US embassy cable - 04OTTAWA3115

S E C R E T SECTION 01 OF 04 OTTAWA 003115 
 
SIPDIS 
 
NOFORN 
 
NSC FOR NSA RICE 
 
E.O. 12958: DECL: 11/17/2009 
TAGS: CA, PGOV, PREL 
SUBJECT: SCENESETTER FOR PRESIDENT BUSH,S VISIT TO CANADA, 
NOVEMBER 30 - DECEMBER 1, 2004 
 
 
Classified By: Ambassador Cellucci, reasons 1.4 (b) (d) 
 
Summary and Key Themes 
 ---------------------- 
 
1. (C/NF) The Canadian Government and the Embassy strongly 
welcome your visit and the opportunities it will afford to 
advance our broad bilateral relationship.  The two key themes 
I would stress for your visit are partnership and 
reassurance.  The Canadians need to be reassured that at the 
end of the day, whatever tactical disagreements we may have 
over Iraq and individual trade cases, we are firmly united 
across the world,s longest undefended border by common 
values, shared political heritage, and the largest bilateral 
trading relationship in the planet,s history.  We need to 
send the message that we value Canada with no strings 
attached.  The early timing of this visit will help make this 
point. 
 
2. (C/NF) Specifically, it would be very helpful if you came 
to Ottawa with three key public messages.  First, a positive 
signal demonstrating movement on BSE, short of resolution but 
beyond &we,re working on it.8  A firm date for completion 
of the regulation would give PM Martin a huge political boost 
and help beleaguered Canadian ranchers get through the 
winter.  Second, appreciation for the positive role Canadians 
play in the world as peacekeepers and in transmitting our 
shared political and cultural values to failed and failing 
states.  And third, personal thanks for our close cooperation 
in defending the continent against terrorism, both in border 
security, and in the larger fight to roll back the 
availability of weapons of mass destruction, contain the 
activities of terrorist groups, and support development that 
will provide alternatives to terrorism. 
 
3. (C/NF) Several themes about the future would also be 
helpful for your private meetings.  You should note the 
substantial Canadian support to date for Iraq reconstruction 
and encourage Canada to play a larger role in the development 
of political and security institutions there.  You should 
promise continued close cooperation in places such as Sudan, 
Afghanistan, and Haiti, and solicit PM Martin,s views on how 
to best synergize our efforts.  And finally, you should 
commit to focus on settling our trade and environmental 
disputes.  End Summary 
 
Martin,s Minority Government Stable, but Weak 
--------------------------------------------- 
 
4. (C) After governing in majority for ten years, the Liberal 
Party called elections June 28 to gain a mandate for PM 
Martin, who succeeded Jean Chretien in December 2003.  The 
Liberals were hurt by a scandal involving the disbursement of 
public monies in Quebec, and the Martin government was 
reduced to minority status, the first in Canada since 1979. 
In the first week of Parliament, Martin was able to loosely 
win over the New Democratic Party, putting him neck-and-neck 
with the Conservatives and the separatist Bloc Quebecois. 
Both the Liberal-NDP and the Conservative-Bloc alignments are 
very tentative, however, and different issue-driven 
coalitions are likely to emerge on an ad hoc basis. 
 
5. (SBU) Predictions on how long the government will last 
range from six months to two years.  Canadians do not want to 
go to the polls soon and the Government and Opposition know 
it.  But given the nature of Canada,s political system, the 
Government,s fall is never more than one bad decision away. 
 
6. (C/NF) The Liberal's thin margin leads Martin to exercise 
extreme caution, which some observers are now touting as weak 
leadership.  The PM has made it clear that he will not try to 
carry out an aggressive agenda, and on issues such as missile 
defense, would just as soon wait rather than try to tackle it 
now and risk a negative vote. 
 
Seeking Canada,s Place in the World 
----------------------------------- 
 
7. (SBU) All of this is taking place in the context of a 
certain amount of soul-searching here on Canada,s decline 
from &middle power8 status to that of an &active 
observer8 of global affairs, a trend which some Canadians 
believe should be reversed.  In the short term the country,s 
priorities are improving the quality of life for Canadian 
citizens and there is little support for increasing defense 
spending (currently among the lowest per capita in NATO) or 
the foreign affairs budget.  PM Martin has promised to focus 
his government on policies to perpetuate the &Canadian 
economic miracle,8 help cities, improve health care, and 
provide easier access to child-care.  However, he has also 
made modest increases in the defense budget and has announced 
plans to add 5,000 troops to the armed forces. 
 
