The events of recent weeks may have finally shattered Canada’s economic complacency. U.S. President Donald Trump’s imminent disruptive trade agenda has sent shock waves through our political class, fuelling anxiety across the country.

This external threat should also force a long-overdue reckoning with Canada’s deeper, self-inflicted economic vulnerabilities. The crisis we face is not just about U.S. tariffs; it is about the fragility of our economic foundations and the urgent need to act decisively to rebuild them.

Shifting political economy alliances and the pressing challenge of demographic pressures are unforgiving realities we must confront. Persistent domestic challenges – low innovation, stagnant productivity and declining competitiveness – have left Canada ill-prepared to navigate this moment.

Real gross domestic product per capita has now declined in eight of the past nine quarters, retreating to levels last seen in 2017. To return to its pre-pandemic trajectory over the next decade, GDP per capita would need to grow at an average annual rate of 1.7 per cent, a marked departure from current trends.

Productivity growth is a cornerstone of economic health, but it has averaged just 0.8 per cent annually over the past two decades, compared to 2 per cent in the United States. Intellectual property products investment per Canadian worker provides sobering examples. In 2008, Canadian business spending on these products was about $2,000 per available worker, compared with about $4,000 in the U.S. In 2023, the Canadian figure had crept up to about $3,000, while the U.S. figure soared to more than $10,000.

So, it’s 30 cents versus $1.

Canada is in an economic emergency. Rather than being paralyzed by external pressures, we must focus on what we have the agency to control: a long-term economic growth agenda which will build resilience from within.

History offers powerful lessons on how existential threats can drive transformation. In 1957, the Soviet Union’s launch of Sputnik – the world’s first satellite – exposed the U.S.’s technological vulnerabilities, spurring swift and decisive action. Washington’s creation of the Defense Advanced Research Projects Agency (DARPA), paired with massive investments in science and technology, repositioned the U.S. as a global leader in aerospace, computing and communications. DARPA’s innovations – GPS, the internet and more – became the backbone of U.S. economic and technological dominance.

The Netherlands faced a similar reckoning at the end of the Second World War. The Dutch Hunger Winter of 1944-45 revealed the fragility of the nation’s food systems, prompting a transformative response. Strategic investments in agricultural research, sustainable practices and public-private partnerships turned the Netherlands into a world leader in agricultural innovation. Today, despite its small size, the country exports more than €100-billion (more than $149-billion) in agricultural goods annually.

Israel provides yet another example of necessity-driven innovation. Surrounded by hostile neighbours and limited natural resources, Israel embraced a culture of ingenuity, investing strategically in defence, water management and cybersecurity. Israel’s high-tech industry now accounts for nearly 15 per cent of GDP and more than 40 per cent of exports, demonstrating how existential threats can inspire world-class innovation.

Canada now stands at its own crossroads. The external pressures from protectionist U.S. policies, combined with internal stagnation, demand an urgent and commensurate response. This moment must be used to focus on our country’s engines of growth.

For decades, Canadian policy-makers have been warned about structural issues that are holding us back, such as interprovincial trade barriers, regulatory gridlocks and tax competitiveness. Yet little progress has been made.

Competing in advanced industries – including biotechnology, aerospace, energy technology, cleantech and advanced manufacturing – is critical for modern economies. These sectors are key drivers of innovation and productivity, fuelling economic growth and creating high-wage, future-oriented jobs. Yet Canada’s current science and technology ecosystem is not delivering innovation at the pace of its global peers.

For Canada to catch up, it must focus on creating mechanisms that translate its public research and development investment in intellectual capital into private-sector innovation. This requires building institutions between the public and private sectors to bridge the gap between discovery and commercialization.

As U.S. economist Alex Tabarrok recently noted, “Canada’s best chance to stay at the forefront of technology lies in exploiting its comparative advantage. Artificial intelligence offers the potential to dramatically increase the rate at which profitable mines are discovered, while industrial robotics and automation represent the future of mining. Similarly, agriculture is becoming a high-tech industry, integrating advances such as genetic engineering, robotic laser weeding, and satellite-based crop monitoring.”

Canada’s comparative advantages are not limited to mining and agriculture. We have huge upside potential in advanced materials, energy technologies (including nuclear) and biotechnology.

As history shows, resilience and innovation often emerge not from comfort but from necessity and emergency. This is Canada’s Sputnik moment, its Hunger Winter, and its test of ingenuity and resolve. If we do not take responsibility for addressing our structural economic weaknesses, who will? And if we do not act decisively in this moment of economic emergency, when will we?

The post Now is the winter of Canada’s economic reckoning appeared first on Business Council of Canada.

With the January 20th inauguration of Donald Trump now upon us, the world is returning to an era of realpolitik. Canada is faced with a highly turbulent geopolitical context where, to paraphrase Lord Palmerston, there are no permanent friends or enemies, only permanent interests.

Canada’s interests are not defended by being good at convening. They are advanced with the soft and hard power that comes from having an abundance of the energy, food, and resources that your friends and enemies need.

It is right and good for Canada to leverage its abundant resources to advance our interests because our interests are benign. We want our citizens and our allies to be prosperous and secure. Inasmuch as we have the ability to accomplish that, it would be a dereliction not to.

Canada will have an election sooner rather than later, and the likely winners, Pierre Poilievre’s Conservatives, have indicated they have every intention of making Canada a resource superpower. Here are some suggestions to achieve their goal.

