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Notes Remarks by
The Honourable Christian Paradis, P.C., M.P.
Minister of Natural Resources
“Canada’s Global Economic Leadership”
Embassy of Canada
June 22, 2010
Check against delivery
Good morning everyone. In a few days, the world will gather in Toronto. At the G20 summit, they will be given a historic opportunity to do everything necessary to keep the global economy firmly on the road to recovery. Even after an unprecedented global economic crisis, we still live in difficult times.
Overcoming our challenges will mean all nations must demonstrate fiscal discipline, implement financial sector reforms and open up global markets even further. The world will be coming to Canada in search of answers and I believe that by following Canada’s example, they will find many of the answers they are looking for. We are open for business, creating more and better jobs today and for the future.
A few hours ago in New York, my colleague, finance minister Jim Flaherty, released a report entitled "Canada’s Global Economic Leadership". This report tells Canada’s winning economic story. As Canada prepares to host the world, it is one that deserves to be heard. Consider where Canada finds itself on the eve of the G20 summit. Canada has dealt with the deepest and most synchronized global downturn since the 1930s in far better shape than other major industrialized countries. Canada was the last G7 country to enter this shared recession. Even when we did, a decline in output in our country was the smallest of our G7 counterparts.
As inescapable as this global crisis has been, Canada’s economic recovery has also been remarkable. Canada has virtually recouped as recession worth of economic decline. No other G7 country can say that. In the first quarter of 2010, real economic growth increased 6.1%, the strongest quarterly growth in Canada in ten years. Just as impressive has been the recovery in Canada’s job market, although I would emphasize our work here is far from finished and yet, in less than a year, employment in Canada is up by almost 310,000 jobs. Three quarters of the jobs lost during the recession have been recovered.
Canada in fact is the only G7 nation to record a cumulative increase in employment since March 2009. Canada’s solid economic performance owes much to the strong fundamentals in place before the global crisis and the timely and decisive action our government took once it reached our shores. Canada’ s economic action plan, one of the largest stimulus packages in the G20, was the roadmap to our recovery. This two-year plan was designed to protect and create jobs and improve Canada’s long-term growth and prosperity. It also called on other orders of government to step up to the plate with stimulus too in order to create an even more powerful economic impact.
And the plan worked. It did so by lowering taxes, permanent tax relief to individuals and families and Canada’s federal tax to GDP ratio is now at its lowest level since 1961. Real consumer spending has increased in each quarter since the economic action plan was implemented. We estimate that the action plan added almost two percentage points to economic growth on average in the last three quarters of 2009 and going forward, both the IMF and the OECD expect Canada to have the strongest economic growth over the next two years of all G7 countries.
So the results we are beginning to see demonstrate that our economic action was the right way to meet the economic challenges Canadians were facing. It was a plan for its time but it was also designed to ensure it didn’t outlive its time. This is an important point, given that governments around the world are now grappling with crippling debt loads. Canada entered a global downturn from an undeniable position of strength. Canada was the only G7 country to consistently post surpluses in the years prior to the global downturn. As a result, Canada has the lowest total government net debt burden in the G7 at the – at the onset of the crisis. We had the fiscal room to respond quickly and decisively with extraordinary stimulus.
Our economic action plan is fully consistent with this Canadian fiscal discipline. Our current deficit is projected to decline by almost half between the fiscal year just ended and the fiscal year following this one. By 2014-15, it is expected to be virtually eliminated. In fact, the IMF expects that Canada will be the only G7 country to return to balance within the next five years. In Toronto, G20 nations will be asked to confront the fiscal challenges ahead of them and the unavoidable need for fiscal consolidation. Canada will be urging all nations to get their fiscal houses, just as we have in order to ensure a truly sustainable recovery.
Another Canadian advantage we believe is worth imitating is the stability and resilience of our financial system. Where others failed, requiring taxpayer bailouts or government takeovers, Canada’s financial institutions held their ground during an unprecedented global financial storm. And they did so for a reason. Canada’s banks and other financial institutions were better capitalized and less leveraged than their international competition prior to the global recession. They were also supported by a strong financial regulatory and supervisory framework. Canada’s hard earned reputation for prudence by our banks, households and regulators meant that we entered the global recession without the major housing market imbalances we saw in many other advanced economies. As a result, house prices and household net worth declined significantly less in Canada than elsewhere. We were able to sustain credit growth even during a recession, the likes of which most Canadians had never experienced. That is why the World Economic Forum has ranked Canada’s banking system the soundest in the world for two consecutive years.
Fixing everything that went wrong during the recent international financial turmoil won’t happen overnight. It is clear that there is no one-size-fits-all solution. Having said that, Canada is calling on all G20 nations to follow through on the commitments we have all made and doing so, we continue to emphasize the features of the Canadian system that have – that has served us so well, such as stronger capital liquidity standards and a limit on leverage. And that does not include a punitive tax on the financial sector. Canada’s performance during the crisis clearly demonstrated that such a tax is not necessary and would only reduce the flow of credit and encourage excessive risk taking. Canada’s financial sector held its ground under intense pressure and we are determined to boost its rising global position even further.
In addition to fiscal consolidation and financial sector reforms, the world will also expect G20 leaders to make headway on promoting trade and investment and fighting protectionism. At the risk of duplication, Canada is once again moving the agenda forward by its actions and its example. My presence here today is one of those examples.
When prospects for the global economy were at their bleakest, Canada kept its economy open for investments from around the world, resisting protectionism and tearing down trade barriers. As a trade oriented country, Canada fully understand what open markets mean for long-term prosperity and we have done our part to make that happen. We unilaterally eliminated tariffs – eliminated tariffs on important machinery and manufacturing inputs, in the process becoming the first G20 nation to become a tariff-zone for manufacturers. In doing so, we built on our relentless efforts to made Canada an increasingly attractive destination for business and according to the economist intelligence unit, the best place to invest and do business in the next five years.
On the tax side, as a result of federal and provincial business tax changes, Canada will have an overall tax rate on new business investment that is the lowest in the G7 this year and the lowest statutory corporate income tax rate in the G7 by 2012. Our government has also taken steps to reduce the regulatory burden on businesses, especially small and medium size ones while modernizing competition and investment regulations. All of this will ensure businesses located in Canada will be able to focus on what they do best: investing and creating jobs.
Consider all of the advantages I have just described to you today, the strongest economic growth in a decade, fiscal prospects that are the envy of the industrialized world, one of the world’s most stable financial systems, also I must point out the lowest overall tax rate on new business investment in the G7 this year, and finally the only G20 nation where a manufacturer can set up shop and face no tariff costs on production, it all adds up to a compelling choice for a global gathering task with putting the global recession behind us. In a highly uncertain world, Canada has demonstrated real economic leadership. We are creating jobs, growing investment, reducing taxes and making the responsible decisions sustainable economic growth requires and thanks to our responsible fiscal stewardship, their actions we can bank on. In 2010 Canada hosted the world in Vancouver in the pursuit of athletic excellence. We achieved a record setting performance in doing so. Now we host the world in Toronto at a time when the stakes are even higher. In the face of a global recovery still fanning its feet, we can’t risk failing the historic test we will confront this weekend. As Canada and other nations have demonstrated, there are rewards for those who set clear targets and act decisively. At such a momentous time, I say "Follow our lead". Thank you very much and have a nice day.
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