Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 16 - Evidence - Meeting of October 2, 2014
OTTAWA, Thursday, October 2, 2014
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 10:34 a.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 convening this morning to continue our study of 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.
Today we have with us Professor Laura Macdonald, Director, Institute of Political Economy at Carleton University; and Professor Monica Gattinger, Chair, Collaboratory on Energy Research and Policy, Associate Professor, School of Political Studies, University of Ottawa. I understand ''collaboration'' and ''laboratory'' being put together, but it is an interesting title to carry.
Welcome to both you. I will take you in the order that you are here, and then we will turn to questions from senators. You have been briefed by the clerk on the areas that we are studying. I will turn now to Professor Macdonald for an opening statement.
Laura Macdonald, Director, Institute of Political Economy, Carleton University, as an individual: Thank you very much. I am excited to be here today to talk about the North American relationship and our trade and investment ties with the U.S. and Mexico.
I'm a political scientist, not an economist or a representative of a business organization, so I'll be speaking to you in that capacity. I have been working on North America since the days of debate on NAFTA, so I have a long trajectory on this. I have edited a book on the problems in cooperation in North America since the SPP, and I have heavily focused on the role of Mexico in North America.
My current research focuses on the Canada-Mexico bilateral relationship within the NAFTA context. I have a particular focus on issues of migration and human rights. On the side, I'm also working on Mexican social policies and measures that have been undertaken particularly at the sub-national level to reduce levels of violence and crime in Mexico, focusing on Mexico City actually. I hope to bring to the committee my expertise on Mexican politics and some thoughts about the implications of changes in Mexico for the North American relationship. I am also part of the Borders in Globalization research partnership that Chris Sands mentioned in his testimony last week.
As background, Mexico is Canada's third-largest trading partner and it is identified in the government's Global Markets Action Plan as ''an emerging market of broad Canadian interest.'' When the GMAP, as I'll call it, was announced, Minister of International Trade Ed Fast stated that all of Canada's diplomatic resources would be devoted to increasing trade with these priority markets. I would argue, however, that the relationship with Mexico, which I would consider the most important of these emerging markets for Canada, has been largely overlooked and aspects of it have been mishandled. As a result, the bilateral meeting with President Peña Nieto last year was frosty, to say the least, and the planned visit of President Peña Nieto in June was cancelled as a result of the controversy over the visa imposition.
I would say in general that it seems unlikely to me that Canada will make a lot of progress in advancing our ties with other emerging markets, particularly those in Latin American, if we can't get the Mexico relationship right. Other countries are paying attention to this, and migration issues are particularly sensitive for most of these countries.
In contrast, President Obama and President Peña Nieto have agreed to establish a high-level economic dialogue. The HLED, which will be led at the cabinet level, is envisioned as a flexible platform intended to advance strategic economic and commercial priorities. I think we have a way to go to catch up to our American neighbours on this relationship, whatever the impact. Of course, there are tensions in that relationship as well.
Just quickly, the first way I would offer to improve the situation is by trying to bring Mexico back into the North American relationship, perhaps in a new way. As you know, the SPP broke down. The Security and Prosperity Partnership of North America that lasted from 2005 to 2008 broke down, partly because perhaps it was too ambitious, but at least it was trying to establish trilateral approaches to shared economic and security issues. Since then, Canada and the U.S. have been advancing pretty rapidly on one bilateral track while the U.S. and Mexico have been advancing on another bilateral track. Canada and Mexico have some common initiatives, but they're pretty weak, so I think it is time to think about ways in which we can return to negotiations on a trilateral basis, perhaps on a case-by-case basis and perhaps less ambitious in scope.
I'd like to quickly remind you that two institutions were set up during the NAFTA negotiations, the North American Commission on Labour Cooperation and the North American Commission on Environmental Cooperation. These organizations were badly underfunded. The secretariat for the NAALC was closed in 2010. The NACEC was better funded and had more political support and is still with us, headquartered in Montreal, and has done some highly positive things in encouraging cooperation across borders on shared environmental issues, but it could use more support. It's doing a lot on very little money. This is one area that I think the Canadian government could look into, revitalizing these forms of cooperation.
I would like to talk about the issue of the Mexican visa. The sudden imposition of the visa requirement was a major irritant in the Canada-Mexico relationship. Changes have been made in the Canadian refugee system, and the Minister of Immigration has placed Mexico on a list of safe countries, for whose citizens it is very difficult to make a refugee claim. As a result, the number of refugee claimants from Mexico has declined dramatically. Interestingly, the fact that the visa requirement was lifted for citizens of the Czech Republic while maintained for Mexico also aggravated the situation. In general, the government did not appreciate how sensitive and important this issue was for Mexicans and how seriously they would take this move by Canada. I can tell you from travelling in Mexico that if you mention you're a Canadian, the visa issue comes up.
Of Mexicans who are likely to travel to Canada, the number of tourists has declined significantly, which has economic spinoff. More than 1.6 Canadians visit Mexico every year. The number of Mexicans coming to Canada peeked at 257,000 in 2008 before the imposition of the visa. We saw a decline of 55 per cent in the number of tourists the following year; but I think it has recovered a bit since then. That's a big economic impact for the tourist sector in Canada. As members of the business community mentioned last week, it also has a chilling effect on trade and investment relations between the two countries. If Mexican business people feel they will have a hard time getting to Canada, they are more likely to go to the U.S. where the visa requirements are less onerous. They require a visa, but it is less difficult and less expensive to get.
It is also interesting that the rationale for the imposition has shifted over time. Initially it was about the refugee claimants, apparently as that's what we were told; but now it's not exactly clear why Canada didn't lift the visa requirement. It might be something to look into, but it seems to be around security issues. I would echo the previous witness to this committee who said that he doubted that cartel leaders are facing significant barriers to their trade resulting from this visa imposition. They know how to get around these barriers, but licit desired travelers are having a hard time.
