The perks and limits of cosying up to Washington
Prime Minister Justin Trudeau’s full court visit to Washington augurs well for Canada’s perpetual task of making an impression on the neighbours in the sprawling mansion. Whether this new cosiness can survive a future Republican administration should not obscure the competitive gains being racked up on the world stage by a dashing digital-age leader of what used to be a worthy initiative of a nation. Canada can always use whatever edge it can find.
The U.S. remains the destination for three-quarters of Canadian exports. We are currently leveraging its stronger economic growth as a freebie stimulus policy. It continues to fight the world’s battles against the likes of Daesh (also known as ISIS or ISIL).
All good. But we shouldn’t forget that the United States can be a fickle neighbour, even toward a little brother with whom it shares geography and similar values. The latest revival of the softwood lumber issue provides a handy reminder.
So while we definitely want to be better friends with our best friend in the world, we desperately need more friends. These need to be mutually reinforcing goals.
Affection between the prime minister and President Obama aside, long-term economic and political developments in the U.S. are not trending well for Canada. The political ones are obvious. Donald Trump, with his mania for masonry, isn’t the only American politician speaking of erecting walls rather than expanding bridges. Even Hillary Clinton, one should remember, was quick to point an erroneous finger at Canada after 9/11.
Economically, the U.S. recovery is only robust compared to the state of anemia elsewhere. Wages remain stuck and par- ticipation in the workforce hovers below 60 per cent. Moreover, Canada simply isn’t as strategically important to the U.S. as it once was. Not unimportant. Just not as important.
Witness oil, the one export we could count on and the main U.S. demand in the 1989 Free Trade Agreement. The astounding rise of U.S. shale production means Canadian petroleum no longer gets a free pass. Our oil exports are heavily discounted. Without shale, Keystone would indeed have been a no-brainer. With shale, Canada, even while remain- ing the largest foreign supplier of crude to the U.S., carries less weight.
On the border, Canada is apparently making encouraging progress in its 15-year quest for a smoother flow of goods and people. Here’s where positive personal relations between leaders helps. Still, U.S. security anxieties have never abated post 9/11. Today, the longest undefended border in the world is a relic of our school-day imagination, and Congress is likely to be wary. Even on this side of the border, we have yet to hold a full and frank discussion about the sovereignty trade-offs we might tolerate for a leaner border, such as greater information sharing and pooled policing power.
While Canadian prime ministers must always be in the business of finding common cause with our powerful partner, as now is the case with climate change, this should not distract us from the need to diversify into other markets and to build up Canada’s capability to create high-value exports the world wants. Despite a flurry of free-trade deals, we have fallen behind competitors in penetrating foreign markets, particularly beyond commodities. We have fewer innovative products on offer from fewer global champions. To succeed globally, Canada needs to think anew about policies that develop our resourceful businesses, to borrow a phrase, and restore confidence in decision-making around resource industries.
Finding the right policy approaches to generate greater, politically sustainable growth, is a key area of concentration for the Public Policy Forum. Canadians have seen good public policy make a difference throughout our history. This was true in building a transcontinental pipeline and St. Lawrence Seaway; negotiating an Auto Pact and Canada-U.S. Free Trade Agreement; investing in a broad-based post-secondary education system and opening our doors to refugees and immigrants, with their ingenuity and drive.
Imagine in our 2-per-cent growth world that the adoption of smart policies — making us more innovative in knowledge, services, manufacturing and resource extraction — can add even a paltry one-third of1per cent a year to GDP. That would translate into an economic pie nearly $1 trillion larger than otherwise would have been the case by our 200th birthday. A trillion dollars can deliver a lot of social good.
So let’s have a good week in Washington making friends and advancing Canada’s interests. But let’s not get distracted from the work back home at manifesting our own destiny.
While we definitely want to be better friends with our best friend in the world, we need more friends