Speaker 1:
Today's episode is a special conversation that was recorded at Canadian Club Toronto on June 15th between Canada's ambassador to the United States, Mark D. Wiseman, and CEO of BMO Financial Group, Darryl White. They discuss the future of Canada-US relations and what it means for Canadian business and economic growth.
Speaker 2:
Welcome to Markets Plus, where leading experts from across BMO discuss factors shaping the markets, economy, industry sectors, and much more. Visit bmocm.com/marketsplus for more episodes.
Darryl White:
This is an important conversation at an important time, and I hope we're also going to have a little bit of fun while we're here. But let me just say off the top, I have had the benefit of knowing the ambassador for quite a long period of time in a lot of roles where he has been engaged, competent, excited, all about follow-up and follow-through.
And as I think about the conversations we've had over the last several months, I have never, I mean this, I have never seen you as energized, as engaged, and this is a high bar for him to cover of his own record, and committed to the mission on behalf of Canadians as I'm seeing right now. So I think we should all thank Mark for his service to Canada.
Mark Wiseman:
In investing, Darryl, I always said to my investment teams that deploying capital was easy. Bringing it back with a return was much harder, and so maybe you should save your thanks until there's a return on the investment.
Darryl White:
It is true that I get the last word, so we'll see. We'll see how it goes.
All right. But I have the fun of being able to ask the questions today for a change. Let's start with you're four months in?
Mark Wiseman:
Four months today.
Darryl White:
Four months today.
Mark Wiseman:
Four months.
Darryl White:
Happy four month anniversary. So four months in, give us your review, what have you learned, including perhaps what's surprised you.
Mark Wiseman:
I'm four months as a diplomat, I'm four months as a government employee. And for people in my role, that's quite unusual. But the bottom line is there's a lot to learn.
And one of the things that's very fortunate and I think all Canadians should know is that we have an incredible team, not just in Washington, but across our 13 consulates in the United States, and then an incredible team to support all of that in Ottawa as well.
But it really is a team effort and it has to be a team effort because of the size and complexity of the relationship that we have with the United States of America.
And that's been my big surprise. My big surprise is just how complex the relationship is between our two countries. Just to put a few things in perspective, there's 120 million border crossings a year across the Canada-US border. On average, it takes about 10 seconds to process somebody who's crossing the border. Complexity and the organization that it takes to make that work is unbelievable. There's $2.4 billion of goods a day that cross the border. Again, most of it happens seamlessly. We don't even think about it.
And then there's all kinds of other things like air traffic control, just to use a simple example. If you get on a plane in Vancouver and you fly to Toronto, you're likely flying across the United States. If you get in a plane to Seattle and you fly to Boston, you're likely flying over Canada.
That kind of works day in and day out, not to mention NORAD, not to mention controlling water levels on the Great Lakes, not to mention any number of other things that go on between our countries and the complex ecosystem each and every day, and almost all of that happens seamlessly without an issue, without politics or politicians or tweets or Truth Socials. It just happens and it works to the benefit of both countries.
And so to me, kind of all the hard stuff around trade, which I'm sure we'll get into, I kind of expected. But what I didn't really expect was all the other things that go on.
Darryl White:
The foundational layers.
Mark Wiseman:
And that work. That work. And there's hardworking Americans and Canadians each and every day that just make sure that it works. And again, we shouldn't take that for granted.
Darryl White:
Before we get into trade, give us your sense now in Washington most of the time for the last four months to the day, what's the mood as it relates to Canada?
Mark Wiseman:
I'm going to take a little bit of time on this answer because it's nuanced. The first thing I would say is that Americans don't wake up every day thinking about Canada. We are obsessed, for good reason, with the United States. They're not obsessed with us. Maybe for Heated Rivalry or something or with the Olympic gold medal hockey game. But by and large, Americans do not have naturally the obsession that we have with the United States.
And the United States is actually undergoing quite tumultuous times, right? We all understand that. The conflict in the Middle East. This is all, by the way, in four months since I started. When I started there was no conflict in the Middle East.
