HANNAFORD： Crunch coming between government control and your rights
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Summary
Many are still wondering why Prime Minister Mark Carney decided to poke President Donald Trump right as Canada and the U.S. were about to make a deal on trade. With me today is Yaroslav Baran, co-founder of Ottawa's Pendulum Group of Political Consultants, and in a past life, communications director to PM Stephen Harper.
Transcript
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Good evening Western Standard viewers and welcome to Hannaford, a weekly politics show of the
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Western Standard. Many of us are still wondering why Prime Minister Mark Carney decided to poke
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U.S. President Donald Trump right as Canada and the U.S. were about to make a deal on trade.
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First, he legislated supply management off the table. The 230% tariffs that Canada applies to
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U.S. dairy products to keep Canadian product competitive are a known irritant to Donald
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Trump. Then, right before the July 31st trade talks deadline, he promised, with conditions,
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to recognize Palestine as a legitimate state. Trump is famously pro-Israel. Why would Carney do that?
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With me today is Yaroslav Baran, co-founder of Ottawa's Pendulum Group of Political Consultants,
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and in a past life communications director to PM Stephen Harper. Yaroslav led party communications
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through three national election campaigns. They'd be the ones that Mr. Harper won, right, Yaroslav?
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Yes. Well, the first one, in fairness, he knocked the other guys down to a minority,
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but in the few subsequent ones, he won and increased his vote share every step of the way.
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Some of us would say that when consultants can gain some part in a significant string of election
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victories, we should take what they say seriously. So we want to hear from you tonight, Yaroslav,
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about what Mr. Carney is doing. Some people say that he doesn't know what he's doing. Some people say
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that he knows exactly what he's doing, but he hasn't shared the plot, a hidden agenda, in other words,
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which would be kind of ironic, really, given the accusations that used to be made at the people
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you worked for. What do you say about it, Yaroslav? Is he on the ball? Well, you know what? The trade
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negotiations between Canada and the United States are not easy, and we can't pretend that they're
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easy. These are highly complex, and probably the trading relationship between the United States and
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Canada is more complex than between the United States and any other country, given the volume and
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given the breadth of commodities and products and services that we do trade. Now, that said, let's take
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stock of what happened. There was this big August 1st deadline that everybody was really focused on,
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and that was the date when Donald Trump imposed a broad 35% across-the-board tariff on imports from
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Canada. However, I would say, you know, the sky didn't actually fall just because our negotiating team
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failed to finalize a trade agreement with the U.S., and the biggest reason for that is, I mean,
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the victory lap should go not to the government itself, but to Canadian exporters. Because when
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this trade war started some months ago, only about 38-39% of Canadian exports to the U.S. were covered
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by the Canada-U.S.-Mexico Free Trade Agreement. But the reason it was so low is that many exporters
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simply didn't bother filling out the paperwork to officially register their exports as being under
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under KUSMA because there's an extra compliance burden, but with little incremental benefit to
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doing so because there's already a relatively, you know, free trade environment. So knowing that this
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deadline was coming, Canadian exporters from sea to sea to sea have been frantically filling out the
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paperwork, doing forms, and becoming compliant so that their exports were covered and protected by the
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free trade umbrella. So by the time we got to that August 1st deadline, somewhere around 85, 90, some would
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argue 95% of Canadian exports were covered and protected by this KUSMA force shield over the Canadian
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economy. So this is, you know, this is an accomplishment by Canadian exporters who became compliant to give
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Now, that trade deal is, of course, up for renegotiation. Is it in about a year?
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Yeah, it's supposed to start in July of 2026, but there's pressure now, most recently, from the United States to start that
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renegotiation early. So that means we're not out of the woods. We could have additional chapters of this trade war. And even so,
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regardless of when that KUSMA review begins, we're still not out of the woods. There are certain sectors
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that are still being pummeled by US tariffs because they're, they're being treated as outside of that, of that KUSMA regime,
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steel, aluminum, copper, softwood lumber. So these sectors are still being very, very hardly hit. And this is
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now the focus of Canada's trade negotiators trying to find some relief for those sectors. Well, at the
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same time, announcing domestic assistance packages, you know, loan guarantees and stuff like that,
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as a temporary solution, until we can negotiate a way out of this morass.
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So the first question is, can you say again, what proportion of Canadian US trade is covered by
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the US Mexico Canada trade agreement? Well, it's a moving target, because different exporters are still
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coming online. And you know, some exporters are being scrutinized and maybe deemed not compliant. So
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different analysts have different figures. But the figures I keep hearing from reputed sources are
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somewhere between 85 and 95%. But so that, so the steel, the aluminum, the softwood lumber,
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the copper, that's the 5%. Yeah, that would be outside of that. And they're still being hit
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very, very hard with, in the case of the three metals, 50% tariff. And in the case of softwood,
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it's a little bit different. They're not technically tariffs, they're duties, they're, you know,
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they're levied under different, different legislation from the US. And it is different depending on who the
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exporter is, in some cases, it's 34%. In other cases, it's higher, in other cases, it's lower.
