, we present an example that other nations some day surely will recognize and apply in their relationships among themselves.” – Dwight Eisenhower, November 14, 1953
“Geography has made us neighbors. History has made us friends. Economics has made us partners, and necessity has made us allies.” – John F. Kennedy, May 17, 1961
“Let the 5,000 mile border between Canada and the United States stand as a symbol for the future. Let it forever be not a point of division but a meeting place between our great and true friends.” – Ronald Regan, September 28, 1988
“As we stand on the threshold of a new millennium, let us build a future of peace and prosperity, of freedom and dignity for our continent and beyond.” –William (Bill) Clinton, April 8, 1997
Those moving words remind me daily of our historic bonds.
Our relationship truly spans the entire spectrum of our citizens’ lives. Our governments engage at all levels – from federal cooperation on matters of international security to local health or law enforcement assistance across the border to trade and investment delegations from states and provinces. Non-governmental institutions help to cement government ties – like national universities engaged in joint research, local clubs promoting cross-cultural exchange, or environmental groups looking to protect our shared waters and forests.
Of course, we have thousands of small, medium, and large companies engaged in hundreds of billions of dollars of annual trade in goods and services — $669 billion in 2015, to be more precise. To put that into perspective, that’s more than the U.S. trade in goods with Japan, India, South Korea, and Brazil, COMBINED. Canada trades more goods in one day with the United States than it does in two months with France. Some three-quarters of Canada’s total merchandise exports are destined for the United States. Our businesses on both sides are also heavily invested across the border, with our two-way stock of investment at nearly $700 billion.
All of this is buttressed by perhaps the most important ties of all – the personal links of family and friends. Some 400,000 people cross our border every day, many of them to visit with colleagues, friends, and relatives. Who among you has a relative or close friend who is either American or lives in the United States? (“Yeah, that’s what I’m talking about. I don’t think you’d see that kind of show of hands in any other country.”)
So, we have this great, broad, deep, vast relationship that includes government, business, public and private institutions, and individual citizens. What are we doing to expand and enhance it? I can tell you that at the U.S. Embassy and within the U.S. government, we never take this relationship for granted. Every day we are working hard to continue to enhance our cooperation – from fighting terrorism to facilitating cross-border travel – do you have your Nexus card?
You name it, and we’re probably working together on it. There is a process for official U.S. government travel outside the United States called “country clearance.” This is a request to the U.S. Embassy in a given country to allow a U.S. government employee to travel to the country – technically, I, as the Chief of Mission, have to approve all the travel to Canada. It’s a good thing that I know how to delegate. In each of the last two years, we have had approximately 10,000 official U.S. government visitors to Canada. Ten thousand! What are they all doing here?
Just what I’ve been talking about – meeting with counterparts on trade, the border, climate change, energy, scientific research, consumer protection, food safety, law enforcement, international security, banking oversight, and on and on.
I could tell you more about any of a dozen of those areas of cooperation, but that’s my overview of the big picture. I know we have a lot of foreign policy and international relations thinkers here and we could talk about a variety of fascinating topics. I know a favorite topic at the moment is the current U.S. presidential election, but sorry, I’m not going there!
I do want to tell you more about one of my favorite initiatives. It’s something that doesn’t gather many headlines because it’s not very glamorous. But it is very important – and that is regulatory cooperation.
All of the issues we discuss with our Canadian counterparts are important, and many yield significant benefits for our citizens. But I’ll tell you why I’m specifically drawn to this idea of regulatory cooperation. It’s because I think regulatory cooperation is one of those areas where we have had, and will continue to have, concrete results that can and do provide immediate benefits to both sides of the border, for businesses, consumers, and governments – the fabled “win-win-win” scenario. Many of those wins may seem small, but they add up, and some can end up being incredibly important in stoking trade, investment, and the economic growth upon which our joint prosperity depends.