There was no invasion of Venezuela. There was a whole bunch of primaries that have taken place as we head into the midterm elections. There's inflation, there's a new Fed chair. There's any number of things that are going on either inside or in relation to the United States that are more pressing, that are higher in the news cycle than Canada. And you just have to pick up any US paper, it doesn't matter, it could be The New York Times, The Wall Street Journal, The Washington Post, Canada's not on the front page.
And so we just have to remember first and foremost that there's a lot of things going on in the United States of America at a very complex time for their country politically, socially, economically, that doesn't involve us. So that's the first thing I would say is that we're not top of mind. We'd like to be more top of mind at some measure.
Second thing I would say is there's a very big difference between Congress, meaning the elected members of the Senate and the House of Representatives, and the executive branch of the United States, meaning the president and his cabinet.
Inside Congress are people that have districts or states that they represent. They've been there for a longer period of time, many of them multiple terms, and they tend to have a much better understanding and have had constant engagement in terms of the importance of the relationship between Canada and their district or Canada and their state.
Remember, there's 13 states that border Canada. We are the largest buyer, the largest export market for almost 30 states. We're essentially a top three export market for pretty much every state in the United States.
So when you're meeting with congressional leaders, they've kind of have had a longer set of experiences and have a very local understanding of the relationship. It could be tourism, it could be because we're buying a certain product that is produced in their district or in their state. It could be that Canadians own businesses, Bank of Montreal being one of them, that are employing people in their district and their state. So those are easier, both sides of the aisle, easier conversations to have.
The administration, meaning the executive branch, has less experience specifically. They don't have specific districts where there's a connectivity, and they are focused on fundamentally changing the nature of US policy both domestically and internationally. And that means that those conversations are more difficult, harder to get their attention, and also potentially more at odds with the direction that they have stated that they want to go in terms of changing the policy direction of the United States.
It's interesting and I've kind of learned in the last four months that you have to navigate those two branches quite differently. The third branch of course being the judiciary.
Darryl White:
Let's talk about trade. CUSMA in this room, CUSMA. Can you take the group back a little bit and then go forward? Back a little bit, just a reminder on what this is and what it isn't. Renegotiation versus review I think is a helpful reminder for everybody. And then where do you think we are and where do you think we're going?
Mark Wiseman:
Okay. So everybody take a deep breath. Relax. It's all going to be okay. And it's going to be okay because we have an agreement with the United States and Mexico that expires. It expires at 11:59 PM on June 30th, 2036. We all have to keep that in mind.
It is a 16-year agreement that was signed in 2020, and unlike our last negotiation, there's no cliff. As our chief negotiator, Janice Charette, has said, "We're not falling off a cliff. We're not falling off a cliff on July the 1st." In fact, nothing really happens, I'll explain to you what happens on July the 1st of this year, but nothing really happens because the agreement has 10 years to go until it comes to its end.
Under the four corners of the agreement, there is a review period that takes place, and the opening of that review period is July the 1st. And that is an opportunity for all three parties to the agreement to raise issues about the agreement's operations and to try and resolve them.
And starting, starting on the 1st of July, starting, it's not a one-day deal, the parties may decide to renew the agreement. And renewal of the agreement means you restart the 16-year clock. So in effect, a renewal of the agreement means you extend it from 2036 to 2042. That's what's up for grabs in terms of renewal. If it's not renewed, the agreement remains in force until 2036.
So when we're talking about the renewal of CUSMA, we're really talking about an extension or a potential extension of the agreement for an additional six years to 2042. Now, it is true that the agreement can be canceled, and that cancellation-
Darryl White:
But that's always been true.
Mark Wiseman:
That's always been true. So the agreement, the day it was signed, the next day it could be canceled on six months' notice. Today it can be canceled on six months' notice. Six years from now it can be canceled on six months' notice, but that's always been true.
And no one, including Ambassador Greer, the US trade representative, or the president have suggested that they would intend to cancel the agreement. In fact, quite the opposite. Ambassador Greer has publicly come out and said that the US, like Canada, like Mexico, wants to preserve those foundational pillars of the CUSMA agreement.
