Business Council of Alberta
Recently the Business Council spent a week in Washington D.C. meeting with officials, think tanks and insiders from both major parties and here are several takeaways we think every Canadian should know (and we think few already do):
Canada has become an afterthought, and indifference is one of our greatest policy threats.
- On both sides of the political aisle, and even from Canadian officials in Washington, we heard the same story over and over: many of the issues our diplomatic core ends up working on are ones where Canada simply gets “swept up” in something else the United States is trying to do, and they forget to carve out space for Canada.
- As one example to show how small but also how pervasive this issue can be, Canadian diplomats were recently fighting rearguard action on behalf of dogs and cats. Stringent new regulations were enacted to protect against importing animals from rabies-heavy areas of the world. Unintentionally, however, these rules were holding up the thousands of Canadian pets who cross the border every day. Thankfully, the pets are back moving again, but the broader issue remains.
China is the top issue of cross-partisan concern
- American politics may seem divided, but on this issue they are in perfect sync: China is viewed as the single biggest geopolitical threat to the United States.
- Every aspect of the relationship with China is of enormous concern, from supply chains and intellectual property; to infrastructure security and cybersecurity; economic independence and geopolitics.
- Most Canadians dramatically underrate how seriously American leaders feel about this issue. While not universal, the idea that this is tension is bubbling toward a new Cold War was present if not pervasive. How Canada positions itself relative to China will be critical in our U.S. relationship.
USMCA is up for review
- USMCA is the name of the current Canada-US-Mexico free trade agreement in the United States, and in Canada it is also called CUSMA. It is effectively the modernized NAFTA agreement renegotiated in 2018 under President Trump.
- It is up for “review” in 2026. While there is always room for improvement, the deal works fairly well for Canada, and Canada’s leaders would generally like to see the review be little more than a box-checking exercise.
- However, we are unlikely to get that wish. Under either scenario, we are very likely to see some contentious trade talks. There are some headline irritants — like the Digital Services Tax, supply management and softwood lumber — and also there are some larger strategic considerations like North American defence and energy security.
- Under a Trump administration, expect to see two additional different things: 1. A hyperfocus on balance of trade; 2. Horse trading – dealmaking on one area of trade based on concessions in another area of the Canada-US relationship which may or may not be directly trade related.
Digital Services Tax is a major trade issue
- While it hasn’t made a lot of headlines in Canada, our implementation of a Digital Services Tax — which effectively taxes foreign tech companies like Uber, Meta, Google, Airbnb, and others at a rate of 3% — is one of the largest trade irritants in the relationship, and sure to be a major feature of the USMCA review.
- Perhaps most galling to our American friends is that the tax was enacted outside of an international process, and made retroactive to the two previous years.
The U.S. Energy Conversation has moved
- The energy conversation has moved dramatically on from where it is in Canada to being far, far more pragmatic.
- Natural Gas is a transition fuel; exporting LNG is among the best things we can do for the global climate and our economy; nuclear is part of the answer. These are widely supported statements across the mainstream federal political spectrum in the United States.
- Perhaps more than anything a recognition that actual solutions in the category of energy and environment will require optimizing for multiple variable including the environment, the economy, affordability and security – not just one.
NATO – we need to pay up
- Of the 32 countries in NATO, Canada is last, dead last, in spending on defence over the past decade. This is not a fact many Canadians know, but it’s a fact the American political establishment knows very well.
- Under any future permutation of governments in Canada and the United States, Canada will face enormous pressure to bring this spending into line. And well we should. Not only is it the requirement of the alliance, military spending has historically been a major driver of economic growth, training and innovation. But we have to get on it. Military spending is notoriously difficult to ramp up quickly and at quality.
- Expect to see a potential expulsion clause enter the NATO conversation. If this takes place, it could mean that if we don’t pay up, they might kick us out.
Project 2025 is not what you may have been told
- By now you have likely heard something about Project 2025, a 900+ page document outlining conservative ideas for every area of the American Federal government under a future conservative government.
- Parts are very out of step with Canadian mainstream politics, especially around social, cultural, and medical policy. Parts of it are much more reasonable in economic, trade, and energy policy.
- One thing this document is not, however, is the script one should expect a Trump presidency (because that is its ostensible audience) to follow.
- We met with the Heritage Foundation, a group that is apparently quite hard to sit down with in part because of the heat generated by Project 2025. Yes, many of the people involved are connected Republican and Trump insiders. No. the document is not a playbook. Few serious people, and in fact not even the Heritage Foundation themselves, bill it in that way.
A note on Alberta’s representation in the United States. It is our impression that Canada has been well represented by our diplomatic core for a very long time, and that proud and effective tradition continues. This was our first opportunity, however, to see Alberta’s representatives to America in action in the US. We can tell you they are doing exceptional work on behalf of the province, lead by Alberta’s top representative – James Rajotte. They are highly respected in American political and policy circles, highly-integrated with the rest of the Canadian diplomatic team, and performing an essential function, especially given how large the relationship is between our two countries, and the importance of Alberta’s role within that. In our opinion, this is a high-return undertaking for Alberta.