1. Build more pipelines

Canada has the world’s third-largest oil reserves and an almost unlimited supply of natural gas. Most of this is concentrated in the prolific Western Canada Sedimentary Basin. Getting more product to tidewater, where it can access the highest bidder in global markets, would not only provide good jobs, government revenues, and foreign exchange earnings; it would provide Canada with more soft power on the world stage and reduce our economic dependence on the U.S.

Building new export pipelines in Canada will be a complicated business no matter which government is in power, so best to stick with the projects where the initial legwork has largely been completed: Prince Rupert Gas Transmission and Northern Gateway. Get these built by 2030. Filling up Trans Mountain and Coastal Gas Link, and optimizing the Enbridge Mainline system, will give us room until then.

2. Reform the Impact Assessment Act

The “No More Pipelines” bill turned out to be the “No More Anything” bill; since the IAA was passed in 2019, only one project, Cedar LNG, has been approved under its auspices. Not only has it stymied investment in electricity generation, pipeline infrastructure, and the development of mines, it’s also caused deep rifts with the provinces because, as affirmed by the Supreme Court of Canada, it is unconstitutional.

Going back and forth with competing environmental legislation every four or eight years won’t win Canada back more investors. What’s required by the next federal government to improve the investment landscape and get things built is simply to abide by the Constitution and stay in its jurisdictional lane. In practice, this means projects should have just one assessment and one decision maker, according to the separation of powers determined by the Constitution.

Provinces should conduct environmental assessments for mines, oilsands projects, refineries, power generating facilities, and intra-provincial pipelines. Inter-provincial and international pipelines and transmission lines should be assessed by the Canadian Energy Regulator. Nuclear projects should be assessed by the Canadian Nuclear Security Commission (CNSC). Railroads, marine terminals, offshore, and other projects on federal lands that meet certain thresholds should be assessed by the Impact Assessment Agency of Canada.

Separate from project approvals, the federal government will still be responsible for issuing permits to control and mitigate effects within their jurisdiction, such as on fish and migratory birds; it should become more efficient in doing so.

All of those agencies, provincial and federal alike, should focus on being more transparent and responsive, and excel in their duty to consult and accommodate Indigenous rightsholders. World-class regulatory agencies protect us from risk, not progress.

3. Go Nuclear

Canada has the world’s richest uranium reserves. Saskatchewan’s Athabasca basin already provides 20 percent of the world’s uranium supply, and several expansions and new mines are slated for the region. Nunavut has a sister basin, the Thelon, with similarly high grades which have not yet been tapped.

These resources will be essential for the burgeoning nuclear renaissance, driven by demand for energy security, clean baseload electricity, and the ravenous needs of AI and data centres. Thirty-one countries have endorsed a declaration to triple nuclear energy capacity by 2050.

The next government should support the expansion of uranium mining, for example by ensuring timely regulatory processes via CNSC.

But beyond exporting Saskatchewan uranium, Canada can be a nuclear energy powerhouse across the value chain.

Ontario already exports nuclear services, equipment, and technologies for CANDU reactors. It is now expanding to small modular reactors, which OPG is leading the Western world in developing at its Darlington site. Eastern Europe is the best near-term market for nuclear co-operation, but eventually we should expand beyond even there.

The next logical step is for Canada to plan to enrich uranium, for domestic and export purposes. As the Western world seeks to build up nuclear capacity, Canada is the most obvious candidate to become a new supplier of enrichment services—currently a very small club. Cameco, the Saskatchewan-based uranium miner, already refines and converts uranium, and fabricates nuclear fuel bundles for CANDU reactors. But these use natural, not enriched, uranium in their plants. The BWRX-300s being constructed by OPG will require enriched uranium, as will any future micro and small reactors used in Canadian remote communities and for industrial applications.

Enrichment in Canada would support global diversity of supply in a way that would preserve non-proliferation efforts, while also ensuring our own domestic energy supplies. Cameco is already developing next-generation, laser-based technology for commercial application in enriching uranium.

Building enrichment capacity within Canada would require diplomacy with the Nuclear Suppliers Group and coordination with the International Atomic Energy Agency. Canada likely won’t begin enriching uranium within the next government’s term, but it should secure the endorsement of our allies and fulfill the legislative and international requirements to do so in that time.

4. Earn Indigenous consent

The Canadian Constitution recognizes and affirms Aboriginal and treaty rights. These types of rights are almost always impacted by resource development and thus impose a duty on the Crown to consult and accommodate affected Indigenous rightsholders when evaluating and approving such projects.

To proceed at pace with resource development—to obtain a social license for projects and avoid costly legal challenges and delays—it is in everyone’s interest to earn Indigenous consent for projects before they go ahead. Most Indigenous communities are not opposed to resource development; they are opposed to being left out of the economic benefits that such projects bring, or excluded from the planning to ensure their environmental and cultural impacts are reasonably mitigated. Rightly so.

In the past two decades, the energy, mining, and forestry sectors have gotten pretty good at developing strategies with Indigenous rightsholders to ensure fair benefits from projects. These include procurement, employment, payments, co-management, and equity stakes.

To continue down this path and enjoy additional industry-Indigenous alignment, the next government should, first, fast-track the implementation of the Canada Indigenous Loan Guarantee Program, which was recently initiated following much prodding of the Liberals but is based on a similar successful program in Alberta, and keep it well capitalized; and second, employ additional tools, including those that can incent industry-Indigenous partnership in the upstream activities of mining and oil & gas extraction, where Indigenous rights are most impacted.

These could look like the nascent First Nations Resource Charge announced by Poilievre in February 2024, that would cede federal tax room otherwise be paid by proponents to Indigenous communities. Indigenous-specific royalty trusts, royalty credits, and investment tax credits should also be explored. More tools that can support more kinds of resource projects and partnerships would be welcome and stimulative.