So we're going into a period now of review where the US has put certain issues on the table that it would like to see modified. And we've put issues on the table that we would like to see modified.
Darryl White:
Irritants.
Mark Wiseman:
Irritants. And Mexico has put issues on the table that it would like to see modified. We will work through those issues, but the backdrop is there's no cliff. It doesn't matter if we work through those issues and conclude that review on July the 2nd or conclude that review in January, or if we never, frankly, conclude the review. The base case is that the agreement remains in place through till 2036. Now, I want to put a big caveat because-
Darryl White:
Yeah, 232.
Mark Wiseman:
... there's a big incredibly important caveat, which are the sectoral tariffs, the 232s. So those tariffs are the ones that are biting in terms of impact on the Canadian economy, Canadian business, Canadian workers.
And those sectoral tariffs are sitting outside and are arguably in violation of CUSMA. And in particular, that's steel, aluminum, autos, and then the additional tariffs, 232 tariffs on top of what is already a complicated story for Canadian forest products.
Those tariffs we need to find a path forward on quickly because unlike everything else under CUSMA slash USMCA, the default is they're staying in place, and they are incredibly painful to wide sectors of the Canadian economy.
So the focus of the negotiating team, again, led by Minister LeBlanc and our chief negotiator, the focus for us is trying to find a way through those sectoral 232 tariffs. That's the issue. So we can take a deep breath on the CUSMA review.
Darryl White:
And let's defang July 1st.
Mark Wiseman:
And July 1st doesn't matter. I won't say July 1st doesn't matter because it's technically the opening of the review period when the renewal window opens. But the 232s we've got to deal with as quickly and effectively as we can because they are hurting us.
Darryl White:
Let's broaden the aperture. Folks in this room either directly here represent people who trade with the world, not just the United States. I've spent a lot of time, including the setup of our business, talking about what I truly believe is advantage North America.
I mean, at the end of the day, on this continent, we have the best neighbors, not perfect, but the best neighbors of anywhere in the world if you had to choose over the course of time. We have the best talent, we have the best tech, we have the best capital markets, and we have the best resources all on this continent in North America. It's a hell of a neighborhood to live in in the world.
And at the same time, the prime minister has been doing great work to expand Canada's potential around the world with a view to diversifying. How does the advantage of North America align with the push to do more with the rest of the world, and are those things in conflict?
Mark Wiseman:
The short answer is they're not in conflict at all. In fact, I believe that they're complementary, but it's an and, it's not an or. So it's not about diversifying to the rest of the world at the expense of our relationship with the United States. The prime minister was very clear on this point in the speech he made at The Economic Club of New York a couple of weeks ago.
And we are privileged. Let's be clear. We as Canadians are privileged to be next door to the world's most dynamic economy, to the world's largest economy, to the world's most innovative economy. We should not seek to trade that for anything.
I would argue that every country in the world would like to have the geographic connectivity and the economic connectivity that we have as Canadians with the United States of America. But with that has come a degree of complacency, and I think that's what-
Darryl White:
And over-reliance.
Mark Wiseman:
And over-reliance. And I think that's what the prime minister has said.
And so when we think about it, the fact that 3/4 of our trade goes south, we need to think about diversifying a way.
Now, if you look at the government's target, the prime minister said that he wants Canada to double its trade with the rest of the world over the next 10 years. It's not relative to the United States. It's an absolute target. We should be growing our relationship and trade with the United States at the same time.
I saw some of my former colleagues from CPPIB in the audience, and when I started at CPPIB, almost 80% of our assets were in Canada, which was unhealthy. When I left CPPIB over a decade later, we had only about 20% of our assets in Canada, but we never sold a Canadian asset. We grew everything else. And so we shouldn't be selling the United States. We should just be growing everything else faster than we're growing the United States.
And by the way, we have been growing the United States. Since we signed the CUSMA agreement in 2020, trade with the United States is up 27%. I hope in the next six years it's up more than it did, and I'm sure the prime minister feels the same way, more than 27%. I hope our trade with the rest of the world grows at an even faster pace.
