Letter to the Prime Minister on President Trump’s economic agenda and the impact on Canadian competitiveness

Dear Prime Minister,

On behalf of Canada’s business leaders, I am writing to commend you and your government for your skillful and forward-looking approach to Canada’s most important bilateral relationship. You have assembled an experienced, well-connected and resourceful group of officials to lead this initiative. The joint statement that you and President Trump released yesterday underscores the longstanding economic and security ties between Canada and the United States, and bodes well for further progress and cooperation.

The Business Council of Canada is committed to working closely with your government in strengthening cross-border supply chains, promoting bilateral trade and investment, and responding to trade-related challenges such as a possible U.S. border adjustment tax. To that end, we and other business groups are redoubling our advocacy efforts in the United States and coordinating our outreach to key stakeholders.

At the same time, we are mindful of the likely impact on the Canadian economy of President Trump’s domestic policy agenda.  Even if the border tax proposal is abandoned and key pillars of NAFTA remain in place, initiatives such as tax reform, changes to environmental policy and deregulation could have serious consequences for Canada’s economy and competitiveness.

As a place to do business, Canada has many advantages, including abundant resources, stable and efficient public institutions, and a skilled and diverse workforce. Yet in spite of those strengths, our country’s ability to attract new jobs and investment will inevitably suffer if the new Administration follows through on promises to cut corporate taxes and simplify the regulatory environment.

For that reason, we again urge you to adopt a laser-like focus on competitiveness as the key to generating long-term economic growth and ensuring a better future for all citizens. In our view, the best way to ensure Canada’s success in an increasingly challenging global environment is to position our country as a magnet for trade, investment, innovation and people. Your government can do that by:

1. Streamlining the consultative and regulatory-approval processes for major private-sector infrastructure projects. Targeted spending on productivity-enhancing infrastructure projects can bolster Canada’s long-term competitiveness. The federal government can lay the groundwork for increased business spending on infrastructure by ensuring that regulatory approval processes are transparent, predictable, fact-based and capable of rendering decisions in a timely manner. This is particularly important for the energy and resources sectors, vital sources of middle class jobs and government revenue.
2. Broadening the tax base and lowering tax rates. While other advanced economies have been reducing their corporate tax rates to attract business activity, Canada’s combined statutory corporate tax rate has been creeping higher due to increases at the provincial level. As a result, Canadian companies now pay rates higher than those borne by their competitors in most OECD countries. With comprehensive tax reform looking increasingly likely in the United States, Canada cannot afford a further loss of tax competitiveness. A comprehensive plan to both broaden the tax base and reduce corporate and personal tax rates would strengthen Canada’s ability to attract and retain investment and talent.
3. Positioning Canada as a global trade and investment hub. Canada’s engagement in the global economy sustains our country’s prosperity and supports millions of well-paid jobs. But the rise of protectionism in markets around the world puts our economy at risk. Your government deserves credit for moving swiftly to safeguard Canada’s longstanding preferential trade and investment relationships with the United States and Mexico. At the same time, Canada needs to intensify its trade diversification efforts by implementing the Comprehensive Economic and Trade Agreement with the European Union, concluding negotiations with Japan and India, and deepening our commercial relationship with China.  A broad and ambitious trade strategy is essential to give Canadian exporters access to new markets and position Canada as a global hub for trade and investment.
4. Monitoring the development of climate policy. A decade ago, our Council formally endorsed the use of carbon pricing to encourage energy conservation, reduce greenhouse gas (GHG) emissions and address the risk of climate change. While we support your efforts toward a more consistent approach to climate policy across Canada, we must also acknowledge that the United States and several other major GHG emitters are headed in a different direction – one that imposes significantly lower costs on business. Climate policy in Canada must therefore address the risk that jobs and business activity will simply relocate to less restrictive jurisdictions, with no net reduction in global emissions. Revenues raised from carbon levies and emissions-trading programs should be used to offset higher business operating costs, and to provide funds to develop, adopt and invest in innovative technologies that will help us transition to a lower-carbon economy.

Prime Minister, now is time to pursue an ambitious agenda for growth and competitiveness that benefits all Canadians.  Business Council members across the country are committed to Canada’s economic success and stand ready to help in any way possible.

Sincerely,

The Honourable John Manley