U.S.: ‘The most protectionist administration since the world trade order was put in place’

| December 18, 2017 | 0 Comments
International Trade Minister François-Philippe Champagne (Photo: Jana Chytilova)

International Trade Minister François-Philippe Champagne
(Photo: Jana Chytilova)

François-Philippe Champagne, Canada’s energetic trade minister, comes to politics from business. A lawyer by training, he worked for more than 20 years in large international engineering, technology and energy companies. He was vice-president and senior counsel of ABB Group, a technology company that operates in more than 100 countries, and later worked as strategic development director, counsel and chief ethics officer for energy giant AMEC.
In 2009, when the World Economic Forum named him a young global leader, he told The Globe and Mail he was interested in one day returning to Canada and following in the footsteps of fellow Shawinigan native Jean Chrétien. Elected in October 2015, Champagne soon became parliamentary secretary to Finance Minister Bill Morneau. He was appointed trade minister in January 2017.

Diplomat magazine: When you took on the job of trade minister, what were your top priorities?
François-Philippe Champagne: The first thing that the PM asked me, which embodies our government, was to make trade real for people. That means providing jobs for the middle class, making sure consumers have better prices, making sure we provide opportunities for SMEs [small- and medium-sized enterprises] to come into the global marketplace.
Trade is all about people. The first meeting I went to — I think it was at the WTO — I was the last person to speak and I don’t think anyone had mentioned the word ‘people’ in their speeches. I said ‘Why don’t we have a WTO for the people? Why don’t we start with the people, their needs and their aspirations and build from there?’ Perhaps we’d find better solutions, more practical approaches to trade. For me, making trade about people is the embodiment of our vision of progressive trade, whether it’s about labour, workers, the environment or gender.
I often say that trade is not a race to the bottom, it’s a march to the top. Canada is in a place now to always aim for higher standards and we saw that in the gender chapter [one that addresses issues relating to women in the workplace] we just did with Chile. We were the second country in the world to add a gender chapter to a trade agreement. The first one was between Paraguay and Chile; then Canada and Chile. I am so proud of it. When people are questioning me about what should be the next phase in these clauses, I say that three months ago, this wasn’t even part of the agenda. Now we have countries looking at that and asking how far can we go? What’s the next frontier in terms of progressive trade?
When I was younger, people often looked to Scandinavia in terms of progressive approaches, but now I think Canada is leading the way. We’ve obviously been promoting gender chapters in our trade agreements and we’ll do a similar initiative at the WTO. I think we are a force for good in the world.

On Canada: “Canada is becoming a beacon of civility, predictability and rule of law — a very inclusive society.” (Photo: Jana Chytilova)

On Canada: “Canada is becoming a beacon of civility, predictability and rule of law — a very inclusive society.” (Photo: Jana Chytilova)

DM: Have those priorities changed?
FPC: I think we’ve achieved a lot. I look at CETA — the free-trade agreement we’ve struck with Europe — and people would say it’s the right agreement at the right time; it’s the gold standard. But I’m always reminding people that you have to look at trade in the long term, over decades. Those who were visionary more than a decade ago saw a world where Canada would have preferential access to Europe, that we’d have 9,000 tariff lines coming down to zero and that Canada would have preferential market access to more than half a billion people and $3.3 trillion in public procurement, greater mobility, access to human capital in Europe. When you see that, it shows me that whatever decisions we take today will have the greatest impact for days to come.
My role is to see how I can position Canada in the best possible place to provide opportunities for Canadians — for workers, consumers and SMEs. This is envisioning trade over the next few decades. Today [market access is] what really matters. In a world where you have more uncertainty, Canada is becoming a beacon of civility, predictability and rule of law — a very inclusive society that sees diversity as a source of strength.
I’m often called the chief marketing officer of Canada. When I promote Canada abroad, many nations tell me I don’t need to do that. They say ‘Where else would we invest in [2018] if not Canada?’ We stand out as a beacon. People feel good about investing in Canada because of these key elements — and our human capital.

