Heard “Around the World”

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June 9, 2017

Heard “Around the World”

Canada reset its foreign, defence and international assistance policies this week.

In a Tuesday speech to the House of Commons, foreign minister Chrystia Freeland laid out a significant realignment in the principles that guide Canada’s foreign policy. These principles reflect the changing world order, and particularly the impacts resulting from the election of Donald Trump. She outlined a vision for an activist Canada, marked by multilateralism, respect for international rules and borders, increased international trade, more fairness in distributing the domestic benefits of globalization and increased defence capabilities. In a clear disagreement with the U.S. President’s approach to trade, Freeland argued that enhanced trade supports all participants: “Far from seeing trade as a zero-sum game, we believe in trading relationships that benefit all parties.”

Without naming him, Freeland addressed the changes in U.S. foreign policy that have emerged under President Trump and what Canada believes they will mean both for itself and for other countries: “The fact that our friend and ally has come to question the very worth of its mantle of global leadership puts in sharper focus the need for the rest of us to set our own clear and sovereign course. For Canada that course must be the renewal, indeed the strengthening, of the postwar multilateral order.”

Freeland’s clear rejection of the argument that Canada can “free ride” under the protection of U.S. military power set the stage for the release of the Defence Policy Review the next day. “To rely solely on the U.S. security umbrella would make us a client state…such a dependence would not be in Canada’s interest.” As a result, Freeland said, “Canadian diplomacy and development sometimes require the backing of hard power,” a clear signal that Canada will be upping its defence spending.

Guns and Roses

Presenting the results of the lengthy Defence Policy Review on Wednesday, defence minister Harjit Sajjan announced significant and long-term increases in defence spending, with investments rising from the current $18.8 billion by an additional $6.6 billion to $25.4 billion in the next five years and by $62.3 billion over the next 20 years. No sources for the funding of these new expenditures were identified.

The bulk of new capital spending will go to building more surface combatant ships (up to a total of 15) and additional advanced fighter jets (88, up from the 65 previously announced.) There will be a small increase in the number of Canadian Armed Forces personnel (an additional 3,500), as well as investments to acquire drones and to expand space and cyber security capabilities.

Should these planned expenditure increases all come to fruition, they would raise Canada’s defence spending from today’s 1.19% of GDP to 1.4% of GDP by 2026-2027. Both President Trump and his Secretary of State, Rex Tillerson, have been highly critical of countries—Canada among them—that are far from reaching the suggested NATO spending target of two per cent of GDP. The defence spending increases announced this week are seriously back-loaded well into the future, so it remains to be seen whether this very gradual build-up in defence expenditures by Canada will satisfy the Americans.

Also this week, international development minister Marie-Claude Bibeau released Canada’s new Feminist International Assistance Policy, following a year-long consultation period. Although international assistance spending will only increase minimally, and well short of the 0.7% of GDP commitment, the new policy is underpinned by a feminist-based lens which represents a major change in the guiding principles for international assistance. The new approach will focus on gender equality and empowering women and girls; sexual and reproductive health rights; nutrition and food security, education and humanitarian spending; inclusive economic growth; environment and climate change; inclusive government; and peace and security.

Ovations for Obama

Former president Barack Obama gave his first post-president speech outside the U.S. in Montréal on the same day as Minister Freeland’s foreign policy speech.  In his remarks, President Obama promoted a progressive vision of an active and involved global citizenry, working together to forge a shared destiny. He clearly opposed President Trump’s attempt to pull the United States out of the Paris Agreement, stressing the undeniable momentum of the movement on climate action. Following his speech, the former president had dinner with Prime Minister Trudeau. The bromance that blossomed in Washington in March 2016 apparently is alive and well. At the dinner Obama and Trudeau reportedly discussed encouraging young people to become more involved in politics and government.

Hands Across Borders

The national Chambers of Commerce of Canada, the U.S. and Mexico this week came together to create the North American Economic Alliance to “serve as a platform for the three-private sector organizations to speak with one voice to the U.S., Canadian, and Mexican governments about the most effective way to enhance our competitiveness and our capacity to create jobs in North America.”

The new group promised to pursue several objectives, including protecting jobs and revenues supported by NAFTA, building on its current strong foundation, keeping the negotiation trilateral, modernizing the agreement while retaining current benefits, acting swiftly to reduce risks, and consulting broadly.

Also this week, the Council of the Federation sent a delegation of seven premiers to Washington for meetings on NAFTA. They were hosted by the Canada Institute of the Wilson Center where they had a chance to take their message to key influencers in the capital.

Border Adjustment Tax

While the rest of Washington has been transfixed with the testimony of former FBI director James Comey on the Trump campaign’s Russia connections, Congress has been beavering away. Hearings were held on the proposed border adjustment tax, a key alternative for generating the revenue needed to pay for tax cuts including a proposal for a substantial cut to the corporate income tax. Ways & Means Committee Chairman Kevin Brady (R-TX) and Speaker Paul Ryan (R-WI) are both championing the tax, but many others disagree. Industry groups from both sides flooded the Hill this week to argue for and against, while a related argument broke out on whether the tax would violate World Trade Organization rules.

In other news, U.S. treasury secretary Steve Mnuchin visited his counterpart in Ottawa on Friday. After a quick morning bilateral, Minister Morneau joined Secretary Mnuchin for a CEO roundtable. Secretary Mnuchin also met with cabinet. His mandate is the tax reform and budget package, which he has championed. He has been an outspoken critic of the border adjustment tax proposed by Kevin Brady (Rep. Texas), the chair of the House Ways and Means Committee.

Softwood and Agriculture

Following last week’s announcement of a major financial support package for the domestic softwood lumber industry, natural resources minister Jim Carr led a trade mission to China where he signed a memorandum of understanding to promote Canadian wood and wood products to help build more sustainable cities.

And of note, U.S. agriculture secretary Sonny Perdue, who is widely seen as a supporter of NAFTA, met with his counterpart, Lawrence MacAulay in Toronto this week at the annual meeting of the Southeastern United States and Canadian Provinces Alliances (SEUS-CP). The two discussed what could potentially be included in a NAFTA framework, and Secretary Perdue pursued Canada’s pricing structure on dairy and grading of wheat, both irritants that will no doubt be on the NAFTA renegotiation table.