I would add that the idea of placing Mexico on a list of safe countries along with countries such as Norway, Sweden and the United Kingdom seems somewhat odd as a solution to this problem; and it wasn't a solution because it didn't lead to the lifting of the visa requirements. We know that over 70,000 people have been killed in Mexico over the last eight years or so, and there are Mexicans with real reason to fear persecution and even death. Journalists, for example, are heavily targeted, and human rights defenders sometimes need a safe way out of the country. Canada is not offering very good options for them here.
A stronger relationship with Mexico is important, but we shouldn't overlook some of the challenges that Mexico currently faces, which I want to address.
First, most analysts would say that Mexico did not do that well out of NAFTA or not as well as they expected to do. Economic growth levels have not been particularly impressive compared to other Latin American countries. Mexico is the Latin American country that has been hardest hit since 2008 with a negative GDP growth of -6.2 per cent since 2009. They have recovered since then somewhat, but slow growth in the U.S. affects them just as it affects us.
As well, poverty levels remain heavily entrenched. They rose quite dramatically after the economic crisis and have gone down a little in relative terms since then, but, in absolute terms, the number of Mexicans living in poverty has been going up.
President Peña Nieto has undertaken significant reforms. One example is fiscal reform, which is really needed because Mexico is the second worst country in Latin American in terms of capture of tax revenues. Their tax is the second lowest in the Americas after Guatemala, I believe.
As well, there are important reforms to the education system, but there are still serious concerns about human rights in the country. Amnesty International issued a report recently on high levels of torture. There are other significant concerns that it is important to keep an eye on.
Canada had a small program in the south of Mexico training judges and lawyers on how to operate in their new legal system, which is an oral trial system. They have made interesting reforms in the legal and judicial system over the last several years, but it's a very slow process to switch from one legal system to another; and they need support. It was a positive program to help Mexico with some of the human rights and legal challenges it faces, but the program ended last year, I believe. As far as I know, there is no new such program.
Canada could be doing a lot more, given how important Mexico is to our country in terms of economically, socially and culturally in terms of tourism. Canadians go to Mexico in large numbers, and they care about the country. We need to think of other ways in which we can be helping out with human rights reforms.
To conclude, I would like to mention the area of academic cooperation. I have worked for years with Mexican colleagues. In the past, I ran three North American mobility program grants that were designed to send students between the U.S., Mexico and Canada. Those programs have been cancelled, first by Obama, not Canada. Since then, in May 2013, President Obama and President Peña Nieto announced a U.S.-Mexico bilateral forum on higher education, innovation and research to expand opportunities for educational exchanges, research, partnerships and cross-border innovation to help both countries. Both the U.S. and Mexico are sending students back and forth in large numbers. I don't have the numbers on how many students are going to Mexico from Canada but I think it's pretty low. Again, this is another area we could support to develop populations in both countries that know each other better and are better positioned to cooperate in the future in trade and investment as well as art, culture and so forth.
[Translation]
Monica Gattinger, Chair, Collaboratory on Energy Research and Policy, Associate Professor, School of Political Studies, University of Ottawa, as an individual: Thank you very much. I want to begin by thanking the committee for giving me such a warm welcome today. I greatly appreciate this opportunity to discuss the ongoing study with you.
[English]
My remarks will be predominately in English mainly because my energy work is undertaken in English. I think in English when it comes to energy.
[Translation]
But if you do have questions in French, it would be my pleasure to answer in your language.
[English]
Very quickly, a little bit about myself: I'm not a disciplinarily trained academic but an interdisciplinarily trained academic with one foot in business, one foot in public administration and government, and another foot in economics. I have found this to be a relatively useful set of lenses with which to view energy issues in North America.
As the chair mentioned, I am the Chair of the Collaboratory on Energy Research and Policy.
[Translation]
And you are right, the idea is to combine the words ''collaboration'' and ''laboratory.''
[English]
The Collaboratory's mandate is to strengthen energy research and policy capacity on salient energy issues in North America. We are the only organization of that kind, to my knowledge, in North America really focusing on energy issues but from a North American perspective. I'll be bringing some of those views and ideas to my talk today.
As I mentioned, I am pleased to see the committee taking on this study. I think it's extremely important, and my remarks will focus in on a key resource sector, in this case energy.
I'll start by giving a brief bit of context around energy and energy policy-making. I will then turn to the North American energy scene, which is in the midst of a fundamental transformation that perhaps Professor Plourde yesterday spoke with you a little bit about. Then I will offer up some ideas in terms of where government action might be supportive when it comes to energy in North America.
First, on the importance of energy, I would argue that energy is a resource sector unlike any other. Yes, it is a sector in and of itself in terms of economic activity and industrial growth, but it's also a critical input into competitiveness, quality of life and standards of living. In my view, it deserves a particular kind of treatment in the committee's deliberation around key resource sectors, In an increasingly competitive and regionalized global economy, having an efficient, reliable, affordable, safe and sustainable energy system is essential.
Flowing from that, I would urge the committee, when it comes to its deliberations around this particular resource sector, to not narrow or limit your focus to looking at cross-border trade and investment flows. Yes, it's important to know how many hydrocarbon molecules are flowing across borders, how many electrons are flowing across borders; but given the importance of energy as an input into competitiveness, quality of life and standards of living, I think it's very important to think about what kind of an energy architecture or energy platform we have in North America and what platform and architecture will best serve the environmental, economic and societal needs of North Americans, and I'll come back to that later.
It is very important, in my view, to get this right. We've got fundamental questions before us around issues of energy mix, labour, climate change and how to best develop North America's energy resources as a whole for the benefit of all North Americans.
I'd like to underscore how important it is to get this right.
When it comes to energy, as we know, infrastructure decisions are multi-billion dollar decisions, and those are capital assets with extremely long lifespans. The infrastructure decisions taken now will lock us in for decades. Conversely, a lack of decisions on infrastructure also poses its own unique set of challenges. One can certainly see the window of opportunity on key energy opportunities narrowing, at best, or perhaps even passing us by.
When it comes to energy policy and, as with Laura, I have been studying my particular area of research interest over the last 15 or so years, and I've watched over the course of that period energy policy-making becoming increasingly complex. I would not want to be an energy policy-maker at this time because the number of imperatives they have to address, if you will, are becoming increasing numerous.