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So where is the auto industry in this division of Canadian assets?
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Well, this is also still a moving target, the audio sector is still being negotiated by both sides. But
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steel and aluminum are really big components in auto manufacturing. And we've all heard the, you know,
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heard the adage that the typical automobile on average goes back and forth across the Canada-US
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border eight times before it's ready to be sold. So imagine having that 50% cariff leveled on steel
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and aluminum parts every single time that it crosses the border. It's just, ultimately, this is not a
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sustainable model to continue to have a viable auto sector in Canada, if this isn't fixed.
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All right. Well, I mean, I think we all understand now that in Mr. Trump's view of the world, he needs
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to have certain strategic industries located within the United States. And I think that means within the
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lower 48%. If I could double click on copper for a second, because yeah, what you're saying is
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absolutely correct. And the steel, the steel tariffs, for example, are motivated by a desire to cultivate
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and reinforce a domestic US steel industry. Sure, that, you know, makes sense from a, from a,
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from a strategic point of view. But copper is kind of funny. Canadian copper faces a 50% tariff when going to
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the US. But the US barely has a domestic copper industry. Canada currently exports four times as
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much copper to the US than Americans produce copper domestically. So I would argue the Americans are
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really shooting themselves in the foot. They are still going to be hugely dependent on Canadian copper
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imports, except they're now going to be paying a much higher price of their own making because they
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don't really have a domestic industry yet to be able to offset those volumes.
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But presumably, the idea of these tariffs is to force US copper users to develop the industry that
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Trump believes should be there in the, in the United States.
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Sure, but that's a long term game. And that's a lot of pain in the meantime for, for the US market.
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All right. Okay. Trade is, is on the line. Mr. Carney is doing his best, we, we must assume to keep it
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there. But I still come back to the, the original question, which was, if you are in the middle of
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these complex negotiations, why would you, as Prime Minister of Canada, provocatively say, we are really
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proud of our communist system of producing dairy and eggs. So we're not even going to talk about that,
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whatever you think about it. And by the way, I know you will support Israel, sir, but we, we think it's
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time that Palestine was recognized as a state. Why would you do that two days before the trade deadline?
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Is there a method in this matters? Or is it really just a kind of dumb thing?
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Yeah, I, I, to be honest, I don't think that that is part of a master strategy in, in trade negotiation.
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I think that these are both kind of one offs. I mean, dairy industry, supply management.
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Mr. Carney's hands were somewhat tied by the passage of legislation by, by Canada's parliament in June.
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Now it started off as a block Quebecois private members bill, but it was supported by members of all parties.
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So this thing passed basically unanimously. And that, what that bill does is it forces the government
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to keep supply management off the table in these trade negotiations and in all other trade negotiations.
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It's basically a, it reaffirms the position of industries like dairy as a sacred cow, if you will,
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and keeps them exempt from, from being whittled away in, you know, in negotiations.
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Now that doesn't mean that there are certain, that there's some tinkering that can be done around the edges
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and there probably will be some, but the system itself cannot be dismantled.
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I'll give you an example of this recently. I mean, there was a longstanding dispute going on for geez,
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five, six, seven years between Canada and New Zealand over, over dairy.
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And it was finally resolved in June, but it was resolved in a way that did not dismantle or
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fundamentally alter the supply management system. But New Zealand is happy with the outcome and it's
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just administrative reinterpretations of the implementation of this system, which, which,
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which satisfied the New Zealanders to give them more access to the Canadian dairy market. So
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some fixes are possible, but not a structural overhaul.
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If you will. Now, Palestine is something different. And, um, you know, there's-
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Before we go to Palestine, figuratively speaking, I just sort of want to make one comment on that,
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Yaroslav. Mr. Carney is often represented by those who don't care for his politics as a sinister mastermind,
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you know, a Svengali character playing the puppets. And you were saying that this incredibly powerful,
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sinister PM with some say a hidden agenda, couldn't stop a bill going through parliament that he didn't
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like with all the, with all the, uh, levers of, of manipulation that he has at his disposal?
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Well, I think it's because he did like it. Uh, the, the political value of protecting supply
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Okay. So it wasn't this, it wasn't that he was out maneuvered. It's just that he sort of let,
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I don't know what things happen and somebody else is responsible.
