A Biden Victory Would Serve Canada Well
Current polls suggest that Joe Biden is likely to be the next President of the United States. Across the globe, political elites are assessing the implications of a Biden Administration vis-a-vis American foreign policy. Most notably, the Canadian federal leadership is endeavouring to understand the potential shift in the White House. Not only is the United States Canada’s neighbour, but it is its largest trading partner by far. Canada-U.S. relations have deteriorated since 2017 due to a series of trade disputes, Meng Wanzhou’s arrest, and feuds between Donald Trump and Justin Trudeau.
Trump and Trudeau first publicly disagreed over trade and climate at the G7 Summit in 2017. In the year that followed, the Trump administration introduced a 25% tariff on steel and a 10% tariff on aluminum. This angered the Canadian government, leading to trade tensions. The passage of the USMCA, an updated version of NAFTA with several new provisions, ultimately ended the trade war. The U.S. and Canada were considered the “winners”, while Mexico was considered the “loser”. More specifically, American and Canadian labour unions benefited at the expense of Mexico’s ability to attract foreign direct investments in the auto-manufacturing sector.
In December 2018, Meng Wanzhou, Chinese tech giant Huawei’s CFO, was arrested by Canadian authorities under orders from the U.S. government. The Chinese were outraged and immediately retaliated by incarcerating two Canadian citizens, Michael Kovrig and Michael Spavor on spying charges. Currently, the two Michaels are in Chinese custody and Wanzhou is under house arrest in Vancouver. Wanzhou’s arrest was a mere accoutrement to America’s trade war on China. It appears that Trump used Wanzhou as leverage, insinuating that, should the U.S. and China form a trade deal, he would intervene in her trial. Trump’s directives created significant tension between China and Canada. From Canada’s perspective, China is an important trade partner; however, Canada has been improving its economic ties with other Asian nations too — most notably through the Trans Pacific Partnership (TPP). Moving forward, Canada may benefit from an American President who engages in fewer ad-hoc measures. Or, at the very least, a President that would consider the broader consequences of his actions with respect to America’s “allies”.
At the 2019 NATO Summit, the American-Canadian bilateral dynamic began to deteriorate once again. Trudeau was caught on camera gossiping with several world leaders about Trump’s lengthy press conferences. In response, Trump called Trudeau “two-faced”. This year, the Canadian-U.S. border has been closed since March due to COVID-19, impacting Canadian towns close to the border that were economically reliant on American tourists. The two governments took divergent approaches towards fighting the virus. It is thus no surprise that case numbers are significantly lower in Canada than in America on a per-capita basis.
Trudeau would be delighted if Biden defeats Trump on November 3. Obama and Trudeau had a strong working relationship while the former was in the White House. The Media referred to their rapport as a “bromance”. Biden, Obama’s Vice President, was deeply involved in diplomatic relations with Canada. Being both Democrats, Biden and Obama share similar outlooks on international affairs that align closely with Trudeau’s Liberal perspective.
Beyond diplomatic dynamics, Biden’s proposed policies would benefit the Canadian economy. The former Vice President’s platform aims to de-escalate trade tensions between the U.S. and its trading partners. America’s trade woes were largely a product of Trump’s volatile messaging. On Twitter, Trump stated that “I am a tariff man”. (Economists are in general agreement that tariffs create net losses for society because they artificially protect inefficient industries.) Biden’s steadier disposition suggests that he would not engage in such inflammatory rhetoric. By and large, Canadian corporations would gain from more certainty around international economic policy. A predictable political environment allows business leaders to craft sound strategies and minimizes the investment risk for asset managers on Bay Street. Biden is also proposing an increase in U.S. corporate tax rates. Trump cut American corporate taxes in 2017, which made the U.S. a more attractive location to conduct business relative to Canada. On a sectoral basis, the forestry industry would profit from a Biden Administration. Biden’s platform touts an ambitious New Deal-esque climate plan. The proposal involves funding clean-energy retrofitting of thousands of buildings and millions of houses. This would increase demand for Canadian wood as Americans import large volumes forest products.
The lion's share of Canadians will be glued to their TVs next Tuesday, pensively awaiting the results of the American election. In an international order characterized by chaos and volatility, Canada would be well served to have an amicable, predictable, and reasonable neighbour. The U.S. and Canada share a rich history of fighting against common threats of tyranny in Europe and forging cutting edge deals on trade and the environment. A Biden Administration will endeavor to ensure a continuation of this prosperous relationship.