Western Standard - HANNAFORD： There's no choice, so do a deal with Trump, says Jack Mintz.

00:00:00.000 Good evening, Western Standard viewers, and welcome to The Hannaford Show, a weekly politics

00:00:22.780 show.

00:00:23.860 Last week, Canadians were told by President-elect Donald Trump that along with Mexico, they

00:00:29.560 would be facing a 25% tariff wall on their exports to the US unless they got control

00:00:35.160 of north-south trade in illegal drugs and illegal aliens trying to sneak into the US

00:00:41.460 from Canada. With me tonight to talk about that is Dr. Jack Mintz, one of Canada's foremost

00:00:46.880 economists and original thinkers. Good evening, Jack.

00:00:49.980 Good evening, Nigel. Pleasure to be with you.

00:00:53.320 Great to have you. Jack, two questions to start. First, President Trump has a reputation for

00:00:58.860 making outrageous demands as he launches into negotiations. It's no secret he's written a book

00:01:05.580 about the art of the deal. So is he serious? And the second question is this. Although he's talking

00:01:12.060 about illegal drugs and aliens, is that really the issue or is the deal somewhere else? Well,

00:01:20.240 what do you say, Jack? Well, first of all, on, you know, is this kind of like typical Trump stuff

00:01:26.740 like we saw during 20 in the first mandate where he you know certainly threatened tariffs of all

00:01:34.280 sorts of things and of course he opened up NAFTA the negotiation over our free trade agreement with

00:01:40.060 the United States of Mexico and you know some of it was bluster in the sense that he was trying to

00:01:47.480 get certain deals made it's a transactional person but as we saw with the NAFTA the deal

00:01:54.640 was opened up and there were some changes that were made and that did happen i think we're in a

00:02:00.560 very different situation now uh for this mandate um i don't think i don't think it's exactly the

00:02:06.480 same as before uh first of all i think there's very broad support uh in the united states for

00:02:13.600 favoring domestic production uh and i think also uh the republicans are looking at tariffs

00:02:20.000 not just only to protect industries in the United States and draw investment back into the United

00:02:28.100 States, but also as a source of revenue. And so Trump has said during the election that he wanted

00:02:35.580 to put in a broad-based tariff on all countries. You talk about 10 or 20% at that time. And I think

00:02:44.100 there's actually a very serious possibility that he may want to do that as a way of trying to

00:02:49.880 not just achieve his trade goals but also to get the kind of revenues he would need and this isn't

00:02:58.820 the only source but we one of the sources to help pay for the tax cuts and the need to balance the

00:03:05.220 budget or at least try to move to a smaller deficit in the United States so if you're going

00:03:10.820 to sort of make all the things come back together I think we're in a very different situation right

00:03:15.700 now. And of course, his threatening of 25% terrorists in the case of Canada and the United

00:03:20.680 States, I think that is something where perhaps relief would be given if the right actions are

00:03:26.700 going to be taken. And I think that is his goal. Sorry, go finish up. Well, I was going to answer

00:03:34.280 your second question, which was, you know, about the border and security of the border.

00:03:44.280 You know, the initial Canadian response was, oh, this is a much bigger issue for Mexico than it is for Canada.

00:03:51.280 Like, why are we, you know, being brought into this?

00:03:55.580 And you might argue that it's a bit unfair to put 25% on Canada, just like Mexico, 0.76

00:04:00.700 given that, you know, the millions that have been involved in illegal immigration coming into the United States.

00:04:08.320 compared to what i've just read recently the americans have caught close to 200 000

00:04:16.000 trying to come into the united states so from the northern border but i think there are some issues

00:04:22.560 that need to be dealt with and we can get into more detail later on but as it was reported today

00:04:29.360 out of the out of the people that the americans have caught at the southern and northern border

00:04:35.760 as potential terror terror terror terror suspects that that 86 percent of them are coming from the

00:04:47.760 northern border and that is an issue i think that we're going to have to deal with but just as a

00:04:54.160 comment on that you've heard no doubt that um premier smith here in alberta has decided to

00:05:01.760 to deploy Alberta sheriffs in an attempt

00:05:05.040 to at least start to cope with that situation.

00:05:08.080 And I hear that some other provinces

00:05:09.640 are doing the same thing.

00:05:12.880 Is this something that a province can actually

00:05:15.760 make it a big dent in?

00:05:18.180 No, well, I think they can maybe try and do some of it.

00:05:21.420 I think, you know, you have, for example, in Ontario,

00:05:24.840 the Ontario Provincial Police,

00:05:26.820 you have an Alberta, the RCMP,

00:05:28.860 And you may use the local police forces to try to maybe catch people who become illegal immigrants. 0.97

00:05:40.940 But I'm not sure we can do very much about it because there's a legal process.

