Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 16 - Evidence - Meeting of October 1, 2014
OTTAWA, Wednesday, October 1, 2014
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 5:15 p.m. to examine the potential for increased Canada-United States-Mexico trade and investment, including in growth areas in key resource, manufacturing and service sectors; the federal actions needed to realize any identified opportunities in these key sectors; and opportunities for deepening cooperation at the trilateral level.
Senator A. Raynell Andreychuk (Chair) in the chair.
[English]
The Chair: Honourable senators, the Standing Senate Committee on Foreign Affairs and International Trade is here to examine the potential for increased Canada-United States-Mexico trade and investment, including in growth areas in key resource, manufacturing and service sectors; the federal actions needed to realize any identified opportunities in these key sectors; and the opportunities for deepening cooperation at the trilateral level.
We have before us today Dean André Plourde, Faculty of Public Affairs, Carleton University, appearing as an individual; and, by video conference from Phoenix, Mr. Erik Lee, Executive Director, North American Research Partnership.
I'm going to take you in the order that I have you on the list, unless you have another preference. I will turn to Mr. Plourde first and then we will hear from Mr. Lee and go to questions.
[Translation]
André Plourde, Dean, Faculty of Public Affairs, Carleton University, as an individual: Madam Chair, thank you for this opportunity to address you this fine fall afternoon. If I may, I will begin my comments in French, and then continue in English. Feel free to use the official language of your choice in your questions and comments.
I will try to highlight four topics in my presentation, which will be brief. I am an economist by training. The subjects of particular interest to me, both from a research and an educational standpoint, are energy policy, energy economy, oil and gas markets, and the link between energy and the environment. So you will appreciate that my comments will focus specifically on those industries.
The first point I would like to raise is that, despite NAFTA's existence, Mexico is not a full-fledged partner in North American energy markets. The Mexican government made that decision during the NAFTA negotiations. The structure of Mexico's role in energy markets has definitely been adjusted, but that country nevertheless chose, in a way, to withdraw from some important elements of NAFTA. This is the first point to take into consideration, as that decision has had a substantial impact on the ensuing development.
[English]
The second point I would like to bring to your attention is that this is not the first time that the Government of Mexico, of whatever political party, has talked about and acted at some level in terms of allowing more market participation in its energy industries and specifically in the oil and gas sectors. I can list for you three times when this has happened in the last 25 years. At the time of NAFTA being negotiated, there were clearly some changes in the definition of certain industries that then allowed foreign participation under the Mexican constitution and under the petroleum law which governs how the state plays a role in the oil and gas industry. There were some changes in definition that allowed some roles for the petrochemical industries, for example, and for some limited electricity generation, but they were not very successful.
A second attempt was made a few years later, when there was an effort to have service contracts negotiated within the natural gas industry so that it would allow more participation by foreign firms into the Mexican oil and gas sector. Again, there was a lot of build up to this but there were not a lot of changes. A few Canadian firms sought to participate in that level of activity and it kind of petered out before it got started.
Finally, over the last year or so, there have been both constitutional amendments considered by the Mexican authorities and modifications to the petroleum law that would allow a broader role of the private sector, whether internal to Mexico — that is, Mexican nationals — or from foreign countries, into the oil and gas industry. This is not the first time it's happened, and it's important to capture this opportunity.
Where the Government of Canada or where agencies of the Government of Canada can play a role here is that there was a tradition of collaboration across the energy regulatory agencies in Canada, the U.S. and Mexico. That is, la Comisión in Mexico; FERC in the U.S.; and the NEB in Canada. They have had exchanges and discussions at some level. It would be good to encourage further collaboration. If you think the regulatory system for the energy industry has to change dramatically in Mexico, there is a lot of expertise in the regulatory agencies in Canada and the U.S. and it would be good to encourage their participation.
Third, there is a huge but extremely ill-defined potential for oil and gas production in Mexico. That has been the case partly because Pemex has played a monopoly role and has favoured the oil sector over the natural gas sector over the years, so Mexico has produced more oil than natural gas. Therefore, not much is known about the potential for the production of natural gas in Mexico.
There is no reason to believe the international boundary between the U.S. and Mexico marks the line where the natural gas reserves stop in the Gulf of Mexico. I think that is important. This will change or there is a lot of potential for the pattern of activities to change over the next years. This creates a lot of opportunities for Canadian firms to participate either directly in projects or as participants that can provide their expertise in terms of exploration, development and operations in some kind of more aggressive or more complete service contracts. There are working groups within the three governments, trilateral working groups, working on the energy industry that could facilitate some kind of discussion. In part, they are headed here by Natural Resources Canada.
