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September 21, 2007
HP-569

Paulson Remarks on Signing of Update to U.S.-Canada Income Tax Treaty

Chelsea, Quebec--Thank you for your kind remarks, Minister Flaherty. It is a pleasure to join you in marking this important day.

Today, we are signing a protocol that is the fifth update to the tax treaty originally signed in 1980.   Mutually beneficial tax agreements between the United States and Canada have a long tradition, dating back at least to 1928 when our countries signed an agreement on the taxation of income from shipping.

Our existing tax treaty is a significant part of the U.S. – Canada relationship.  It strengthens our economic relations.  It promotes growth and investment.  These treaties have evolved as the ties between our nations have grown stronger. 

We share not only a 5,500 mile border, we share a commitment to trade and open investment.  By further reducing barriers to cross-border activities for U.S. and Canadian taxpayers, this updating of our treaty enables us to move even more swiftly in the dynamic global economy. 

Our countries have the largest bilateral trade relationship in the world, with total exports and imports exceeding $530 billion in 2006.   Canada is the United States' largest single-country trading partner.  The Ambassador Bridge that links Detroit and Windsor is the largest trade link in the world --- 7,000 trucks cross daily, carrying goods worth more than $120 billion per year. 

The vast majority of our cross-border trade flows without difficulty.  We share Canada's commitment to a "safe, secure and efficient" border, and we have learned that security and efficient flow of legitimate trade and travelers are not mutually exclusive.

This robust economic relationship with Canada is vital to continued growth in America, and the U.S. Congress has the opportunity to generate even more opportunities by approving the pending Free Trade Agreements with Peru, Colombia, Panama and South Korea.  Our deep, beneficial ties with Canada clearly demonstrate the value of global trade and investment.

This updating of our treaty represents the welcome culmination of many years of dedicated work by officials in both Canada and the United States, and it is an honor to be here on behalf of those whose efforts made this possible.  Both countries worked very hard to find a balance of priorities and goals that will benefit our citizens.

I want to express my appreciation for Minister Flaherty's advancement of a mutually respectful and productive collaboration between our countries.  He was instrumental in our ability to reach agreement on this treaty and, during the recent turbulence in financial markets has proven to be a sure and steady hand on Canada's economic keel. 

As Minister Flaherty mentioned, this protocol includes several important provisions.  It eliminates the withholding tax on cross-border interest payments and updates tax rules on pensions for workers who cross the U.S. - Canada border.  It also updates and clarifies the existing treaty in areas such as the treatment of partnerships. 

There is also a provision for arbitration of unresolved double-taxation cases; this will lead to more expedient and efficient resolutions of these cases. The inclusion of an arbitration provision is a new development for the United States.

I look forward to working with the Senate Foreign Relations Committee to have this protocol ratified by the full Senate as soon as possible.  I also appreciate the work the Foreign Relations Committee has done in reviewing the other four tax agreements that President Bush has sent to the Senate, and I am hopeful that they will be ratified very soon.

The U.S. – Canada economic relationship is also characterized by substantial mutual investment; 11 percent of U.S. direct investment abroad is invested in Canada.  In turn, Canada is a dominant investor in the United States, representing 9 percent of total foreign direct investment in our country.   We welcome Canadian investment; it is the ultimate vote of confidence in the U.S. economy. 

We reciprocate that confidence --- the natural result when we are committed to economic cooperation.

Minster Flaherty and I also share a commitment to environmentally sound business practices, and to preserving our abundant natural heritage for generations to come.  So it is particularly appropriate that we are here in beautiful Gatineau Park.

Thank you for your hospitality today.  I look forward to working in partnership with you to bring this agreement into force, and on economic issues that will surely arise in the future.

REPORTS

• Fifth Protocol to the U.S.-Canada Income Tax Treaty of 1980