Trade Talks; Capital Walks
Canadian businesses have access to global markets, but infrastructure and policy certainty are needed to seal the deal, says Aaron Fowler, Canada's chief trade negotiator for international trade
Hello everyone! I’m rolling out a new story series today called ‘Home Base’ that will explore some of the themes and commentary from the OECD-New Brunswick Conference on Place-Based Economic Development, held Oct. 2-3 in Moncton, N.B. ‘Place-based’ is an academic term to describe public policy and industrial strategy centred on local community needs and values, something I’ve been thinking and writing about for over 20 years. I hope you enjoy it. Cheers – Lisa
Global capital is on the move and Atlantic Canada could be its next destination – but only if governments provide clear policy direction on how and where that capital should go.
The economic uncertainty caused by U.S. President Donald Trump’s aggressively self-interested trade demands has investors looking for stable jurisdictions, and the East Coast, like the rest of Canada, could be that destination.
However, as Aaron Fowler, Canada’s associate assistant deputy minister for International Trade and chief trade negotiator, told a Moncton, N.B. audience last week, policy certainty from all levels of government is required.
“We need capital, but capital doesn’t love environments of uncertainty,” he told the audience at the OECD-New Brunswick Conference on Place-Based Economic Development, held October 2nd and 3rd.
“When you’re talking about major investments, multi-billion-dollar investments, where the productive phase of the capital investment probably isn’t going to come online for three to five years, there’s a real hesitancy on the part of private businesses to make a commitment of that nature in an uncertain policy environment.”
Trading By the Rules
As Canada’s chief trade negotiator, the Moncton-raised Fowler is the lead on negotiating new deals with countries beyond the United States, such as the recently signed Canada-Indonesia Comprehensive Economic Partnership Agreement (CEPA) and the Canada-Ecuador free trade agreement.
For a trade-dependent country such as Canada, negotiating agreements with like-minded, rules-based countries is a national priority.
“The consequences are potentially severe if we get this wrong,” said Fowler, offering some stark numbers to illustrate how reliant local communities are on consistent, predictable trade.
About one in six jobs is directly linked to exports, and trade is equivalent to about two-thirds of Canada’s GDP.
“Canada’s reliance upon an international trading system that works is very difficult to overstate.”
With the American rejection of that system, Canada has had to quickly reorient its economic policies to shore up Canadian industries affected by American trade policies and support an aggressive reorientation of Canadian exports to markets beyond the U.S.
Shock Absorber Strategy
The federal government strategy has three elements.
First, it is trying to limit short-term pain through a series of financial supports, such as the $5 billion Strategic Response Fund and the $1 billion Regional Tariff Response Initiative for small and medium-sized businesses.
Second, it continues to try and negotiate a new economic relationship with the United States, as illustrated by Prime Minister Mark Carney’s meeting with President Trump in Washington yesterday.
According to Fowler, this includes trying to get a better deal for sectors such as aluminum, forestry products, automotive, steel and aerospace, which have been singled out for punishing tariffs, and ensuring the next iteration of the Canada-U.S.-Mexico Free Trade Agreement (CUSMA) provides a viable, effective and safe framework for Canadian businesses.
Third, Canadian businesses need to push into new markets.
“We don’t have a market access problem in Canada,” says Fowler, who explained Canadian businesses have access to 1.5 billion consumers who account for two-thirds of the world’s GDP via 15 free trade agreements with 51 nations.
“We have a broad and ambitious negotiating agenda with dozens of other countries, but taking advantage of those agreements to penetrate the market in a way that’s going to be meaningful for individual businesses requires a degree of support that goes beyond the negotiating table because we’re not the only people doing it; so is everybody else.”
Infrastructure Needed
Enter strategic infrastructure, such as roads, rail, pipelines, and ports, that are required to reorient Canadian corridors to flow east, west, and north, rather than simply south.
“There’s a reason that we sell all of our energy to the United States, and it’s not because they pay us the most,” said Fowler. “It’s because the infrastructure follows the business relationships, and our business relationships are north-south.”
Prime Minister Carney believes projects such as LNG Canada’s export facility in Kitimat, on British Columbia’s northwest coast, and a proposal to move crude through the Port of Churchill, on the shores of Hudson’s Bay in Manitoba, could help diversify energy markets.
Locally, the Port of Belledune, in northern New Brunswick, is positioning itself as a green energy hub, with projects related to biomass, hydrogen, advanced energy storage systems, and small modular nuclear reactors.
Port Saint John is already a significant energy hub, courtesy of Irving Oil, Canada’s largest refinery, which imports most of its crude via ship and then exports refined oil. It is also home to Canaport LNG, Canada’s only import facility for liquefied natural gas, which was initially a joint venture between Irving Oil and Spanish multinational Repsol, the latter of which is the sole owner and operator today.
Beyond its liquid bulk cargo, Port Saint John has expanded its container terminal and added cold storage to the mix, positioning itself as an eastern gateway connecting Canada with Atlantic and Indian Ocean ports in the Americas, Europe, Africa and Asia.
“The U.S. will never stop being a critical partner for Canada,” said Fowler, “but we have to make sure that it’s not the only available partner for Canada if we want to have long-term resilience.”
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