Chapter 6
Canada in the World

Highlights

Strengthening Canada’s Military

• This budget makes a significant, long-term investment in Canada’s defence capabilities, including:

• an immediate allocation of $270 million this fiscal year for Operation Apollo in Afghanistan and to address urgent capital and other requirements; and

• an ongoing increase of $800 million per year of new funding beginning in 2003–04.

• It also sets aside a $125-million reserve for contingencies in 2002–03 and $200 million for 2003–04.

Ensuring Security at Home

• Budget 2003 builds on the large investment by the Government in 2001 to respond to Canada’s changed domestic security needs. New measures include:

• a reduction in the level of the Air Travellers Security Charge for travel within Canada from $12 to $7 for one-way travel and from $24 to $14 for round-trip travel;

• an additional $50 million next fiscal year and $25 million in 2004–05 for the Security Contingency Reserve to help the Government to respond to unforeseen future security needs, including border security; and

• to ensure the Canadian Coast Guard can provide necessary safety services, $94.6 million over the next two years for major repairs to its fleet for shore-based infrastructure and capital replacement purchases.

Enhancing Canada–U.S. Trade

• Recognizing that cross-border trade is critical to Canada’s economy, Budget 2003:

• supports the implementation of the Canada–U.S. 30-point Smart Border Action Plan to enhance the security of the border and facilitate the legitimate flow of people and goods; and

• commits $11 million over the next two years to bolster Canada’s representation and trade promotion activities in the U.S.

Increasing Canada’s International Assistance

• Budget 2003 confirms Canada’s commitment to meeting its international obligations:

• the budget increases Canada’s International Assistance Envelope by 8 per cent annually through 2004–05 toward the objective of doubling the assistance budget by 2010. This translates into an increase of $1.4 billion this fiscal year and the next two fiscal years; and

• effective January 1, 2003, Canada is providing duty-free and quota-free access to all imports from 48 of the world’s least developed countries, with the exception of certain agricultural products.

Introduction

Canada has a long history of successfully embracing global markets, and Canadians recognize that international stability, security and prosperity are key to their well-being.

Developments over the last 18 months have reminded Canadians that security and prosperity cannot be taken for granted. The global environment requires a military that is funded and equipped to help shoulder its international responsibilities, as our efforts in the war against terrorism, and particularly in Afghanistan, have demonstrated. This budget provides further support to Canada’s military this year and beyond.

New security concerns have demanded action to keep our borders secure, while facilitating the legitimate flow of goods, services and people. In the aftermath of September 11, 2001, the Government introduced a $7.7-billion package of measures to ensure the security of Canadians—the largest in Canadian history. Much has been achieved since then. The Government has moved ahead with important new initiatives in the areas of air, marine and border security and is committed to do more.

The Government has partnered with Canadian businesses to help them make the most of the opportunities available in Canada’s major foreign markets and enter and thrive in new ones. As the pace of global competition quickens, it becomes ever more important that the Government continue to advance the interests of Canadians in active, innovative and responsive ways. This budget boosts Canada’s presence in its most important foreign market, the United States.

The unrest in many parts of the world and the poverty that afflicts so many in the developing world offend Canadians’ values and threaten Canada’s security and economic prosperity. That is why, from its peacekeeping activities to land mine treaties to the G8 Africa Action Plan, to its leadership on debt relief and providing free access to the Canadian market for virtually all goods from the least developed countries, Canada has a rich history of effective, compassionate responses to international challenges. Such actions to combat global instability and poverty are the responsible actions of a country dedicated to helping build strong societies beyond its own borders.

Strengthening Canada’s Military

Sustaining Canada’s Military

Last fall National Defence completed a Defence Update, whose objective was to identify what was needed to sustain Canada’s military in the coming years, and how best to achieve it. In the process, National Defence identified several areas to realize savings through reallocation and other efficiency measures. The Defence Update also indicated that Canada’s military required an increase in its base funding to ensure sustainability.

Budget 2003 provides the military with an additional $170 million this fiscal year for urgent capital requirements, the maintenance of existing capital equipment, spare parts, the purchase of new capital and other expenses.

Budget 2003 also provides $800 million per year of new funding beginning in 2003–04. Taken together with the more than $200 million per year in internal savings that National Defence will identify through reallocation and other efficiency measures, these funding increases should address the sustainability gap identified in the Defence Update.

In addition to the funding increases outlined above, National Defence is one of the few departments that receives an automatic annual adjustment in its base funding level of 1.5 per cent. This increase will amount to a further $150 million a year over the next two fiscal years.

Meeting Canada’s International Security Responsibilities

Canada has an honourable tradition of working with the international community and its allies abroad to keep the peace and respond to threats to global security. In 2001 the Government provided $210 million to support the Canadian Forces in the coalition against terrorism during Operation Apollo. In early 2002 the operation in Afghanistan expanded from a naval and air mission to include ground troops, and the Government provided a further $85 million.