A targeted effort to build the capacity of Indigenous communities to assess the merit of resource projects on their territory, and negotiate their participation in them, would also reduce bottlenecks.

5. Incent critical minerals production through defence spending

China is actively manipulating critical minerals markets. This undermines projects in Western democracies by either starving them of the capital needed to develop in the first place or forcing them to shut in existing production.

Because it is intolerable to be dependent on China (and in some cases Russia) for the materials—raw and processed minerals and components—necessary for our economy to function, there is an urgent national security case to support some minimum level of domestic or allied capability.

In particular, materials needed in our defence supply chains should be supported through defence spending. The U.S. already does this through its Defense Production Act (DPA), and indeed has invested, in collaboration with Natural Resources Canada, on six critical minerals projects in Canada in the past year. We should do the same, independently of DPA funding, by ramping up the amount we spend on military equipment inputs most vulnerable to restrictions by our adversaries, including germanium, gallium, indium, graphite, tungsten, arsenic, scandium, and other rare earths.

Because Canada has access to significant quantities of these commodities (and in many cases existing capacity to process them) and many of our NATO allies do not, there is a special responsibility to do so at pace. Supporting the mining sector to innovate new ways to process these materials economically, and with less safety and environmental impacts than current competitors, will be the icing on the cake.

The next government should work with Canadian mining companies and defence contractors to determine what combination of stockpiling, strategic reserves, feed-in tariffs, contracts for difference, or other vehicles is optimal to secure access for which materials are needed for the defence supply chain. Such an initiative would have the added bonus of helping Canada reach its NATO spending commitments faster, given the long timeframes inherent in acquiring the defence systems otherwise planned.

6. Address labour disruptions for port and railroad services

Nobody wants to limit labour rights or restrict the ability of unions to negotiate fair deals. But the spate of railroad and port strikes in Canada in recent years has gone too far, creating broad-based economic harm and tarnishing the country’s reputation as a reliable trading partner.

Canadian workers and businesses that depend on exporting their goods cannot keep being held hostage like this—not if we want to step up and be the preferred supplier of energy, resources, and food to our allies. Supply chain disruptions have reached crisis levels and the current situation is incompatible with the national interest.

The next government should have public support at the ready to make structural changes. At a minimum, the next government could amend the Canada Labour Code to enable them to impose binding arbitration before a work stoppage occurs.

As Russell Conwell exhorted in the early 20th century in his famous Acres of Diamonds speech, “Get rich, young man, for money is power, and power ought to be in the hands of good people. I say you have no right to be poor.”

I say Canada has no right not to develop its energy, minerals, and agricultural goods to the best of its abilities; not only to improve Canadian’s quality of life but to ensure that reliable and ethically produced alternatives of these essential items exist to any nation in the world that needs them.

The post Want to remain strong and free, Canada? Six steps to becoming an energy and resource superpower appeared first on Business Council of Canada.

When Justin Trudeau came to power in 2015, he embodied generational change and promised renewal, transparency, and ambition. Early achievements, such as the Canada Child Benefit, which significantly reduced child poverty, and enhancements to the Canada Pension Plan, which secured better retirements for future generations, reflected this promise.

Yet, over time, the government’s initial momentum gave way to an overemphasis on political optics at the expense of substance. Its failure to meet the moment was not due to a single misstep but rather the cumulative impact of weaknesses in governance, economic underperformance, and policy incoherence.

Governance

The seeds of this decline were sown in the first days of Trudeau’s government. From the early days after the October 2015 election, it was clear that the transition would be a test the government was unprepared to pass. The reliance on campaign strategists—adept at winning elections but unequipped for the intricacies of governance—created a hollow foundation. Policy expertise was easily dismissed, leaving critical decisions in the hands of those more attuned to political theatre than the nuanced demands of managing a country.

This miscalculation set the tone for a government that often prioritized the performance of politics over the practice of it, where form overshadowed substance and immediate political victories were favoured over long-term policy strategies.

Governance requires more than charisma—it demands a leader capable of navigating the complexities of policy and empowering those around them. Trudeau often fell short in this regard, relying heavily on a small cadre of advisors who prioritized political narratives over effective and thoughtful policymaking.

This overconfidence—rooted in a belief that only a few political advisors at the top could manage the entire government agenda centrally—led to an overly controlling approach. Instead of building robust governing systems and empowering institutions, decisions were concentrated in a few hands. This approach fostered inefficiency and a reactive style of governance, unable to address the country’s most pressing challenges effectively. Promising ideas were often undermined by poor execution and a lack of attention to detail.

The decline of cabinet government

Under Trudeau, the traditional model of cabinet government—where ministers lead their departments, initiate policies, and take responsibility for their execution—significantly declined. Power was heavily centralized in the PMO, leaving ministers with little authority to shape the policies within their portfolios. Too often, they were reduced to spokespersons tasked with defending decisions already made by the PMO rather than contributing to them. This approach stifled collaboration, as ministers were unable to bring their expertise to the table.

This centralization also weakened accountability. Ministers, constrained by the PMO’s dominance, lacked ownership over key decisions. As a result, execution suffered, and it was often unclear who bore responsibility for policy failures—as we witnessed recently on the GST rebate debacle or the carbon tax announcement for Atlantic Canada.

Economic policy failures

Trudeau’s tenure coincided with a period of sluggish growth, declining productivity, and mounting fiscal vulnerabilities.

GDP per capita, a critical measure of prosperity, has now been negative for eight of the last nine quarters, lagging peer countries like the U.S. and underscoring Canada’s struggles to transition to a high-value, innovation-driven economy.

