00:02:40.740most many of the economic fundamentals have declined in this country using stats can data
00:02:46.900bank of canada data so that is you know irrefutable and then they were had policies that
00:02:52.540were so hostile to the development of economic of natural resources in this country the no pipeline
00:02:57.540bill the tanker ban bill and so forth so what carney has been reversing uh many of those policies
00:03:04.880But I thought he had a wonderful chance to take it to the next level, and he didn't.
00:03:10.580I thought that it was a stand-pat, stand-still budget.
00:03:13.240They didn't go to the next level, which they have to do to overcome the economic damage of the past 10 years.
00:03:20.800Carlo, your quick thoughts on the fiscal update.
00:03:25.100Look, I want to keep trying to cheer on this government.
00:03:28.540They're in charge, whether I want them to be or not.
00:03:31.160And I want the country to succeed, but I felt like this was, just like the budget last November, a missed opportunity to take moves to kickstart the economy.
00:03:44.920Just imagine how infinitely greater it would have been if we had another pipeline.
00:03:51.080Look, you know, where we have built the expansion of Trans Mountain, where we have built, we have seen rewards.
00:03:58.900This should be the chance to hammer that case. I think Canadians realize the dire financial situation. Everyone, I think, in air quotes, was worried about the deficit. And this was an object lesson in the need to build the infrastructure to earn the money that Canadians want to spend on other things.
00:04:20.940So, look, from the West, it was, yeah, the missed opportunity was the object lesson in the need to build the infrastructure to move products to market.
00:04:32.320I love that term, the luxury of complacency, because it sums up so much of kind of the feeling that we have in Canada.
00:04:43.860This is all just because of Donald Trump.
00:04:46.300You know, if it wasn't for Donald Trump, we'd be doing great.
00:04:48.500i'm sorry but you look at the economic growth over the last few years and the budget did brag
00:04:55.240carlo about how we're going to be the second fastest growing economy in the g7 according to
00:05:01.400the imf at 1.5 that is that that is not an economy on fire i have to ask both of you gentlemen though
00:05:11.700So this fiscal update, just like the budget last fall, I was expecting more.
00:05:18.920You know, you listen to the rhetoric of the government and how they've positioned themselves and you think, okay, this is a group that wants to move fast, that wants to do things differently.
00:05:30.740And I'm having trouble seeing what they're doing differently than the old government, other than you've got a nice new guy from Central Casting, who's a central banker, who is at the front of it.
00:05:46.660Ian, are you seeing in significant ways a departure from the former Trudeau government?
00:05:55.920If you had asked me 90 days ago, I would have said yes.
00:05:58.300His announcements were reversing a significant number of the Trudeau government policies on energy, on carbon tax and the MOU at the Premier of Alberta and so forth.
00:06:12.340What sandbagged me and caught me off guard, because I thought he was going to go in a different direction as a blue liberal.
00:06:17.780What caught me off guard was his announcement, and I'm going to focus, we'll probably talk more about it, but this sovereign welfare, sovereign investment fund, which is not a real sovereign investment fund.
00:06:31.460There's a slip of the tongue, sovereign welfare fund.
00:06:36.700Why I think it's, we're now seeing a regress.
00:06:40.220My criticism for years has been that we've made a mistake for 60 years with what John Ibbotson called the Laurentian elites.
00:06:48.080And I'll say it very succinctly and why I thought Carney was reversing it, but he isn't, that the Laurentian elites believed in the superior efficacy of state central planning.
00:07:32.380It seeks out the best returns at obviously least cost and least barriers to entry.
00:07:38.360And why we've seen so much capital flight to the states is simply because they're better investment opportunities.
00:07:44.300And so, you know, things like the no pipeline bill, the tanker ban bill, the incredible red tape that's been documented by both the OECD and their analysis of the OECD countries were near the bottom, as well as the World Bank separate study on red tape and regulation were at the bottom.
00:08:00.040I thought he was going to strip that or start that to go down that road to strip it aside.
00:08:05.520What he's done is he's really gone back down, gone to the status quo ante of the last 60 years, including the peak, the peak period under Trudeau, which is where the state is going to allocate capital.
00:08:18.020The state is going to make the decisions to make battery plants or subsidize Bombardier to take on, you know, Airbus and Boeing.
00:08:51.800So, Carla, since Ian raised the issue of the sovereign debt fund, because we're borrowing all the money that's going into it, this is not a sovereign wealth fund in the way the Norwegians have.
00:09:08.800It's, you know, I look at what we have already, and I know that Prime Minister Carney was asked about how is this different from the Canada Infrastructure Bank?
00:09:17.560And he said, well, that focuses on loans.
00:09:20.160And then you go to the Canada Infrastructure Bank website and you find out that, no, they take equity stakes.
