The federal government will have a lot to say about Canada’s business competitiveness, and what it intends to do about it, between now and the 2019 election. But it will all be drowned out if it can’t get past the most pressing challenge to competitiveness: the Trans Mountain pipeline.
While the pipeline dispute is a lot of things to a lot of people, it is a critical and highly visible test of Canada’s openness for business. It’s an equally important test for Prime Minister Justin Trudeau’s government, which has talked an ambitious game about securing Canada’s long-term economic prosperity – and must deliver on that talk.
Trans Mountain embodies a lot of key elements in the broader Liberal vision for repositioning the Canadian economy: investment, infrastructure, productivity, expanding global markets. But the future of the project also strikes at the core question of Canada’s competitiveness – just as the government refocuses its policy lens.
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Federal Finance Minister Bill Morneau signalled earlier this year that his government would turn to addressing Canada’s business competitiveness challenges – a response to the deep U.S. corporate tax cuts that essentially wiped out Canada’s competitive tax advantage. The government is spending the next few months studying the impact of the U.S. tax reforms and formulating a plan to give Canadian business a lift.
But Canada had competitiveness issues well before the U.S. tax package came along; further cuts to Canada’s corporate tax rate, on top of the nine made by previous federal governments since the start of this century, almost certainly won’t be this government’s solution.
Rather, it is more likely to develop a range of measures that will take aim at the broader questions surrounding Canada’s business competitiveness. We can expect it to unveil its plan in the final quarter of the year, to get the policies rolling well before it prepares its campaign budget next spring.
In the grander scheme, competitiveness boils down to an economy’s ability to attract and retain investment. That’s what gives it the capacity to expand its potential, to improve productivity, to prosper – all the things this government has preached from its economic pulpit since it took office.
At the foundation of this capacity to compete for investment is a legal and regulatory system that provides a degree of certainty to investors – a system that minimizes their risk through predictable and timely due process. Everything else you can offer to attract and retain investment must have this framework supporting it.
That’s why the Trans Mountain battle matters so much. It is a highly visible public challenge to that framework. And it involves a project that has the ability to make or break growth in what is perhaps Canada’s most prominent global industry.
What’s more, the Trudeau government has loudly and unequivocally committed to getting the project done. In doing so, it has raised the stakes. If Trans Mountain fails, the government’s credibility – with foreign investors, with domestic business, with voters – will be in tatters. Trans Mountain will stand as a global beacon warning of just how broken Canada’s investment climate has become.
Will that be fair? Of course not. Canada offers business investors much more than a single high-profile project can reflect. Things such as a highly skilled labour force, a strong and stable financial system, access to U.S. and global export markets, quality public health care, clean and safe cities, well-developed transportation and telecommunications networks – all factors that matter to businesses when deciding where to invest. They’re all areas where Canada does better than most – and areas this government has shown a desire to build upon and improve.
But fair has nothing to do with it. Without securing Trans Mountain, any pro-competitiveness initiatives will pale in comparison to one massive, credibility-crushing failure. The Liberals will head into an election year not as the government charting the path for Canada’s economic future, but as the one that isn’t open for business when it matters most.