Governments in essence, in my view, are in search of what you can think of as the Holy Grail of energy policy with four key imperatives that they seek to try to identify appropriate balance points between. One of those is, of course, energy markets, making sure we have energy markets that function in a way that is competitive, efficient, affordable, et cetera.
Second, and we have seen this increasing layering on to energy policy-making over the last 15 or more years, are questions of environment. Clearly exploration, production, transmission, distribution and consumption of energy have environmental consequences that policy-makers need to grapple with in meaningful ways.
We also have security imperatives and it's not just about security of supply. It's also, as we know, particularly post- 9/11, security of critical infrastructure, whether that's hard infrastructure or cybersecurity.
In addition to market, environment and security imperatives, we now have increasingly another imperative that is proving particularly challenging for governments and industry to deal with, and that's the challenge of how to garner social acceptance and support for energy development. Yes, it is particularly acute when it comes to hydrocarbons, but we see this as well when it comes to renewable energy, too.
The nature of political opposition to energy development is really expanding in scope so that we've moved from what one might think of a classic NIMBY opposition — so the ''not in my backyard'' form of opposition — to the much broader principled forms of opposition to energy development, neatly captured by terms like BANANA, ''build absolute nothing anywhere near anybody.'' What's a policy-maker to do? What's an industry proponent to do faced with that? There's also NOPE, ''not on planet earth,'' to make it even more interesting.
These four imperatives — market, environment, security, and social acceptance and support — create this handy little acronym MESS, and the question is, what kind of MESS will governments make of energy policy? Will it be a mess in the sense of disorder and disarray — I have a teenager; I fear to go into his bedroom — or in a military sense of a mess hall where people come together to meet their shared needs, so coordination and collaboration around energy policy? Again, I'll come back to that again.
At the same time we have the policy context that's increasingly multi-faceted and challenging for policy-makers to deal with, we also have a fundamental transformation of the North American energy sphere, and there are two key components to this transformation, the first of which is on the market side of the energy MESS.
We have the shale revolution that I'm quite sure Professor Plourde yesterday would have spoken with you about. The increasing production of tight oil and shale gas in the United States, largely at this stage but in other jurisdictions in North America as well, is transforming the North American energy picture. What is really important to bear in mind about this transformation is that it was largely unanticipated. If you were to go back five or seven short years ago, we would have been talking about the number of LNG import terminals we need in North America because we faced at that time a natural gas shortage. Now we're talking increasingly about the United States very rapidly moving into an LNG net exporter status as early, if some of the latest projections turn out to be accurate, as next year. That's a fundamental transformation in really five to seven very short years. We've gone from hydrocarbon scarcity to abundance in the United States and in North America more broadly. I can come back to statistics later, but for the purposes of moving this presentation along, I'll leave that perhaps for the discussion session.
This is having tremendous economic impacts, not only in terms of the energy sector in and of itself, but also in terms of energy, again, as an input into competitiveness, quality of life and standards of living. Lower prices for natural gas are reviving industry sectors in the United States that were thought to be on the decline — steel, petrochemicals. There is a real transformation taking place on the electricity side, a tremendous amount of fuel switching from coal to natural gas, and clearly there are some advantages of that in terms of GHG emissions, but it is also creating a tremendous amount of uncertainty in energy markets.
There is much debate surrounding what this means for Canada-United States energy relations. For Canada, this begins to call into question the size and viability of U.S. markets for Canadian energy moving forward. This is perhaps less the case on the oil side, but definitely the case on the side of natural gas, and again, I can come back to statistics, but for purposes of moving forward I won't.
We are seeing a real reorientation of energy flows and infrastructure in North America. You would have to go back to the 1950s to see this many major pipeline proposals either in the works or before regulators. This is a tremendous reorientation of energy flows in North America.
At the same time as this is taking place, we are seeing the second transformation in the North American scene, which is the transformation in North American energy politics. All of this centres around this issue of social acceptance and support. The politics of energy are becoming increasingly fierce, polemical and protracted. We only have to look at the newspaper just about every day to see that is the case.
[Translation]
An Hon. Senator: (Inaudible)
Ms. Gattinger: Absolutely. A number of projects are facing very strong and controversial opposition.
[English]
The challenge here or some of the risks here is we have a lot of money and time going into projects. If you look at Keystone XL as another example of this, the president of TransCanada just within the last little while has talked about the costs of that project doubling and largely, again because of trying to address issues of social acceptance and support.
So what's to be done? How do we, if you will, clean up North America's energy MESS? I think the first thing that is really important when it comes to addressing these issues is, first of all, to recognize that the days of the old world of energy development are behind us. Long gone, in my view, is the time that an energy project proposal would go before a regulator and go through a technical, expert-based process to arrive at a decision from a regulator, and that would then be a slam dunk in terms of, if you're a project proponent, moving forward with an energy proposal. As we've seen now, clearly the legitimacy of some of these expert-based processes is being called into question by those who are opposing energy development.
This is where I come to what the role for government is. I think governments have a pivotal role to play in this context. I think they need to be more than just cheerleaders for individual energy projects. I'd like to stress again that I think, in the context of North America, it's very important to expand our gaze beyond thinking about these issues exclusively in the sense of trade, because it tends to encourage zero-sum thinking in North America. We also need to move beyond discussion and debate around individual projects — which is really where we see a lot of politics now — to looking at the energy architecture in North America more broadly.
In North America in the last number of years — and I think Laura's comments pointed to this to some extent — for a variety of reasons, we've seen something of a bias against collaboration and, in the energy sector, that is certainly the case on a continental basis. It's not that governments have not been working together. We've had the Clean Energy Dialogue between Canada and the United States. The U.S. Secretary of Energy, Ernest Moniz, was just here in Ottawa a couple of weeks back, and a memorandum of understanding was signed between the Canadian and American governments. All of these initiatives are worthy and important, but I would urge this committee to recommend that we go much further in terms of discussions of energy in North America.