And this should be a challenge for Canada, a wake-up call. We have been too complacent. We have been too reliant. We need to diversify our sources of demand for our products. We need to look to build infrastructure to allow us to go east and west, not just north and south, but we don't have to do that, and nor should we do that necessarily at the expense of the relationship with the United States.
And by the way, again, I'm repeating what the prime minister said, a strong, resilient, self-reliant, more diversified Canada is great for us, but it's also great for the United States of America. The United States wants a continental partner who can help exploit and strengthen this continent that is self-reliant and strong and able to build and stand on its own two feet. The perfect example of that is on defense.
Darryl White:
Exactly.
Mark Wiseman:
And so a strong Canada that's self-reliant and living up to its commitments that it's made in terms of defense spending is great for the United States of America. And so is a Canada that's building the energy infrastructure that it needs, and so is a Canada that's building the AI and data infrastructure that it needs, and so is a Canada that's building the human resources and talent structure that it needs. That's great for the United States.
And so when the prime minister said in New York that Canada strong helps make America great again, it actually resonates. It's what the US is sort of asking us in many respects to do, and we should take up that challenge, not for the United States, but for ourselves.
Darryl White:
Put your old hat back on, you're an investor. You're pretty good at it. One of your jobs is to sell Canada to Americans. I'm not talking about the trade file anymore. I've heard you say before, "I'm long Canada."
What's your sales pitch when you're in those places, through the consulates, in the different parts of the United States, not just in Washington on the political class or the trade file, on why here for investment, for talent, for research? Why?
Mark Wiseman:
So first of all, I start with some of the comments that were made earlier. I mean, we are an incredibly, incredibly well-endowed country, not just in natural resources, but as I've talked about many times previously, in terms of the human talent and the human capital that we've developed in this country. We have an incredibly resilient, educated, multicultural, global population.
And then when we combine that population with our resources and the innovative businesses that we've built in our building, I mean, there is no better country with opportunity than there is this one.
So the first thing is, I mean, I think that selling Canada is easy, and as we say many times, it turns out we happen to have a lot of the things that the world wants today, be it critical minerals, be it energy.
So we've got all the pieces of the puzzle to take ourselves to the next level.
Darryl White:
So we do, and I'm sorry to interrupt you, but the pushback I could imagine being, with all of that, your unemployment is higher than the US, your GDP growth is lower, your productivity stinks, and you're over-regulated. Why now should I invest?
Mark Wiseman:
We talk about this all the time, and we've got to get our act together. Productivity is probably the best measure to see where that gap not only exists but has been growing.
We've got to be more innovative. We've got to take more risks. We've got to invest more in our own country, and we need to build the critical infrastructure to be able to enable the private sector to take us where we need to go in terms of productivity growth. We've got to get out of our own way, including with things like interprovincial trade barriers.
We've got a bit of a crisis here and we will waste it if we don't get our act together and become more self-sufficient and more resilient and more diversified.
Now, the government has a role to play in that, for sure. They should be held accountable, but so should our business community. We need to take more risk in our own country. We need to invest more in research and development. The government should help that along with policies and incentives, but at the end of the day, it's got to be a partnership between the private sector and the public sector that's going to get us there.
So that's part of my sales pitch. I'm biased, but I believe the government is heading in the right direction in terms of dealing with those impediments.
I also think though it's important to remind Americans as part of the sales pitch as why Canada is important to the United States. And we don't do a very good job at that.
As I said earlier, we are a huge market. We buy more American-made automobiles than any country in the world other than the United States. We buy more American-made automobiles than Japan, Germany, China combined.
But not only that, Americans understand, rightly, that they are energy self-sufficient, meaning that they produce approximately the amount of energy that they consume. But Americans also import 4 million barrels of oil a day from Canada. Why? Because it's much more efficient to do that and then export 4 million barrels from the Gulf and otherwise.
So we're creating the balance for American energy. So if you think about it, 4 million barrels they bring in from us permits them to export 4 million barrels and remain energy-sufficient.
We need to remind Americans of how important we are to them. And there is an America-first policy in place for sure, but America first doesn't mean America alone and nor does it mean Canada second. And we need to explain that for the US to achieve what they want to achieve, they need us to do it, and we need to do a better job at reminding them.