This budget provides an additional $100 million in 2002–03 to cover the remaining costs of Canada’s contribution in Afghanistan to date. Altogether, this $395 million in funding covers the incremental costs thus far of Canada’s participation in the war on terrorism.

On February 12, 2003, the Minister of National Defence indicated to Parliament that Canada was willing to once again send troops to Afghanistan, this time as part of the United Nations mandated mission to maintain peace and security in that country. Given this commitment, and the current climate of increasing global uncertainty, this budget establishes a $125-million reserve for contingencies in 2002–03 and $200 million in 2003–04.

Defence and International Security Funding

Ensuring Security at Home

Strengthening Domestic Security Capability

In the aftermath of September 11, 2001, the Government took action to protect Canadians by strengthening Canada’s domestic security capabilities and contributing to the international coalition against terrorism. It provided substantial ongoing funding for these measures, enabling Canada’s military and associated agencies to respond more effectively to the ongoing challenges of military interoperability, intelligence and the protection of Canadian citizens and the country’s infrastructure.

Securing Canada’s Borders

In 2001 the Government provided $7.7 billion over five years to enhance the personal and economic security of Canadians. Of this amount, $4.3 billion was targeted for increased intelligence and policing, better screening of entrants to Canada, enhanced emergency preparedness and support for the military; $2.2 billion was targeted for greater air security; and $1.2 billion was allocated for initiatives aimed at strengthening border security, facilitating the flow of goods and people and improving border infrastructure. Among other things, this funding has enabled the Government to:

• introduce the permanent resident card system and increase capacity for front-end security screening of refugee claimants;

• operate Integrated National Security Enforcement Teams to gather information to prevent, detect and prosecute criminal offences against national security;

• expand the Canada–U.S. NEXUS system for pre-approved, low-risk travellers at major land border crossings;

• acquire additional x-ray machines, x-ray vans and ion scanners at Canada’s airports and seaports and container examination equipment for high-risk marine containers; and

• implement the Advanced Passenger Information System at Canadian airports to collect advance passenger information.

Security Contingency Reserve

In 2001 the Government also set aside a Security Contingency Reserve of $345 million over five years to allow the Government to respond to future security needs that could not be anticipated at the time of the budget. This allowed the Government subsequently to provide funding for the procurement of smallpox vaccine and related medical supplies, address gaps in Canada’s marine security in light of the events of September 11, and administer visa requirements.

Budget 2003 provides an additional $50 million for 2003–04 and $25 million for 2004–05 to the Security Contingency Reserve to help the Government to respond to unforeseen future security needs. The Government of Canada will continue to work closely with the U.S. to enhance border security in the interests of protecting Canadians and maintaining and strengthening key economic links.

Air Security

Recognizing the security needs of air travellers in Canada after the events of September 11, 2001, the Government provided $2.2 billion through 2006–07 to make the air transportation system even safer and more secure in accordance with rigorous new Transport Canada national standards. As part of the new approach to air travel security, the Canadian Air Transport Security Authority (CATSA) was created to consolidate the delivery of a number of key aviation security services under a single federal authority at 89 airports across Canada.

In April 2002 CATSA assumed responsibility for the delivery of certain aviation security services, including pre-boarding screening of passengers and baggage; the acquisition, deployment and operation of explosives detection systems; financial support for enhanced policing at Canadian airports; and working with the Royal Canadian Mounted Police to provide on-board officers for domestic and international flights. In November 2002 the Government announced new aviation security enhancements. CATSA was given responsibility for the implementation of an enhanced restricted area pass system for Canadian airports and for the screening of non-passengers entering restricted areas at airports.

Air Travellers Security Charge

To fund these initiatives, the Air Travellers Security Charge was introduced, to be paid by air travellers effective April 1, 2002. The charge was established at a level sufficient to fund the expected $2.2 billion of expenditures for the enhanced air travel security system through 2006–07. The Government also committed to review the charge this year and, over time, to ensure revenue remains in line with planned expenditures.

On the basis of this year’s review, in particular taking into account an updated forecast for air passenger traffic and the Government’s change to full accrual accounting, the level of the charge for air travel in Canada will be reduced from $12 to $7 for one-way travel and from $24 to $14 for round-trip travel, effective March 1, 2003. This reduction is consistent with the objective of funding the enhanced air travel security system on a sustainable basis. Annex 3 provides further details about the review and how the new rate was determined.

Marine Security

The Government has implemented a number of new initiatives to enhance Canada’s marine security. It has increased the requirement for advance notice by vessels entering Canadian waters; developed new procedures for boarding ships that present a threat before they arrive at Canadian ports; and, in cooperation with the United States, enhanced security-screening procedures for ships entering the Great Lakes/St. Lawrence Seaway System.

In January 2003 the Government of Canada announced funding of up to $172.5 million for projects that will further increase Canada’s marine security. These projects, funded from the Security Contingency Reserve, include measures to protect our marine infrastructure, increase the surveillance of maritime traffic in Canadian waters, and improve our capability to respond to emergency situations.

