A new President in the United States brings an opportunity for a renewed Canada US relationship. However, it is unlikely that the US strategy will substantively shift. For some time, in response to changes in the global economic balance of power, the US has charted a course away from globalization, and placed a greater emphasis on national capability, self-sufficiency, and security. It is unlikely this approach will change under President Biden. Canada’s economy and security is highly integrated with the US. Therefore, it is important to determine the impact this approach will have on Canada and this critical relationship as a whole. Canada must also explore if pursuing a similar approach would be in our nation’s best interest.
Canada has experienced the changes in the US approach first hand. Punishing national security tariffs imposed by the US on steel and aluminum imports from Canada resulted in an economic hit to the Canadian steel and aluminum industry. Manufacturing jobs in those industries increased in the US as a result.
Changes to the US tax code have incentivized US companies through favourable tax conditions to move manufacturing jobs out of Canada back to the US. Furthermore, during the recent negotiation of the NAFTA agreement, the USMCA, we watched as the US moved away from “free” trade to “managed” trade. This resulted in the imposition of caps restricting the amount of certain goods that can be exported/imported before tariffs are triggered. This is intended to achieve a more equitable balance of trade and to protect US domestic capability. For Canada it will reduce the amount that Canada’s exports to the US can grow.
During COVID 19, the US government has taken one step further by invoking the Defence Production Act to ramp up domestic US Personal Protective Equipment, drugs, and vaccine manufacturing capacity, and restrict external US shipments to ensure their domestic population is addressed first. With highly integrated supply chains between Canada and the US, this has created cause for concern. Canadians are left wondering whether Canada’s supply of these critical items is at risk.
Also facing challenges is our energy industry. President Biden upon assuming office immediately cancelled a key energy project, the Keystone XL pipeline. This decision will affect North American energy supply and thousands of Canadian jobs. Additionally, The Governor of Michigan is seeking to prevent oil and gas from transiting through the Line 5 pipeline under Lake Michigan. Enbridge’s Line 5 affects thousands of Canadian jobs and is a critical energy supply for thousands of households in Ontario and Quebec. Suspension of portions of this pipeline would have a detrimental affect on Canada’s economic and energy security.
Canadian exports to the US in infrastructure and construction services are also in jeopardy. President Biden signed a US executive order entitled “Buy America” which would exclude Canadian bidders from US Government infrastructure projects, impacting a significant portion of Canada’s current revenue.
This direction by the US government is not an isolated incident but rather a trend. The “Roadmap” signed between Prime Minister Trudeau and President Biden outlines a commitment to modernize trade rules, including those related to procurement, to ensure that countries can use their own national taxpayer dollars to spur domestic investments. This in other words would exclude other countries from bidding on government domestic work.
Determining how to mitigate these potential negative impacts or to pivot and consider adopting similar national capability and self sufficiency initiatives must be an urgent focus of all Canada’s political leaders.
Toward this end, the House of Commons approved a Conservative motion to establish a special committee on the economic relationship between Canada and the United States. This committee is responsible to examine and review all aspects of this critical partnership as well as to explore the economic rules, regulatory frameworks and the security concerns of both nations. I am pleased to serve on this committee.
With over $1.5 billion per day in trade between Canada and the US, Canada cannot afford to be complacent. Canada must not assume that the conditions that have been in place for the last 20 years will remain unchanged. The US has signalled the areas they intend to change, in some cases, fundamentally. Canada must define our priorities and decide how we plan to respond. The future of our recovery, and our economic security and prosperity depends upon it.