US embassy cable - 05OTTAWA2108

UNCLAS SECTION 01 OF 04 OTTAWA 002108 
 
SIPDIS 
 
DEPT FOR EB/IFD, EB/OMA, AF/W, WHA/CAN AND WHA/EPSC 
 
STATE PASS USTR 
 
STATE PASS SEC FOR TAFARA 
 
TREASURY FOR OASIA/IMI - NAGOSKI 
 
USDOC FOR 4320/MAC/ON/OIA/JBENDER 
 
PARIS ALSO FOR USOECD 
 
 
E.O. 12958: N/A 
TAGS: EFIN, ENRG, EAGR, EAID, ETRD, CA, NI, Ralph Goodale 
SUBJECT: TREASURY SECRETARY SNOW'S VISIT TO CANADA: "MOST 
USEFUL, HELPFUL AND WORTHWHILE" 
 
REF A) Calgary 331  B) Calgary 196 
 
1. For official use only. Not for Internet distribution. 
 
2.  Summary:  Treasury Secretary Snow's July 7-9 visit to 
Calgary highlighted the strong positive relationship between 
the US and Canada and focused on cooperation in the energy 
sector.  Canadian Minister of Finance Ralph Goodale hosted a 
tour of the second largest petroleum reserves in the world 
(Ref B), followed by informal discussions with business and 
government leaders, bilateral meetings, and two well- 
attended press conferences. 
 
3.  Given the location of the visit, press coverage focused 
on energy:  U.S. investment, concerns about Chinese 
investment (Ref A), and pipeline prospects.  There was also 
interest in the prospects of re-opening the border to 
Canadian beef and on debt reduction in the wake of the G-8 
summit.  Goodale and Snow also weighed in on global 
macroeconomic imbalances, strategic review of the 
international financial institutions, trade disputes, 
corporate governance and the need to support Nigerian 
reformers.  The media ignored some real news, such as 
commitment to conclude revision of the bilateral tax treaty 
by the end of this year. 
 
3.   The visit to the oil sands highlighted the fact that 
Canada is the largest source of energy for the U.S. and that 
we enjoy excellent cooperation in developing North America's 
energy resources.  This was the first cabinet-level visit to 
the oil sands, and the first bilateral visit by a Treasury 
Secretary in over 20 years.  Secretary Snow's comment to the 
 
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press that the visit was "most useful, helpful and 
worthwhile" sums up the tone of the visit, which is intended 
to be the first of annual consultations.  Snow and Goodale 
frequently expressed, both privately and to the press, the 
close and positive working relationship between our two 
countries.   End summary 
 
4.   Treasury Secretary Snow traveled to Calgary, Alberta 
July 7-9 for meetings with Minister of Finance Ralph 
Goodale.  Ambassador Wilkins, on his first official trip 
outside Ottawa, participated in the full schedule and joined 
Minister Goodale in hosting an informal BBQ for business 
leaders and government officials, including the Deputy Prime 
Minister, at the Consul General's residence.  The trip 
featured a July 8 tour of the oil sands in Fort McMurray, 
Alberta, and bilateral meetings on July 9.  Both events were 
followed by well-attended press conferences. 
 
Wide-ranging discussion 
----------------------- 
 
5.  In their opening statements to the press, Goodale and 
Snow explained that this is the first of what they expect to 
become annual bilateral consultations, with the next meeting 
to be held in the U.S.  On the hour-and-a-half flight to and 
from the oil sands in Fort McMurray July 8 they discussed 
the full range of U.S.-Canada economic issues, including 
softwood lumber and the Byrd Amendment, both governments' 
commitment to resolving the restrictions on beef exports to 
the U.S., North American energy security, and commitment to 
complete revision of the tax treaty. 
 
6.  During the bilateral meeting on July 9, they covered 
strategic review of the International Financial Institutions 
(World Bank and IMF), noting that it has been on the 
international agenda for 18 months and that Canada and the 
U.S. intend to do further work together to ensure that the 
institutions remain vital and focused.  They discussed the 
need to send strong signals of support to the Government of 
Nigeria, encouraging reformers there who are working to 
fight corruption and support good governance.  The two also 
covered follow-up to the G-8 summit at Gleneagles, ways the 
U.S. and Canada can continue to enhance cross-border trade 
in financial services, and new rules and regulations related 
to corporate governance that would maintain a robust 
approach but address concerns about unintended impact on the 
cost of capital for small and medium firms.  Details of the 
July 9 meeting are being reported septel. 
 
Energy is the focus 
------------------- 
 
7.  In response to a question on how our governments are 
following up on the G-8 initiatives to encourage investment 
in energy production and increase refining capacity, Goodale 
said Canada relies on successful markets and oil sector 
response.  As oil prices rise, drilling activity increases 
and there is accelerated interest in the northern pipelines. 
The finance ministers had pointed out that other countries 
need to respond too, and there is a role for science and 
technology.  Most press reporting has focused on the energy 
elements of the visit. 
 