Its singular focus on the electric vehicle sector repeated historical mistakes of rent-seeking and subsidy-driven branch plant economic policy. Opportunities to leverage Canada’s natural advantages and foster innovation in energy, agriculture, biotechnology, and advanced infrastructure were neglected in favour of ineffective industrial policy measures.

Public debt expanded at an alarming rate, without a coherent strategy to align spending with long-term pressures such as an aging population. Even as economic conditions improved post-pandemic, the government persistently overspent and missed its own fiscal targets, betraying an absence of discipline and accountability. Meanwhile, labour productivity remained stubbornly low, a symptom of neglected innovation and outdated regulatory frameworks.

Rising immigration levels were not matched by corresponding housing supply increases, exacerbating affordability challenges for millions of Canadians.

Foreign policy incoherence

On the international stage, Trudeau’s government often seemed unmoored. Despite grand declarations about Canada’s role as a champion of multilateralism and progressive values, its foreign policy lacked clarity, coherence, and strategic focus. Relations with key allies suffered, and Canada’s influence in global institutions waned, leaving the country increasingly reactive and sidelined in critical geopolitical debates.

A particularly glaring failure was Canada’s inability to meet its NATO commitment to spend 2 percent of GDP on defence. This pledge, reaffirmed by member states in 2014 as a response to rising global threats, was intended to signal solidarity and collective strength among NATO allies. Yet, a decade later, Canada remained far below this threshold, spending approximately 1.3 percent of its GDP on defence.

This failure became acutely problematic following Russia’s invasion of Ukraine in 2022, a crisis that underscored the urgency of robust military readiness and alliance cohesion. Canada’s shortfall not only strained its credibility within NATO but also limited its ability to contribute meaningfully to collective defence efforts.

Climate and energy policy 

Climate change was a cornerstone of Trudeau’s political identity, yet his government’s approach was marked by contradictions. Politically motivated carbon tax rebates undermined the integrity of its pricing framework, and the decision to cap oil and gas production during a period of global energy insecurity reflected a disconnect between environmental aspirations and geopolitical and economic realities.

The NDP agreement and strategic drift

The 2022 agreement with the New Democratic Party, while providing temporary political stability, signalled a significant shift leftward. This realignment alienated centrist voters, eroded the Liberal Party’s traditional identity, and underscored a government increasingly focused on survival over principled governance.

By overstepping its role and acting as though it could run provincial governments through programs like pharmacare and dental care, the federal government neglected its core responsibilities. Financing these initiatives with borrowed money added long-term pressure to both federal and provincial balance sheets while straining federal-provincial relations. Meanwhile, key federal priorities—such as economic strategy, defence, and immigration—were overlooked, creating considerable policy damage.

Lessons for future governments

Trudeau’s government began as a hopeful chapter in Canadian politics, offering a vision of renewal and progress that resonated deeply with the electorate. Yet, as the years passed, this promise was overshadowed by the realities of governance—a sphere that demands not only sound policy ideas but also the skill, discipline, and institutional strength to bring them to fruition.

His tenure was marked by contradictions and inherent tensions: an ambition to lead on climate change undermined by policy incoherence; a genuine commitment to inclusion and diversity overshadowed by cultural polarization; and a preoccupation with redistribution at the expense of focusing on economic growth.

The last few years serve as a cautionary tale: leadership in a modern democracy requires a delicate balance of ambition, pragmatism, and sound governance.

Future governments must learn a critical lesson: while managing effective communication is important, the true measure of success lies in managerial competence and precise policy execution.

The past should not be a prologue. Trudeau approached the prime ministership as a narrator and communicator, often leaving people with the impression he was acting rather than governing. He neglected the policy and managerial rigour the role demands and did not adapt to the complexities of governance. As Albert Camus once wrote: “Tragedy is easy and lies within man’s reach; the masterpiece always demands more.”

The post Justin Trudeau is stepping down—here’s where things went wrong with his government appeared first on Business Council of Canada.

In October, the Parliamentary Budget Officer said the government was already on track to miss that target, putting the deficit at $46.8-billion. But Ms. Freeland’s comments on Tuesday suggest the situation is worse.

While declining to commit to most of the fiscal-anchor pledges, Ms. Freeland said the government would meet the debt-to-GDP-ratio target of 42.1 per cent. What Ms. Freeland didn’t say was that GDP came in $45-billion more than expected. So, using the same ratio, that implies a deficit of up to $60-billion for the last fiscal year.

Fiscal responsibility has long been heralded as a cornerstone of sound governance. Yet, over the past few years, the federal government has consistently prioritized short-sighted decisions over long-term fiscal and economic stability. While extraordinary circumstances such as the COVID-19 pandemic necessitated emergency spending, the absence of a coherent plan to transition back to fiscal discipline has left the country ill-prepared for emerging challenges.

Canada’s deficit is not merely a number; it is a reflection of systemic overspending and a lack of fiscal foresight. Unlike deficits incurred during times of national crisis, this shortfall is largely structural, driven by spending commitments that were neither time-limited nor adequately funded. Programs rolled out with little regard for sustainability have locked the government into perpetual increases in expenditure.

This approach has eroded Canada’s fiscal buffer, leaving the country vulnerable to external shocks. President-elect Donald Trump’s threat of renewed tariffs on Canadian goods could deliver a significant blow to an already fragile economy.

Compounding these challenges is the increasing pressure from NATO allies to meet the 2-per-cent defence spending target much faster than currently planned. For years, Canada has lagged behind, contributing approximately 1.3 per cent of its GDP to defence. While this discrepancy has been tolerated in the past, geopolitical tensions and shifting global alliances are making our allies less forgiving.