On the job: “30 per cent of my job is about trade agreements, 70 per cent is about how I convert these trade agreements to create jobs.” (Photo: Jana Chytilova)

On the job: “30 per cent of my job is about trade agreements, 70 per cent is about how I convert these trade agreements to create jobs.” (Photo: Jana Chytilova)

DM: In your mandate letter, Prime Minister Justin Trudeau asked you to modernize free-trade agreements with Chile and Israel. You mentioned Chile. How is Israel going?
FPC: We are progressing. We have discussions with our Israeli friends. I was just with the ambassador of Israel. I invited him to Shawinigan to discover a bit of Quebec. He came with the consul from Montreal. I think he’ll remember that trip for a long time because it showed him the diversity of our country.
Trade is all about people. We have the benefit in Canada of having a lot of communities that have roots in other cultures. This gives us an edge when it comes to trade. We’re moving forward with our Israeli friends.

DM: Do you have a timeline on that?
FPC: I would say as soon as possible. I come from the private sector and ‘soon’ when I was in business was yesterday. When I came to government, I was told it might be next month and when you deal internationally, on a multilateral basis, it might be next year.
[Call me ambitious,] but I’d like this to succeed because these things do make a difference. More and more, when you look at the international trade arena, it’s no longer about tariffs, it’s about market dynamics, it’s about non-tariff trade barriers, it’s about how we can facilitate commerce and the mobility of people and that is really the key with these agreements.
The nice thing about being in the job I have is that you have to look forward. You have to have the vision of where Canada needs to be and how these agreements can facilitate commerce for SMEs and those who’ve been underrepresented in trade. I think about women entrepreneurs, indigenous people, I think about youth. One of my objectives is to [host the first] indigenous trade mission [of Canada], which we’re about to announce very soon.

On the U.S.: “The uniqueness of our relationship is that we don't sell to each other; we build things together.” (Photo: Jana Chytilova)

On the U.S.: “The uniqueness of our relationship is that we don’t sell to each other; we build things together.” (Photo: Jana Chytilova)

DM: Where would you go on that trade mission?
FPC: We’re consulting with the main stakeholders because it has to be meaningful. We have to go to markets where indigenous businesses can make a difference. Hopefully, [this will set] the stage and the tone for more trade between our indigenous communities and the rest of the world.

DM: Japan was also in your mandate letter. How are things going there?
FPC: The place I’ve spent most nights as trade minister, other than Canada, is Japan. Now, that’s about three nights. Our relationship is great; Japan is a key ally. We are discussing how can we maintain trade in the Asia-Pacific [that is] open, rule-based and progressive. We are discussing a trade agreement for the region, which would help position Canada for the future.

DM: So it’s a longer-term thing?
FPC: We’ll have to see. As you know, there is the TPP (Trans-Pacific Partnership), which was an agreement with a number of nations. Canada has remained at the table. We’ve been engaging with Japan closely on that. This is about setting the tone. Canada has this unique opportunity to set the terms of trade in that part of the world.

DM: Let’s turn to the elephant in the room — NAFTA. Where do you think it will end up?
FPC: On NAFTA, I always start with the numbers because they speak for themselves. We exchange about $2 billion in goods and services every day. We are the U.S.’s largest client and when I talk to someone [there], I always say ‘You’re lucky — you’re talking to your largest customer.’ We’re their largest energy provider — whether it’s oil, gas or electricity. We have about 48 states that have Canada as their primary and secondary export market and about nine million jobs in the U.S. depend on trade with Canada. The uniqueness of our relationship is that we don’t [just] sell to each other; we build things together. The big prize is how can we be more competitive in North America, how can we build more in North America and how can we export [more] to the rest of the world?
Every time our U.S. friends make a decision, I always remind them it has impact on both sides of the border because [we] have an economy that’s so integrated. I’ll give you an example: I was looking at a photo of landing gear for a plane. There was the city where the different parts are made and it looked like the United Nations of North America. There were parts from Canada, the U.S. and Mexico. And the parts would have crossed the border several times before [the landing gear] became a finished product. Our goal has been to really remind our U.S. friends, whether it’s the prime minister, [Foreign] Minister [Chrystia] Freeland, provincial cabinet ministers or mayors, of the integrated nature of our economy. I was in Ohio recently and I was reminding stakeholders that 300,000 jobs in Ohio depend directly on trade with Canada. Then, I was with the vice-mayor of Cincinnati and, if my memory serves me well, 20 per cent of the economy of greater Cincinnati is dependent on Canada. When I was in Ohio, 40 per cent of all exports go to Canada.
For me, the big prize is [to be] more competitive, build more in North America and sell to the world together.

