Quick Listen: Darryl White on the Importance of US-Canada Partnership

Speaker 1:

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. The views expressed here are those of the participants and not those of BMO capital markets, it's affiliates or subsidiaries. Today's episode is a special one, featuring the CEO of BMO Financial Group, Darryl White, as he addressed the audience at the US Canada Summit, hosted by BMO and geopolitical risk advisory firm, Eurasia Group. The summit focused on the changing dynamics of trade, food, energy security, and the environment in North America, as the world order experiences its greatest shifts in decades. Let's take a listen.

Darryl White:

Welcome to the inaugural US Canada Summit. It's amazing that that is the case, but it is the case. Today is meant to be a serious conversation about what about the opportunities and the challenges our two countries face, as we navigate the intricacies of one of the world's most developed geopolitical relationships. And I find myself saying, "One of the world's most developed geopolitical relationships," but I think as we conclude, we'll realize that ours is the world's most developed bilateral relationship. If that's so, and given the scale and the importance, do we have the institutions, the forums, in place to afford it all of the attention and all of the nurturing that it deserves?

Let's face it, folks, whether it's on the Canadian side or on the US side, we spend a lot more time concerned about relationships that are far less economically meaningful, and which with the benefit of objectivity, have much less impact on our lives. So I believe that's why we're all here today, to begin to address that gap, because our business, like so many of yours, benefits from a healthy, productive and growing geopolitical linkage between Canada, the US, and our allies.

Bank of Montreal, as it was known, and it was founded in the spirit of binational cooperation more than 200 years ago, has been thinking cross-border trade since its very first days. Indeed, among our founders were several merchants from New England, backing a then fledgling bank in Montreal because they wanted to make it easier to do business between the two countries, 205 years ago. What a novel concept. It's not a coincidence that the bank's New York City office opened only a year later. That was in 1818, incidentally years before we opened an office here in Toronto. BMO was the founding member of the Chicago Clearing House in the 1860s, which, again, was entirely natural given the steady movement of grain and other goods between the Midwest and the Port of Montreal.

We've been steadily growing our operations in the US ever since, with the 1984 acquisition of the Harris Bank, the 2011 acquisition of the M&I bank in Milwaukee, and now, in 2003, the just completed acquisition of California-based Bank of the West, the largest bank acquisition in Canadian history. All of that has cemented our position as the eighth-largest bank in North America. But more importantly, more importantly, with the most deeply integrated operations across the Canada US border, like our two countries.

Everyone has a vested interest in seeing the relationship between the two countries thrive and prosper, which of course it has, whether people generally know it or not. Ask any person on the street, in New York, in New Orleans, or New Mexico, "Which country is America's single largest trading partner?" And I bet you the answer wouldn't be Canada. In fact, nine times out of 10, I bet you the answer would be China, and I wouldn't blame them. China's global ambitions are daily media fodder, and for good reason. Barrels of ink have been consumed and countless trees have been felled to produce articles in books dedicated to examining China's belt and road initiative.

But friends, let's look around, consider our continent. Whether it's the 401 or the interstate, our road is already built. With the extraordinary connectivity of our electrical systems, our energy pipelines, our defense infrastructure, our integrated supply chains, education, policy, partnership, we're already wearing the belt too. We've built a flourishing, and, for the most part, for the most part, smoothly functioning economic stronghold in North America. But we need to remind ourselves, don't we, that it is the case. The reason we need to remind ourselves is because sometimes we forget, and when we do, we risk jeopardizing the relationship, and unfortunately, rarer circumstances, sometimes we actually do it real harm.

While the disputes between Canada and the US have been relatively few and infrequent, they can have real and unintended consequences. What may seem like a good idea to legislators far away from the 49th parallel may not be such a good idea for others on both sides of the border, those who benefit enormously from the trade between our two countries. The Great Lakes St. Lawrence region, the region we are in now today, is a microcosm of the larger relationship between Canada and the US. It's a region that employs about a third of our combined workforce, and it's a significant manufacturing hub. About a fifth of US manufacturing takes place here, and more than half of Canada's, and of course, the trade ties between the US and Canada, which reach well beyond the Great Lakes region.

As Canadians, we need to still remind ourselves of the importance of the Americans as our trading partner. And last I checked, 31 states count Canada as their number one export market, their number one customer. And for America's top exporting states, Texas and California, where Canada is not number one, it is a solid number two. Behind who? Mexico, the third amigo in the strategically critical USMCA trade pack. Incidentally, renegotiating that trade pack, renegotiating NAFTA, was, in my view, one of those instances where a tendency to take this existential connection for granted could have had serious, serious and unintended consequences for all parties. And in the years since, we've faced another, with electric vehicle tax credit, and there will undoubtedly be others in the future.

Fortunately, and thanks to many people in this room today, thank you, many negative consequences were averted, and the relationship continues to thrive. Yet, there can be no doubt, folks, that the world has changed. The hyperglobalization of an era not so long ago has already begun to recede. Those close strategic relationships we've forged between our two countries is being tested at the same time. Neither country can afford to distance itself from the other. We need to find ways, new ways, to deepen our already close relationship. And yet, as significant and as impressive as the scale of our trading relationship is, we know that we can do so much more. That's why we're here today. Is there any sector that symbolizes the underlying strength and resilience of the US Canada relationship than the auto sector?

The industry's footprint is undergoing a major geographic reconfiguration around the world, with gigafactories and new assembly plants being planned across Canada's significantly decarbonized electricity system, the US battery belt, and Northern Mexico. Just last month, Europe's largest automaker, Volkswagen, chose Southwestern Ontario for its first North American battery plant, making the largest single investment in Canadian auto-history. The climate transition alone holds tremendous potential for Canada and the US. Our respective governments must work together to expedite the development and processing of Canada's critical minerals to benefit the world. With a plentiful supply of minerals required for the next generation of electric batteries, together, we have what the world needs right here.

Leaders like everyone in this room think beyond borders. It's why we opened our operations in the United States in 1818. To strengthen our competitive position, Canada and the US must get serious, more serious about identifying and capitalizing on regional competitive advantages in new ways, and leveraging our hard won free trade agreements, not just the USMCA, all of them. In many cases, governments have done the hard work, and more and more companies on both sides of the border can now take advantage of the advantage market access that has been secured, the greater the benefits will be for the citizens of North America. But the US Canada relationship is the big one, that almost seems to be taken for granted between NAFTA cycles and whatever represents the irritants of the day.

Ironically, the border blockades last year in Ottawa and on the bridges drew the most intense attention we've ever seen, as I heard from all of our clients, on the sheer volume of cross-border trade. More than the NAFTA negotiations and the tariff disputes over softwood, lumber and aluminum. One takeaway from that experience is that people, all of us, not just the experts, the trade specialists, the academics, and the politicians, need to know who the largest customer of American-made and Canadian-made goods and services is. Each other.

So we need more opportunities to discuss the relationships between our two nations, not less. We need to develop more space for that dialogue to take place, and this summit is a modest attempt to start to do just that. Forums like this, we think, can be a third place, a space that's neither home nor office, neutral ground. A place where people can choose to meet and talk on equal terms to learn and share ideas. Let's be honest, let's be real about the conversation. We have real challenges. Sometimes we need to tackle those wicked problems, the ones that can seem almost impossible to solve. Let's start today. We need more opportunities like this where people interested in this relationship, importers, exporters, and trade perspectives, can be brought, and where members of government can engage less formally with business people. On behalf of BMO and everyone here today, thank you.

Speaker 1:

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Speaker 3:

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