Trump is about to eat Canada’s lunch

Canada’s Liberal government has a welcoming message for foreign companies that might be concerned about a protectionist post-Trump America: Come on up, we’re open for business!

Only, not if you’re in the drywall business. Last week Canada’s trade tribunal ruled to uphold punitive tariffs on U.S. sheetrock imports to Western Canada, since they were found to be too cheap. Cheap imports, as president-elect Donald Trump will tell you, come at the expense of certain jobs at home. So maybe our two governments aren’t really so unlike.

Actually, Canada continues to impose “anti-dumping” duties on dozens of imported products in the name of protecting Canadian jobs, from sugar to potatoes to kitchen sinks. Maybe the Liberals have some reason to think Ottawa’s tariffs for appeasing domestic producers are somehow different than the wave of protectionism supposedly just now washing over the U.S. and Europe.

Trade Minister Chrystia Freeland boasted recently that “We are the country today that is most clearly bucking (that) trend,” making this “a tremendous moment to go out and pitch Canada as the best place in the world for foreign investment.” Unless you’re a foreign investor looking for Vancouver real estate, in which case B.C.’s got a tariff for you, too. And if you’re a Chinese oil company interested in resource assets, or a U.S. aerospace company looking at a Canadian satellite maker, or an Australian company looking to buy a Prairie potash powerhouse, our barriers are even higher. As with our airlines, banks and insurers, media and telecom companies, and even fishery, pharmacy, optometry and engineering firms, foreign investment is either blocked entirely or at least severely restricted.

That’s not to blame the Liberals for trying to find ways to market Canada as an attractive investment destination in the new Trump era. But they’d have better luck with improving things investors really value, like lower red tape and taxes. As Trump prepares to use those very things to make the U.S. more alluring — with plans to slash tax rates for businesses and high earners, eviscerate burdensome regulations, and unleash an oil and gas bonanza unshackled from obligations to the globalist climate crusade — the response of the Canadian government has been to assure the world that what we lack in attractiveness, we make up for in personality.

The reaction of the prime minister’s entire inner circle to the shock of Trump’s election has been to reassure themselves that their response should definitely not be rethinking the unattractive policies they’re so deeply invested in, like higher taxes on top talent, higher business costs from new pension and carbon taxes, and yet more complexity in energyproject approvals. Rather, as usual, they see the solution requiring nothing more than their sunny-ways branding. There was Katie Telford, Trudeau’s chief of staff, telling Fortune magazine shortly after Trump’s election: “Consider investing in and expanding in Canada … We welcome all of you.” And Justin Trudeau himself, last month addressing a Calgary business audience — which surely included many investors unconvinced that slapping carbon taxes on oil and gas will help Canadian energy compete against Trump’s drill-baby-drill policy — explained how the power of green thinking can overcome stuffy-old profit considerations. “If the United States wants to take a step back from (climate regulations) quite frankly, I think we should look at that as an extraordinary opportunity for Canada and for Canadians,” he said. “Being strong on the environment and strong on the economy go together,” he added.

One or two folks hearing that comment live-tweeted by reporters dared to publicly question this odd formula equating higher taxes with greater growth. But another top Trudeau insider, senior adviser Gerald Butts, was quick to tweet back that “the smart capital” is hardly “betting long on carbon these days.”

Butts has thought along such lines since long before Trump or even Trudeau, since many years ago when the Ontario Liberals, with his guidance, began assuring Ontarians of the economic benefits of saddling citizens and businesses with everrising and unending climate rules and decarbonizing costs. Today, capital investment in Ontario (after stripping out the government share) is more tepid than a decade ago. Meanwhile, Canadian investment flowing to the U.S. has soared over the same period. So maybe Ontario’s costly climateering didn’t make for such a comfortable business climate after all.

Oh well. Maybe that fleeing capital is just “dumb.” Perhaps those investors are naive enough to believe the International Energy Agency’s recent outlook that projected growing demand for oil out to 2040, saying “investment in oil and gas remains essential to meet demand and replace declining production.” Or they’re silly enough to include in their risk calculations that the subsidy regimes upon which “smart capital” had modelled renewable-energy returns are being frantically rolled back by regretful governments from the U.S. to Europe, with recent subsidy cancellations in the U.K. leading analysts to predict a 95-per-cent collapse in investments in renewable energy.

Not far from 10 per cent of Canada’s GDP relies on the carbon fuels our federal leaders think only dummies want. But smart capital also realizes the only things turning carbon fuels — which remain an unparalleled source of cheap but powerful energy (and still the only one good for shipping) — into an investment worth shorting are taxes and regulations that punish them. As Ontarians know, betting against carbon doesn’t just hurt fossil-fuel producers; it costs every business and consumer that buys energy, too. Our federal leaders might be willing to risk Canada’s prosperity by going short on carbon and long on smiles. But with Donald Trump and Big Oil’s Rex Tillerson set to lead the free world, plenty of global investors won’t want to stake theirs on it.

Among Western governments these days, that supposedly “smart” short position is looking more unpopular every day.