A group of influential business and academic leaders want Canada’s government to boost trade ties with China and other Asian nations in a bid to offset any collateral damage caused by U.S. President Donald Trump’s protectionist policies.
Finance Minister Bill Morneau’s Advisory Council on Economic Growth is set to unveil the proposal and other recommendations Monday morning. BNN previously reported the report would be released as early as this week.
The trade proposal is one of five new areas the group is recommending the government focus on in an effort to improve Canada’s long-term economic prospects. According to the source, the four others areas earmarked for improvements center around boosting innovation, industry growth (by improving R&D and regulation in sectors that will help the economy grow), worker skills, and workforce participation.
The Advisory Council’s desire to see broader trade relations has increased since Trump’s election win in November, according to the source. While the leaders are hopeful Canada’s relationship with the U.S. can strengthen, they believe the potential risks from protectionism should not be taken lightly.
“I think the Advisory Council is hitting all the right issues,” Former International Trade Minister David Emerson told BNN in a phone interview. “We do need to strengthen our ties with the Asian Pacific regions and start to take advantage of Canada’s position in world, particularly with nations like China and India,” said Emerson, who is currently chair of the Asia Pacific Foundation of Canada.
After taking office last month, Trump quickly pulled out of the Trans-Pacific Partnership, crippling a deal that would greatly increase trade between Canada and Pacific Rim countries. Moreover, along with Trump’s plan to renegotiate the North American Free Trade Agreement there’s an ongoing fear tied to a potential border adjustment tax on imports. National Bank estimates a tax would result in a nine per cent drop in Canadian exports, causing a 1.5 percentage point hit for GDP growth.
“Anything Canada can do to diversify our trade partners is, especially, in this environment a very good thing.” former Quebec Premier Jean Charest told BNN in an email. “To diversify our trade towards Asia makes total sense. We should go to where the world’s middle class will be living and spending,” said Charest, a partner in the Montreal office of law firm McCarthy Tétrault, who previously played a key role in the creation of the Canada and European Union Comprehensive Economic and Trade Agreement (CETA).
The Advisory Council’s planned announcement comes as Morneau considers making a trip to Washington later next week, according to another source familiar with the finance minister’s plans. That trip may depend on whether lawmakers confirm Trump’s pick for treasury secretary, Steven Mnuchin. A confirmation could set the stage for a meeting between the two finance leaders. “Minister Morneau and our staff are engaged with counterparts and officials in the United States, and the minister is planning a visit to Washington in the near future. A date will be announced once details are formalized,” Annie Donolo, press secretary to Finance Minister Morneau, told BNN in an email.
Along with China, the Advisory Council is expected to propose stronger trading relationships with India and Japan. As well, the group of experts will push for more transportation infrastructure, such as ports, that can meet the needs of new trade ties with Asian nations.
CANADA'S ASIAN EXPORTS (IN MILLIONS, SOURCE: STATSCAN)
|COUNTRY||NOV. 2016||OCT. 2016||NOV. 2015||M/M CHANGE||Y/Y CHANGE|
“It’s in Canada’s interest to increase market diversification,” said Christopher Sands, director of the Center for Canadian Studies at Johns Hopkins University in Washington, D.C., in a phone interview with BNN. “Nobody wants to give up on the U.S., but if you can get into new markets, that’s great. So I think that it’s good advice.”
Finance Minister Morneau established the Advisory Council last March as part of a plan to help the government in "finding ways to overcome the challenges posed by an aging population as Canada seeks to achieve sustainable, long-term growth." The 14-member panel is chaired by Dominic Barton, who heads up the global consulting firm McKinsey & Co. Other panel members include Cenovus CEO Brian Ferguson, Caisse de dépôt et placement du Québec CEO Michael Sabia and McGill University Principal Suzanne Fortier
Barton told BNN in November that new trade relationships are essential to Canada's future economic growth. “We have to broaden our trade linkages, particularly with Asia,” Barton said at the time. “We can't just be focused on north-south.”
The Advisory Council also plans to recommend business leaders play a more active role in explaining the important trading relationship between Canada and the United States. An example of that was on display recently at Prime Minister Justin Trudeau’s cabinet retreat in Calgary. Blackstone CEO Stephen Schwarzman, a billionaire businessman, was in attendance. Schwarzman is chairing Trump’s newly-formed economic advisory group and spoke of the administration’s “unusually positive view” of Canada. "Canada has been a great partner for the U.S. for as long as anybody can remember. There may be some modifications, but basically, things should go well for Canada,” Schwarzman told reporters.
Next week’s expected announcement from the finance minister’s Advisory Council follows an initial wave of recommendations in October. Those included creating an infrastructure bank, increasing foreign direct investment in Canada, and boosting immigration to help fill a skills gap. Efforts are underway to implement all three of those recommendations. Late last year, Morneau and other Cabinet ministers from the Trudeau government helped raise awareness around Canada’s investment landscape at an investor summit in Toronto. More recently, the government hired Boston Consulting Group’s Kilian Berz to help attract more foreign investment
Five new recommendations from the finance minister’s Advisory Council on Economic Growth:
The Advisory Council is expected to recommend a focus on boosting innovation, particularly through increased collaboration between various stakeholders (such as researchers and venture capitalists). Council members believe increased collaboration could help Canada increase the level of commercialization tied to innovations. These recommendations are expected to be tied to the existing initiatives under Minister of Innovation, Science and Economic Development Navdeep Bains.
The Advisory Council has identified sectors where Canada is a global industry leader or has the capability to become one. They include Agri-Food, Health and Life Sciences, Mining, Energy, and Tourism. In addition, the Council suggests a review of the potential demand and job growth for each of these sectors, as well as a focus on ways to further fuel growth through increased R&D or reduced regulatory barriers.
One of the key recommendations is for Canada to diversify its trade relationships. In particular, the council has pointed to increasing trade ties with China, India and Japan. As part of this, the Council is recommending that Canada needs to invest in the right transportation infrastructure (from ports to rails) to ensure these new trade agreements tied to Asia can be best pursued.
The Council is also encouraging Canadian business leaders to play a more active role in explaining the important trade relationship between Canada and the United States. This could be a way to improve ties between the two countries at a time when protectionism is a growing threat.
Given Canada is home to one of the fastest aging populations in the OECD, the Advisory Council is recommending more Canadians who are capable of working become active in the workforce. Four groups are expected to be highlighted: Canada’s indigenous population, lower-income Canadians, people over the age of 55, and women with children.
The Advisory Council sees a need to boost the skills of Canadians who are currently working. With automation rapidly transforming the workplace, the Council is expected to recommend ways to ensure millions of Canadians can stay in the labour force. One idea is to create a future skills lab, where companies can collectively pilot projects that may help them re-train their employees for a more digital corporate world.