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Slip-sliding away: Canada’s declining competitive position

By Independent Senator Doug Black      

Put simply, there’s a perception that Canada is ramping up taxes and restrictions just as the U.S. ramps down.

Neither the federal nor provincial governments are helping to ease the competitive pressure being applied by the United States, writes Sen. Doug Black. Getting oil to tidewater via Kinder Morgan’s Trans Mountain pipeline expansion has been a thorny issue for Prime Minister Justin Trudeau, left, and B.C. Premier John Horgan, right. The Hill Times photograph by Sam Garcia
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Add a protectionist United States trade agenda to a Canadian government ambivalent to business and you get a situation that is increasingly very concerning to me and many Canadians.

Foreign direct investment to Canada has frozen. Canadian companies’ investments are increasingly headed south. Unless we pull a U-turn fast, Canada risks an economic slowdown: our tax revenues will fall, our incomes will decline, and our GDP will stumble.

Without a doubt, the aggressive stance being taken by the U.S. on trade is bringing tremendous uncertainty to the Canadian economy.

NAFTA is far from a done deal.

More recently, President Donald Trump’s latest salvo, to impose significant tariffs on steel and aluminum products entering the U.S., has piled on the risk to our economy.

And then there were the tax cuts. In December 2017, the U.S. Congress passed sweeping reforms to their system of taxation, dramatically lowering both individual and corporate tax rates. Other changes have encouraged American corporations to reinvest their profits made abroad back in America, as well as facilitated the writing off of expenses for businesses when purchasing new equipment.

All in all, this “America First” strategy is drawing investment to America like a magnet. The losses to Canada are already noticeable.

Direct investment in Canada dropped 26 per cent in 2017, according to Statistics Canada. Foreign purchases of Canadian businesses also turned negative for the first time in a decade, meaning foreign companies sold more Canadian businesses than they bought—a bad sign for how others see Canada’s growth potential in the coming years.

Unfortunately, it seems that both the federal and provincial governments are not on top of this file, as our prospects for business and jobs appear to be going from bad to worse.

In fact, both the federal and provincial governments are piling on: no movement on corporate or personal taxes; adding carbon taxes; increasing regulation; and pushing up the minimum wage.

Put simply, there’s a perception that Canada is ramping up taxes and restrictions just as the U.S. ramps down.

And then there is our continuing national inability to build pipelines and to responsibly move Canadian oil to tidewater. We have developed an international reputation as a country where projects come to die.

The results of this failure, to be unable to sell our oil to countries other than the U.S., is, according to Scotiabank, costing Canada roughly $15-billion in lost revenues every year because of the discounted price at which we sell to the U.S. That revenue could fund the construction of 15 new cancer hospitals. Or 750 schools. Or almost 30,000 kilometres of highway.

We stand at a pivotal moment. Either we recognize that Canada is fast becoming uncompetitive, and we correct that, or we accept that our standard of living will decline and that those projects that are so important to Canadians—like health care, reconciliation with Indigenous peoples, and enhanced infrastructure—cannot proceed. There will be no money in the purse.

Doug Black is an elected Senator representing Alberta who sits with the Independent Senators Group. He is chair of the Senate Committee on Banking, Trade, and Commerce, and a member of the Senate Committee on National Finance.

The Hill Times

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