OTTAWA — An influential organization representing Canada's biggest corporations is urging Justin Trudeau to take ambitious steps to shield the country from threats posed by Donald Trump's domestic economic agenda.
In a letter to the prime minister, the head of the Business Council of Canada warns Ottawa to make Canada more competitive as the U.S. president pursues his plans to slash corporate taxes and ease regulatory obstacles.
Otherwise, John Manley writes, Canada's ability to attract new jobs and investment will suffer.
The letter comes one day after Trump provided a measure of comfort to Canadian business leaders and entrepreneurs, saying he planned only to tweak the North American Free Trade Agreement in ways that would be of mutual benefit to both countries.
Prime Minister Justin Trudeau walks down the West Wing colonnade with U.S. President Donald Trump at the White House in Washington, D.C., Feb. 13, 2017. (Photo: Kevin Lamarque/Reuters)
In recent weeks, the future of another proposal that has been a major concern for Canadian firms has also come into doubt: the border-adjustment tax. Trump told a newspaper last month that imposing a border tax would be "too complicated."
But despite such reassuring signals, Manley is urging Ottawa to adopt "a laser-like focus on competitiveness" to ensure Canada can generate stronger long-term growth in the changing environment.
"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," the former Liberal MP and Chretien cabinet minister writes.
In particular, he lists four key ways Trudeau can boost Canadian competitiveness:
— Streamline the regulatory process for major private-sector infrastructure projects. He says Ottawa can attract more private business investment by making sure regulatory approval processes are transparent, predictable, fact-based and can reach decisions quickly — change that Manley says would be helpful to natural resources sectors.
— Cutting corporate tax rates. Manley says the combined federal-provincial taxes paid by corporations in Canada are higher than those in most industrialized countries in the Organisation for Economic Co-operation and Development. With tax reform likely on the way in the U.S., he warns that Canada must stay competitive.
— Make Canada an international trading and investment hub. Amid rising protectionism, Manley says Canada must give exporters access to new markets by deepening its trading relationships with Japan, India and China.
— Address the risk that businesses will move to places with less restrictive climate policies. The U.S. and several other big economies are implementing plans that will impose lower carbon-pricing costs on businesses than those in Canada. Manley warns that jobs and business activity could simply relocate to cheaper jurisdictions. He recommends using the revenue from carbon-pricing programs to help offset costs for companies and to support the creation of new technologies to help reduce Canadian emissions.
No time frame on budget balance
Trudeau has also been facing political pressure to take immediate action at home to help Canada brace for any spillover effects from changes in the U.S.
Interim Conservative leader Rona Ambrose has called on the Liberals to adjust domestic policies because Trump plans to reduce energy costs, cut corporate and personal taxes and push for more deregulation — a plan she fears will help the U.S. steal jobs from Canada.
"Can the prime minister name one single economic policy that he has changed since the election of President Trump to protect our economy from Trump's low-tax agenda?" Ambrose asked Wednesday during question period.
She has also accused the Trudeau government of implementing policies that have raised costs for Canadians — from a carbon tax and an income-tax hike for top earners to higher payroll costs for employers through the expanded Canada Pension Plan.
Finance Minister Bill Morneau has signalled that the Liberal government aims to lift long-term growth by staying on its current path, one of multibillion-dollar infrastructure investments and enhanced child-benefit cheques for families.
It also includes borrowing and several years of budgetary shortfalls.
Last fall, Morneau predicted a deficit this year of $25.1 billion. The annual shortfalls are gradually expected to shrink over the coming years to $14.6 billion in 2021-22.
The government, however, has declined to give a time frame as to when it expects to bring the books back into balance.
"We recognize that in order to create good-paying jobs for middle-class Canadians, we have to have an economy that is working," Morneau said in the Commons.
"We know that making investments in our economy is critically important."
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