CHAPTER 1:
CANADA-AMERICAS FOREIGN AND TRADE RELATIONS

There has been a significant change [...] in Canadian attitudes towards the hemisphere. Many more Canadians are now travelling more than ever in the region than in the past. Spanish is the foreign language most in demand in Canadian universities [...] [P]eople-to-people contacts have been growing exponentially. In a very real way, [...] this hemisphere has become our region. We are feeling much more at home here than [...] in the past. [George Haynal, 25:1540]

History of our Relations with the Americas

Canada's relationship with the United States is already widely known and well understood - so much so that the Committee need not go into much detail here. By way of a summary, however, our common Anglo-Saxon history and proximity to each other mean that we share the English language, similar traditions, cultures and institutions. This closeness has resulted in, and enables us to boast of, partaking in the longest undefended border of the world; we trade more with each other than do any two other countries of the world (two-way trade amounting to US$309.3 billion in 1997); we invest more in each other's country than do any two other countries of the world (cross-border direct investment holdings of more than $273.4 billion in 1998); and, finally, Americans hold the most, while Canadians hold the second most, number of work visas or temporary work permits issued by the other country of any nationality. In summary, Canada and the United States are the most integrated national economies of the world.

The Committee feels compelled to provide something more than a statistical overview of our relations with Latin America and the Caribbean, which are not widely known. While formal relations between Canada and Latin America at this time are both cordial and relatively formative, Canada's relations with the Caribbean are more developed - neighbourly and longstanding. Canada has enjoyed considerable trade with the Caribbean, particularly with those nations belonging to the British Commonwealth, dating back to our colonial days. These relations have grown to include the establishment of religious missions (Presbyterian Church of Canada); close banking relations as early as upon this country's confederation; and extensive tourist relations, including the construction and financing of tourist resorts, and immigration and educational transfers to Canada beginning in the 1950s.

More specifically, Atlantic Canada took part in what has become to be known in early Canadian history as the triangular trade between Great Britain, British North America and the British West Indies. This trade featured Canadian exports of fish, lumber and other staples to both Commonwealth sites in return for, amongst other goods, sugar, molasses and rum from the West Indies throughout the eighteenth and nineteenth centuries. Indeed, this trade was subject to one of our very first disputes with the United States, relating to whether or not its carriage should be reserved for British and colonial shipping. At that time, British and colonial monopoly over two of the three legs of this trade was being leveraged to obtain a monopoly over the third (between North America and the West Indies) by denying American access to British West Indies ports. The Americans, in turn, imposed retaliatory duties on the cargos of British vessels arriving from these very same ports. The end result, after 12 years of tit-for-tat retaliatory actions, was the repeal of all such legislation in 1830 and the establishment of free trade in shipping. A fitting result in view of what the hemisphere is now contemplating.

Since these early days, Canada has extended preferential access to its markets for selective Caribbean exports. In 1898, Canada reduced its tariffs by 25% on a number of products, including raw and refined sugar, but in several subsequent conferences the preferential rate was increased to 33.33% and the list of products receiving preferential treatment was also expanded. These efforts eventually culminated in the CARIBCAN, which since 1986 has provided tariff-free access on a very broad range of goods from the Caribbean, including agricultural products (but not supply management products, textiles, clothing, leather garments, footwear, lubricating oils ¯ i.e. products that would effectively compete with import-sensitive domestic production). The Canadian International Development Agency and Canada's presence on multilateral fora, such as the Caribbean Development Bank and the Inter-American Development Bank, along with our financial contributions also form part of our longstanding economic relations with the Caribbean.

Canada's relations with Latin America, on the other hand, are not so extensive (both in breadth and depth) and can at best be described as having been a low priority - at worst as much neglected - until the 1990s; after which, the opposite is more true. Since the 1960s, the Quebec, Alberta and Ontario governments have established a number of bureaus in Latin America in support of their commercial relations. Indeed, the Quebec government has gone much further in extending these relations to include political, social and cultural dimensions. Cultural ties between "Latin Quebec" and "Hispanic America" include four Quebec offices in the region and numerous inter-governmental agreements and programs that embrace scientific and inter-university cooperation. Quebec has, therefore, been successful in attracting students from Latin America to study its province's universities.