Engagement on Homeland Security 
------------------------------- 
 
8. (SBU) Within the constraints of weak public support and 
low funding, PM Martin has made his foreign affairs and 
homeland security bureaucracies more capable and has kept 
Canada selectively active in global issues.  In the wake of 
the September 11 attacks, Canada has implemented a range of 
practical measures that improve Canada,s homeland security 
while facilitating the flow of people and commerce across our 
common border.  Starting with the December 2001 Smart Border 
Action Plan with the U.S., changes include enhancements to 
aviation security, full compliance with UN and other 
multilateral conventions, and strengthening of financial 
controls.  In the fall of 2003 Canada undertook an aggressive 
reorganization of its security and border agencies, 
consolidating them into a structure similar to that of DHS, 
and in April 2004 rolled out its first-ever national security 
strategy.  Bilateral efforts have resulted in better 
information sharing, joint targeting, and smoother flow of 
low-risk traffic. 
 
9. (S/NF) A potential irritant on the Canadian side that may 
be raised has to do with sharing of intelligence regarding 
Iraq operations.  The government is aware that we are 
creating a separate US-UK-Australia channel for sharing 
sensitive intelligence, including information that 
trationally has been U.S. eyes only.  The GOC has expressed 
concern at multiple levels that their exclusion from a 
traditional "four-eyes" construct is "punishment" for 
Canada,s non-participation in Iraq and they fear that the 
Iraq-related channel may evolve into a more permanent 
"three-eyes" only structure.  PM Martin may raise this with 
you privately. 
 
A Modest but Effective Agenda on Global Affairs 
--------------------------------------------- -- 
 
10. (C) PM Martin has also kept Canada in the game 
internationally.  In 2002 Ottawa sent 750 soldiers to 
Afghanistan where they served with distinction in Khandahar, 
and Canada led the maritime task force monitoring movement in 
the Persian Gulf, a service that began with an eye on 
Afghanistan but later was useful in the lead-up to Operation 
Iraqi Freedom.  Ottawa continued to support democratization 
in Afghanistan, leading the ISAF mission from February to 
August 2004, and contributing 2,300 of 7,100 troops.  Canada 
has been active in development and elections support for 
Afghanistan, committing USD 500 million to a wide-variety of 
programs through 2009.  Finally, Canada has pledged to deploy 
a Provincial Reconstruction Team, possibly to Khandahar, in 
the fall of 2005. 
 
11. (C) In Haiti, Canada has provided civilian police 
officers, a sizable aid budget, and positive involvement in 
diplomatic efforts on the ground.  Canada has been largely in 
synch with our efforts to seek a durable solution to Sudan,s 
current and chronic crisis.  PM Martin, who met with 
President al-Bashir in Sudan last week, supports the 
&responsibility to protect8 as an obligation of each 
government and a core function of the international community 
through the United Nations.  Canada has allocated US$16 
million to support the African Union in Sudan. 
12. (SBU) Despite opposition to our invasion of Iraq, Canada 
has offered strong support for Iraqi reconstruction, saying 
"we can't afford to fail."  The GOC quickly committed funds, 
pledging about US$ 240 million in Madrid, and made active 
efforts to leverage contributions from countries that were 
initially hesitant.  Over two-thirds of Canada's aid has been 
allocated and over half has been disbursed on projects such 
as police trainers in Jordan. Canada also supports Paris Club 
efforts on debt reduction. 
 
Trade and the Border: Vital Links for Canada 
-------------------------------------------- 
 
13. (SBU) The U.S. and Canada have the largest bilateral 
trade relationship in the history of the world and over 95% 
of that trade is trouble-free.  The billion dollars a day in 
trade with the U.S. generates about a third of Canada,s GDP, 
with energy exports and the integrated North American auto 
industry dominating the picture. 
14. (SBU) Since implementation of NAFTA ten years ago, 
US-Canada trade has doubled.  Most Canadians see NAFTA as a 
success but are frustrated by its limits, thrown into relief 
by U.S. trade remedy actions on softwood lumber and pork. 
Expectations that NAFTA would give Canadians greater control 
over US actions have largely been disappointed.  The softwood 
case remains a long-running and intractable irritant; even 
so, Canadian lumber exports boomed last year in response to 
US housing demand. 
 
15. (SBU) There are trade disputes and then there is beef. 
Reopening the border to trade in live cattle is Canada's most 
pressing bilateral concern and our top priority for this 
visit.  Cut out of our highly integrated North American 
market since 2003, Canadian ranchers have lost over $2 
billion to date.  Canada has spent $400 million on relief for 
the cattle industry, but many farmers and their suppliers may 
not survive another winter. Indefinite delays and the 
perceived unpredictability of the U.S. regulatory process 
have soured views of the U.S. in some of the most 
traditionally pro-American regions of Canada.  Issuance of 
the new rule, or at least a firm commitment to a date for 
completion, would help restore public confidence and give the 
GoC some political room to respond to other U.S. priorities. 
In the long term, failure to resolve the problem will result 
in two North American beef industries, reducing efficiencies 
and stiffening competition in traditional US export markets. 
Significantly, movement on beef will give Martin political 
space to cooperate more on security. 
 
