Canada in Latin America

Canada’s Latin American trade complications

Despite PM’s push, more deals with region unlikely in the near future

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On Governor General Johnston visiting Latin America

Governor-General quietly expands ‘invisible’ role before trade trip to Mexico

Heather Scoffield The Canadian Press Published Friday, Nov. 30 2012, 9:59 AM EST

When David Johnston takes on a cabinet-level trade assignment this weekend in Latin America, it will be a showcase for what could be the unoffical slogan for his vice-regal reign: bland is beautiful.

The Governor-General is quick to point out he means bland as in an effective – if stealthy – exercise of his powers as the Sovereign’s representative in Canada.

“This office probably works best when it is rather invisible. Not terribly much involved in controversy. Out of the mainstream of politics. And, I suppose, somewhat bland,” Mr. Johnston said in a Rideau Hall interview prior to leaving for Mexico City.

Make no mistake: Mr. Johnston knows he lacks the panache and media punch of his two most recent predecessors, Michaelle Jean and Adrienne Clarkson. And it doesn’t bother him a bit.

He’s exchanged the effervescent public profile of those who came before him for something else: access to the prime minister on policy issues.

The trade-off has been a dearth of media attention. Mr. Johnston’s office has been quietly lobbying the Parliamentary Press Gallery in Ottawa to pay more attention to his scheduled events.

Still, it would be a mistake to confuse “bland” for “vacuous,” warns foreign policy analyst Colin Robertson.

“He lacks the charisma of his predecessors, but intellectually, he’s a rock star,” Mr. Robertson said. “The big shift is that Harper has confidence in Johnston. They talk.”

The white-haired former law professor and university president was tapped by Prime Minister Stephen Harper in 2010, when minority governments were the norm and constitutional questions an ever-present element of Canadian politics.

Amid today’s calmer political waters, though, Mr. Johnston is quietly expanding his other roles – promoting volunteerism, travelling the world and speaking about how Canada should become a “smart and caring nation.”

Mr. Johnston, who is writing a manual on Canadian securities regulation in his spare time, is unapologetically geeky about his passion for international trade and innovation.

He’s also a details person: Mr. Johnston meticulously rehearsed his ceremonial Grey Cup kick-off at least 100 times, perfecting his strike to the point that he could barely walk down the stairs the next day.

So when Mr. Harper asked him to go to Mexico, Peru and Guatemala, he methodically set about learning not just the intricacies of the region’s economics and politics, but also carefully assessing how his own presence can complement the efforts of other Canadian business and political leaders.

“One tries to get to know the countries one is visiting as well as one can,” he said, describing how he works in tandem with the Department of Foreign Affairs and the Prime Minister’s Office to determine goals and priorities.

“It’s not a one-off. It’s many different parts working in harmony.”

Mr. Johnston fully appreciates the pomp and circumstance. His overriding goal in visiting Mexico is to “pay respect” to the democratic election of Enrique Pena Nieto – the head of the traditional ruling party PRI, which lost power in 2000 after 71 years at the helm.

For the PRI to make a legitimate comeback, said Mr. Johnston, “that’s a great victory.”

But once the ceremony is over, Mr. Johnston’s hard work begins.

He said he intends to start by buttonholing several of the other 75 foreign leaders at the ceremony to discuss bilateral relations. Then, he’ll turn his attention to increasing two-way trade trade and investment. He also hopes to find more ways to share Canadian expertise in mining, justice, policing and governance.

He is travelling with a sizable entourage of senior officials, members of Parliament, business and education representatives, a judge and several ambassadors.

When he gets back, he’ll be reporting, in detail, straight to the prime minister. The two men speak and share ideas regularly, but after a foreign trip, Mr. Johnston has a formal responsibility to check in.

“When I come back, [I need to] be pretty candid and say, ‘Yep, this is going well,’ or, ‘No, this is not going well and here’s where we have to adjust our approaches,’” Mr. Johnston said.

The governor-general’s trip to Latin America should be the beginning of a larger Canadian attempt to revive its relationship with the region, Mr. Robertson said.

“The flag isn’t as present as it could be.”

In Guatemala, Mr. Johnston will be looking at how Canada can help the country’s police and judicial system to deal with the drug trafficking that is destabilizing the entire region.