00:05:44.440 And, of course, that's part of the problem.

00:05:46.520 Just like the United States, once they identify themselves to be a refugee or something like that, 1.00

00:05:51.580 then there's a process that's involved to look at the claim.

00:05:55.400 and that could take quite a few, quite a long time before it's dealt with, you know, since it's two years.

00:06:01.500 And so I think that, you know, there is an issue, I think.

00:06:05.040 Well, certainly not our problem, but if we succeed in reducing the number of people trying to crash the border to the U.S.,

00:06:14.140 then I have to assume that's going to work in our favor.

00:06:19.740 Well, I think, you know, there's two different, you know, there are two different types of issues involved.

00:06:25.140 There are people that come through our border, including airports, et cetera, that come on the West Coast and East Coast, et cetera, not from just the United States.

00:06:38.800 And this is what the concern is, is that what the Americans are arguing, they're terrorists, actually, or terrorist suspects, that it's easier to go through Canada than to go through Mexico to come into the United States.

00:06:52.520 whether how true that is you know i'm no expert but going back to your question uh what i was

00:06:58.440 going to say was that in the end the federal government has to uh enforce the border they

00:07:04.440 they have the um you know the canada border and uh border operations is their purview it's the

00:07:13.480 it's federal responsibility and i don't think the provinces can can do as much as what the

00:07:18.520 program it has to do okay so i think what you were saying just a moment ago is that it has now become

00:07:25.880 acceptable to discard free trade or at least acceptable in the united states to discard free

00:07:32.600 trade in favor of trade barriers that support other political objectives um i mean we have a

00:07:39.960 free trade deal with the u.s the united states mexico canada agreement and applying a 25 tariff

00:07:49.800 with that agreement in place would indeed seem to be discarding a free trade agreement

00:07:55.320 so excuse me people are saying he'll never do it really because it would hurt americans to pay more

00:08:03.080 for oil, gas, lumber, and motor cars sourced in Canada.

00:08:08.120 Is that a, are we just kidding ourselves? Is that actually going to help us?

00:08:14.120 Well, I think we, you know, there is an economic theory that I think is very important to

00:08:19.560 first lay out, and that is who pays for a tax or like an excise tax on beer,

00:08:27.000 or who pays a tariff in the case of when we're talking about trade.

00:08:33.080 uh and and the theory will tell you that uh some of the tariff uh will be shifted forward to

00:08:39.960 consumers some of it will be shifted back to producers including the retailers who might

00:08:45.960 have to absorb some of the costs with lower profits and that depends on you know on uh

00:08:53.080 you know what the sense of you know how you know the size of the markets and the sensitivity of

00:08:59.080 demand and supply to to changes in price so to give you an example in the case of oil let's say

00:09:09.520 let's say United States puts a tariff on Canadian oil sold to United States well first of all the

00:09:17.320 American American market gets heavy oil there's different sources of heavy oil including Mexico

00:09:24.460 and Venezuela, which right now is not very important, but there's also some other sources

00:09:29.180 internationally. And so the Americans could decide, well, we're going to put this tariff

00:09:34.700 on Canadian oil, but we'll buy more oil from other sources, particularly heavy oil, which is needed

00:09:43.120 for the refineries in the Gulf Coast. In that case, a significant part of the tariff is going

00:09:50.660 be borne by producers in Alberta with respect to the tax on the oil.

00:10:00.140 Now if the United States can't get the same amount of heavy oil from other places then

00:10:05.860 some of that tariff is going to get shifted forward to American refineries that are going

00:10:10.800 to have to pay more for their oil and then of course that will raise gasoline prices 0.91

00:10:15.060 in the United States.

00:10:17.500 So probably some of that tariff is going to get shared between the two countries.

00:10:23.140 And it's not all going to just fall on American producers.

00:10:27.060 And that's why the discussion is somewhat been incorrect in talking about the impact

00:10:32.560 of American tariffs.

00:10:33.560 It depends on the sector.

00:10:34.560 It depends on the industry.

00:10:36.720 It depends on the options.

00:10:39.100 But oil is a really good example.

00:10:41.080 case of Canada, except for the Trans Mountain pipeline now, we can't sell our oil anywhere

00:10:48.260 else in the world. All of it is piped down to the United States. 90% of our oil is sold

00:10:56.540 to the US. And so if you put a tax, if the Americans put on a tax, we have no options.