We need some support from the highest levels to bring officials together to discuss issues of technical, regulation and policy, but again, from this broader lens. You would have to go back to the early 2000s to see veritable trilateral discussions around energy through, at that time, something referred to as the North American Energy Working Group. I would argue and encourage the committee to consider pushing for a new and improved North American Energy Working Group, which would have a number of key focuses.
The first is to put in place a new North American Energy Picture document. The last North American Energy Picture document we have goes back to 2006. The world has changed in energy markets since 2006. We need to get a better handle on what it looks like in North America in energy these days.
The North American Energy Working Group also prepared forward-looking documents, envisioning what the future of energy might look like in North America. I would again urge the committee to think through the potential opportunities of moving in that direction again, but I would expand the effort beyond just government officials to also include industry, civil society and, as Professor Macdonald pointed out, the academy as well.
I will end on one idea that I'd like to put forward to the committee. North America's energy ministers will be meeting in the next number of months. I would suggest, humbly, that it would be worthwhile to explore the opportunities that there might be in terms of the creation of what could be called a North American energy council. This would bring together officials, industry, civil society and the academy who could begin to have some debate and discussion around what North America's energy future might look like, what are some of the different scenarios that we can think through, and move beyond looking at individual projects to looking at the bigger picture. This is the kind of debate, discussion and action that, in my view, we need to be undertaking at this time to identify what the key opportunities are and how we might best go about acting on them.
The Chair: Thank you. That covered a lot of interesting and contentious areas.
[Translation]
Senator Fortin-Duplessis: Ladies, I want to congratulate both of you on the quality of your presentations and commend you on the enthusiasm you have shown when discussing your work. We can see that you like it a lot.
My question is for Ms. Macdonald. You are both from Carleton University, and I think that, for your university, the relationship between Canada and Mexico is very important, since you organized a seminar on the history, challenges and business opportunities between our two countries. Ms. Macdonald, I wanted to ask you whether, since the attacks of September 11, 2001 — which placed increased emphasis on security — you have noted a negative impact on trade between the United States and Mexico, between the United States and Canada, and between Canada and Mexico.
[English]
Ms. Macdonald: So the question is about since 9/11?
[Translation]
Senator Fortin-Duplessis: Yes, as a result of the measures implemented to increase security.
[English]
Ms. Macdonald: Yes, definitely, there has been an important impact on trade between, I would say, mostly Canada and the U.S. and U.S. and Mexico. I don't think Canada and Mexico have been as much of a concern because of the lack of a land border, but both countries have experienced serious impacts on trade levels.
As a result of those security measures, Mexico, of course, on top of concerns about terrorism, faces other barriers related to concerns about undocumented migration. So that, too, has been increasing hand-in-hand with concerns about terrorism.
The Governor of the State of Texas, I believe, recently said there are ISIS militants who will come into the U.S. from Mexico, just as after 9/11 people were saying there were al Qaeda people in Mexico. There has never been any concern about terrorism in Mexico, but there's a tendency for politicians to seize on these ideas of some vague menace in order to ramp up border controls.
Certainly on the U.S.-Mexico side, they've faced a great deal of hostility from some members of the American population who are concerned about Mexicans travelling to the U.S. across their borders. I'm not as much of an expert on Canada and the U.S., but for Mexico, that has been a serious impediment to cross-border cooperation in general, not just the amount of trucks crossing but bigger priorities around thinking together about how we can improve cooperation across borders.
[Translation]
Senator Fortin-Duplessis: I want to make a correction. I thought you were from Carleton University, but you are actually from the University of Ottawa. I apologize for my mistake, Ms. Gattinger.
My second question is for Ms. Gattinger. You are currently writing a book on Canada-U.S. relations in the areas of energy and climate change since 1980. Is that the topic of your research?
Ms. Gattinger: Yes.
Senator Fortin-Duplessis: You have extensive experience in public cross-border policies related to the energy sector. While writing your book, have you seen improvements or deterioration in the energy sector since that time?
Ms. Gattinger: Thank you for the correction. If I may, Madam Chair, I would like to clarify something. Are you talking about improved relations in terms of trade and investment?
Senator Fortin-Duplessis: Have you noticed any deterioration in terms of greenhouse gases, especially in the energy sector? I am not sure how you are addressing this in your book.
Ms. Gattinger: I will address that topic in two ways. I will first look at investments and foreign trade. At that level, we have certainly noted an increase in trade, especially between Canada and the United States, and especially in oil.
As for natural gas, mainly owing to the shale gas revolution, we are seeing less and less natural gas exportation from Canada to the United States.
Regarding the September 11 attacks, one of the characteristics of the energy sector is that cross-border movements are mainly passing through pipelines, or through extra-high-voltage transmission lines in the case of electricity.
As far as security goes, the issues are a bit different. I would say that, especially in the electricity field, the two countries have worked very closely together to ensure that this infrastructure is protected, be it in terms of hard infrastructure or cybersecurity. That is the situation in terms of trade.
In terms of politics — and here we can open up the discussion on climate change — I think there have been some instances of bad timing between the two countries. For example, the United States' interest in initiatives in this field may not be of the same nature or at the same level as Canada's interest. It is clear that, in some cases, when it comes to Canada-U.S. energy relations, the current U.S. government seems to be taking climate change very seriously — and I can attest to this after listening to the U.S. Secretary of Energy, Mr. Moniz over the past few weeks. For Canada, that clearly raises questions regarding the nature and level of its engagement in climate change, whether we are talking about federal, provincial or municipal administration.
[English]
Senator Johnson: Good morning. Thank you for your excellent presentations. They certainly added a gravitas to our discussions.
Professor Macdonald, given your areas of focus — human rights, social citizenship, immigration and security within our North American context — you know that over the summer the U.S.-Mexican border, especially in Texas, experienced a large influx of Central American children, many of whom were unaccompanied by parents or guardians and were brought in by paid smugglers. Out-of-control violence caused by gangs in their home countries is cited as reasons for why their parents are sending them to the U.S. for a better life.
