Canada’s economy was teetering on the edge of a cliff last week, facing the prospect of devastating U.S. tariffs. Through a host of efforts, we were able to achieve a stay of execution for 30 days.
Canada is in this situation because of decades of poor decisions. We have become too reliant on one large trading partner because it was easy. Provincial governments could not find ways to reduce trade and mobility barriers. A series of major project cancellations and policy decisions by the current federal government handcuffed Canada’s options for selling our natural resources.
Add this up and we have achieved the ultimate “own goal” and left Canadians poorer as a result.
So how do we get out of it?
Canada must prioritize free trade and diplomacy while addressing U.S. concerns. Our government must protect free trade by demonstrating actions addressing those concerns — on defence spending, border security, fentanyl, etc.
These efforts could be viewed by the U.S. president as “wins,” something he likes to achieve. Canada’s diplomatic efforts must highlight how we are addressing the irritants but also frame the future as Canada playing a role in U.S. national security — food, energy, critical minerals, Arctic access and more.
Canada must also respond strategically, but avoid measures that hurt us in the short or long term. We cannot afford to escalate into a trade war with a dollar-for-dollar approach. We will lose that quickly.
The initial proposed round of counter-tariffs from the federal government was reasonable. Future responses must be regionally and industrially fair. It must ensure that we do not hurt the long-term incomes of Canadians — measures such as broad-based export tariffs or export restrictions, particularly in sectors such as energy and electricity — or measures that would give the U.S. an incentive to find alternative suppliers.
We are fortunate that the U.S. economy is tuned toward integration with Canada, but that is not a permanent guarantee.
But let me be clear: When we say, “diplomacy first,” that does not mean diplomacy only. There is a time to respond, and we need to — thoughtfully and strategically. But in a relationship — between two countries or two people — you don’t go straight to threatening the nuclear option when one side asks for changes.
The federal government must be prepared to support Canadian workers and businesses affected by any tariffs through measures that will support long-term competitiveness, such as tax breaks or cuts, accelerated approvals processes or production incentives and loan guarantees.
Heed the wake-up call for Canada’s competitiveness: strengthen our economic resilience and put our foot on the gas of a major economic and trade expansion initiative. The cornerstone of this should be to accelerate infrastructure projects that expand our global trade capacity — building new pipelines, expanding ports and improving air cargo logistics to get our goods to non-U.S. markets. We should recognize that Canada is a big and expensive country to travel across, and undertake efforts to reduce the cost of air travel.
We must also remove barriers to internal trade, which make every Canadian poorer — they are the equivalent of a 21 per cent tariff on ourselves.
Another own goal. Why is it easier to get American beer in a Manitoba liquor store than an Alberta craft brew? It’s time we fix that.
Similarly, policies such as emissions caps, clean electricity regulations and capital gains taxes that undermine our competitiveness must be scrapped, and we must make it faster to permit and build the productivity-generating projects we need for the future.
U.S. trade is existential to the Canadian economy. As Canada prepares for a new chapter in our political leadership, job No. 1 for Canada’s next prime minister and government must be to shore up trade with the United States.
One of the best ways to do that will be to improve competitiveness, productivity and prosperity — to actually make Canadians better off, and ensure we never find ourselves in a situation like this again.
Adam Legge is the President of the Business Council of Alberta
As appeared in The Calgary Herald.