U.S. Secretary of State Rex Tillerson and Canadian Foreign Minister Chrystia Freeland addressed reporters after a bilateral meeting on the occasion of the kickoff of NAFTA renegotiations. (Photo: US Department of State)

U.S. Secretary of State Rex Tillerson and Canadian Foreign Minister Chrystia Freeland addressed reporters after a bilateral meeting on the occasion of the kickoff of NAFTA renegotiations. (Photo: US Department of State)

DM: What are the major sticking points from your perspective?
FPC: Minister Freeland would be best placed to answer that, but what we’re facing philosophically is probably the most protectionist administration since the world trade order was put in place. This is just a fact; this is not a rumour; this is what it is. I see it in the discourse going on between Canada and the U.S., but also on the world stage. I’ve spent a bit of time with Ambassador [Robert] Lighthizer, [the United States Trade Representative], and I realize the U.S. is questioning a lot of the trade order that was established — largely by the U.S. — and for which they’ve been one of the primary beneficiaries. Our role is to be a positive force of influence, to look at modernization of institutions, but also to keep what’s good. I think we all benefit from trade that is open, principle-based and rule-based.

DM: What’s the status of the $218-million invest-in-Canada hub?
FPC: We are very committed. This, for me, is going to be a flagship initiative of our government. This is about creating a concierge service to attract investment, to facilitate investment and retain investment in Canada. We know it’s a very competitive world out there and we need to put our best foot forward.
It’s about retention. I call it customer after-care — ensuring these investors have a place and people are following their investments and learning from that.
What’s most in need today is human capital. You saw that the ABB group has selected Montreal as their e-mobility centre of excellence, for example. We are seeing a number of companies choosing Canada for its human capital. We’ll be there to promote what we have best to offer. The other thing Canada does best is renewable energy. I often ask ‘Why don’t you think about green manufacturing?’

François-Philippe Champagne says that when he looks at Canada's Bombardier, he sees 200,000 employees who work in the country's aerospace sector and the 300 small- and medium-sized businesses that support the industry in Canada. (Photo: Bombardier)

François-Philippe Champagne says that when he looks at Canada’s Bombardier, he sees 200,000 employees who work in the country’s aerospace sector and the 300 small- and medium-sized businesses that support the industry in Canada. (Photo: Bombardier)

DM: What is the status of the Development Finance Institution? [In May 2017, the Trudeau government announced it would create a DFI — a specialized bank that supports private-sector investment in developing countries.]
FPC: For me, the DFI is another instrument in our foreign trade policy. I’ll give you an example: We’ve been looking at how Canada, with a group of Canadian companies, can help in the reconstruction after the hurricanes in the Caribbean. There’s a part that’s commercial and maybe there’s part of it where we can use the DFI to help out there.
We’re looking at [introducing] the DFI in the coming weeks. This is where Canada can really make a difference. In engineering procurement construction management, we have some of the best companies in the world. It’s about green technologies, water filtration and solar energy. It’s trying to put the best of Canada into a consortium.

DM: What keeps you up at night?
FPC: I sleep pretty well because we have really busy days. But what keeps me up is making sure that I don’t miss an opportunity for Canadian companies. I’m always on the lookout for the next opportunity. I come to this job with the mind of an entrepreneur — 30 per cent of my job is about trade agreements; 70 per cent is about how I convert these trade agreements to create jobs and prosperity.
I’m always talking about seizing the moment.

DM: You were the trade minister when most of CETA came into force on Sept. 21, 2017. How significant do you think CETA will be for Canada and are you concerned at all about final ratifications in European parliaments?
FPC: I think it’s transformative. This is really a historic moment. This is the right agreement at the right time.
Economically, we’ve removed 9,000 tariff lines and Canada is the only country in the world that is not physically located in Europe, but has [enhanced] market access to Europe, whether in terms of tariff or labour mobility. When I was in London, they called me the lobster man on the BBC because I used lobster as an example. Canadian lobster, before Sept. 21, was coming into Europe at [up to] 20 per cent tariffs. These tariffs are coming down to zero gradually. Frozen shrimp were coming in at 12 per cent; they’re coming down to zero. I see that as historic. I give credit to [CETA and now NAFTA negotiator] Steve Verheul, who is a superstar. I give credit to the visionaries [who came up with the idea].
I’m not at all concerned with the rest of the ratification. I think we’ve made the case for progressive trade. If you can’t do progressive trade with Canada, who are you going to do it with? We’re going to start seeing the benefits. People will realize that this is an example of what trade can be in the 21st Century, with a chapter on the environment, labour, a chapter that preserves the right of the state to regulate in their best interest and an improved dispute settlement mechanism.