The economic headwinds facing Canada are not limited to external threats. Domestically, the unemployment rate – now approaching 7 per cent – is a harbinger of a broader economic slowdown.

It doesn’t have to be this way. Reclaiming control over public spending will require a fundamental shift in how the federal government approaches fiscal policy. First and foremost, it must adopt a clear plan for deficit reduction.

One area ripe for reform is the government’s approach to program spending. A comprehensive review of existing programs is needed to identify inefficiencies and ensure that resources are directed toward initiatives that align with national priorities. Similarly, the government must resist the temptation to introduce new spending commitments without a corresponding plan to fund them sustainably.

In recent years, the government has ramped up counter-cyclical spending at the wrong times, particularly during periods of higher interest rates. Rather than focusing on long-term productivity gains, the government increased spending focused on boosting consumption instead. For example, even as the economy rebounded after the pandemic, government spending fuelled consumer demand, but did little to enhance the economy’s productive capacity.

The problem with this strategy – manifest with the latest GST temporary exemption on certain goods – is that it stimulates consumption without addressing underlying productivity challenges. Meanwhile, the rising debt burden limits Canada’s ability to act during future economic slowdowns and unforeseen circumstances.

Canada faces several structural economic headwinds. One major challenge is the country’s aging population, which is putting increasing pressure on public services and social programs as the work force shrinks and the number of retirees grows. Additionally, Canada’s reliance on the U.S. for trade leaves the country vulnerable to changes in global trade dynamics and geopolitical tensions.

One of the implications of the federal government’s fiscal imprudence is the significant uncertainty it yields to economic and fiscal stability, as rising debt levels and unsustainable spending will undermine investor confidence, limit future policy flexibility and increase vulnerability to economic shocks.

This week’s abdication of fiscal responsibility couldn’t come at a worse time for our country.

The post Ottawa has abandoned any pretence of controlling its spending appeared first on Business Council of Canada.

Dear friends,

If Canada ever needed a wake-up call, we got one on Monday from U.S. President-elect Donald Trump. He announced his intention to impose a 25 per cent tariff on all goods coming from Canada once he takes office in January.  

We have a choice. We can wring our hands and fret about the impact this could have on our economy … or we can take action and address our challenges in a proactive way.  

There is no friend, partner and ally more important to Canada than the United States. We have a lot to offer our neighbour, but we can’t take the relationship for granted. We need to demonstrate that we are a reliable partner. 

It starts with keeping our word. 

Earlier this week the Business Council launched a new report that urges Canada to develop and implement a defence industrial base strategy. Such a strategy would not only better protect Canada in an increasingly volatile world, it would bolster our economy with well-paying jobs that drive prosperity and, significantly, it would show our allies that we keep our promises. 

There is now a chorus of American lawmakers – Republicans and Democrats alike – who are calling on Canada to move faster to live up to its longstanding NATO commitment of spending two per cent of GDP on defence.  

Now is the time for action. 

In addition to getting serious about our national security, Canada’s public and private sectors must work together to improve our country’s prosperity. There is so much within our control, including eliminating interprovincial trade barriers, modernizing our infrastructure, championing Canadian success and harnessing Canada’s unique strengths.  

Earlier this month we launched the Can-Do / C’est possible campaign. You can learn more about it in this newsletter. I encourage you to join with us to help get Canada’s economy back on track.  

Together, we can do great things. 

Yours truly,

Goldy Hyder
President and CEO
Business Council of Canada

The post Investing more to defend ourselves and strengthen our economy appeared first on Business Council of Canada.

As part of the Trudeau government’s preparation for a second Trump administration, the idea of a minister dedicated to Canada’s relationship with the United States has reportedly been discussed.

The motivation is based on the fact that, with a return to the less predictable economic and trade terms of Trump’s last presidency and amid increased American protectionism more broadly, Canada may be at risk of losing its coveted market access; an existential threat to our economy. Appointing a cabinet-level official whose entire focus would be managing relations with our superpower neighbour could be seen a way to ensure that we keep this top of mind, not just during election cycles.

Sounds good, right? Wrong, and here’s why:

First, the move would add a fourth minister to the already cluttered Department of Global Affairs Canada, which already has a foreign affairs minister, minister of trade and  a minister of international development. In addition to the increased bureaucracy, another minister would add to the silos that already plague the department. In fact, as part of its revitalization initiative, the ministry has recently addressed its compartmentalization by amalgamating key branches. Creating a new minister position would run counter to this important streamlining and would impede coherence.

Second, imagine the American secretary of state dealing with not one, but two Canadian cabinet counterparts. This would be unavoidable because so much of Canada’s foreign policy is imbued with our relations with our superpower neighbor. In other words, yes, our bilateral relationship with the U.S. is our no. 1 priority, but it has to be finessed within a complex geopolitical landscape.  And the secretary of state would simply not appreciate the extra time needed to check with two counterparts on moves at the UN, for example.

Third, our engagement with the U.S. is extremely multifaceted, impacting the work of most Canadian ministries. For example, our ministers responsible for defense, immigration, transportation, environment and climate constantly interact with their American counterparts. Adding another duplicative layer to this intense and fast-paced choreography could be counterproductive. Whose words are the definitive ones on any issue? Even nuanced differences could send mixed signals.

And importantly, who has the power to implement decisions? Line ministries do, not a minister without the delegated powers to deliver on agreements.

Imagine the American secretary of state dealing with not one, but two Canadian cabinet counterparts.