Could you please tell us, as a North American neighbour and partner, what can Canada do to assist countries such as Honduras, Guatemala and El Salvador to improve security conditions for their citizens, and can crises such as this one experienced in the summer be addressed trilaterally?
Ms. Macdonald: This is a big question. It would merit its own hearing. It has been a huge tragedy that we've been watching occur on the U.S.-Mexico border. I think Canadians haven't been hearing as much about it as have Americans. Americans are extremely conscious of this crisis, and many have been moved to see the plight of these children arriving at the border unaccompanied. It does speak to the fact that we need to think about these issues in a regional fashion. We can't just say North America ends at the Mexico-Guatemala border. We need to think beyond that border as well, and not just about border control but about how to improve security and human safety in the countries of Central America.
We hear a lot about Mexico, but Honduras and Guatemala are much more dangerous than Mexico and have been suffering severe economic, social security crises for quite a while now, which seem to have escalated in recent years.
I think Canada could do a lot more in supporting these countries with their levels of violence. As I said, I've been looking at levels of violence and methods being used at the municipal level in Mexico that seem to be relatively successful, and I think there could be some points of learning there.
What really did not work in Mexico was a militarized solution adopted under the previous president, President Calderón, who brought the army into the streets and the army started shooting people. It was a disastrous response. They started killing the cartel leaders, which led to more competition among the cartels. What seemed to work better is a more human security approach, focusing on training of police officers and military officers around human rights, but also providing social rights to people at the local level, trying to build human capital, social capital so that people feel connected to their society, strengthening states so people will trust their states rather than seeing them as the enemy, as part of the threat that they're facing. This is very much the case in countries like Honduras, in particular, where we've seen an escalation of human rights violations since the coup.
So we need to think about this regionally. There are regional solutions in place to think about this, but there's a fear that these actors could prefer a more militarized solution, which clearly has not worked. We need to think about more humble, local-level initiatives that involve also reducing levels of poverty and inequality in these countries.
Senator Johnson: As you said, it is a study unto itself almost. But it is a burgeoning problem.
Ms. Macdonald: Thank you for the question.
Senator Johnson: Professor Gattinger, I asked a question yesterday of the professor from Carleton with regard to energy and, of course, you said we should be working towards setting up a North American working energy group, it sounds like. My question to him was this, and I would like to hear what you have to say: What are our prospects for North American energy collaboration, and further on trilaterally reducing greenhouse gas emissions? And, also, within the context of what you're talking about as a working group, how would that fit together?
Ms. Gattinger: By nature I'm an optimist, so I would say the prospects are good. Having said that, as we know, there are a number of moving pieces right now in the United States at the political level, which perhaps will challenge that in the short term.
In the Mexican context, and I presume Professor Plourde spoke about this yesterday, we have the energy sector reforms that have been undertaken in Mexico. I think there, there are some real opportunities for Canada to assist Mexico on the technical level with the implementation of those reforms. It is one thing to have legislation that says it shall be so. It's another thing in the Mexican context with two very large, long-standing monopolies in petroleum and electricity to move towards a liberalized system. So I think for the Canadian experience, particularly in our case because we have experience with Crown corporations whose monopolies have been opened up to some extent, in electricity, there are some real opportunities there.
On climate change, where I see greater collaboration that I find quite heartening is at the sub-national level. We see some very interesting things happening, whether it's in terms of the recent agreement between Quebec and California, those natural partners geographically. However, it is moving things forward in terms of cap and trade systems between the two jurisdictions. I think there can be some clear room for that.
But where I would come back to, though, is looking at what is the energy architecture in North America that will help us move forward on those issues. If you look, for example, in electricity, where Canada could play a really strong role, and perhaps this might be underappreciated in the United States, is with our hydro. Hydro is a terrific backstop for renewables, which we know are in many instances not dispatchable. They produce when the wind is blowing or when the sun is shining. Hydro was a terrific backstop for that. We need to do a better job at exploring where those opportunities might be in terms of thinking through how we can collaborate when it comes to the platform for energy in North America and reducing GHG emissions.
Senator Johnson: That's excellent. I will certainly take that message home to Manitoba, with all our hydro power. Thank you.
Senator D. Smith: In broad terms, what I sense we're really talking about is increasing business between Canada and Mexico, which is something I agree with.
My question is for Professor Macdonald. I was intrigued when you said that one of the areas of your study is violence and crime. I raised this issue with the two witnesses we had yesterday. Dean Plourde deferred, because he said he wasn't close enough to it, to our witness from Arizona. In a nutshell, what that witness, Erik Lee, said was, well, yes, it is a real issue. Progress was sort of being made in terms of at the national level with the police, but at the state and local levels there are real problems, and you just can't rely at all on the rule of law in terms of the culture there.
What I'd like to hear is that progress is being made. It sounded like there was some at the national level, but not really. When you bring up issues like visa requirements and things like that, one of the real ironies here is that literally 34 years ago, when all the trouble was going into Chile, Prime Minister Trudeau picked two young MPs to go and talk to 10 different embassies other than the Canadian one to find out if what he was hearing from our embassy was the truth because of the visa requirement. The two he picked were Senator Dawson and me. We were both very young.
Senator Dawson: I was younger.
Senator D. Smith: In any event, what I'm talking about here is a culture that respects the rule of law. Is progress being made there? I invite your comments on the broad issue I've raised because I'm in support of increasing trade, but visa requirements are another issue.
The Chair: I hope you can answer that rather succinctly, because I have a long list of questioners.
Ms. Macdonald: I, too, would like to hear that there is progress being made, and I'm not sure. There was a decline in homicide rates in Mexico last year, but there was an increase in other kinds of crime. President Peña Nieto announced that he would create a gendarmerie that would address some of these issues. A really big problem is just the large number of security agencies that exist in Mexico that are not well coordinated.
Even, as you heard yesterday, if you focus on the national, that leaves the sub-national police forces, which are really problematic. The gendarmerie was supposed to have 20,000 members. It's now down to 5,000. I'm not sure what it's going to do. So I'm not sure that we are seeing much progress. At the same time, we are hearing of some alarming incidents happening in recent days. There was a shooting on a bus of teachers from a normal college, a teacher-training college, the other day that killed a number of people and 55 students went missing afterwards.