00:09:25.580And you look at the Canada Growth Fund.
00:09:28.800And so the Canada Strong Fund, the new one, is $25 billion.
00:09:34.200The Canada Infrastructure Bank is $45 billion.
00:09:38.320And they take equity stakes in companies.
00:09:41.320The Canada Growth Fund takes equity stakes in companies.
00:09:44.400and is there also to try and encourage private sector investment.
00:09:49.020The Strategic Innovation Fund is also there
00:09:52.060to try and encourage all of this other investment.
00:12:35.980So we have elections, and the results of those elections have consequences.
00:12:40.820At the end of the day, you can go riding by riding and put people on one side or the other.
00:12:46.160But really, what matters in terms of the international perception in how we function is the end result.
00:12:53.800So I would argue there are folks that are upset about this.
00:12:57.100But at the end of the day, the collective we has, when you look at the results of the election, wound up where we are.
00:13:05.080I would also argue that I don't know that folks who are suddenly aware of this or suddenly becoming vocal about it were as vocal as they needed to be early on.
00:13:15.620And I include, so I was just in Speedy Creek, swift current over the winter, talking to the only.
00:13:22.380Brad Wall from Speedy Creek, he's a first-time caller.
00:13:26.300I'm making a joke about how we used to call into the local radio station there.
00:13:30.780He'd call himself Brad from Speedy Creek.
00:13:38.780The point is I was talking to them, and I said, look, with the issues on trade infrastructure and moving grain to market,
00:13:45.960When you hand out paychecks or envelopes, do you have a flyer in there informing the workers at the terminal how important this is and to raise that message every time an MP comes home to take a stand?
00:14:02.820Those who have wanted to prevent us from building have been very active.
00:14:08.440my history in international development, working with NGOs and foundations, these folks will go to
00:14:15.820the front line. I don't disagree that there's been opposition and folks complaining in Canada,
00:14:21.680but I don't know that the industries, I'm just speaking at crop life, I don't know that agriculture
00:14:28.320has been organized. They're too busy fighting amongst themselves to fight against the real
00:14:34.080threats, those who prevent us from building things. So I think the weakness is twofold.
00:14:39.580It's one, the majority, I guess, or the minority that was able to form a government in the past,
00:14:47.400but also those of us who are committed not doing enough. And I would argue that the fact that we
00:14:55.220are where we are is a condemnation. And I'm looking at myself here. As much work as I've
00:15:02.200done arguing, raising the case, doing the research on a national trade infrastructure plan,
00:15:07.880trying to figure out how to communicate. I didn't do enough. I wasn't successful in getting the
00:15:13.800message across. So the results are what they are. We are where we are because of what we've done
00:15:20.340and what we haven't done. Brian, can I follow up on that? Because I want to add to this to
00:15:25.440answer your question and add to what Carlos said. I agree with everything you said. You said, well,
00:15:29.420what how can we be our own western man what have we done well let me give you exhibit a
00:15:32.940we have interprovincial tariffs in a very recent monograph i think it was trevor tone but from
00:15:37.780calgary but it was an economist converted all of the interprovincial trade barriers using some
00:15:43.360sophisticated economics converted it into the equivalent of a percentage of tariff
00:15:47.820quebec 25 the effect of the interprovincial trade barriers in quebec are 25 tariff against the rest
00:15:54.040of canada you looked at ontario and the other provinces there between 15 and 20 percent the
00:15:58.600American tariffs are 6%. So we're screaming at Donald Trump, and yet the provinces are charging
00:16:03.280three and four times what Donald Trump's charging us. That's just exhibit A. Exhibit B, RBC Thought
00:16:10.960Leadership has a graph where they computed and compared us to the OECD. We have the highest
00:16:16.000corporate income taxes in the OECD. Finance Minister Flaherty, some years ago, talked about
00:16:23.920tax advantage where he said, I want to keep our taxes a little bit below the Americans so we
00:16:28.560don't incentivize our companies to go to the states i've been arguing and i get some progressives
00:16:33.300very angry what we've done is put a great big bullseye on ourself to our own investor class0.56
00:16:38.260and business class in our country go to america we are exploiting the hell out of you with the
00:16:45.200highest corporate income taxes in the wealthiest most successful countries in the world go away
00:16:50.980third one the the the for the demonization of resources which trevor tome and before him
00:16:57.720steven gordon at laval the university and other economist showed had the highest productivity
00:17:02.340over the last 30 40 years the the resource sector as steven gordon showed in the 90s
00:17:07.400was responsible for almost all of our increase in our prosperity and our standard of living
00:17:11.520so what did we do over these many last years we went out of our way to try and inhibit and put
00:17:17.780barriers and penalties on the development of resources the ring of fire has been talking for
00:17:23.34035 years to build a road and we haven't built the road on mining. We are the worst on planet
00:17:27.960earth from developing a mine from scratch. It takes 21 years in Canada, the worst in the world.
