00:00There are tremendous opportunities for Canada, and I would say to Southeast Asia, and you've heard me say this before, come to Canada.
00:05I mean, you know, we're here at the Milken Institute. We're talking about capital.
00:09So much of the capital today is talking about where is it that they can actually find places for global diversification.
00:15I would say Canada is a great place because the other thing we hear from so many of the capital investors here is they're looking for predictability.
00:23They're looking for countries that can, you know, that they could invest in.
00:27And right now, there are a lot of really terrific things to do with Canada.
00:32But speaking about Southeast Asia, last week, President Prabowo was in Canada.
00:37He and Prime Minister Carney signed the Canada-Indonesia Comprehensive Economic Partnership Agreement, so free trade deal with Canada and Indonesia.
00:46This is really excellent. I know a little something about that.
00:49As the former trade minister, I led those negotiations.
00:52So there's great opportunity there between Canada and Indonesia, of course, with this new deal, but also the region and broadly within CPTPP,
01:03because many of the countries who are Canada's trading partners within that agreement are also a part of this ASEAN.
01:08So you can see that this is a real great environment for Southeast Asia to think about North America.
01:16But I would say think of Canada in that North American equation.
01:20You talk about CPTPP. Is this a good opportunity to expand it even further in new countries like China so that everybody can band together and benefit from greater coordination in trade policies?
01:35Well, I think that having been the chair of CPTPP a couple of years ago, the decisions for accession will ultimately be among all the partners.
01:45And therefore, does it make sense for all of the partners?
01:47One of the things that was really important to all of the CPTPP, all of the CPTPP partners that they were very proud of is that the agreement is a high standard agreement.
01:57High standards on the environment, high standards for workers, really good market access.
02:03And also looking at you as a trading partner.
02:05Are you a good, consistent trading partner that also respects the rule of law?
02:10I think that is what makes CPTPP so strong.
02:14Because if you look at countries today, they're looking for predictability.
02:19They're looking for that market access.
02:20They're looking for dispute settlement mechanisms that they can rely on.
02:25That's what investors, that's what companies are looking for as well.
02:29And I think those private sector companies are going to say to their countries,
02:32let's make sure that we have access to these markets that are really good.
02:38But don't, you know, don't, you know, ensure that there is that stability because that's what's actually, that's what will work for us.
02:46Many countries are negotiating with the U.S. with China in mind.
02:51We have the likes of Mexico making concessions, imposing tariffs on Chinese products as a way to get a better deal with the U.S.
03:00Do you see Canada going the same way or forced to go the same way?
03:05Well, I mean, the North American market is so integrated.
03:10I mean, we have had the, in Canada we call it KUSMA, in the United States we call it USMCA.
03:14But this is a trade agreement between our three countries and, in fact, between Canada and the United States that have been going on for decades.
03:23Our supply chains are incredibly integrated and it has served our economies well.
03:28We have seen tremendous growth in our businesses and jobs for our workers.
03:34That type of integration will necessarily require us to think about the cost inputs that make up that trading relationship in sectors like auto as an example.
03:48And we will always, I think, in Canada, think about both trade being fair, but also one that is also open and trusted as well.
03:59Talk to us about where trade negotiations are, from where you're seated.
04:03I know you don't have a front row seat, but you do understand the negotiations happening right now.
04:07So, we've heard from Malkhani's point person saying it is not the dead end in terms of the tariff deal.
04:14They're so optimistic.
04:16The best case scenario, how would that look like?
04:19Well, all three countries now have launched consultations about the review that is due to come up in 2026 of this agreement.
04:30It's a review, it's not a renegotiation, it's a review, that's what's actually in the agreement itself.
04:35I think there's an opportunity there to really look at what really works really well and what is it that we should be looking at a little differently.
04:43I would also say that today, Canada continues to enjoy tariff-free access through the USMCA because it's USMCA compliant.
04:53That bodes well for our industries.