We hear a lot of mixed stories. It's messy. I do want to emphasize that it's localized. It's not all of Mexico. I wouldn't say at all that Mexico is a broad culture of violence. It's less violent that other countries that we trade with. I'm not sure how much they're connected. There is a connection at the broad level, but it would be nice if trade were leading to better human rights conditions and living conditions for all Mexicans. I'm not sure that's happening very effectively so far.
I'm not sure I'm answering your question, but it's a big question. It's very complicated. China also has a bad human rights system, as we know. If we want to go out in the broader world, as we have to do, we have to learn how to confront these situations, learn how to work with them and learn how we can help by building better global systems of governance and human rights.
Senator D. Smith: I won't pursue it because I got your message, chair.
The Chair: Thank you. If there should be such a thing as a second round, you'll be there.
Senator Housakos: The underlying message we seem to be hearing from witnesses so far is that Canada, over the last 20 years, since NAFTA was implemented, has not taken full advantage of the potential we have in Mexico. Clearly, if you look at the three economies in North America, Mexico is on its way to growing in leaps and bounds.
Inevitably, though, the Mexican-American relationship, one can understand why it's so strong, given the distance, the distribution networks that Americans have and provided the large market they have. Obviously I had mentioned to previous witness the people-to-people connection that Mexico and the United States have. There are tens of millions of Americans of Mexican descent. There's a bond and bridges that can be created. As I've said in the past, businesses are done between people. Canada, of course, doesn't have those innate advantages that the Americans do.
What can we do to overcome those disadvantages of distance, distribution networks, market size and the people-to- people connection? One thing that has struck me from my travels, in this life as a senator and my previous life in business, is I don't think Canadian institutions of higher learning — universities, which both of you work with — do enough in creating cultural, academic and student exchanges, and not just with Mexicans but all over the world. It has also struck me, when you go to the United States and visit their universities, it's almost inevitable when somebody does a master's study or goes into some form of their study, at some point of their education and their course in university they will find themselves in Europe, Asia or somewhere doing their studies and building relationships, experiences and bonds.
It's a long question, but that's the nut of it. I'd like both of you to comment on it.
Ms. Macdonald: Thank you for that question. I couldn't agree more. Because we have the disadvantage of distance, although we're not that distant — it is our neighbour in North America — we have to work harder to establish those connections. I don't think, as you agree, that our educational systems have served Canadians very well in this respect. Our students need to learn Spanish. I think it has been far too easy for Canadian businesses to go to the U.S. for many years, where most of us speak English and are able to work easily, but it's a changing world and we need to learn other languages, whether they be Spanish or Mandarin or Japanese, and we need to find ways for government to support that process.
If my dean had spoken about this yesterday, he would say we have all these cutbacks, we don't have the money for exchanges. We've been struggling with ways of figuring out how to do that at Carleton, and we're turning to the Mexican government to try to fund some of these exchanges when we're a wealthier country than Mexico. Canada should be doing more about funding educational exchanges, specifically with Mexico.
I would add that Canada has had in the past — even if we're farther away — a very good reputation in Mexico. Canada was, in fact, the country that Mexicans respected most and identified in public opinion surveys. That declined after the imposition of the visa. I think we fell to second or third place. But there is a residue of goodwill there that we could take advantage of, and that's why I stress the importance of the visa. It is also important for educational exchanges as well to think about visas.
Ms. Gattinger: I absolutely agree with the comment that the senator has made. Thank you very much for that. I would echo certainly what Laura has said.
One other area that I think might be worth thinking about on the business front is to expand that beyond just higher education and to be looking at business leaders, leaders in government and leaders in NGOs. As an example, the U.S. Secretary of State has — some of you might be familiar with this — the International Visitor Leadership Program. What that program does — I've just been nominated to take part in one of these things — is it takes leaders from across the country, brings them into the United States for extended study tours, essentially, so they can meet with other leaders in the sector, whether it's on the government side, NGO side or industry side.
I couldn't agree with you more; it comes down to people-to-people relationships. It also comes down to a consciousness. My students are conscious of the U.S. as a marketplace to go and work in, they're interested in that. They don't think of Mexico. They should be thinking of Mexico. If there was more in the way of academic exchange, perhaps more support for other leaders as well across different sectors, we would begin to build those relationships. But we need to be strategic in that, too. It's not firing off in all directions. It's identifying where the sectors are and this is what this committee is working on, where there are the greatest areas for growth. In my biased opinion, energy clearly is one of those, but obviously it's not the only one.
Senator Demers: I have a little bit on what Senator Smith asked last night and today. I lived 23 years in the United States and my daughter is a teacher in Texas. It's imperative that Mexico and Canada keep working and expanding what we're trying to do. You talked about 70,000 people dead; even some of the police officers were corrupt, and you are certainly aware that Mr. Calderón in the past had tried extremely hard.
You used the word '"'trust'' and I do believe in that. Isn't the trust between the U.S. and Mexico very fragile, to the point where something happened a few weeks ago? What about the trust between Mexico and Canada? More of the information comes from what is happening in the relationship of the U.S. and Mexico and it filters to here and they think it's all the same thing.
I will leave it at that. I would like to know what you're thinking on that, please.
Ms. Macdonald: Yes, there is a level of trust, as I said. There is a lot of respect for Canada in Mexico amongst Mexicans. When Canadians come down to Mexico, I think Mexicans have a good relationship with them in general and, as previous witnesses have said, many Mexicans come to work in Canada in the agricultural field. I could say more about that. But I think it's rather shallow. When they think of Canada, they think it's up there, it's cold. They seem to be nice; they're not the Americans. We do have the advantage of not being Americans, which has a historical relationship with Mexico that is extremely fraught, with various periods of high hostility.
So we have an advantage and the Canada brand is a good one. It could sell well in Mexico, but it's shallow. We need to know more about each other. We need to bring in Mexicans to know Canada better; not just send Canadians to Mexico to learn Spanish but bring more Mexicans to study here.