00:17:33.700So there's many things. Why is that a problem? Why shouldn't it take 21 years? Because it drives
00:17:38.560down GDP per capita. It drives investment out of the country to the United States and it's reducing
00:17:43.820our standard of living. I call it in to be colorful. I've called it in my classes for years,
00:17:49.080the argentinization of canada ouch ouch ouch ouch from from from a latin americanist that's a
00:17:57.740ouch but let me just jump in quickly okay what has the government done hold on carlo hold on
00:18:03.300um here's what i've got in front of me because i was just writing about this today
00:18:08.360yeah is that canada's combined corporate tax rate comparisons all right uh com we are at a
00:18:16.540combined federal provincial territorial rate of about 26.5%. That is just below the G7 average of
00:18:24.64028.6, but above the OECD average of 24.2. Like that's not overly competitive. And I would say
00:18:33.760that going back to the time of Laurier, if not before, part of Canada's industrial policy was
00:18:42.200have a tax rate that is more competitive than our neighbors and the others.
00:18:51.940And so just so that people know, the U.S., which has cut taxes,
00:18:56.960their combined federal and state tax on average,
00:19:01.120and it depends on which state you end up in, is about 25.5%.
00:19:04.760So we're a full percentage point above on average.
00:19:08.580And, you know, if you're going to Alberta, if you're going to Ontario versus Ohio or Florida or Tennessee, whatever, it will all change.
00:19:17.660But on average, we're now higher than the Americans.
00:19:20.380That's not a good spot for us to be in, Carla.
00:28:05.560And we were talking about this a little bit
00:28:07.460Just before the break, Carlo, on the, you know, as you were describing, the internal trade side, have we done enough in terms of tax reform, cutting back on red tape, reforming things like immigration, which has led to a horrible situation where it's just, Justin Trudeau said, we're bringing in people faster than we could absorb them.
00:28:35.480Um, on terms of corporate welfare, have we done enough to reform our own internal systems
00:33:06.100So the Americans can't even export to us if they want.
00:33:10.180They've got to wait for their competitors in Canada to say,0.94
00:33:13.240yeah we want some of your cheaper stuff and because the sm5 did this the americans are now
00:33:20.180going to come back and say not only do you have to honor the previous agreement but we want a
00:33:25.480bigger cut you pissed us off and now we we want more so that i think was always a potential on
00:33:32.320the table but that is certainly going to happen um going forward our own worst enemy um well
00:33:40.740Well, you know, every other industry I talked to, Ian, says the dairy industry, the dairy cartel in Canada could kill the entire Kuzmin agreement and and messes all up.
00:33:54.520This is why I, you know, at the end of the day, there's eight thousand five hundred dairy farmers, mostly in Quebec and eastern Ontario, more in Quebec than eastern Ontario.
00:34:02.960But let's not quibble, you know, whether it's 60, 40, who cares?
00:34:05.500It's a small number, but it's extremely symbolic.
00:34:08.240I mean, Donald Trump talks about it endlessly.
00:34:09.820the americans have been talking about if you go and look at the ustr trade report tabled in
00:34:14.380congress every year it's a public document they have been listing that at the top of the list
00:34:18.500since the clinton administration that's a third of a century ago and so we should if we want to
00:34:24.400cause my agreement and i think it's absolutely essential because if it is revoked or canceled
00:34:28.240you watch the canadian dollar crash and you watch more business exits to the united states it's
00:34:33.780going to haul about canada and so we should look at that ustr report and say look at the four or
00:34:39.120five or six top irritants, the digital services tax, you know, the Telecom Act, the supply
00:34:43.920management, we should be looking at that instead of saying, as many Canadians are, we're not going
00:34:49.060to give up an inch to that Donald Trump. We should see this as an opportunity to open up our own
00:34:55.220economy, which will benefit us and stop us from exploiting ourselves, which is what protectionism
00:35:01.320does because the protected industries raise the prices to Canadians to charge us more because they
00:35:07.720can get away with it because of lack of competition. So what we should be doing in the
00:35:11.980KUSMA negotiations is saying, hell, man, we'll give you that. We'll give you supply and management.
00:35:16.580We don't want it. We'll open up the telecom. We'll open up airlines. But in exchange,
00:35:22.340this is what we want. We want complete open access, tariff-free to the United States across
00:35:28.320the board. And this is an opportunity, but we're seeing it. A lot of pundits and politicians are
00:41:35.140And in the States, you have special provisions on getting cell phone service to First Nations,
00:41:41.620to reserves, to places where there's low density and low incomes.