However, the most significant catalyst for commercial engagement was the end of the cold war between East and West, which saw Canada shift its policy attention from national security to international economic issues, most notably trade. One of the first decisions Canada made at this time was to join the Organization of American States (OAS), a post-World War II institution created in 1948. From its inception until Canada joined in 1990, the OAS had largely been dormant on important hemispheric policy issues as Latin American tradition would not have any supra-national institution infringe on what was considered matters of national sovereignty. But this was about to change.

As reported by the House of Commons Standing Committee on External Affairs and National Defence in 1982, this Committee's forerunner, if made effective, the OAS could become an indispensible regional organization for hemispheric policy formulation and coordination.1 It could also serve as an important instrument of Canadian foreign and trade policy with Latin America. Accordingly, Canada's move from observer to full member status, at a time when Latin American countries were, in general, reforming their trade policies from protective import-substitution to free trade and customs union strategies, saw the OAS emerge as an important source of political governance in the region - much as it was originally designed.

Canada made its presence known from the very start and, in effect, breathed new life into the OAS by leading the efforts for the establishment of the Unit for the Promotion of Democracy (UPD), which has been assigned the tasks of monitoring elections and strengthening democratic institutions and principles. The UPD, at last count, had been called on four times this decade (Haiti, Peru, Guatemala and Paraguay) to help resolve tense situations that, when using the recent past as a guide, had the potential to erupt into political and, possibly, military crises. This development can now with perfect hindsight be seen as a necessary precursor for the OAS to embark upon its current Summit of the Americas agenda that provides for, and improves upon, hemispheric governance, including its ambitious free trade initiative.

Furthermore, since the 1990s, Canadian companies have made significant investments in Latin American business ventures. Most notably, Canadian mining companies, such as Falconbridge, Placer Dome, Rio Algom, Cominco, Teck Corp. and Barick Gold Corp., have investments either underway or planned totalling more than US$7 billion in Chile. Beyond exploration activities (for copper and gold), these Canadian companies' production facilities are reported by the National Mining Society of Chile (SONAMI) to account for more than 40% of Chilean exports of mineral and metal products.

Canadian Trade and Investment with the Americas

Canada's trade in goods and services with the Americas is critical to its standard of living, amounting to US$322.3 billion in 1997 and representing more than 79% of our total trade with the world. However, most of this trade is with the United States (US$309.3 billion) as Canada's trade with Latin America and the Caribbean, totalling US$13 billion in 1997 and representing only 3.2% of our aggregate trade with the world (see Table 1.1), is modest at best. It is, nonetheless, growing at a tremendous pace. Since 1991, Canada's trade in goods and services with Latin America and the Caribbean has grown by 88.6% or, on average, by 9.5% per annum - faster than trade with the United States, (81.3%), where there has been a free trade agreement in force for more than a decade. The most significant Latin American and Caribbean markets for Canadian exports are Brazil (US$1 billion), Mexico (US$916 million) and Venezuela (US$621 million). In turn, Canada is a significant market for the exports of Mexico (US$5 billion), Brazil (US$940 million) and Venezuela (US$701 million).

Foreign direct investment (FDI) between Canada and the Americas is also substantial. In terms of stocks abroad, Canada had investments in the Americas amounting to $169.5 billion in 1997, representing more than 70% of its total outward FDI ($239.8 billion). While the United States again dominates this relationship, Latin America and the Caribbean were the destination for $43.5 billion of these investments, accounting for a 18.2% share. More specifically, Barbados ($14.3 billion), The Bahamas ($6.1 billion) and Bermuda ($4.7 billion) are ranked third, fifth and sixth, respectively, amongst Canada's largest recipient countries of FDI.

Canada also depends on considerable FDI from the Americas, amounting to $150.6 billion and representing about 70% of a total of $217.1 billion invested from abroad in Canada. The United States accounts for the lion's share, $147.3 billion, while Latin American and Caribbean investments of $3.2 billion amount to only a 1.5% share.