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Cablegate: Treasury Secretary Snow's Visit to Canada: "Most

This record is a partial extract of the original cable. The full text of the original cable is not available.

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
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

SIPDIS
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

SIPDIS
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

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