04:56At the same time, we are seeing 50% tariffs on really important industries like steel and aluminum and forestry, software.
05:04So, we are going to have to work with the United States to, those tariffs are just unacceptable and we're going to need to work on those.
05:12And I know that the government is doing that.
05:14But today, you're seeing Prime Minister Carney also look at trading relationships with other trading partners that Canada benefits from really excellent relationships with, whether it's the United Kingdom or whether it's the European Union.
05:29Of course, last week it was Indonesia in Canada, but this region in particular as well.
05:34The Prime Minister, I believe, has plans to be here for APEC and ASEAN.
05:38And I think these are just opportunities for Canada to continue doing that work of diversification, while at the same time ensuring that we continue to participate in our very important relationship that is North America.
05:52But diversification is something that this government is very committed to and you're seeing the Prime Minister do that work right now.
05:58Diversification is great, but you also require a deal with the US.
06:03Because it was supposed to happen in August and now there's a lack of clarity when that might be.
06:09What's the cost to Canadian trade and what's the cost to the Canadian economy if we don't see a deal anytime soon?
06:17Well, I know that the government is working hard on that.
06:19They're going to have to work very hard to bring some certainty to Canadians with the United States.
06:25But today, Canadians are seeing that just simply because, you know, over 80% of our trade with the United States continue to enjoy USMCA tariff-free access.
06:38So that is good for Canada.
06:40So, you know, in terms of a general rate, Canada still is leading the pack that way.
06:46No question that the government is going to have to try to land something to create that certainty for Canadian businesses and workers.
06:53They expect it, and I know that the government is working hard on that, and that work just has to continue.
06:58Could there be a regional response?
07:02You talked about how Prime Minister Carney will be headed to ASEAN in Malaysia in October, and he's looking to diversify.
07:11He's looking at negotiations with the countries in this part of the world.
07:14Could there be a response from these countries to counter what's happening with the US?
07:20Well, I think the very fact that we are, that the work that has happened now over years by Canada and its commitment to this region,
07:29and this work continues to deepen the commercial and the diplomatic relationships in this region,
07:39just simply means that that ambition for diversification, what we can do together,
07:43what we can do bilaterally means that it puts Canada and, indeed, our trading partners in a better position,
07:50because that is essentially what diversification has to mean.
07:54Globalization at risk, obviously.
07:56Can the WTO play a role?
07:58Is it playing a role right now?
08:00I think the WTO should absolutely play a role.
08:02I was just there a few months ago.
08:05This is their 30th year.
08:06The question I asked was, if we didn't have a WTO, would the world create it today?
08:11And the answer is yes.
08:12You need a set of rules.
08:14You need a rule book to deal with just the practical things like export restrictions and how to provide transparency to that,
08:21how to make sure that the ease of goods and services are able to move across borders.
08:26Those are the things that are under the hood, but the WTO is actually working in that respect,
08:32because that set of rules are there.
08:33Does it need modernization?
08:35Does it need rules to fit our purpose today?
08:40Think about AI.
08:41Think about the environmental climate transition.
08:46Those are very real in many, many markets across the world.
08:50And we either have a set of rules that we've all negotiated and that we can live by,
08:56but it does need work.
08:58And I would hope that everyone continues to stand up the rules-based system so that we have something that we as a world are able to work with.
09:07The supply chain that's getting disrupted now on the back of Trump, is that permanent?
09:13Or do you see the supply chains getting back post-Trump in three or four years' time?
09:18Well, I think what I'll do is reflect from what I'm hearing here at Milken.
09:23I mean, you're listening to a number of companies, a number of investors, and they've been throwing out terms like,
09:32well, you know what, of course we do work with the United States, but now can we look at United States plus one,
09:36United States plus two or three, which really means that how do we look at those supply chains?
09:42Can we rely on what it was, or do we just simply modify, get creative, create backup and then another backup?
09:52And I think that that's actually here to stay.
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