The last point I want to leave you with is that there are both good bits and what some people would think are bad bits to this. The ''good bits,'' we have just discussed, in the sense that there are a lot of investment and activity opportunities and opportunities for Canadian business in the Mexican authorities. The ''bad bit'' is that at some stage Mexico could become competition for Canadian production of natural gas and crude oil in traditional export markets for Canada. This is something that Canadian producers, I would argue, are in the best position to weigh as we move ahead. How to take advantage of those opportunities, I think, is important.
A question mark as we move forward is going to be: Can we have a heightened collaboration across the three governments on environmental issues? This is not directly necessarily an only tie to the energy industries but it is an important part. A trilateral commission already exists. I think it would be good for that role to be enhanced as we move in this potential new world for Mexican participation.
The Chair: I now turn to Mr. Lee, from Phoenix, for your presentation, sir.
Erik Lee, Executive Director, North American Research Partnership: Thank you very much for the invitation to speak to this important committee on expanding Canada-U.S.-Mexico trade. Our think-tank, the North American Research Partnership, is located in Phoenix and San Diego, California. We have advisers and partners throughout North America.
I believe that this trilateral perspective, coming as it does from the U.S.-Mexico border region, might offer unique insights for this committee. Specifically, I would like to add three points for your consideration that have to do with the importance of North America's borders, a complex and rapidly changing Mexico and Canada's trade diplomacy on the ground in the U.S. and specifically in the U.S.-Mexico border region.
First, as was previously mentioned, the manner in which we approach and manage our shared North American borders clearly is key to the competitiveness of North America and, we would add, the economic and social well-being of North America's border communities. It is important to emphasize that progress in managing the U.S.-Mexico border in particular has a potential to have a large and positive impact on North America's future prosperity.
The U.S.-Mexico border is managed quite differently from the U.S.-Canada border. It is simultaneously a complex place of tremendous congestion and dysfunction, as well as private and public sector innovation. To take one example, there is deep and broad concern throughout the U.S.-Mexico border region regarding excessively long border wait times for commercial and passenger vehicles. These wait times are often in the order of several hours — both on the passenger and on the commercial sides. I testified on this topic a couple of weeks ago at the Texas legislature. If Texas is concerned, then we should all be concerned.
To give one example of the cost of these wait times in this part of North America, an analysis done in San Diego in 2006 indicated that border wait times in San Diego alone cost that region over $7 billion in lost productivity. Excessive border wait times are a symptom of deeper issues with infrastructure, staffing and the implementation of technology at our ports of entry, and these wait times are particularly pronounced on the U.S.-Mexico border.
In terms of innovation, as is often the case with the U.S.-Canada border, the debate on the future of the U.S.- Mexico border infrastructure centres on public-private and also public-public partnerships, which have an important role to play in the current context of fiscal constraint.
There are examples of innovative projects in San Diego, for example the binational air terminal; and in El Paso, with the U.S. custom and border protection section 559 alternative financing program. I believe that Canada, the United States and Mexico will all want to observe how these projects develop in order to develop best practices in this regard for both borders.
My second point has to do with how we understand and analyze Mexico and the U.S.-Mexico border in the U.S. and Canada going forward.
Mexico has profound rule of law challenges — of that there can be no doubt. Modernizing Mexico's justice system and building law enforcement capacity, particularly at the state and local level, is a heavy lift and will take several more years to complete.
Public safety on the Mexican side of the border has improved remarkably on the western end, while significant challenges remain in the eastern states, such as Tamaulipas. Mexico offers particular challenges for doing business, but these are not insurmountable. We need to be more nuanced in our assessments of Mexico, which has a large trillion- dollar economy, a growing middle class and growing trade with the U.S. and dozens of other countries.
In addition, I would re-emphasize the speed and breadth of Mexico's recent economic reforms in energy, education, fiscal issues, telecommunications and myriad other issues, for which the United States has no historical analogy. It is almost as if Mexico passed several Obamacare-sized legislative packages in rapid succession. This rate of legislative activity on large difficult issues is absolutely inconceivable in the United States. Mexico is moving very quickly.
