(Remarks by Paul M. Tellier, president and CEO of Canadian National Railway Company, on Dec. 14, 2001, at the Canadian Railway Club, Montreal.)
OTTAWA — A couple of weeks ago, an historian at the University of Toronto asked one of the big questions. Michael Bliss’s National Post article was headlined Is Canada a Country in Decline? Professor Bliss wrote, “It’s increasingly hard to be proudly Canadian.” He argued Canada has squandered its opportunities in everything from our social policy to our cultural achievements, our political life to our contribution to international diplomacy.
When it comes to the economy, Prof. Bliss reminds us that our per capita wealth used to be on par with the Americans. Now it’s about three-quarters of that of the Americans. And the gap is widening.
But the professor’s argument flies in the face of some of Canada’s recent achievements. I look at some of the great success stories in Canadian business, Bombardier, SNC-Lavalin, Four Seasons, Loblaws and McCain, to name just a few. I conclude Canada is not in decline.
These companies are world leaders in their respective sectors. Governments, opinion leaders and Canadians should take pride in their successes. These companies have something in common. None of them became leaders by remaining content to be a big fish in a small pond. They regard the world as their market and they take the steps necessary to be the top competitor in that market. I can speak from personal experience about the kinds of decisions this requires.
When CN became a shareholder-owned company, we had a choice. We could have set our sights on becoming the best railway in Canada. Instead, CN set a much more ambitious objective: to be the best in North America. We benchmarked ourselves against the best in the industry. And we made the decisions necessary to get us to the top. We got there by making the conscious decision to become more North American in our focus and our reach.
Are we less Canadian because our network now spans the continent from the Atlantic to the Pacific to the Gulf of Mexico? No!
Is CN less important to Canada because our trains serve 15 U.S. states and more than half our revenue is generated from traffic moving to, from, or within the United States? Absolutely not! In fact, we are even more important to Canada’s economy. We help our Canadian customers compete in North America.
CN’s success — and the success of other Canadian businesses — comes from acknowledging that our economy is increasingly integrated with the United States. This integration will continue. It is inevitable. It is irreversible. It’s happening on a global basis and it’s certainly happening in North America.
It makes no sense to talk about a Canadian automobile industry any more. It’s a North American industry that includes plants in Canada, the United States and Mexico. The same is true in many sectors such as forest products, aluminum, aerospace, and so on. And that’s been good for Canada.
For the first time in its history, Canada has a trillion-dollar economy — an economy built on trade. In fact, 45% of Canada’s gross domestic product now depends on trade — up from 25% just 10 years ago. And about 87% of Canada’s exports now go to the United States. The North American Free Trade Agreement gives Canada market access to the richest economy in the world. We can’t take that market for granted. Mexico has the same opportunity. But we have a big opportunity to sell to Mexico as well.
Canada’s future lies in tapping the opportunities throughout North America. To those who disagree with this orientation, I say: Where would the standard of living of Canadians be today if we had not signed the Free Trade Agreement in 1988? I don’t think most of us appreciate how much our jobs depend on this integration.
But economic integration raises big questions. What features of Canadian life do we want to integrate further? What do we want to protect as distinct and part of the Canadian fabric? The questions are crucial because of the respective size of Canada and the United States. Our economy and our population will always be about a tenth of theirs.
We are justifiably preoccupied by the need to provide Canadians and Canadian firms as much of a level playing field as possible. I say “as much as possible” because it will never be perfect.
We have some excellent examples of how Canada and the United States work together in a partnership of equals. The International Joint Commission, for example, is responsible for water quality in the Great Lakes.
Another example involves the Canada-U.S. border. In recent months, CN has joined with other businesses in urging policymakers in both countries to maintain the free flow of commerce while making North America more secure.
Canada needs to establish bilateral or trilateral mechanisms to address North American issues as equal partners. Negotiating bilateral agreements is not an abdication of sovereignty. It’s an assertion of sovereignty. Sovereign governments — democratically elected governments — enter these agreements voluntarily.
We need to ask the right questions and debate the answers. We need to do it now, because the integration of the North American economy is taking place faster than any of us expected.
You cannot have an integrated economy without a discussion about whether there should be a common currency.
We’re not alone in facing the question of maintaining a distinct monetary policy. Peripheral currencies around the world face the same debate. Sooner or later, there will be just a handful of currencies through which all global trade will be conducted — perhaps the euro, the U.S. dollar and the Chinese yuan. A few years ago, I would have referred to the Japanese yen. What better illustration of how things change!
In the mid-1970s our dollar was worth US$1.05; recently it fell to historic lows — around 62 cents. In the process, Canada has retained the nominal ability to set its own monetary policy. But what is it costing Canada to maintain a separate dollar?
On the one hand, the falling dollar brings competitive advantages for some producers. It makes our exports cheaper for others to buy. On the other hand, it makes our imports more expensive for Canadians. The falling dollar can also mask economic decline, especially if our industries cannot compete without a cheap dollar. Some Canadian exporters have been able to hide poor productivity growth behind a falling dollar. In fact, the value of the dollar contributes to Canada’s productivity problem. Most of the technology that improves productivity is imported. The more the dollar drops, the higher the cost of technology.
So we must ask ourselves: is the dollar costing Canadian jobs? Is it hurting Canada’s ability to attract the brightest and best people from around the world?
For an integrated North American company, like CN, this issue is real. We have customers in both countries. We have employees in both countries. We pay taxes and report to regulators in both countries.
None of these aspects on their own makes a compelling case for a common currency. But I know our customers face the same questions. And, in the end, the value of the Canadian dollar has a big impact on their decisions on where to locate operations.
My own view is that, eventually, Canada and its biggest trading partner will move to a common currency. But the broader point is that we must have a discussion on this now.
Canada has a small population and a small domestic market. But we have a big opportunity. We can take advantage of a huge market on the continent. But Canadians must overcome a traditional insecurity about Canada’s future. We must take a clear-headed look at our situation, and decide where we want to go.
We need better synchronization of Canadian and U.S. policies. Governments on both sides of the border must think in North American terms. We need more bilateral agreements. Eventually this may mean we will have a closer North American union, much as they have in Europe. We would maintain sovereignty in key jurisdictions, but within a much larger North American federation.
We cannot just drift along, hoping the issues will go away. We have to have the courage to ask the tough questions, and the openness to debate them honestly.