DM: What’s your take on the amount of taxpayer money that’s subsidized Bombardier?
FPC: When I look at Bombardier, I never look at one company or one set of managers, or one set of shareholders. I look at the more than 200,000 employees who work in the aerospace sector in Canada and the 300 SMEs who support that industry in Canada. When you see us at the forefront of the battle, defending our aerospace industry, you have to think that I’m standing there with my colleagues to defend these 200,000 workers in an industry that is offering great wages and great benefits and invests significantly in research and development in our country. We have developed, in the C Series, an airplane that is the envy of the world. It’s 30 per cent more fuel-efficient, less noisy — it’s really the next generation of what a plane should be. You can see it from the resolve of Delta to continue with that purchase despite all the hurdles the Department of Commerce is trying to put in their way.
I never look at one company, one set of employees or employers. When you see us at the forefront of the battle, I’m standing there with my colleagues to defend these employees. It’s just natural for us to protect, defend and promote the aerospace industry in Canada.
I never think of Bombardier alone — I always think of it as at the centre of an ecosystem we’ve built. It’s not just Montreal; I come from Shawinigan, and there are people there, and in Trois Rivières, and I’m sure I could go across the country and find small companies that supply pieces of equipment to Bombardier. This affects many communities in Canada and that’s why we’re fighting so hard to preserve it and protect the know-how we’ve developed in Canada, which is quite unique. We’re the third-largest centre of aircraft manufacturing in the world. We’ve built that and we need to preserve it, defend it and promote it.

DM: How did you react to the sale of Bombardier’s C Series program to France’s Airbus?
FPC: The C Series leads the industry in design, efficiency and environmental standards. It is the benchmark for excellence in narrow-body aircraft and a cutting-edge Canadian innovation. It is no surprise that the C Series is attracting interest from all corners.
Proposed investments of this kind require the government to consider whether they are in the national interest. The Airbus deal, like all significant proposed investments in Canada by non-Canadians, is subject to the Investment Canada Act, which is overseen by the Minister of Innovation, Science and Economic Development. That review will look at whether this is a good deal for our aerospace sector and for Canadian jobs.
On the surface, Bombardier’s proposed partnership with Airbus on this aircraft would help position the C Series for success by combining excellence in innovation with increased market access and an unrivalled global salesforce. Canada has a highly skilled workforce and a climate that fosters innovation. That’s why our aerospace sector is strong, diverse and well-positioned to take advantage of the opportunities that could arise from this deal, including new pathways into global supply chains across all of the company’s business lines and products.
In fact, we have already seen successes, including today’s announcement by EgyptAir to procure 12+12 C Series aircraft.
With this proposed partnership, Airbus would commit to making Canada its fifth home country and the first outside Europe. Airbus already employs a Canadian workforce of 1,900 people across seven provinces and generates $1.2 billion of Canadian supply chain spending. This presents further opportunity to grow our aerospace industry and create well-paying middle-class jobs across the country.

DM: What about the suggestion that Bombardier become a Crown corporation or some kind of government entity?
FPC: I never think that government is best suited to run businesses. I think we have enough entrepreneurs, innovators and creative people in our country to take the business risk that comes with forming a company and developing a sector. What we do is make sure we build a framework that favours investment, research and development and the attraction of human capital.
DM: How does government reconcile the bribery charges against Bombardier executives?
FPC: As trade minister, I expect companies to uphold the highest standard of ethics and corporate responsibility when they operate abroad. In my previous life, I was chief ethics officer of a large company. My message is clear to any Canadian business operating in Canada and abroad: We expect the best out of them, to respect all laws and regulations, to lead the way when it comes to corporate social responsibility and to uphold the highest ethical standards. We are following the events as they unfold. The courts are [addressing] this matter and we are looking at the process.

DM: On supply management, how do you square subsidies such as the five-year dairy farm investment program offering $250,000 to licensed dairy farms to help offset CETA’s effects?
FPC:. I’m a firm believer in supply management; I’m a firm believer in our dairy producers. I’m a firm believer in the excellence of our products. As a government, we’ve put a framework in place to help our dairy producers to modernize and innovate.

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