The idea is simple – wherever we share virtually identical regulatory goals, we should coordinate our regulatory actions, language, standards, and rules to make sure we’re not imposing unnecessary costs on businesses and consumers simply to comply with different regulations that accomplish the same result. There can certainly be good reasons for different regulations, standards, or labels. And our primary responsibility is to protect our citizens’ health, safety, and welfare, and honor their preferences. But we need to get away from the narcissism of small differences. If we’re going to have different standards or rules or labeling requirements, we should be able to articulate a good reason for doing so.
Small regulatory differences — well-intentioned as they might be –– can put sand in the gears of our economic engines. We benefit most from the continued integration of our economies when we smooth out these differences. I think we can all agree that regulations that protect our health, safety, and environment are important and necessary. What often happens, however, is that our regulatory agencies set out to accomplish similar outcomes but come up with slightly different regulations. These differences can mean that companies need to go through two sets of testing, obtain two sets of approvals, produce two sets of labels, or even produce slightly different products altogether, if they want to sell into both markets.
Let me give you a couple of examples:
- Energy efficiency labeling for household appliances appears on both U.S. and Canadian brands. We’re both trying to give consumers basically the same general information about energy efficiency and costs. But the data are different because the testing procedures are different. The appliance industry has been clear with us that these seemingly minor misalignments impose substantial costs and can make it nearly impossible to sell a particular appliance across the border. And standards are continuously being updated to accommodate new technologies. That’s a good thing. But the pace and manner of those updates differ across the border, which then creates an even larger gap between the testing and labeling requirements.
- Another example – Our consumer health products regulators in both countries have robust processes in place to examine, assess, test, and approve products and the production facilities for those products. If we could recognize each other’s regulatory oversight as meeting our own standards, we could potentially avoid costly duplicative re-evaluations and testing. When a Canadian or American regulator assesses that a product, facility, or process has met a standard that both countries agree upon, we should have mechanisms in place to allow that product to be freely sold in both markets. According to Consumer Health Products Canada, a trade association for that industry, a policy of mutual recognition would have a tangible impact on trade, as the costs of retesting products can range from $150,000-$190,000 per product, per year, depending on the type of testing required. Mutual recognition would enable appropriate products approved by Health Canada, for example, to be shipped directly to customers in the United States, and vice versa.What we have to appreciate is that there are probably tens of thousands of such products. And all sorts of regulations and standards and labelling extend across the entire economy – from dog food, to lighting, to airplane parts, to specialty chemicals. And given the size of our trading relationship, even incremental efficiencies from regulatory cooperation can produce huge gains.
You’ll be pleased to know that we are indeed already looking for these efficiencies. Our primary mechanism for this has been the Regulatory Cooperation Council (RCC), which is an intergovernmental process that brings together policy leaders, regulators, and stakeholders to try to do exactly what we need to do – align our regulations where possible to reduce trade frictions while delivering on our commitment to the health, safety, and welfare of our citizens.
In fact, we just concluded successful RCC meetings in Washington in early May. Literally hundreds of participants from government and industry got together in two days of meetings to advance our agenda on this front. And these were not just people all gathered in a big room to hear presentations. There were some 20 break-out rooms, where specific regulators and stakeholders met to identify paths forward on everything from locomotive emissions to packaging certifications.
During the RCC event, the U.S. Food and Drug Administration and the Canadian Food Inspection Agency signed the Food Safety Systems Recognition Arrangement. This is a major achievement and the result of the dedication and hard work of many on both sides of the border. This arrangement means the United States and Canada recognize that our food safety systems are comparable. What are the practical benefits of this? It will reduce the need for inspections over time, allowing for more efficient passage of low-risk food products across our shared border and permitting safety inspectors from both countries to focus their attention on higher-risk products.
I am immensely proud of all the work that is going on. But I’d really like to see us think bigger – to move away from this seemingly “whack-a-mole” approach, where we look for suggestions for regulations to align, to a more holistic approach by which the default is that we recognize each other’s approvals unless we can identify specific reasons why we shouldn’t. Is that going to be easy? No way – you can imagine how difficult this can be bureaucratically, politically, and logistically. But I really think it would be worth doing.