Darryl White:
So when the president says, "We don't need Canada," what he really means is we do need Canada. We just want to have the best deal we can get.
Mark Wiseman:
The president is the negotiator-in-chief, and he's good at it. And I would tell you that the discussions that we are having daily, including today at the G7 where Minister LeBlanc and our chief negotiator are there, along with Ambassador Greer and others from the US government, it's not a formal negotiation, they all happen to be in the same place and I'm sure they will run into each other on the sidelines of those meetings, those discussions are productive, serious, informed, and respectful is the way that I would describe them.
So you can take the negotiator-in-chief's position, but what I can tell, just between us, behind the scenes, stuff is getting done on a rational, collaborative, intelligent, and [inaudible 00:27:44] basis.
Darryl White:
Yeah. And may I say of all the adjectives that you chose, respectful was an important one.
Mark Wiseman:
One last thing I just say is that I thought I was going to walk into a bit of a buzzsaw in Washington when I showed up. It's been the opposite. My welcome to Washington at every level, including my meeting with the president in the Oval Office when I presented my credentials on the 17th of February, which was a record, it usually takes four to six months from when you arrive to when you present your credentials and you officially become the ambassador, it was 38 hours for me, and the US did that for a reason.
And every meeting that I've had, every discussion that I've had has been respectful. Canada and I have been treated as a first among equals. We really do have a special relationship and that comes through in every meeting that I've had.
Darryl White:
So that's encouraging but, and last question, there are understandably pessimists among us in Canada as a result of what the last year, year and a half have felt like. In five years, 10 years, what does this relationship look like? And can you give those people some optimism against the concern level that we all experience every day? Because we in this country obsess with this and our American friends don't.
Mark Wiseman:
Look, I don't want to suggest this is easy. The irritants, you called them irritants, so I'll use your word, it's been used by others, they're real. Some of them are very hard to manage through.
Darryl White:
Yeah.
Mark Wiseman:
They're very hard to manage through. And there is not alignment of interest on every issue. All of us in this room know what some of the hard ones are, right? Forest products, softwood lumber has been an issue between our two countries for four decades or more.
Dairy products, very tough issue because of the position that we've taken on supply management. We have policy reasons and reasons why we've decided to do that. It's very hard for the US to understand that when they want more access to our market.
So let's be clear, these discussions aren't easy, and the 232s are nettlesome, really, really nettlesome, right? You look at steel, there's overcapacity on both sides of the border in terms of steel production, we're both fighting against the imports of subsidized foreign product as well.
The issues are difficult. The reason ultimately to be optimistic goes back to the way that I frame it, which is it's in each of our interests to get this right.
Darryl White:
Yeah.
Mark Wiseman:
And it's in the US's interest to get this right. They need Canada. They need a cogent trading relationship with us. They need a cogent defense relationship with us. They need a cogent people relationship with us, and we need the same with them.
And so maybe I'm old-fashioned, but at the end of the day, there's a mutuality of interest that will get us to the right place. It may take more time than we want and we may have more uncertainty than makes us all comfortable. But we're in a world today, unfortunately, that is unbelievably uncertain. And that uncertainty goes well beyond the Canada-US relationship.
I will say people that keep saying, "Well, I'd love to get some certainty, I want more certainty," we're not in a particularly certain world today and we're going to have to live, I think, for a little bit longer with uncertainty. That may be around the trade relationship and may be more broadly but I am optimistic, Darryl, that we will get to the right place because it's in our interest.
The United States has been around for 250 years, not without turbulence. We've been around for 159. We're not moving out of the neighborhood and neither are they, and so we'll do what's in our interests and figure it out.
Speaker 2:
Thanks for listening. You can follow this podcast on Apple Podcasts, Spotify, or your favorite podcast app. For more episodes, visit bmocm.com/marketsplus.
Speaker 1:
The views expressed here are those of the participants and may not necessarily represent those of BMO Capital Markets, its affiliates or subsidiaries. For BMO disclosures, please visit bmocm.com/podcast/disclaimer.