Fourth, if one of the objectives is having someone dedicated to travelling and engaging intensively with American leadership at all levels, a minister is not an efficient choice. They have legislative, departmental and riding distractions. In addition, the title does not resonate outside D.C.. I remember having to explain what a cabinet minister does to governors in my territory when I was consul general in Atlanta.

Also, ministerial churn is like a revolving door. The U.S. is a vast country with regional dynamics that take time to master. Relationships that are developed over long periods and across the political spectrum in a quiet, nonpartisan way are far more consequential. That work is better left to the Canadian ambassador, whose title and role are respected and recognized, supported by a network of strong and savvy consuls generals who reside in-country, and who understand their region. If they are good, they spend all their time investing in those relationships at a personal level; often listening more than talking,  reporting back on early trends when it is easier to have impact.  But for that, Ottawa has to listen to what it hears. I know from experience that this is not always the case.

In fact, an additional minister roving the U.S. would not only be duplicative, it would also undercut the crucial diplomatic role of the ambassador. There are only so many interlocutors we can throw at senators, representatives and governors.  I have seen them politely take such meetings as a favour to the consul or embassy staff. The better approach is sustained engagement by the same senior diplomat, with the help of stakeholders like business leaders who have a stake in their district or state.

Fifth, I worry about the signal this would send to the Americans.  They already know how important they are to us. There would be a whiff of desperation in such a move. We are already navigating an asymmetrical relationship. We do not need to highlight this weakness and project our insecurity. As such, it would only make sense to do this if they appointed a cabinet counterpart,  which the Americans will not do.

Lastly, we do not need a dedicated minister to have policy coherence at the cabinet table on our relationship with the United States. It is the role of the prime minister to align our whole-of-government approach. That responsibility cannot be delegated. Leadership resides at the top. That, our American friends understand.

The post Canada and Trump II: We Don’t Need a Minister of American Relations appeared first on Business Council of Canada.

As the world reverts into regional trading blocks, the role and convening power of the B20 has never been more important. When business leaders gather in São Paulo, we will do so in the context of a volatile geo-economic environment which offers too few opportunities to discuss global issues of common concern ranging from economic security to the energy transition.

The Business Council of Canada (BCC), which I have the privilege of leading, is proud of the role it has played in the evolution of the B20 dating back to its initial inception. The BCC was an early advocate in favour of the idea of creating a consensus forum on global economic and security issues which was far broader than the G7 and in which the private sector could play a central role.

This year, as in previous years, the B20 gathering will afford business leaders the chance to offer practical, pragmatic solutions borne from our unique experiences and expertise. Our deliberations will help inform discussions between our respective governments at next month’s G20 summit, whose participants include a number of national leaders attending for the first time since elected.

Our B20 host, Brazil’s National Confederation of Industry (CNI), has done an excellent job of pulling together a comprehensive set of events and materials to ensure the success of our joint efforts. Canadian participants look forward to sharing our perspective on such issues as supply chain resilience, promoting economic growth, and increasing productivity through innovation.

Canada is fortunate to have free trade agreements with many G20 member states such as our North American partners the United States and Mexico; with France, Italy, and Germany through our trade agreement with the European Union; with Japan and Australia through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership; and our bilateral pact with South Korea.

These agreements form the trade architecture which positions Canada at the heart of increasingly integrated value and supply chain networks. As seismic events – from wars and the pandemic to extreme weather – have tested the resilience of those supply chains, Canadian business leaders have proven themselves to be dependable economic partners to help feed and fuel the world.

Energy and food security depend on efficient and resilient global value chains. All trading nations must therefore enhance our trade enabling infrastructure, a priority which Canadian business leaders share with many economic partners. This includes enacting domestic permitting reforms which allow for the construction of export infrastructure to speed and safeguard the free flow of goods.

We are also being called upon to protect value and supply chains from various threats, everything from cyberattacks and sabotage to economic coercion and the weaponization of trade. Economic security is national security. Without cooperation between the public and private sectors, trade and investment will be disrupted to the detriment of people and families from across our countries.

This emerging reality speaks to how the global trading order has changed. Countries must now assess their bilateral and multilateral relationships with other nations by identifying where they can cooperate and collaborate with each other, where they must compete with each other, and, yes, where they need to challenge each other. We call this an ‘eyes wide open’ approach.

October’s B20 meetings will allow us to help make those assessments. It is in our interest, then, to have frank and candid conversations about the challenges and opportunities of our time without shying away from uncomfortable or inconvenient topics. Global trade and investment decisions are best made when based on honest appraisals of the facts. The stakes are extremely high.

There has never been a time in which it has been more important to have certainty, stability, and predictability in our trade relationships and regulatory environments. The countries that get that right – amid growing geopolitical uncertainty – stand to benefit from the business investments which are desperately needed to deliver increased productivity and prosperity for all our peoples.

(Goldy Hyder attends the B20 in Brazil along with Matthew Holmes of the Canadian Chamber of Commerce and the BCC’s Shauna Hemingway. October 23-24, 2024)

The post The Importance of the B20 in an Era of Regionalization appeared first on Business Council of Canada.

In principle, a green taxonomy, a set of standard investment criteria for projects, should use the power of the markets to hasten climate action. It should complement sustainable finance efforts, which are well established in capital markets, by clarifying which sectors are deemed investment-worthy.

This month’s announcement from Ottawa – which unveiled new green taxonomy guidelines and a plan to introduce mandatory climate disclosure – is helpful in this regard.

The development of this made-in-Canada green taxonomy rightly involved private-sector input to reflect the unique composition of our economy. A Sustainable Finance Action Council composed of the country’s most significant financial institutions and pension funds filed its recommendations with the federal government in March. This month’s announcement, while overdue, came out of that process.