And if you think the impact of common standards is not worth the effort, let me share a story that NPR did a little while ago on what they called “the humble innovation at the heart of the global economy.” The innovation wasn’t so much a product or invention, but it has to do with standardization and the benefits it can have on trade. It’s the story of the intermodal shipping container – you know, the big containers you see at ports and on trains or the back of tractor-trailers?
The NPR piece itself draws from a book about the shipping container called “The Box – How the Shipping Container Made the World Smaller and the World Economy Bigger.”
According to the story, before standardized shipping containers, ships were loaded up willy-nilly with all the various things they were carrying, from fruit to machinery, all packaged differently and loaded and unloaded largely by manual labor. It could apparently take weeks for even large teams of people to load and unload a ship back then.
Well, some form of containerization was in development over decades in the 19th century, and by the early 20th century there were efforts to standardize containers for shipping. But the innovation that really put the container at the center of global commerce came from the owner of a trucking company, Malcolm McLean, in the 1950s. McLean wanted to avoid the traffic that was gumming up his deliveries up and down the east coast of the United States. So he came up with the idea of putting his trucks on ships and sailing up and down the coast instead. The idea morphed into separating the engine of the truck from the cargo part, and the intermodal container was born – a standard container that could be used across different modes of transport, from ship to train to truck.
Although the idea spread relatively quickly, adopting it globally took years of negotiations among stakeholders from business, government, and labor – you can certainly guess what this innovation did to employment of dock workers. Transport companies, ports, and governments had to make huge investments. The result is not just a standardized container for easy shipping. It is a fundamental factor in our ability to move goods cheaply and efficiently around the world and thus enables the very existence of our global supply chains.
According to a 2013 Economist article, McLean found that containerization lowered the cost of loading a ship from $5.83 per ton to 16 cents per ton. The piece makes the bold but believable claim, supported by academic studies, that “containers have boosted globalization more than all trade agreements in the past 50 years put together.” But these gains would not exist without everybody agreeing on the standard. Imagine if China or Britain or France all wanted their own container standards. My point here is that aligning our regulations and standards can have huge impacts.
Of course, that’s not to say that trade agreements don’t matter. They are incredibly important in removing barriers to trade, creating those globalized supply chains that are so fundamental to economies like ours, and delivering huge benefits to consumers in terms of expanded choices and lower prices. But even in trade agreements, creating rational, rules-based approaches to managing trade is among the most important benefits. I can’t mention trade agreements without adding my strong endorsement for the Trans-Pacific Partnership, the most ambitious and comprehensive trade agreement in decades. The U.S. Administration is working closely with Congress to move forward on the deal. I hope that when the Canadian government has concluded its consultations and analysis, it will reach the conclusion that being a part of TPP is in Canada’s interest. By the way, TPP has an entire chapter on “regulatory coherence,” which seeks to foster in all member countries an open, fair, and predictable regulatory environment.
All of the efforts I have described above, from TPP to the Regulatory Cooperation Council to our collaboration on the Arctic, are part of a broader and critically important process for us to forge ever closer ties, not only between the United States and Canada, but also between our two countries and the rest of the world. Our shared values and close cooperation enable us to play a constructive role together in addressing conflict, tension, and emergent situations around the world. We are at our best when we work in harmony toward peaceful and productive engagement – whether through trade, diplomacy, development, or cultural and educational exchange. When people are vested in the stability and prosperity of other countries, they have an incentive to strengthen and expand that stability and prosperity. If you have a trading relationship with a company in Vietnam, you have an incentive to help make sure that relations are good with Vietnam; even more so if you have an actual investment in a factory or other business. If you’ve studied in Brazil or you’re an artist who performs regularly in South Africa, you have an interest in the welfare of those countries. All these interactions help to weave the fabric of peace and prosperity around the world. We are very lucky that fabric between the United States and Canada is the strongest in the world. I applaud your and your group’s commitment to strengthen it globally.
Thank you very much.