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Not at all. If he were to, if he were to oppose a bill or stop this bill, it would be,
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many argue that it would be political suicide for him in the next election in Tibet,
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that he would lose all of his Quebec seats or at least everything outside of Montreal.
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Oh yeah. Supply management is hugely politically, uh, important, especially in Quebec and, and to some
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Well, oh geez. Um, I, I honestly do not believe that this was a trade negotiation maneuver.
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Not at all. Uh, there's been a significant pressure, international pressure in, in recent
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weeks, given what's been happening with the, with the stunted delivery of humanitarian aid in Gaza.
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And this was really started by French president, Macron, uh, Macron, who by the way, has a massive,
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uh, Arab and Muslim constituency in France. And that, you know, and that translates into political
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pressure. He started the ball saying, um, you know, we've had it. It's something must be done
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with this humanitarian crisis. And we will have to, we France will, will recognize the Palestinian
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state when the UN general assembly opens up in September. And he started to court other world
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leaders such as Keir Starmer in the UK and Mark Carney in Canada to follow suit, to create sort of a
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united front. Now, Mr. Starmer said, uh, he sort of came out with a compromise solution. He said,
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if something is not done, if humanitarian aid doesn't flow and flow big, then we will follow
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France's lead and we will do likewise. Mark Carney took a, uh, you know, a third more nuanced, uh, approach.
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He, he came closer to France's position and said that Canada will recognize a Palestinian state,
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but with certain conditions. For example, that, uh, Palestine would have to disarm, that there would
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have to be free and fair elections, that all the hostages, that hostages would have to be released,
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and that Hamas would be forbidden from contesting the elections. Now, keep in mind, there's also a very
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significant voter base in Canada that is applying the kind of similar pressure on, on, on the Liberals
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that, uh, that, um, President Macron has felt in France. Remember, for former Foreign Minister
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Melanie Jolie, you know, she was the first one seized with this issue, and she personally had a
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disproportionately high number of Arab and Muslim voters in her own riding. So that kind of internal
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political pressure is pretty massive. And I would argue that that is really what is,
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what is motivating this. He's trying to walk a balanced line because on the surface, it seems
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like a reasonable proposal. It is aligned with longstanding Canadian foreign policy that a two
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state solution is ultimately the way forward. So it's not a technically a departure from that policy.
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And the conditions seem very reasonable on the surface, you know, release the hostages,
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Hamas cannot contest elections and so on. The issue here is that it is a big, big deal to bestow
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official diplomatic recognition of another state, for example, state of Palestine. And you cannot
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bestow and revoke that, you know, every couple months based on circumstances on the ground. So once
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that recognition is given by Canada, it's basically permanent. So what's to stop a new Palestinian
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government from, for example, agreeing to these conditions? And then two years later, three years
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later, suddenly we see Hamas resurface as a major political party contesting elections. Like Canada
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can't really, you know, bestow and revoke diplomatic recognition like turning off and on a light switch.
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It just, it doesn't work that way. So there's, this is a really big move and should not be taken
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very lightly. Do you suppose that, let's just play with the idea that, that Mr. Carney was,
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had trade on his mind, but this was more on his mind. Maybe there wasn't a deal with the Americans
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in the offing anyway. So it didn't really matter whether he upset them by offering this conditional
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recognition of Palestine. Could that be the case? It seems to me that this recognition of Palestine
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move was entirely separate from trade, that he was trying to satisfy, you know, domestic political
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pressure in certain quarters, as well as genuinely in his mind, trying to address the acute humanitarian
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crisis in Gaza. The problem is that this announcement has really antagonized Israel and a whole lot of
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Israel supporters. Many argue that it's, that it rewards the October 7th attack, that it rewards
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terrorist activity. As one analyst from the McDonnell Laurier Institute recently wrote that it,
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that it effectively creates a forward operating base for Iran right on Israel's doorstep. So these
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are some of the implications, albeit unintended for Mr. Carney, of taking this kind of a bold step. And
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even though Donald Trump has not said that it will impact Canada-US trade negotiations, the fact
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remains Canada is one of few countries still without a deal. And Mr. Trump did publicly criticize Mr. Carney's
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announcement that he will recognize Palestine. So implicitly, it's pretty reasonable to conclude that it is
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having an impact on the Canada-US trade negotiations. Fair enough. Let's move the, move the, move the window a little bit,
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Jaroslav. We've now had a little more than three months of Mr. Carney post-election plus a month before. He has made a number of bold
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promises, promises that we're going to build, build Canada, build Canada strong. There will be this,
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there will be that, there will be subsidies for steel, they'll keep the, we'll look after the softwood
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lumber, we're going to build houses, we're going to build so many houses. It's almost starting to sound
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like Mr. Trump in full flow. He's made a lot of promises. And yet when the basic wealth generators,
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like pipelines, like the energy industry to be more specific, are very much still in the balance.