16. (U) Canada enjoys an enviable economic situation, with 
steady budget surpluses and the most sharply-reduced debt 
burden in the G-7.  Although the economic outlook is rosy, 
the currency's rapid appreciation against the U.S dollar, 
driven partly by rising commodity prices, could put a damper 
on exports, and there are concerns here about global 
imbalances and the sustainability of the U.S. economic 
recovery.  Even with strong economic fundamentals, Canadian 
GDP growth is projected to lag that of the U.S. in 2004. 
 
17. (U) In addition to worries about exchange rate risk and 
perennial trade disputes, Canadians feel increasingly 
vulnerable to &border risk8.  Exporters worry about 
lengthening border delays due to infrastructure overload and 
to tighter security measures such as prior notice 
requirements.  Application of USVISIT fingerprint and photo 
requirements to Canadian non-citizen residents, and the 
possibility that eventually Canadians will require passports 
to enter the U.S., have sparked public anxiety among 
Canadians.  Businesses fear that future terrorist incidents 
could lead to catastrophic border closings and strongly 
support the GoC,s efforts to strengthen bilateral security 
cooperation.  Continued DHS engagement with Canada via the 
Smart Border Action Plan, the Ridge-McLellan dialogue, and 
regular working-level meetings, is a key element in managing 
this anxiety and addressing underlying problems.  The GoC is 
pushing to accelerate progress and add to the &Smart 
Border8 agenda in its version of the North American 
Initiative, &Beyond Smart Borders8. 
 
Energy Inter-Dependency 
----------------------- 
 
18. (U) Canada is by far the United States' largest foreign 
source of energy.  It is our largest supplier of petroleum, 
as well as our leading external source of natural gas, 
uranium, and electric power.  With Alberta,s oil sands now 
classified as &proven reserves,8 Canada,s petroleum 
resources of 180 billion barrels are second only to Saudi 
Arabia,s. 
 
19. (U) Canada,s northern territories contain large energy 
resources, notably natural gas deposits in the delta of the 
Mackenzie River, several hundred miles east of Alaska,s 
Prudhoe Bay.  The energy industry expects that two gas 
pipelines will be built, one from the Mackenzie Delta and the 
other from Alaska,s North Slope.  As the regulatory 
framework for the Alaska line develops, industry will have to 
determine the pipeline,s exact route both in Alaska and as 
it passes through Canada. 
 
20. (U) Canada's electric power sector is interconnected at 
numerous points with the U.S. grid and has for decades been a 
large supplier of power to the U.S. market.  The U.S./Canada 
Joint Task Force that investigated the August 2003 power 
outage recommended the creation of a North American Electric 
Reliability Organization, which would implement mandatory 
standards for electricity transmission in both countries. 
Canadian players in this industry are intensely interested in 
the shape of proposed U.S. energy legislation, as it affects 
their future strategies. 
 
Environmental Issues 
-------------------- 
 
21. (U) The U.S. and Canada cooperate closely on a broad 
range of environmental issues. Together we have made 
significant progress on key issues, including trans-boundary 
air and water pollution, regulation of pesticides and 
chemicals and protection of the Great Lakes. 
 
22. (C) There are, however, a number of thorny cross-border 
water issues still unresolved, including Canadian demands 
that the U.S. move a derelict fishing vessel (Victoria M) 
mistakenly scuttled in Canadian waters, controversy over the 
proposed clean-up of pollution of the Columbia River from a 
Canadian smelter in British Columbia and North Dakota,s 
plans to mitigate flooding at Devils Lake by pumping water 
through a canal system to the Red River. 
 
23. (C) The Canadians have raised these issues before at 
senior levels and are likely to do so again.  The most 
pressing of these problems is Devils Lake, where Canada 
believes that the state outlet from the lake to the Red River 
would violate the Boundary Waters Treaty.  North Dakota has 
almost completed its canal system and plans to start pumping 
water in the spring of 2005.  Canada has asked for U.S. 
agreement to &refer8 this issue to the International Joint 
Commission for study and recommendations, but we have not yet 
responded to that request.  The Embassy believes it would be 
in our interest to agree to a &reference,8 tightly limited 
in scope and time-frame. 
 
24. (U) Canada formally ratified the Kyoto Accord at the end 
of 2002, despite vocal opposition from some provincial 
governments and industries.  While political approaches to 
the climate change issue have differed between the U.S. and 
Canada, practical cooperation has been close.  In 2002, we 
signed agreements on Renewable Energy and Climate Science, 
and formed a bilateral Working Group on Climate Change.  Few 
Canadians understand just how much we do on climate change, 
reducing U.S. efforts only to Kyoto.  Canada participates in 
several U.S.-led multilateral initiatives, such as the Carbon 
Sequestration Leadership Forum and the International 
Partnership for the Hydrogen Economy.  We expect that they 
will soon join the Methane to Markets Partnership. 
 
Visit Canada's Classified Web Site at 
http://www.state.sgov.gov/p/wha/ottawa 
 
CELLUCCI