Canadian Coast Guard

Canada has the longest coastline in the world and the Canadian Coast Guard has a vital role in ensuring marine safety. For more than 500 years the oceans have made an important contribution to Canada’s economy. Even today a significant percentage of Canada’s international trade is carried by ship. The country’s rivers, lakes and coastlines further benefit the nation’s economy by offering recreational opportunities for millions of Canadians.

To ensure the ability of the Canadian Coast Guard to provide necessary marine safety services, Budget 2003 allocates $94.6 million over the next two years for major repairs for its fleet and shore-based infrastructure and for capital replacement purchases for that infrastructure.

Enhancing Canada–U.S. Trade

International trade is critical to Canada’s economic performance and standard of living. A key element in achieving success in global markets lies in an innovative, responsive and productive domestic economy, capable of exporting products second to none in the world. Just as important is a strategy of energetically engaging in key export markets to promote international recognition of Canadian products and to foster wider understanding of Canada’s global advantage.

Smart Border Action Plan

In December 2001 Canada and the U.S. began implementing a 30-point plan, known as the Smart Border Action Plan, to enhance the security of the shared border while facilitating the legitimate flow of people and goods. Among the more important measures that Canada has adopted in the context of the Plan are pre-approved programs for low-risk commercial traffic and travellers, commitments to streamline driver participation in smart card programs, the creation of joint-targeting teams at five marine ports to examine in-transit containers, the deployment of border enforcement teams, and commitments to manage the flow of refugee claimants. While more work remains, substantial progress has been made in a number of areas, and border agencies from both countries are continuing to work toward full implementation and expansion of the Plan.

Border Infrastructure

To ensure the smooth flow of goods and people between Canada and the U.S., a number of important steps were taken last year to implement the $600-million Border Infrastructure Fund. In August the Government outlined the main features of the Fund. In September $150 million from the Fund was committed to address immediate border infrastructure needs in Windsor, the single most important trade crossing between Canada and the United States. In partnership with the Province of Ontario, this investment will result in $300 million towards improved border infrastructure at Windsor. Efforts to carry through on the Government’s border infrastructure commitment will continue in future years.

Enhancing Our Presence in the United States

With the U.S. accounting for 87 per cent of Canada’s total exports of goods, and nearly $2 billion in trade crossing the Canada–U.S. border daily, further ongoing efforts are required to promote and advance Canada’s trade and economic interests in the U.S., especially in new areas of opportunity.

Budget 2003 commits $11 million in new funding over the next two years to bolster Canada’s ability to actively engage at local and regional levels across the U.S. through the establishment of additional regional offices and an increased consular presence in strategic locations such as the U.S. southwest. This includes the creation of new satellite offices that will focus on specific sectors or issues, and stronger, targeted trade and economic advocacy initiatives. The Department of Foreign Affairs and International Trade, Agriculture and Agri-Food Canada and Industry Canada are working in partnership on this initiative and providing additional resources.

Increasing Canada’s International Assistance

Canada’s responsibility to help the world’s poor is deeply rooted in Canadian values. At the International Conference on Financing for Development, held in Monterrey, Mexico, in March 2002, the Prime Minister pledged to increase international assistance by 8 per cent a year. The Speech from the Throne committed to double assistance by 2010. At least half of that increase will be earmarked for Africa as part of Canada’s support for the New Partnership for Africa’s Development and the G8 Africa Action Plan adopted at the June 2002 Kananaskis G8 Summit.

The Government will implement these commitments immediately. The International Assistance Envelope will be increased by 8 per cent, or $353 million, in the current fiscal year, and by 8 per cent annually in each of the next two fiscal years consistent with the Government’s commitment to double the assistance budget by 2010. These Canadian international assistance initiatives build upon substantial increases announced in recent years. This budget will provide an additional $1.4 billion for the International Assistance Envelope this year and the next two fiscal years.

These additional resources will complete the financing of the $500-million Canada Fund for Africa, which the Government announced in 2001, and will substantially increase funds to support Canada’s long-term commitment to promote sustainable development in Africa and around the world. The increases to international assistance will also allow Canada to:

• continue its leadership in the international effort to reduce the debt burdens of the world’s poorest countries through a further $75 million in support of the Heavily Indebted Poor Countries Initiative;

• participate in the G8 Global Partnership Against the Spread of Weapons and Materials of Mass Destruction, launched at the Kananaskis Summit. At Kananaskis Canada pledged to provide up to $100 million per year over the next 10 years to support this cooperative G8 initiative;

• contribute $72 million over the next five years to international efforts to halt the terrible scourge of land mines; and

• increase funding for the International Development Research Centre by 8 per cent annually over the next two fiscal years in recognition of its world-class reputation for supporting research aimed at finding innovative solutions to challenges facing developing countries.

Improving Market Access for Least Developed Countries

At last year’s G8 Summit the Prime Minister announced that Canada would take an important step to reduce poverty in the world’s poorest countries by eliminating tariffs and quotas on most of their exports to Canada, with the exception of certain agricultural products. This initiative came into effect on January 1, 2003.

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