Ottawa’s decision to send the governor-general there is exactly the right level of engagement at this point, Mr. Robertson said.

Mr. Johnston’s staff have a thorough understanding of what’s at stake there, and can make some solid recommendations for a path forward, he added.

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Diplomacy: Canada’s New Policies Toward Latin America

From America’s Quarterly, November 2011:

In August, on his fourth official visit to Latin America, Prime Minister Stephen Harper set out to reboot Canada’s on-and-off-again relationship with the region. In the first stop on a four-country tour that took him to Brazil, Colombia, Costa Rica, and Honduras, Harper declared in São Paulo that “during too long a time we neglected relations[…]too much grass grows in the cracks on the road. It is time,” he added, “for increased ambition.”

Ambition is important. But so is perseverance.

Canadian efforts in the Americas are characterized by quixotic spasms of tango-like embrace: joining the Organization of American States (1990); negotiating the North American Free Trade Agreement (NAFTA, 1993–1994); and committing to the Free Trade Area of the Americas (1994)—all nearly 20 years ago. But this rush of engagement was followed by a long siesta until 2007, when the Harper government announced its Strategy of Engagement in the Americas, which emphasized democratic governance, prosperity and security. The plan is only now taking shape.

It does take two to tango, and Latin American governments share equal responsibility for failing to take advantage of Canadian interest and opportunities.

So what makes Harper’s newest effort different?

First, there is the economic malaise in the United States and the recognition that Canadians really do need options to the U.S. market. Agree or not with Standard & Poor’s’ reevaluation of American creditworthiness, there is no disagreement with its analysis that “the effectiveness, stability and predictability of American policymaking and political institutions have weakened.”

For Canadians, the U.S. market and the bilateral relationship will always remain primordial, but as the U.S. hunkers down and the administration focuses on a “jobs” agenda, there is a likelihood of renewed protectionism—which could affect the huge Canada–U.S. resource trade in everything from lumber to fish. Notwithstanding President Barack Obama’s promise to export his way out of the economic malaise, certain Democrats and Tea Party Republicans equate free trade with the outsourcing of jobs. And that may impede further efforts to broaden the opportunities for Canada under NAFTA.

While Canadian and U.S. negotiators are in discussions to ease border access for people and goods, these steps alone will not strengthen the Canadian market. Canada must look to new opportunities to hedge its bets.

That is being done slowly in Latin America. On August 15, a free-trade agreement (FTA) with Colombia—an economy equal to the state of Connecticut—went into effect, and new implementing legislation for the Canada–Panama Free Trade Agreement (similar in economic weight to Vermont) is being introduced in Parliament this fall. Canada also has FTAs with Costa Rica, Peru and Chile.

Beyond FTAs, Latin American countries are making it easier for Canada to invest and do business in the region. A decade-long dose of the Washington Consensus, whatever its faults, has rinsed away the previous attachment to the Prebisch-inspired statism that stigmatized earlier efforts at boosting investment and terms of trade.

Mexico is a prime example. The World Bank and International Finance Corporation’s Doing Business 2011 report declared this NAFTA partner as the easiest place in Latin America to run a company. The International Monetary Fund says Mexico’s economic growth will eclipse that of the U.S. and Canada from now until 2015, and Goldman Sachs predicts that in 40 years Mexico will be the world’s fifth-largest economy—bigger than Russia, Japan or Germany.

Third, Canadian business is prepared for risk, recognizing that the options are either grow or get absorbed. Twenty years of freer trade have given Canadian companies, especially the larger ones, the confidence that they can compete internationally and the experience of operations on the global stage.

CTV network anchor Andrea Mandel-Campbell notes in Why Mexicans Don’t Drink Molson that Canadian companies are historically timid about venturing into international markets, but Mexicans ride on Bombardier-constructed subways and Scotiabank is the sixth-largest retail bank in Mexico. Where once Canada’s business associations focused almost exclusively on the U.S., their membership is now encouraging them to look beyond its neighbor to the south.

Fourth, the renewed Canadian approach melds trade objectives with development aspirations. Attitudes toward aid are changing with the increasing recognition that a job is the best form of development assistance. A key feature of the rebooted relationship with Brazil is a CEO Forum, staffed by the Canadian Council of Chief Executives and the Brazilian National Confederation of Industry.