Regarding the U.S.-Mexico border, I take issue with earlier comments to this committee suggesting that millions of undocumented Mexican migrants are still streaming across the U.S-Mexico border and that the U.S. relationship with the border is all about security and migration. First, Mexican migration to the U.S. fell dramatically during the great recession and has not recovered. This is borne out by the U.S. border patrol's dramatically reduced apprehension statistics for most of its southern border sectors.
Second, the creation of the U.S.-Mexico high-level economic dialogue last year represents a major shift in how the U.S. federal government thinks about the U.S.-Mexico border — a shift from all security all the time to a focus on trade. Washington's ''rediscovery'' of Mexico as a critically important trading partner is a significant and, I think, largely positive development for this committee and for the rest of Canada to consider.
However, I would add that by no means has the popular imagination of the U.S. caught up with these developments. Despite the fact that U.S. border communities have some of the lowest crime rates in the U.S., border security populism is alive and well in the U.S. as evidenced by the recent and erroneous suggestions coming from some U.S. policy makers that some combination of ISIS and the Ebola virus were lurking in Mexican border cities. All of this complexity at the U.S.-Mexico border eventually has an impact on the U.S.-Canada border and North American trade more broadly.
My last point has to do with the importance of Canada's trade diplomacy at the state and local level, particularly in the U.S. Given the United States' prolonged recovery from the great recession and our urgent need to boost exports, particularly to go to global customers and partners such as Canada, the Canadian consulates are truly important local partners. Arizona offers an interesting case study. A couple of years ago, the Department of Foreign Affairs and International Trade closed its offices in Phoenix and Tucson, which were under the jurisdiction of the Canadian consulate in Los Angeles. These were not large operations to begin with so in the southwestern United States, at this point, your very capable staff at the consulate was particularly stretched.
The one upside to all of this, as Mr. Robertson mentioned to this committee last week, was that the Canadian government named a very energetic visionary in the person of Glenn Williamson as Honorary Consul of Canada for Arizona. Mr. Williamson heads up the Canada-Arizona Business Council, an organization that should serve as a model as to how Canada works in the Unites States. Mexico would do well to emulate that model in Arizona and elsewhere. The point is that metropolitan areas throughout the U.S., and particularly in the U.S.-Mexico border region, will continue to seek out opportunities for local companies to export to, and Canada needs to be ready to provide those opportunities.
In conclusion, I emphasize that in order to expand Canada-U.S.-Mexico trade and its benefits for the greatest number of citizens of North America, this has to be a group effort on the part of three federal governments, state and provincial governments, local governments and the private sector. Both Canada and Mexico need to enhance their trade diplomacy and outreach in the U.S. in a significant way. The U.S. needs to adjust its approach and policies at its land ports of entry with Canada but particularly with Mexico.
Finally, I believe we would all benefit if the Canada-U.S. and U.S.-Mexico interparliamentary groups had a higher profile as fora for sharing and generating ideas. Our long North American land borders are represented by a large number of elected officials in the three countries, who, I know, have important ideas on how to make North America work better. With that, I conclude my comments, which I hope were helpful to the committee. Thank you for your time. I look forward to your questions.
The Chair: Thank you, Mr. Lee.
Senator Johnson: Good afternoon and welcome, Mr. Lee. In 2009, you co-authored with your colleague, Rick Van Schoik, a report entitled North America next; a report to President Obama. In this report, you put forward eight key recommendations to the Obama Administration to encourage greater trilateral collaboration between Canada, the United States and Mexico. Five years later, can you tell us what has improved and how has the Obama Administration worked toward enhancing trilateral cooperation?
Mr. Lee: That's an excellent question. We and other think tanks around North America at that time were saying that after eight years of the Bush Administration, it was a good time to reset the relationships between the three countries. Our report and other reports, I think, were helpful in prodding the administration to rethink in particular the U.S.-Mexico relationship and how it plays out at our border. That needed to be looked at carefully.
Beyond the Border and other bilateral U.S.-Canada initiatives had their roots partly in our work and in the work of other think tanks. What's improved is that we have new institutions and new organizations for dealing with issues that come up between the three countries, in particular at our borders. That includes Beyond the Border as well as other initiatives for U.S.-Canada as well as the 21st Century Border Initiative with the U.S. and Mexico.
Senator Johnson: In your final recommendation, you proposed establishing joint and practical assessments of North American policy effectiveness, such as the cross-border collaboration score card in an annual state of North America report to be developed by North American academic and public policy organizations. Have these good ideas been realized?