I just add that there is a big middle class in Mexico. There is a large number of skilled workers in Mexico, for example, in the care sector. Canada has a care deficit looming, so we could be bringing in more Mexican nurses to work here, but there are barriers, as with immigrants from other countries, in terms of recognition of qualifications. We could be working together in a sector like health care to think of ways to make it easier for Mexicans to come here.
[Translation]
Senator Robichaud: Ms. Gattinger, you talked about a competitive energy market. I feel that, the more players in this sector are brought together, the more collusion there is, and we end up paying more. I think that Canadians are starting to wake up and see that they are being overstretched when it comes to energy. In New Brunswick, that state of the affairs was clearly illustrated during the latest provincial election, when the main issue at play was whether to use shale gas or place a moratorium on it. Companies can no longer explore in the same way they did in the past. Could you tell me something that may change my opinion on this industry?
Ms. Gattinger: That is a good question regarding the opinion on the industry. This is interesting, as it is in line with public opinion surveys. Unfortunately, people have very little confidence in this sector, and in governments and environmental NGOs. The level of confidence in the entire sector is very low. For instance, in New England — located right next to the Marcellus shale development — the price of natural gas has increased dramatically, especially last winter. One of the main reasons for that is the lack of infrastructure to transport energy — natural gas, in this case — to the consumers. The same thing is happening with electricity generators.
So it all goes back to social acceptability. I think a meeting should be held for the stakeholders, with fact-based discussions participants would have confidence in. You should build confidence between you, the industry and other stakeholders, or between Canadians, Americans and the sector.
I hope that my message is not misinterpreted and does not suggest that all energy resources should be developed, regardless of the consequences. Dialogue should be created to determine what projects would not be desirable undertakings from a social acceptability standpoint. Confidence in those processes must be built, and there is a lot of work to be done. As you know, not only the industry has issues. Public surveys show that Canadians' trust in the National Energy Board is a problem. Public confidence in regulatory agencies is low. There is definitely some work to be done in this area.
Senator Robichaud: Thank you. Ms. Macdonald, what is it like to live in poverty in Mexico? How does a family live under those conditions?
[English]
Ms. Macdonald: Of course, there are vast differences across Mexico and we should remember there are big geographic differences. Most of the poverty is concentrated in the south — in fact, not where most of the violence is happening; the violence is mostly in the north. Many of the people living in poverty are indigenous, so there are also issues related to race and ethnic and cultural relations.
The poor in Mexico are not as poor as the poor in Africa. It's a relative poverty compared to other parts of the world. However, in fact, interestingly, Mexico is also facing issues of diabetes; one the biggest health crisis is about diabetes and over-consumption of sugar. The poor tend to drink Coca-Cola or other soft drinks because they can't afford and don't not have access to potable water.
There are big problems with infrastructure, health and access to medicines. There are health centres throughout the country, although the smallest communities don't have them, but they are not well equipped in terms of having adequate medicine.
The poor live on a very basic diet, tortillas and beans, if they're lucky mostly tortillas, and they lack access to basic social services. There are many different ways of measuring poverty. There's a whole debate how you measure whether someone is poor or not, and Mexico has made a lot of advances in measuring and evaluating poverty, but not in getting rid of poverty. They have reduced the number of extreme poor, the people who are living on the edge of mortality. However, the number of relative poor has still not improved very much over the last 20 years.
Senator Ataullahjan: I had a couple of questions, but, keeping the time and the chair's directions in mind, I will just ask one quick one of Professor Macdonald.
You've done research on the mobilization of women and their impact on public policy, and I would be very interested in knowing about that with regard to NAFTA.
Ms. Macdonald: Can you give me a bit more direction? How has NAFTA been affected, or how have women been involved?
Senator Ataullahjan: Yes, how women have been involved and how they are affecting the public policy.
Ms. Macdonald: Good question. I think trade, like many other areas, is an area in which women have not had equal opportunities. Women tend to be concentrated in small and medium enterprises, which have not seen the same level of growth or access to international markets as other sectors of the economy, bigger businesses, and so I think there is a lot of work to be done to look at the gender impact of our trade and investment relations.
Another area we haven't touched on is mining, but it's interesting. It's another growing area of interest for Canada in Mexico and other parts of the developing world, and it's not an area that is very woman-friendly. There are many issues about mining, and its impact on family relations and violence against women. I could go on.
It is a really important area that we don't look at enough, and we need to find ways to support small women entrepreneurs and also women workers in the export sectors in places like Mexico, whose rights are easily abused. They are not well represented by their politicians or their unions, and they are often hired because they are more easily exploited than men.
Senator Oh: Either one can answer this. My question is about energy. What are the energy trade effects on trade relations between Canada and Mexico? Also, on political implications, are there any effects on trade agreements?
Also, what effects have energy trade and climate change had on trade relations, or can it prevent us from working on trade agreements?
Ms. Gattinger: Very big questions there. Can you repeat the first part of the question around impacts on trade?
Senator Oh: What are the energy effects on trade relations between Canada and Mexico?
Ms. Gattinger: My apologies, could you clarify a little what you mean by energy effects?
Senator Oh: The energy effects on the trade agreement between Canada and Mexico
The Chair: You've already touched on the fact that the energy issues have an impact on trade. I think Senator Oh was asking you to expand a little on that. You've talked about some of the factors of the energy issues, and they effect trade in the sense that people are not willing to support some of the projects or some of the trade initiatives because they're worried about the environmental impact. You've given us some recommendations. Is there anything further you want to add on that?
Ms. Gattinger: I would be happy to speak bilaterally afterwards. One of the things that really is important to note as a result of this shale revolution, as I mentioned in my remarks, is that we do see re-shoring, if you will, of industries that we thought were on the decline, particularly in the United States, whether they be steel or petrochemicals. There is some evidence in other manufacturing sectors as well. There are clearly some knock-on effects, if you will, of the shale revolution for greater industrial activity and, of course, trade. In the Mexican context, there is much more near- shoring, as we know, in automobiles and a variety of other sectors as well. If you think about it from a climate change perspective, to the extent that that trade is taking place within North America, the lower the transportation costs or distances, the greater the impacts in a positive sense when it comes to climate change, too. I think it's important to recognize, in the United States, one of the primary reasons why their GHG emissions are decreasing is not because of policy that governments have put in place. It's because of fuel switching from coal to natural gas in the electricity generation sector. So it's important to recognize that some of the market changes are having an impact in a positive sense on GHG emission profiles in North America.