00:41:46.840So the Americans have dealt with this.
00:41:48.720look, I think it's not a question of whether or not we require them. It's a question of whether
00:41:54.460or not the requirement is intended to serve the Canadian public interest or whether it's intended
00:42:01.100to serve the interest of the cell phone providers. And I think as long as we have a policy that
00:42:09.120balances the interest between the two, it's workable. I would agree that I don't know that
00:42:15.080We've had that balance in terms of letting the Americans in versus keeping them out.
00:42:21.060But I want to get back to the comments about the trade agreement.
00:42:25.080If I can just pause here for a second, Carla, my concern would be that the CRTC, as much as Ian wants to look towards Adam Smith and being purist on this, and I get that, Ian, really do,
00:42:40.760is that the CRTC is a horrible organization
00:43:24.520All right, so, Carlo, your thoughts on the trade agreement.
00:43:26.980So, you've made the point that if we lose the agreement, we'll see jobs flee, we'll see the Canadian economy tank.
00:43:41.580We're undertaking a project as part of this new North America initiative to bring trade economists together to actually run the scenarios for the review of the North American trade agreement.
00:43:56.340No agreement, two bilateral agreements, 10% across-the-board tariff, which is what I think we'll get, two separate agreements, a zombie agreement, etc.
00:44:06.660And we want to not just come up with the scenarios, but quantify, model the impacts.
00:44:13.060What we've seen with the Bank of Canada announcement in their modeling and what we're seeing from some of the private banks is a quantification of what the damage would be.
00:44:27.220And we're seeing things range from 1.4% to 2% hit and GDP for one year.
00:45:29.440but I think we need data that doesn't have
00:45:32.460client-side encumbrances upon it, shall we say.
00:45:37.120So we need this independent work. And we're doing that now. And as we get the numbers, we'll actually be able to understand what's at risk and who's at risk and be able to take proactive measures instead of being driven by fear and assumption about what lies ahead.
00:45:53.400Carlo, you'll never get me arguing against empirical studies, and I'm really pleased
00:45:57.940that you're doing that. And I think Calgary is doing a fabulous job, University of Calgary
00:46:01.420School of Public Policy. What I was really referring to, and I've seen a lot of stuff
00:46:06.080on this, is the psychology of the capitalist or the owner. If I'm an owner of a business
00:46:11.980that's doing $5 or $10 million a year, and I lent nine years, I lent money to SMEs in
00:46:16.560the Bank of Montreal, millions and millions of dollars. And if I'm sitting here in eastern
00:46:21.260Ontario or anywhere near the border. And I'm doing a third of my business going to the states
00:46:26.040and the, and the, and the Kuzma disappears. I'm sitting there and the cost structure is higher1.00
00:46:30.760in this country. The tax structure is higher in this country. Okay. And we have a government
00:46:34.580that's much more interventionist. And I'm saying, gee whiz, I can just walk across that border or
00:46:40.120drive across the border. They'll welcome me with open arms because they're very aggressive towards
00:46:44.060recruiting capital in these upstate border states. I can go into that country and my tax rates will
00:46:50.520go down my personal tax and my corporate tax and i have a much bigger market i'll never have to
00:46:54.940worry about tariffs again and um you know it's it the barriers to entry or to going into the states
00:47:01.380are low and i think the barriers to staying in canada are very high and so you know there's
00:47:07.240businesses that are exiting we know that capital is moving to the states i don't have the breakdown
00:47:12.100of it i wished i did but i think we will see i'm not saying every last business is going to exit
00:47:16.900to the states. Of course not. But there will be some significant capital flight to the states,
00:47:21.100I'm sure, if we lose Cosmo. There's already capital flight. It's been happening with the
00:47:27.120agreement. And you will have more businesses. So we're doing the on-the-ground work in Alberta.
00:47:34.180And what we're seeing is that businesses are moving the necessary production to the U.S.
00:47:41.420and keeping in Canada. No one wants to uproot their kids. Yes, you can move across the border. Yes,
00:50:53.420We've all been doom and gloom about we've got nothing on our side to offer, which I just think is preposterous nonsense.
00:50:59.180The Americans are freaked out, to use a very unacademic term, over China.
00:51:04.580I read Foreign Policy Journal and Foreign Policy Magazine out of Washington Weekly, written by, you know, former generals and undersecretaries of state and so forth.
00:54:55.700So when you think about an agreement, it's not, okay, we signed, we're done, that nightmare's over, we can get on with our lives.
00:55:01.920Every dollar that we invest in trade diversification to foreign markets going forward has to be matched by a dollar in keeping exports that we have to the U.S.