But questions remain about how energy production will be treated under the new framework. For example, the government left the door open to some natural gas, but has gone out of its way to state that new natural gas production will likely not be eligible for financing. It also is silent on how nuclear technology will be treated under the framework. In Canada’s economy, where these two sectors represent our best options for displacing coal-fired electricity production at home and abroad, this is troubling.

Even the European Union, arguably the most progressive political institution for addressing climate change, often at the expense of its own economy, included certain natural gas and nuclear energy projects in its own green taxonomy.

Canada – the world’s fifth-largest producer of natural gas and second-largest producer of uranium – has chosen to omit them.

There should no longer be a question of whether Canadian liquefied natural gas (LNG) is good for the world. The emissions from approved Canadian LNG export facilities are far below global averages, and among the cleanest in the world.

New LNG projects are a proven conduit for advancing economic reconciliation and creating equity opportunities for Indigenous communities. Canada’s allies and trading partners are looking to Canada to step up as a supplier of reliable, safe and low-emitting natural gas.

Previous policy decisions have limited Canadian LNG’s potential to drive economic growth and offset more carbon-intensive forms of energy elsewhere in the world. Discouraging investment into new low-emitting LNG projects will come at a high economic and energy-security cost; but it will also have a net negative environmental impact.

Nuclear technology simply wasn’t referenced in the government’s Oct. 9 announcement, raising questions about how it will be treated under Canada’s taxonomy.

We’ve seen this before. In 2022, when the federal government announced their Green Bond Framework, nuclear was part of a long list of industries ineligible for support. Following pressure, and a return to common sense, nuclear was later added to the list of eligible expenditures.

Canada can be a major player in the global nuclear energy market, thanks to its high-quality uranium reserves, nuclear supply chain, fuel processing capacity, and long record of safe power production. A taxonomy that fails to position nuclear energy for success would be a cause for disbelief.

There’s another issue on top of that: While sparse on details, the government also announced that it will introduce mandatory climate-related disclosure reporting for large, federally incorporated companies. The timing of this announcement is puzzling at best, given the work already underway by the Canadian Sustainability Standards Board and Canadian Securities Administrators: thoughtful processes that are being taken seriously by the country’s largest firms and pension funds.

The lack of details just adds to the uncertainty Canada’s industrial base is already facing on the heels of the new, half-baked, provisions for greenwashing. Meanwhile companies anxiously wait for the government to fulfill its commitments to deliver investment tax credits and a national loan guarantee program for Indigenous peoples.

Accelerating investments through a taxonomy can have benefits that go beyond reducing emissions. It can help achieve Indigenous economic reconciliation through new resource opportunities. It can also enhance Canada’s ability to be a supplier of choice to countries anxious to improve their energy security.

And boosting investments through a taxonomy can help with a long-standing problem: Canada needs a strong response to its productivity crisis, one that seeks to usher in a new era of investment into the country’s natural resource and energy endowment.

We should be laser-focused on growing economic capacity, adding policy certainty and improving the competitiveness of Canadian firms here and abroad. Developing a taxonomy for Canada can be a helpful tool in the country’s toolbox providing it plays to Canada’s strengths. Let’s get this right.

The post A Green Taxonomy is necessary, but it needs to play to Canada’s strengths  appeared first on Business Council of Canada.

Canada’s productivity crisis has been a hot topic of conversation recently as economists and policy experts increasingly sound the alarm about the nation’s falling per capita income levels.

The debate can seem complex and disconnected from everyday life – which is why politicians have often shied away from embracing a productivity agenda.

But it’s an agenda that remains critical, nevertheless. Our wages and living standards are directly tied to our national productivity – the value of goods and services Canadian workers produce per hour of work. The more productive we are, the higher our wages can be. Conversely, if we allow our productivity to continue to decline, so will our standard of living.

Building a higher-productivity economy that benefits workers will require us to boost our capital investment and become more technology-driven. Just like a carpenter won’t hit their full earnings potential without the right tools, our economy will fail to meet its productive potential if we don’t invest in machinery and equipment, infrastructure and innovation.

And while complex and multifaceted, the challenge is hardly abstract or academic. Government decisions frequently have real-world effects on investment and productivity, whether intended or not. It’s not hard to find instances of policy and political uncertainty stifling the willingness of companies to invest.

In the coming weeks, the federal government faces a series of crucial decisions that could shape Canada’s investment outlook for years to come. Here are a few areas where the stakes are high.

Taxes and spending

Canada’s businesses face significant tax uncertainty, which is dampening investment. The federal government has an opportunity to address this in its upcoming fiscal update.

For three years, Prime Minister Justin Trudeau’s government has tapped into business income to fund new spending, pushing corporate tax revenue to the highest share of GDP in five decades – a considerable disincentive for investment. Any signals of further fiscal expansion will only heighten anxiety in boardrooms and curb businesses’ willingness to spend.

Worse still, these taxes have been applied in a haphazard manner, leaving executives wondering what will come next. This unpredictable environment, coupled with rising political uncertainty, makes long-term planning and investment a challenge.

The government needs to adopt a more transparent, long-term approach to its plans for the corporate sector. At the very least, it should provide businesses with some predictability. The constant pitter-pattering in the fiscal cupboard has unsettled many. Finance Minister Chrystia Freeland has a choice: she can either confront this issue or sidestep it. But either way, investment will be affected.

Energy

Canada’s energy sector remains caught in a web of overlapping rules and regulations, creating an expensive and incoherent policy framework that risks prolonged legal battles and stalled investment.