Mr. Lee: Not completely. Last year we went so far as to publish the State of the Border Report, a comprehensive analysis of the U.S.-Mexico border region. We have not yet done a corresponding report for the northern border. To my knowledge, the Council of Foreign Relations just launched a new report on North America. In terms of a score card, I don't think we're there in terms of having a simple set of metrics to measure this relationship.
Senator Johnson: Where would you think it's going in the next two years before a change in the administration? Do you see any urgency in all aspects of this?
Mr. Lee: There is and should be urgency for the Obama Administration. Our recovery in the United States since the great recession has dragged out for a very long time, as you are well aware. We absolutely need Canada and Mexico as economic partners. They are our number one and number two export markets globally; and this administration is well aware of that. There definitely should be urgency going forward. You can always get things done in the second term of a presidential administration in the United States.
Senator Johnson: I have a question for Mr. Plourde. Welcome, Dean; it's nice to see you this afternoon.
I'm interested in your comments on the Mexican situation. What are the prospects for North American energy collaboration and on trilaterally reducing greenhouse gas emissions? How important is reducing the GHGs to the Mexican government and to Mexicans in general?
Mr. Plourde: In the short term, the potential rests largely with Canada-U.S. collaborations. Building the regulatory structure in Mexico is an ongoing project. It seems to me Mexico needs to give itself a robust regulatory regime that is open to market participation before they can come in as an effective partner. Involving them in discussions at this stage is important, but I don't think Canada and the U.S. should wait until that framework is in place. The Canadian government and the Government of the U.S. should be bringing Mexico along for conversations and participation to get them ready to join an eventual continent-wide partnership.
Senator Johnson: You mentioned they have been conducting sweeping reforms on liberalization. Do you have anything further to say on what the greatest opportunities are for Canada's energy industry?
Mr. Plourde: The greatest opportunity, if the reforms go ahead, will be in the natural gas sector. There is, as I said, a largely unknown potential for natural gas production and development in Mexico. There is a lot of expertise in Canada and that would be an obvious place for Canadian expertise to flow.
Senator Johnson: That's excellent. Thank you.
[Translation]
Senator Fortin-Duplessis: My question is for Mr. Plourde. To mark the 70th anniversary of the Canada-Mexico bilateral relations, last January, Carleton University, in partnership with the Mexican embassy, hosted a seminar on the history, challenges and business opportunities between our two countries. Can you tell us what the main conclusions of that meeting were and which elements are the most relevant to our committee's current study?
Mr. Plourde: The Mexican ambassador to Canada attended the seminar, and he addressed the audience. The main theme was the huge potential of Canada-Mexico relations on some level, and that is definitely perceived. During that seminar, it was suggested that this potential has not been realized at several levels, both in terms of intergovernmental relations — between the two federations' governments — and in terms of business relations — between the two countries' industrial sectors.
Some frustration was expressed by the Mexican representatives, according to whom Canadian governments, both on a federal and a provincial level, did not place a high priority on intergovernmental relations with Mexico. This was actually brought up on several occasions.
We would have liked to foster more trade between Mexico and Canada in order to develop a trilateral partnership between Canada, the United States and Mexico. There appears to be some frustration over the fact that Mexican and Canadian industries are not especially interested in this issue.
As Mr. Lee mentioned, governments have a role to play in developing better relations, which are not exactly poor, but should be more productive. The private sector also has a responsibility to create business opportunities and make the most of them.
Senator Fortin-Duplessis: At that seminar, the President of the Canadian International Council, Jennifer Jeffs, highlighted Mexico's strength and its emerging middle class and said that Canada, like the rest of the world, should pay attention. She said the following, and I quote: ''Mexico is an emerging power to watch, and there are stories to be told in Canada that we are not hearing.'' She added the following: ''It all goes back to getting to know each other better. Education is fundamental.''
Do you think there are hitherto unexplored avenues that would help establish a better mutual understanding and break down cultural barriers?
Mr. Plourde: As a university dean, I will try to make my sales pitch to you. There are definitely cooperation opportunities in terms of trade, both at the university and college level and at the high school level. So much still remains to be done. There are definitely Mexican organizations that advocate this type of trade, but we have not been able to access those existing programs in Mexico. Colleges and universities should take an interest in that reality.
