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Canada must reduce trade and ownership barriers, integrate economy with U.S., say Manning and Harris

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Release Date: May 7, 2007
Canada needs to fully open its economy and drop restrictions on foreign ownership in all business sectors including banking, financial services and telecommunications, Preston Manning and Mike Harris say in a new policy paper released today by independent research organizations The Fraser Institute and the Montreal Economic Institute.

The two also call for eliminating Canada's supply boards and agricultural subsidies, establishing a customs union and common external tariff with the United States, and reforming Canada's approach to foreign aid.

The recommendations are laid out in International Leadership by a Canada Strong and Free, a policy paper in which Manning and Harris argue that Canada should redefine its international position by becoming the world's leading proponent of free trade.

"If Canadians want this country to have a leadership role on the international stage, we need to be champions of free trade and a role model for the benefits of open markets and wealth creation. We must drop investment restrictions, build on our relationship with the U.S. and change the way we define and deliver foreign aid," Manning said.

"The market does a much better job of picking winners than government. To allow the market to do its job, governments should stop protecting the losers and eliminate business subsidies, ownership restrictions, and supply management programs. That will encourage investments to shift to areas of greater promise, leading to a more productive and wealthier Canada," Harris said.

International Leadership by a Canada Strong and Free is the fifth in the Canada Strong and Free series written by Manning, former leader of the federal opposition and of the Reform Party of Canada, and Harris, former premier of Ontario. Both men are now senior fellows with The Fraser Institute.

Canada lost ground as an international leader in the last decade as a result of ill-considered choices, Manning and Harris write. Canada's foreign policy failed to reflect the full range and depth of Canadian values and interests. The country's contribution to international peacekeeping became more rhetorical than substantive, and gratuitous anti-Americanism by some Canadian leaders eroded relations with Canada's closest neighbour and largest trading partner.

"Whatever else Canada's foreign policy for the 21st century entails, it needs to work. If we are to lead and inspire others, our actions must accomplish something. Talk is not enough," Harris said.

In their new paper, Manning and Harris argue that Canada can be effective as a middle power by focusing our foreign policy on promoting free trade, deepening our influence and relationship with the U.S., and finding ways to deliver effective aid to nations in need. When it comes to promoting free trade, they say Canada can't rely on rhetoric, but instead needs to open its borders. They recommend:

• Eliminating supply management and business subsidies; dropping ownership restrictions in transportation, telecommunications, and financial services; and allowing Canadian firms to become more productive and competitive in international markets.

• Pursuing a customs union and common external tariff with the United States, and using this process to lower remaining tariffs and reduce cross-border transaction costs.

On Canada's relationship with the United States, Manning and Harris point out that Canada's place in the world depends heavily on our ability to gain and exert influence in Washington, while the ability of our national government to advance the security and prosperity of all Canadians depends critically on working jointly with Americans.

"The inescapable factor is proximity. Like it or not, Canada lies squarely within the U.S. security and economic perimeter. We may be more comfortable with the economic aspects of proximity, but we must accept that in the present climate, security is top of mind for the U.S.," Manning said. "In order to protect our economic interests and maintain access to one of the world's largest markets, we must reach joint agreements that would render the border invisible to commerce."

Manning and Harris, while commending the federal government's recent strengthening of Canada's military and defence capabilities, recommend:

• Canada and the US work together to create a more open and secure common border for the movement of people and goods.

• Canada's federal government revisit the decision not to participate in the Ballistic Missile Defence program and not to broaden the mandate of NORAD.

• Canada pursue the creation of a customs union involving a common external tariff, a joint approach to the treatment of third-country goods, a fully integrated energy market, a common approach to trade remedies, and an integrated government procurement regime.

On the issue of foreign aid, Manning and Harris write that Canada should direct foreign aid at supporting policies and institutions with a proven track record of increasing prosperity and improving people's lives.

They recommend:

• Using the Tools of Wealth Creation approach as a centerpiece of development aid that could equip poor people with resources to pull themselves out of poverty. This approach includes broadening the distribution of property rights, providing access to capital, developing human capital, and providing access to technology and trade markets.

• Reforming CIDA (Canadian International Development Agency) and refocusing it on the Tools of Wealth Creation approach.

• Untying Canada's food aid from the requirement that it be Canadian-sourced.

• Re-aligning Canada's aid and peacekeeping efforts to focus on Africa, and increasing aid allocations to both conflict-prone nations and post-conflict situations.

"The same weakness that crept into other areas of our foreign policy in the past decade and a half-mistaking rhetoric and activity for results-has infected our government's approach to foreign aid as well," Manning said.

"These policies will boost Canada's actions internationally while here at home, providing more jobs with higher incomes, improving personal security, and re-establishing Canadians' pride in this country as an international leader," Harris said.


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