Canada-U.S. relations are very simple and very complex: our closest neighbour, our biggest customer is also the most powerful nation in the world, rumors of its demise notwithstanding.Mr. Biden likes Mr. Trudeau, that’s a good start. “Best buds” is a long way off. Canada’s best bet to make it so will be to do what we do best — proactively offer solutions to Biden that will also help Canada. Mr. Biden’s problem-solving starts at home — COVID recovery, which includes both a medical and an economic component, then issues such as immigration reform and movement on social and racial justice. Trade, procurement and climate are a little further down the list – all have the potential to create friction with Canada. The Canadian Global Affairs Institute (CGAI) puts our bilateral issues into three baskets:
• defence and security;
• trade and the border;
• energy, environment and climate.
Defense and security are outside my economic bailiwick; suffice to say that Canada and the U.S have worked closely on this file for close to a century — think the North American Aerospace Defense Agreement (NORAD), the North Atlantic Treaty Organization (NATO) and several other agreements. When and how the border will reopen is still unknown. Says CGAI, “it seems likely that in addition to defense and security, public health will now be part of the screening process.” Could Canada help with Biden’s domestic agenda by offering to work with his administration around the delivery of COVID vaccines to the developing world? Could our experience in community health be of interest?
On the trade side $2.6 billion worth of goods and services cross our borders every day. (Pre-COVID, half a million people crossed the border every day too.) More than 1 and-a-half million American and 2 million Canadian jobs are directly related to this trade. Says Robert Asselin, Senior Fellow, Munk School of Global Affairs and Public Policy, “Our access to the biggest market in the world requires a permanent campaign by all levels of government working with business, labour and civil society to fend off the forces of protectionism at the local, county, state and national levels. Canada needs to leverage off this domestic agenda and identify the natural fits. (Biden’s)“building back better” and the trillion-dollar infrastructure plan come with the protectionist promise of “Buy American.” We need to persuade our neighbor of the benefits of continental collaboration on resilient, clean infrastructure, including our shared network of pipelines and electrical grids.”
The energy relationship is vital to both countries – electricity generated in Quebec literally lights up Broadway. Canada is the largest source of U.S. energy imports and the second-largest destination for U.S. energy exports. Mr. Biden has said he will cancel the Alberta-Nebraska Keystone XL pipeline, a project that is fully supported by Mr. Trudeau. The plan commits to spending US$300 billion on research and development – including electric vehicle technology, lightweight materials, 5G and artificial intelligence.
His climate change policy indicates that Canadian exporters of carbon-intensive products to the U.S. will be less welcome. The plan also includes US$2 trillion in spending over four years in clean energy, transportation and infrastructure, and sets the goal of 100 per cent of the country’s electricity generated by carbon-free sources by 2035.
These promises are the kick in the butt Canada needs to develop clear public policy objectives related to competitiveness, productivity and, ultimately, rising living standards for all Canadians. Says Asselin, “Policymakers can no longer think about economic growth and public policy in the same way as in the past generation and a half. The rules of the game have changed, and countries are responding by moving swiftly to assert their competitive advantage.” He points out that the new North American trade accord (USMCA) includes a competitiveness committee that we need to activate and harness for continuous improvements. “Canada should match Mr. Biden’s industrial policy framework with one of its own. Such an approach would challenge the Canadian government to think coherently about its economic policies and prioritize the sectors and technologies in which we have pre-existing advantages, where we can gain global market share and produce economic value for the country. Think agri-food or energy, but also emerging sectors, such as advanced manufacturing and clean technology.”
It’s not just Mr. Trudeau who must try for “best buds” with Mr. Biden — our premiers and legislators need to continue their own outreach to their American counterparts. They played a critical role in persuading their gubernatorial counterparts to sign on to a Canada-U.S. reciprocity agreement as part of the recovery from the 2008-9 recession.
Mr. Biden faces a split Congress: control of the Executive and the House, but probably not the Senate. That’s how Wall Street likes it – little possibility that the extreme edges of policy can run away with spending. Mr. Biden has close to 5 decades of hands-on experience in the U.S. system — he knows how to get legislation done. The first clue to whether he’s on the right track will be his choice of Cabinet personnel, which needs Senate approval. Canadians should wish him well with one hand and push Mr. Trudeau to articulate a modern industrial policy with the other.
Dian Cohen is an economist and a founding organizer of the Massawippi Valley Health Centre.