There has been a lot more exchange, including research projects that were developed jointly. Government organizations must take an interest in this reality and invest in exchanges. For example, my university has implemented a chair project to bring over a Mexican academic to Carleton, so that he could teach and share his knowledge with our students and professors. We would like this project to come together and be supported by both the Canadian and Mexican governments.
Senator Dawson: I have two questions. The first is about the nature of the trilateral relationship you talked about. One witness, who teaches trigonometry, told us that a triangle's three sides are not necessarily of the same length. He also said that the relations between Canada, Mexico and the United States are not maintained according to a normal balance. We have a relationship with the United States, the United States has a relationship with Mexico and, over the last 60 years, we have had a relationship with Mexico. However, the triangle is not as important as it was 20 years ago. We created a committee on North America where the three parties had a secretariat that was active before the Kyoto Protocol came into force. Because of the north-south relationship between the United States and Mexico, all three parties have suffered the harmful environmental effects caused by their neighbours.
I want to come back to the fact that the sides of the triangle are not equal. Should we have continued to maintain our bilateral relationship with Mexico at the same level as before, instead of focussing on the trilateral aspect?
Mr. Plourde: If you were to ask a U.S. expert this question, they would say that the trilateral relationship between the three countries is relatively weak. What we see is that there are two different bilateral relationships: one between Canada and the United States, and another one between Mexico and the United States. Then you have the relationship between Canada and Mexico that is even less integrated. Basically, we have certain organizations that facilitate trilateral relations, and we have not thought about what those relations would lead to. Once again, the three governments should work together. How can we expand those relations and collaborate more closely?
That is a major North American project the three governments could work on together. That could definitely revive the relationship in terms of the environment.
I think that our relationship with Mexico is fine. However, the frustrations expressed by Mexico's representatives during the seminar Senator Fortin-Duplessis mentioned suggest that the bilateral and trilateral relationship with Canada should be much closer.
[English]
Senator Dawson: Since both of you are here at the early stages of our study, we often try to set the tone of the study based on the first recommendations we get from witnesses. How would you set this Foreign Affairs Committee's priorities over the next few weeks and months in trying to update Canada's trilateral and obviously bilateral relationships? As a professor, where would you centre your level of study?
Mr. Lee, it seems that the ball is being passed to you.
Mr. Lee: Thank you for your question, senator. Absolutely, I think there is tremendous potential for the Canada- Mexico relationship. Without a doubt, that's the least developed component of the trilateral relationship. Obviously, the visa issue, as was mentioned by previous panelists, is significant. That is not well seen in Mexico, but that's a concrete issue that you can work on with Mexico. I trust that that will be resolved one way or another.
Educational exchange among the three countries is minimal. This is a huge area of opportunity. For example, the United States only sends about 4,000 students to Mexico every year. There are only approximately 14,000 Mexican students studying at U.S. universities every year. We have 3,500 colleges and universities in the United States; those are terrible numbers.
The numbers are similarly poor for Canada-U.S. educational exchange. So the visa issue, educational exchange, and I think energy cooperation is really what is going to tie the three economies together. I think it's a great time to talk about the CEC and its possible expanded role as Mexico's oil and gas industry undergoes a profound transformation, especially in northeastern Mexico in the state of Tamaulipas and in the Gulf of Mexico. Those are the three areas — the visa issue, educational exchange, and energy and sustainability cooperation.
Mr. Plourde: I certainly would not take objection to this and I would probably expand on the last point. Don't underestimate the importance of developing a regulatory framework in Mexico, especially in energy, and in energy and the environment. It's another area where increased collaboration or even just talking to one another across the major federal regulatory agencies would yield a lot of benefits down the road. Canadian business, Canadians in general and the Canadian government would understand much better the system that emerges in Mexico and give Mexican authorities the opportunity to take advantage of the knowledge that already exists in Canada in that area.
Senator D. Smith: This question is for both witnesses. It's not the most popular subject but I think it should be asked, and that is whether or not progress is being made in dealing with organized crime and gangs and gangsters that seem dominant in some areas. I've read countless stories of bosses and killings that are almost reminiscent of Al Capone days. I think some Canadians have the impression that there might be a difference between our society and Mexican society vis-à-vis respect for the rule of law. These things are never solved overnight. My question is: Is meaningful progress being made in this area? It's for both witnesses to respond to.
Mr. Plourde: Thank you for your question. Please understand, I respect your question, but I have nothing to contribute. My knowledge in this is limited to what I read in the newspapers. I apologize. I really don't have any contribution to make.