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And you know that deep down in his heart, he doesn't like the energy industry because he thinks it's
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responsible or so he says he thinks it's responsible for global warming. When you put it all together,
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is there actually a viable plan there or is this government by announcement Trudeau style?
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Well, it would appear at least now that Mr. Carney has accepted the, you know, the realism of current
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circumstances and is harking his hostility towards Canada's energy sector because he's saying
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all the right things in terms of the need to build things like pipelines and other nation building,
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economic facilitating projects, you know, things like east-west electrical grids and others. But
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pipelines and the petroleum industry are massive to Canada's economy and he has not been at all hostile
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to them outwardly the way that his predecessor Justin Trudeau was. But we'll see if that sticks.
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Many would argue that his actions now are irreconcilable with what he has spent the last 10 years
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talking about on the international lecture circuit, saying we need to aggressively move towards
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a Trudeau model carbon tax internationally, that that is the way forward to fight climate change. And that
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would be antithetical to Canada's energy sector. So it seems that, you know, he is, he's being motivated by
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real politic by the, you know, the realism of circumstances right now. And on the one hand,
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that's positive. On the other hand, you cannot blame political watchers for being a little bit
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skeptical that this is going to last. Moreover, if he really wants to demonstrate leadership that he
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is going to build these massive nation building projects like pipelines, I would argue it's incumbent
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upon him to work on people like the premier of Quebec and the premier of British Columbia,
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who are still saying no pipelines, no pipelines through my territory. And, you know, and wrestling
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them to the ground saying this is necessary and you've got to, you've got to play ball on this.
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Otherwise we can end up in a situation where he's saying, Hey, I'm the good guy. I'm the one pushing this.
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It ain't me. It's a premier stopping it. So he gets the best of all worlds. He gets the public
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relations benefit for theoretically supporting the energy sector without any pipelines actually
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Steve McLaughlin Constitutionally speaking here in Alberta, we take the view that
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the federal government in the person of Mr. Carney now, but before him, Mr. Trudeau has no business in
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certain parts of provincial jurisdiction. Premier Smith famously uses the line that the federal
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government should stay in its lane. And we hold to that very, very firmly. But now when it comes to
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getting a pipeline through to the coast, we actually wouldn't mind if Mr. Carney gone into BC's lane and
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into Quebec's lane. So where is the constitutional authority really lay for things like this?
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Well, constitutionally, provinces control things like pipelines, provided that that pipeline is
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entirely within that province's boundaries. Once that pipeline or other things, highways, whatever,
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cross a provincial boundary, then it becomes the dual jurisdiction issue. Now, provinces still have
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blocking authority. And that's why that moral suasion from the prime minister can become a very
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powerful tool to win over those premiers. But you know what? It's also becoming a more
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competitive environment. If British Columbia, for example, continues to block pipelines of Alberta
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and Saskatchewan products to overseas markets, Manitoba is saying, heck, send it here. We'll build
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a deep sea port in Churchill and export via the Hudson Bay. I mean, Premier Ford is talking about a deep
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sea port near Moussigny on James Bay. Again, using Hudson's Bay as an export tool to get products out to market.
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We're just about out of time, Arislav. But when Parliament resumes in September,
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tell me three things you expect to see in the throne speech.
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Well, actually, I don't think we're going to get a different throne speech. I think it's going to
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be technically a continuation of the previous session, but it's going to be very different
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in that Pierre Poilier is going to be back in the House of Commons. He's got a by-election coming up,
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which I expect he'll win handily. So we're going to be back to a traditional dynamic of government
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and opposition leaders sparring in Parliament because Carly largely got a pretty free ride in June.
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So that's going to be the biggest difference. There's also going to be intense political
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pressure from the United States for the Carney government, for Parliament to pass C2, the Border
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Control Act, which will, it's going to be contentious. Yeah, it does some good things
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about strengthening the border and tackling cross-border crime, but there are also some
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significant civil liberties implications in that bill. Those are probably the two big ones.
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And the final one is we're going to see how this whole nation-building projects thing evolves. The
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premiers are so far collecting project ideas that they are going to pitch to the federal government,
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but it's ultimately going to be the federal government that decides which of these projects
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are going to move forward under this new federal fast-track legislation. So get ready for possibly some
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fireworks and horse trading between the provinces and the federal government for access to the Bill C5
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nation-building fast track. We'll all be gathered around the television watching it when it happens.
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Don't worry. Yaroslav, as always, it's been a great pleasure to hear your insights. You have much wisdom
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to give us. Thank you for joining us. For the Western Standard, I'm Nigel Hannaford.