This business-to-business dimension promises real gains, especially if Brazilians and Canadians can agree on a set of practical objectives such as increasing direct flights and identifying business impediments that can be addressed by working with governments. CEO forums should be included in every FTA negotiation and built into the existing relationships with Mexico and Chile.

To sustain the opening with Brazil and to move the relationships with key partners like Mexico and Chile to the next level will require a series of focused blueprints. These will have to address critical questions such as how to attract more Latin American investment in Canada and what barriers—especially those specific to Latin America—can be addressed by Canadian initiatives. The Canadian business community is engaged and should be a driving force for taking the relationship to the next level.

In every case, there needs to be a systematic plan of engagement starting at the most senior political level.

For one, the prime minister needs to block at least one week a year for visits to the region. To provide the needed intellectual capital, Canadians also need to actively support the work of think tanks and improve existing synergies among organizations.

The demise for lack of funding in September of the Canadian Foundation for the Americas (FOCAL) research center, after 21 years of advancing Canadian interests, is a setback because it consistently provided useful intellectual heft and intelligent trend-spotting.

FOCAL had been largely dependent on Canadian government funding after it was created by an act of cabinet under Prime Minister Brian Mulroney (1984–1993). In its next iteration it should look more like the Inter-American Dialogue or Americas Society/Council of the Americas, with strong private-sector involvement and a focus on investment and trade as the best means of generating development and creating long-term relationships.

The current Canadian government is not the first to promise a new look at the region, but all too often action never followed rhetoric. If the Americas are truly a priority, and Harper’s promise to be “ambitious” is more than just repetition of the old rhetoric, the prime minister’s continued attention to the region will be necessary.

Unless the Canada–Latin America relationship is given a place of priority on the agenda and moves from aspiration to pragmatic results, the grass will grow back in the cracks.

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Embracing the Americas Starting with Mexico

Excerpted from May edition Policy Options Embracing the Americas, starting with Mexico

If Canadians needed a wake-up call to the power of regional blocs and the pace of political integration within the European Union, we got it last fall with our failure to secure a seat on the Security Council as a member of the Western European and Other Group (WEOG). The message is clear: we aren’t European. It is time we recognized geography and embraced our place in the Americas.

We’ve created the most successful bilateral relationship in the world with the United States. It will always be our primordial relationship. But our usually comfortable alignment with the colossus has meant that we’ve been reluctant to look further south on the continental map. The US has never thought this way and the since the earliest days of the Republic they’ve always been active in the Americas and the Monroe Doctrine (1823) has been one of the most durable and longstanding element in American foreign policy.

The combined populations of the Americas south of the Rio Grande gives them the potential over the coming decades to develop into a market as important as that of the EU, China and India. Growth rates are predicted to be 4.1 per cent a year for the next five years – double that of the G8 economies. The Chinese get it and are making significant investments. And with China competing with America for influence, there are geo-political reasons for our making our presence felt because we also have significant interests in the Americas. Yet, as a recent report conducted by our Department of Foreign Affairs concluded, we need “more concrete evidence on the ground of Canada’s interest.” Our relevance in the region will also be measured in terms of our capacity and willingness to participate in the broader social, political and economic agenda.

The Bank of Nova Scotia opened its first branch outside of Canada in Kingston, Jamaica in 1889 and Canadian banks are now found throughout the Caribbean. Our Foreign Direct Investment in the Americas outside USA is three times that in Asia. We’ve created a network of FTAs, far more in Latin America than in Asia: with Mexico, Costa Rica, Chile, Colombia, Peru. The Panama FTA is before Parliament and we are negotiating with Honduras, Caribbean Community and we’ve started discussions with MERCOSUR. We are now the number one investor in Chile. Despite bumps in the road, we have a growing strategic relationship with Brazil, the bookend to Mexico in Latin America. In terms of aid and development, we are committed to Haiti for the long-term.

By embracing the Americas we also play back into our principal relationship with the United States because when successive administrations, especially since Ronald Reagan, think strategically about the Americas, they think start with the trilateral relationship of Mexico and Canada. We should do the same and start our embrace of the Americas with Mexico.

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