Senator D. Smith: You've read those stories, too.
The Chair: Mr. Lee?
Mr. Lee: Senator, thank you very much for your question. I think that's an absolutely excellent question to ask. This is a huge challenge for Mexico historically and going forward.
The development of rule of law in Mexico is absolutely a work-in-progress. I don't want to give the impression that this has been solved.
There is a lot of cooperation between the United States and Mexico on this issue. Mexico is in the process of changing its justice system over to an oral adversarial system where you can cross-examine witnesses and evidence. This is a hugely forward situation; however, this takes time to implement. Mexico will probably miss a deadline of having this ready to go in the next couple of years. I think we will be through to 2020 in changing Mexico's court system over to an oral adversarial system. This was passed by Mexico's Congress several years ago.
In terms of law enforcement capacity-building, I think the federal police and federal law enforcement in Mexico are by far the best able to respond to various threats around Mexico. Where things tend to fall apart is at the state and local level in Mexico. Mexico has a very centralized government. Funds flow from the central government to the states and municipalities. At the local level, this is absolutely the Achilles heel of the entire system.
On the federal level, there has been progress in terms of building a better justice system; some progress in law enforcement; Mexico is still working hard to develop the state and local systems. The U.S. through the Merida Initiative has funds set aside for these initiatives. I don't think it's enough money, but the United States has been working with Mexico for the past several years on this. As I said, it's a heavy lift, senator.
Senator D. Smith: It's a tough subject, but needs to be raised.
The Chair: I wanted to get a clarification or perhaps an expansion from Dean Plourde. You said that we should expand into the energy sector in Mexico and that there are great opportunities, but at the same time, we have to do it right because they could be our competitors in the markets we're reaching.
Linkages are being talked about more and more now. You have to get into the chain. You may produce something; you join with someone else to sell it somewhere else. Energy is no different from that. We have examples of U.S.- Canada cooperation, but increasingly, when I look into the Alberta market, we are the suppliers to some of the bigger companies in the United States, et cetera.
It's more of a philosophical question. We always seem to say if we share information technology, we're going to end up with competitors. However, I think there's a school of thought that says if we share that and combine, we both win- win into new markets, emerging markets, et cetera. So I was a little puzzled when you put the warning out about competitors. How do we overcome becoming competitors as opposed to cooperators in a greater piece of the pie?
Mr. Plourde: Certainly, that argument will be made that we will become competitors. My perspective on this is that that is an inherent part of the market economy. The private sector, the oil and gas industry in all three countries will sort out how to cooperate, how to share the space, how to find new markets if that's the issue. I don't really see this as a role for government to intervene, to start setting artificial boundaries across the issues. Governments will face pressure that way. There is no doubt in my mind that will happen.
I don't see this as a role. I think Canadians and governments in Canada need to see this as an opportunity for expanded trade and for progress to be made on co-managing environmental issues across the continent. I think we should see it that way, and that is the approach we should bring to those discussions.
The Chair: Mr. Lee, do you have anything to comment on regarding expanding the markets and producing either competition or cooperation?
Mr. Lee: I think it was summed up very well, thank you.
Senator Johnson: Mr. Lee, I was interested in your figures with regard to students in Mexico and the United States. Has your research partnership done any further work or conducted studies as to why those are the numbers at this point?
Mr. Lee: That's an excellent question: Why is that the case? In terms of U.S. universities, I don't think that Mexico or Latin America — or the Americas, in general — have historically been a priority for U.S. universities. A lot of the work by U.S. academics, historically, has been focused on Europe and even Asia, and the Americas get short shrift at U.S. universities. That's very unfortunate.
Senator, I'm not sure if you have much experience with U.S. universities, but they're extremely large organizations. The University of California system has a larger budget than many states in the U.S., so we're talking about massive bureaucracies that, unfortunately, are not very well internationalized, which is a term that's thrown around in U.S. academic circles. So there's a lot of work to do.
Also, being in the U.S.-Mexico border region, the U.S. State Department periodically issues travel warnings for Mexico. They're now very specific in terms of ''don't take this highway at night'' or ''this state is really not recommended, but this one is very safe.'' That has a chilling effect on exchange going both ways between the U.S. and Mexico, and probably between Canada and Mexico to some extent.