In the coming weeks, Ottawa is expected to release draft regulations for an emissions cap on the oil and gas sector and finalize clean electricity regulations aimed at decarbonizing the grid starting in 2035. Industry leaders have expressed serious concerns that these policies could undermine investment in the sector, including investment in decarbonization efforts.

A report by S&P Global earlier this year estimated that the emissions cap could result in a $60-billion reduction in capital investment over the next decade. That’s a significant blow to the economy.

The government should be transparent about the economic effects of this measure, with respect to Alberta’s economy.

Telecoms

In August, the Canadian Radio-television and Telecommunications Commission introduced sweeping regulatory changes, allowing major incumbents to access each other’s fibre networks for the first time.

Previously, Canadian policy allowed smaller players to use the networks of larger incumbents. The new rules effectively turn even the big telecom companies into resellers of each other’s infrastructure.

While the aim is to lower consumer costs and increase competition, these changes are likely to reduce investment in digital infrastructure, including in rural areas, where high-speed internet is desperately needed.

Why would companies invest in expanding high-speed networks if they’re forced to share them with other big incumbents at rates set by the regulator?

The CRTC decision is currently under review by the federal government. Should they choose to move forward, they need to be forthright about the impact on capital spending in the sector.

Businesses are closely watching for signals about Canada’s investment climate, and the implications of the government’s decisions are potentially significant. The telecom and oil and gas sectors, for instance, represent one-sixth of all capital spending in the country.

Policy makers have the authority to set priorities, but Canadians deserve transparency about the trade-offs being made. When policies overlook the impact on investment, the cost is borne by the nation’s long-term economic health. We need to be candid about that.

The post Investor confidence is waning. Here’s three ways Ottawa can restore it appeared first on Business Council of Canada.

As President Claudia Sheinbaum takes office this week, a new chapter begins for the economic partnership between Mexico and Canada. Sheinbaum comes to power forty years after the Tratado de Libre Comercio de América del Norte (TLCAN) came into force, and two years before the review of its successor agreement, the Tratado entre México, Estados Unidos y Canadá (T-MEC). 

Both TCLAN and T-MEC have enabled an historic increase in trade and investment between Mexico and Canada.  In 1993, the total combined trade and investment between our two countries was $5.1 billion. By 2023, the value of that trade and investment had grown exponentially to $87.2 billion. Thanks to those agreements, we are, today, one of each other’s top trading partners.   

Much of this is due to the development of strong business-to-business supply and value chains which have been forged between Mexican and Canadian companies. Business leaders from both countries, such as Francisco Cervantes Díaz of the Consejo Coordinador Empresarial, have been tireless champions for increased bilateral trade and investment. Governments may negotiate trade agreements, but businesses use them to create prosperity for a country’s citizens. 

As we begin this new chapter in our economic partnership, there are reasons for optimism and opportunities to be seized. Many of these can be found in a joint report the Business Council of Canada (BCC) co-authored with the Consejo Mexicano de Negocios entitled Perfilados rumbo al Creccimiento. Our report contained six specific and actionable recommendations which could further strengthen and safeguard our economic growth. 

First, we should promote investment in priority sectors such as semiconductors, agri-tech, clean-tech, med-tech, and advanced manufacturing. This should also include investments in trade-enabling infrastructure such as increased seaport capacity and modernized land border crossings for both rail and roads which would improve supply chain resilience and facilitate nearshoring. 

The BCC is greatly encouraged that senior members of President Sheinbaum’s team, most recently Altagracia Gómez Sierra, have met and spoken with Canadian business leaders about the need for greater bilateral investment. Economy Secretary Marcelo Ebrard is also highly respected in Canada and his leadership over the upcoming T-MEC review will help to ensure the ongoing success of the agreement. 

Second, we must streamline cross-border workforce mobility. This could include a ‘trusted employer’ program where workers who are already employed by a company with operations in both countries can be fast-tracked for visas or work permits. The employer would be responsible for ensuring the employee returns to their home country at the conclusion of a defined period such as when a project is completed. 

Third, we should collectively develop a joint strategy to promote domestic policies in both our countries to ensure the competitiveness of our respective manufacturing sectors. This would entail identifying trade and investment policies related to manufacturing and innovation in priority sectors including strategic technologies for artificial intelligence and the energy transition. 

Fourth, we must immediately prioritize greater engagement at the sub-federal level. The Mexico-Canada relationship is almost always discussed as being between two national entities, and yet significant economic activity falls within the jurisdiction of Mexico’s 32 states and Canada’s 10 provinces and 3 territories. More must be done between and among governors of Mexican states and premiers of Canadian provinces and territories.  

Fifth, and related, we must increase collaboration between the public and private sectors of our two countries, at all levels of government, to safeguard and secure our integrated infrastructure from cyberattacks and other security threats. Given the evolving global threat environment, increased intelligence sharing between business and government is essential to stop the disruption of key cross-border infrastructure networks. 

Lastly, we should explore the creation of a bilateral virtual centre of excellence for women and minority-led businesses. Both Mexico and Canada are committed to expanding opportunities for women, minority, and Indigenous entrepreneurs. A virtual bilateral centre of excellence could provide information to underrepresented groups on topics such as trade regulations. 

Canadian business leaders are optimistic about this next chapter in our economic partnership with Mexico. Even in an era of immense global change when many countries, including both Canada and Mexico, are experiencing deep political and economic changes, these trends cannot deter us from more ambitious and consequential conversations about trade and investment opportunities. 

The post A New Chapter in the Mexico-Canada Economic Partnership  appeared first on Business Council of Canada.