Morneau budget short on fiscal responsibilities
Bill Morneau is perhaps an influential figure in Prime Minister Justin Trudeau’s cabinet, but he’s no finance minister. Given the budget he presented two weeks ago, he may be more of a social justice enabler.
Supporting more diversity, equality and inclusiveness is critical to the betterment of our society, but most Canadians expect more from a finance minister.
There were no plans to balance the books and few details were given on the government’s plan to deal with NAFTA’s possible demise.
Washington’s new trade restrictions, including a 25 per cent tariff on imported steel and a 10 percent duty on aluminum, could be the beginning of a trade war.
Despite recent trade deals signed by Canada, the world seems at odds with open trading, and instead everyone wants to protect their domestic markets. This is a dangerous path, given that agriculture and food are often considered the most vulnerable sectors when it comes to trade barriers. Tariff or non-tariff barriers can make a major dent in an economy almost instantly, and consumers are often affected the most.
U.S. President Donald Trump is opting against trade. He sees it as a zero sum game and given the economics of our country, Canada cannot win many trade wars, especially not with the U.S.
We are already witnessing how a trade war could affect the Canadian agri-food sector, as Canadian pulse farmers brace for some major trading headwinds with India. Some political opponents link our prime minister’s recent visit to India with its decision to increase its tariff on chickpeas from 44 per cent to 60 per cent. This decision comes after India introduced a variety of tariffs on pulse crops, including lentils, peas and chickpeas. These are growth sectors for our economy. Canadian pulse exports to India are worth over $1 billion.
There is considerable consensus around the world that trade wars can backfire and support inefficiencies that eventually hurt consumers. Trade barriers, which often remain scientifically unjustifiable but politically motivated, make economies weaker and less competitive. Duties may look like an attractive, simple mechanism to protect domestic interests, but they are an expensive way to retain jobs.
However, Canada doesn’t have an immaculate record either. Canada applies heavy duties on many imports, such as dairy products, poultry and eggs. These duties are embedded into our supply management regime, which is considered by many as one of the most protectionist policies in the world. In some cases, duties exceed 300 per cent.
The awkwardness of asking trading partners for exemptions is palpable.
Yet what remains underappreciated is how intertwined our economies are. Duties in one sector will affect the ability of other sectors to trade. It is difficult to link steel and aluminum with dairy and poultry, but the connection is likely there.
This could easily worsen, which spells trouble for an open economy like ours. Given our abundance of resources and knowledge, we have plenty to share. Almost 60 per cent of our economy is trade-driven.
Morneau shortchanged Canadian taxpayers last week with his budget. The government’s focus on equality would have been better served at another time. We should not be shocked to see Ottawa unprepared for Washington’s wrath toward its trading partners.
Upholding equity values for our country is undoubtedly noble, but the government could fall short on its social promises if it runs out of cash. Sylvain Charlebois is professor in food distribution and policy, and dean of the faculty of management at Dalhousie University.