Senator Johnson: I know what you mean: My son went to Stanford, so I assure you I have some idea of American institutions. That's probably a negative in terms of Mexico — even the application process. Around the table and with all the studies we've done in Foreign Affairs, we all know that when it comes down to the youth and talking about education, knowledge and understanding each other's cultures, this is one of the areas that we like to zero in on in our studies, because it reflects what's happening in society and with our youth. Thank you.
Senator Oh: My question is for both witnesses. What should the Canadian government be doing to help Canadian companies gain additional access to American and Mexican markets?
Mr. Lee: I will take a first crack at your question. In my remarks, I pointed out how the deficit reduction plan had an effect, particularly here in Arizona. The Tucson and Phoenix offices of the L.A. consulate were closed here, so staff in the L.A. consulate, who were already busy with their normal portfolios, had to cover that much more. So Canada needs to think about expanding the number of Canadian trade commissioners and trade experts on the ground in the United States and Mexico.
I would make a pitch for the U.S.-Mexico border region, especially on the north side of the border. California, New Mexico, Arizona and Texas are states that are actively looking at the Mexican market and provide a great base for Canadian companies to both look at manufacturing in Mexico as well as possibly having operations on the ground in these states — R&D, sales, that kind of thing.
I would look at the model of the Canada Arizona Business Council. I think it has been very effective locally. Glenn Williamson would be glad to speak with you about what he's done. The number of flights from Canada to Phoenix is now well over 100 every week, which is a remarkable change over the last several years. We're still fighting to get a comparable number of flights from Mexico, believe it or not. It's almost easier to get from Phoenix to Canada than it is from Mexico.
So consider more Canadian officials on the ground and also look at the Canada Arizona Business Council as a model.
Mr. Plourde: I will add a few additional points. In terms of the government-to-government relationship between Canada and the United States, it's important to encourage exchanges between provincial governments and state governments in the United States. We focused a lot on federal to federal, and there is a real need for provinces and states to talk to one another. Increasingly they're doing so, but the federal government could encourage that.
Similarly, we focused a lot of the attention on the relationship between the executive branches: the Prime Minister's Office and the White House in the U.S. Sometimes we don't pay enough attention to the House of Representatives and the Senate in the U.S. It would be a big payoff in terms of Canadian policy and for Canadian businesses if the Canadian government paid more attention to the needs and the priorities of the house and the states in the U.S.
In terms of Mexico, a different approach comes in. When you were talking, I wrote the first word, ''continuity.'' If we think it's important now, we should think it's important a year from now and five years from now. We seem to have a series of false starts: We like it, we stop. We do a bit, we stop. We don't do any more. So the continuity of engagement between the governments would be important; so a sustained effort of enhancing the relationship would be an important part moving forward.
The other thing — and I think Mr. Lee alluded to this — is to have better support in Mexico, better cultural support and a better understanding of the business climate in Mexico for Canadian companies. So the consular activities in Mexico of the Canadian representatives should be the best source of this kind of information. As a country, we should invest in that as a priority.
The Chair: A final question for Mr. Lee. You indicated more trade offices would be important. Some trade offices in the United States were shut down, and there were multiple reasons for doing so, including cost-cutting but also the efficiency of the offices.
When you put in a federal trade office, you have to represent the whole interest of Canada. The difficulty was that some of the most unique relationships were coming at the provincial level, and provinces were building their own linkages to the United States.
What would you advise, if we were to recommend the opening of offices? What strategy for those offices do you think we need before we would recommend a trade office?
The old style has limitations in this trilateral arena, if we put them in the United States, say, in Phoenix.
Mr. Lee: The role in the United States, the characteristic of the United States in terms of the division of powers and the separation of powers and the strength of state and city governments is absolutely a defining characteristic.
Mr. Plourde had an excellent point that the provincial-to-state relationships are really important. I think you made that same point, senator. A good model to look at is what the Council of State Governments—West, in Sacramento, is doing. It is developing a set of programs with British Columbia and Alberta that is very interesting to look at.
The role of the mayors in the United States is now more important than at any point in history. At the end of the day, companies need to locate somewhere, and mayors are absolutely at the front-line in terms of business attraction; so concentrating on those state-to-provincial relationships and the role of mayors in city governments.
The Chair: As was noted, we have started our study, and you have given us perspectives and entered into areas that we had not heard from. We appreciate the testimony and we hope that some of what you have said will be found in the words of our report.
Thank you very much for the dialogue today.
(The committee adjourned.)