Making Carbon Dioxide valuable 
------------------------------ 
 
8.  The Petroleum Technology Research Center (PTRC), a joint 
US-Canada project based in Saskatchewan, provided an update 
on their research showing that carbon dioxide sequestration 
can enhance oil recovery, making CO2 a valuable commodity. 
In response to a question on supporting G-8 comments on 
energy security, Secretary Snow referred to the PTRC's 
project as an example of just the type of research, 
cooperation and innovation that is necessary.  He 
highlighted U.S. investment in research and development, the 
impact of higher oil prices on both exploration and 
conservation, and the energy legislation that is before the 
U.S. Congress.  He pointed out that although there has not 
been a new refinery built in the U.S. since 1976, the 
existing ones have been augmented.  The U.S., he said, is 
trying to encourage greater use of nuclear power and 
pursuing advances in clean coal technology. 
 
Pipeline progress 
----------------- 
 
9.  Regarding the regulatory climate for the Alaska 
pipeline, Goodale said the GOC's first priority is to 
complete the MacKenzie Pipeline in a timely way, with the 
Alaskan pipeline right behind that.  He said that he and 
Secretary Snow had not discussed timing, but the Deputy 
 
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Prime Minister is leading the cabinet process that will 
guide the pipeline projects. 
 
What about China? 
----------------- 
 
10.  The press, on both days, probed USG concern about 
Chinese government interest in energy investment in Canada 
(Ref A).  In response to questions, Goodale and Snow jointly 
stressed the importance of the U.S.-Canada energy 
relationship and their confidence in market forces in 
encouraging investment that will improve energy security and 
support technological innovation.  Secretary Snow reiterated 
his confidence that the GOC would "make a considered 
judgment through the review process" on investments by the 
Chinese government.  Minister Goodale, while emphasizing the 
importance of foreign direct investment and the benefits of 
engaging China in the world economy, noted that the GOC may 
need to "refresh" the Investment Act with an eye to security 
issues. 
 
We agree on Cows 
---------------- 
 
11.  In response to a question on the legal process around 
BSE and reopening the border to Canadian beef, Minister 
Goodale said he has not had a meeting with Secretary Snow 
over the past 18 months where it wasn't discussed, and 
confirmed that Secretary Snow understands the "strength and 
depth of feeling in Canada." Secretary Snow added that the 
USG is seeking to remove the "ill-considered" injunction and 
that this is an issue for the global trading system, not 
just for the U.S. and Canada.  We need, he said, to make 
sure decisions are based on science, not politics.  (At 
dinner the previous evening, Deputy Prime Minister Ann 
McClellan made the same points to Canadian private sector 
guests, reiterating that the USG and GOC are working 
together to solve the problem.) 
 
Tax treaty revision by the end of the year 
------------------------------------------ 
 
12.  Minister Goodale announced progress on the bilateral 
tax treaty revision during his opening statement to the 
press on both July 8 and July 9.  He said both sides are 
committed to completing revision by the end of the year, 
possibly this fall.  Although the press did not pick up on 
the announcement, it will be welcomed by members of the 
American Chamber of Commerce in Toronto who have advocated 
revision for several years. 
 
Strong economies 
---------------- 
 
13.  In response to questions about global macroeconomic 
imbalances, Secretary Snow provided an overview of U.S. 
economic trends and expressed confidence that "the deficit 
is moving in the right direction."  He stressed that the 
President's fiscally responsible policies over the past few 
years have supported strong growth that is "putting us on a 
very good path" regarding the fiscal deficit. 
 
14.  Minister Goodale added that Canada is very proud of 
having enjoyed fiscal surpluses since 1997, giving it the 
best fiscal performance in the G-7.  He added that all G-8 
members face challenges, but noted that the new U.S. data 
(notably employment figures) are very good news. 
 
Development and debt relief 
---------------------------- 
 
15.  In response to a question on debt relief, Minister 
Goodale noted that seven or eight years ago the GOC embarked 
on an initiative to eliminate bilateral debt owed to Canada 
by the poorest countries and said that they are about 
halfway through the process.  So far, including the 
announcement just made in Gleneagles, Canada has committed 
about C$3.6 billion to debt relief. 
 
Comment 
------- 
 
16.  Secretary Snow's comment to the press that the visit 
was "most useful, helpful and worthwhile" sums up the tone 
of the visit.  Snow and Goodale frequently expressed, both 
privately and to the press, the close and positive working 
relationship between our two countries.   Both press 
conferences (on July 8 and July 9) were well attended 
despite the fact that they coincided with the beginning of 
the Stampede, Calgary's biggest event of the year and, as 
the questions above reflect, there was solid interest in a 
wide range of topics.  However, media interest in U.S. views 
on Chinese investment seemed to overshadow some of the real 
news of the visit, such as the commitment to revise the tax 
treaty. 
 
17.  Secretary Snow did not clear this message. 
 
DICKSON