Senator Oh: Just one short question: The GDP growth in Mexico has improved over the years, but poverty, as you say, still lags behind. Is corruption still a major problem in Mexico?
Ms. Gattinger: Now, I will turn to my esteemed colleague, Ms. Macdonald, for that answer.
Ms. Macdonald: Actually, growth has not improved. If you look before the debt crisis, growth levels were much higher. Growth has been averaging something like 1.7 per cent or 2 per cent. It's not a really high growth level compared to some other emerging markets.
That's an issue, and close ties to the U.S. economy, especially after the financial crisis, were a problem for Mexico. The stalling of the U.S. economy has not been good for growth in Mexico.
In terms of poverty, yes, corruption does continue to play an important role. There have been advances, particularly at the national level, in levels of transparency in public policy, but it's a big problem and not that easy to get rid of overnight.
I would just add, again, my earlier point about taxation rates. There has been a big political battle in Mexico to try to improve taxation. You probably know that one of the richest men in the world is Mexican, Carlos Slim. There has been a battle to try to reign him in in the telecommunications market and now he is managing somehow — I didn't quite follow it all — to benefit from the measures that were introduced to increase competition in telecommunications. He's now going into other sectors.
The big problem is the disparity in wealth. There is a lot of wealth in Mexico, and it should be more effectively directed to the poorest citizens.
There are interesting social programs that I could talk to you about, but they are very cheap. They help to reduce extreme poverty, but they do not get people above a very basic level very effectively.
The Chair: Thank you. I have two questioners in the second round. I'm not sure that they wish to put the questions. I'm looking at Senator Dawson. Okay. I will quickly ask the two questioners to put their questions, and we'll see if we can get an answer.
Senator Housakos: Clearly, in business, nothing stays stagnant. It goes up or it goes down. We've had a free trade agreement with the United States, the NAFTA trade agreement, for over 20 years now and it's paid off some good dividends. There is obviously a lot more that could be done in various cases, in particular in our relationship with Mexico. What is the next step?
You look at various trading blocs on continents around the world that are creating common markets, common currencies and trade agreements that go even further than the NAFTA agreement. It seems that, in this particular instance, in this relationship in North America, the United States and Canada are so preoccupied with chasing the rabbit all over the world and not that preoccupied with looking at this important agreement and how we can shrink it and where we go from here.
I know this is a broad question, but I think it is an important question. I find it surprising that there haven't been more discussions about a common currency or a common passport. That's probably because people don't want to get into those discussions, but I know academics aren't tied up or handcuffed by certain circumstances as politicians might be. So are these issues and discussions that merit some discussion?
Ms. Gattinger: Certainly if you look at classical analyses of deepening forms of integration, in North America we're relatively, how shall I say, early in that process compared to say the European Union in terms of common passport, common currency, et cetera. If you look at the academic literature around this, a number of reasons are put forward as to why that might be the case, one of which clearly is that we have a very different set of international relations here in North America with high degrees of asymmetry among the three countries. If it will be a common currency, which currency will it be? There are those questions that from a political perspective do not necessarily ignite a lot of imagination and enthusiasm.
On some other issues, say around labour, one of the challenges is political will on these issues. We don't necessarily have political will and two very different borders, as I'm sure you've heard in the last number of days.
In the energy sector, we have had a number of critical junctures, if you want to call them that, in particularly Canada-U.S. energy relations over the last century, but this is the first juncture at which the discussion is not about where will energy flow in North America, whether predominantly through Canada, to the U.S., pass through U.S. markets on the way to Canadian markets, whatever. It's including discussions of and projects clearly to take energy offshore as well. There is this opening up on the energy front in terms of thinking about other markets. I think my remarks today are in line with your comment, which is that we should also be thinking about where we are going on energy here in North America and what are some of the opportunities there.
From a political perspective, in terms of advancing those discussions, I think that while there can be a lot of enthusiasm among the academic community for discussions of what is the next big idea, pragmatism might suggest that we are further ahead to move on individual sectors where it might be more feasible to actually develop the coalitions required to move forward on some of the issues, and my remarks were made in that spirit today.
Ms. Macdonald: You've asked us to think big, and I appreciate that. Yes, we do have some more freedom than other people. I would not go to a common currency. We have seen a lot of bad experiences with countries tying themselves to the U.S. dollar. It reduces competitiveness in exports and I'd be very concerned about that.
If I were allowed to dream big, I'd think about labour mobility. This is the issue that other regions of the world have moved forward on much more aggressively than our region has. The EU is an obvious example, but also the Pacific Alliance with which Canada has had discussions about joining. They have labour mobility provisions worked into it. It makes sense in terms of efficiency across the region. If you want to make capital mobile, then making labour mobile at least to some extent just makes sense in terms of basic economics. Politically, it's extremely dangerous, difficult and sensitive, so I don't think it will happen overnight.
As you mentioned earlier, the U.S. government is facing a lot of pressure from its Latin American, Mexican American population to think about their border in a different way and think about the use of Mexican labour in a more constructive fashion than has been the pattern to date. Over the longer term, I think the U.S. will move forward on this. Individual states, like California, for example, which used to be very concerned about these issues, are much less so now that the majority is Hispanic.
Politicians have to think ahead. I appreciate that question in that respect.
The Chair: Thank you. You can see the discussion that you have generated. I'm not sure that your students would want to stay over for an extra half hour, as we have done here. You have covered a lot of new ground that we have not touched upon and we appreciate that. It's certainly going to give us some reflections for our report. Thank you for your input and for staying the extra half hour.
Senators, we are adjourned.
(The committee adjourned.)