POST-ELECTION: BUSINESS LIKES MAJORITY
Majority government gives ‘an element of comfort’ and stability, says board of trade
British Columbia’s business community is dwelling more on the upside of working with incoming prime minister Justin Trudeau’s Liberal government, such as lower small business taxes and a boost in infrastructure spending, than on potential downsides such as higher tax rates on wealthier Canadians.
“They’ve got to be careful (with higher income-tax rates),” said Iain Black, CEO of the Vancouver Board of Trade. “That might sound good on the surface, but have unintended consequences.”
However, Black said with a majority government Trudeau will have the luxury of time to think more about how he will implement his promised tax increase on higher-income families, and that kind of stability is perhaps more important to business.
Black said if there is something that makes “the business environment unhappy,” it is the unknowns that would have come with a minority government, particularly one split between the Liberals and the NDP.
“The business community has an element of comfort in having a majority government of some kind,” he said.
So far, the statements that Trudeau has made on business issues, whether his cautiously supportive comments about international trade in relation to the Trans-Pacific Partnership or the promised $200-million-per-year spending to develop innovative clean technologies in forestry, mining and energy, have been welcomed in B.C.
Black said getting a commitment from Trudeau on the TPP, the trade deal between 12 Pacific-Rim countries representing 800 million people and 40 per cent of the global economy, is a priority for B.C.
“We have already diversified our trade away from the U.S. of A.,” Black said, more so than other provinces, and the TPP would give B.C. businesses a chance to quickly ramp up trade within established relationships, particularly in rapidly growing markets such as Vietnam and large, mature markets such as Japan.
Critics of the deal have slammed it for its potential impact on the auto manufacturing sector, which fears the loss of 20,000 jobs, and the dairy sector, which has to give up access to imports within its supply management.
However, losing the deal and barrier-free trade within its member markets “would be an enormous setback for us,” Black said.
Even the Liberal estimate of running $10-billion-per-year deficits for three years to boost government spending on infrastructure doesn’t faze normally debt-averse business groups.
In B.C., Black said some of the spending preferences would include expansions to rapid transit, a replacement for the George Massey tunnel and continued port expansion.
“If that is how they’re going to run up the deficit, the business community is much more comfortable with that,” Black said. “They see it as an investment.”
Such projects would deliver a welcome economic boost to B.C. while it is suffering the effects of the downturn in global commodity markets, said Ken Peacock, chief economist for the Business Council of B.C.
“Our preference would be for them to balance budgets,” Peacock said, “but in the context of $10-billion deficits, those aren’t unusually large deficits, and are manageable,” especially considering existing low interest rates.
Resource industry groups welcomed the prospect of finalizing the TPP, but also signalled intentions to push the Liberals on other issues.
“To echo Premier Christy Clark, we need to make a new softwood lumber agreement with the U.S. an immediate priority,” said David Elstone, executive director of the Truck Loggers Association.
In mining, the Liberal government needs to understand that the sector is in a vulnerable position in a prolonged downturn that has caused several mines in B.C. to indefinitely close, said Karina Brino, CEO of the Mining Association of B.C.
Reviewing the federal environmental assessment process to improve its credibility is another of Trudeau’s promises, and Brino wants to make sure that the mining community is part of the discussion about what she characterized as a “solid and rigorous” regulatory system.
“This isn’t just about profits, it’s about jobs,” Brino said.
Gavin Dirom, CEO of the Association for Mineral Exploration B.C., said his group will encourage government to finalize the inclusion of environmental assessment costs and First Nations consultations into the capital-cost-allowance tax breaks for mining, a measure that was initiated by the Conservative government but not completed.
AME B.C. will also be lobbying government to increase the share flow-through tax credit to investors in junior mining projects to 30 per cent from its current 15 per cent, “to attract risk capital back into mining,” Dirom said.