Former Bank of Canada governor David Dodge says that Canada may be doing the best that it can when it comes to dealing with protectionist measures from the United States but there is still work to be done domestically to make Canada a more business-friendly environment.
Trade and barriers to it are now the focus of global attention, as the United States continues to press its “America first” agenda by imposing tariffs on imports and threatening to pull out of ongoing free trade talks between the US, Canada and Mexico.
News broke today that US President Donald Trump is pushing to split NAFTA in two and to make separate deals with Canada and Mexico, even as both of the US’s neighbours along with the European Union are still grappling with newly imposed tariffs by the US on imported steel and aluminum.
But Dodge, now senior advisor at Vancouver-based law firm Bennett Jones, says that while the US President may not be fully sussed on the ins and outs of his own country’s trade deficits, he does know how to stir up uncertainty on the international stage, something that could work in the US’s favour over the short term.
“I don’t think anyone really understands the President of the United States,” Dodge told BNN Bloomberg yesterday. “On the other hand, the policies are more understandable: the White House and the people around the President look at the world in the way that if they can create uncertainty about investment elsewhere in the world, then both Americans and foreigners will come and invest more in the United States.”
“That’s what really going on. The President clearly doesn’t understand the reasons why the US runs a trade deficit, [but] he does understand what might make the US more attractive as a place to invest,” Dodge says.
At the same time, Dodge thinks that, so far, at least, Canada has done as well as can be expected in dealing with US protectionism.
“The first response is to push back, just as the government has done,” he says. “Obviously, appearing weak is not a good way to operate, so the government did the right thing. Second, they’re absolutely right and Canadian business is absolutely right to ensure that we are on good relations with US States, with Congress and with US business, so the so-called charm offensive makes absolute good sense.”
“Thirdly, we’ve just entered into a new TPP arrangement and a new CETA arrangement —we should be working very hard to exploit those trade arrangements. That’s the way to deal with this,” he says.
But Canada can still do more to attract business, says Dodge, who noted his criticism of the Supreme Court’s recent decision to uphold constitutionally sanctioned inter-provincial trade laws and he worries that barriers below the federal level are acting as an impediment to companies looking to do business in Canada.
“The fact is that our system is set up to allow for a lot of local influences, whether they be individual Indigenous communities or provinces or municipalities. Our regulatory apparatus in that sense seems to be less certain than it ought to be,” says Dodge.
“We need to create a greater degree of certainty for investors as to the structure of our economy that they are going to face going forward and give them some certainty that once a regulation is put in place or once a law is passed, that it’s going to be there and that they can rely on it — even if they may not like it, they can rely on it,” he says.