00:11:03.940 We can't say, oh, we're going to take our oil and ship it somewhere else. We can with

00:11:08.840 the tmx we got you know we have maybe 900 000 um barrels per day that we could kind of shift over

00:11:15.800 to some other countries but even then you have to sign long-term contracts and all sorts of other

00:11:20.680 things to do that the main point is that we're really beholden to the u.s when it comes to oil

00:11:25.800 but we're also really beholden to the u.s with respect to the auto industry which is also very

00:11:31.000 integrated in north america again 90 percent of our autos and auto parts are sold to the united

00:11:37.480 states of you know of our exports and you take these two industries you know both oil gas refined

00:11:46.200 petroleum and the other one being the auto sector which is both cars and parts you add them together

00:11:53.560 that's one third of our all of our exports that we sell to the rest of the world and those two

00:11:59.720 industries are completely behoven to the united states in terms of our our total trade 90 of it

00:12:06.760 so we don't really have very many options and so that means that you put a tariff on

00:12:12.680 there's a good chance that we're going to absorb some of that tariff it's going to hurt us it'll

00:12:16.840 probably hurt the u.s a bit too but in the end i think we're going to we're going to suffer more

00:12:22.600 of it given the size of the market in the u.s and given the options that the u.s has that we don't

00:12:29.480 have well you think of softwood lumber if they apply a tariff to that i think we're of our main

00:12:36.200 we're their main source for you know what the basic construction material of a house is so

00:12:42.200 that's going to have an upward pressure on home prices in the united states i would have i would

00:12:47.720 have faulted do we have any leverage there perhaps well again it depends on on uh you know how much

00:12:54.760 is um you know can we divert to other countries um that's what that's the point of this theory

00:13:00.520 it tells you that uh if you're even even even if uh us is reliant on our wood which again there's

00:13:07.240 other wood coming from norway and other countries that could be bought but even if they are um

00:13:13.240 you know very much beholden on u.s uh or canadian uh lumber sales uh the question is do we have

00:13:19.800 options to sell our lumber somewhere else and in the case of lumber we actually do sell to asia so

00:13:25.160 we do have some options uh that uh you know are available to us and so probably i suspect in the

00:13:31.880 case of lumber more of the of the tariff would fall on consumers in the united states uh but

00:13:38.440 you know there was a study done on the chinese tariffs that the americans put on you know trump

00:13:43.480 had originally put on and biden continued them actually people forget this is not just trump

00:13:48.120 this is now something that's done on both sides of the of the aisle in the united states both

00:13:53.480 republicans and democrats support these things and the chinese tariffs were found to be significantly

00:14:02.360 shifted forward to the u.s but surprisingly not so much through higher consumer prices but impacting

00:14:08.120 retailer market margins in the united states was kind of an interesting story in itself

00:14:14.280 from what you're saying jack it it seems to me that diversification of canadian trade

00:14:20.680 should be the long-term goal of any government and certainly i i do well recall writing several

00:14:27.000 speeches for mr harper back in the day in which we were applauding new deals in europe and in

00:14:33.800 in asia and so forth but this seems to have fallen by the wayside um you know the

00:14:42.600 with agreements we had agreements all over the globe we wouldn't be in such a tight spot now

00:14:48.760 and if we had ramped up the infrastructure to export oil and lng off the west coast

00:14:55.000 do you think that mr trudeau now regrets cancelling and discouraging those projects

00:15:01.000 oh i don't know if he regrets it he's so concerned about climate change

00:15:06.520 even though natural gas sales for example internationally if it leads to the reduction

00:15:12.360 of coal consumption internationally that actually could be a win in terms of climate change not a

00:15:17.160 loss aside uh i don't think he he regrets it at all i think that that's because his main and only

00:15:25.800 priority has always been climate change even even now he talks about you know how climate change is

00:15:31.800 more important than putting food on your table so you know i think i think i don't think he regrets

00:15:37.640 it at all uh but i but it is a good example uh you know we we talked about you know trying to

00:15:44.200 beef up our transportation networks uh there's been the northern corridor proposal uh trying

00:15:50.920 trying to have more opportunities to sell our goods and services internationally and oil and

00:15:56.760 natural gas is a good example lng we had tremendous number of proposals made around 2010 to build lng

00:16:03.960 plants in bc and only one went ahead and it's now just coming on to production soon and so uh we we

00:16:10.920 have not we have we you know we've talked the game when it came to to oil

00:16:16.320 and gas but instead we didn't do anything after all that time except for

00:16:21.180 the team X pipeline that's been the only one that had any success and at the same

00:16:26.640 time when you look at some of our other sectors you know we we still tend to be

00:16:31.440 very focused on the u.s. and 75% of our total exports go to the United States I

00:16:36.880 I just mentioned the auto and the oil and gas sector

00:16:40.140 because they are our two biggest export earners

00:16:43.600 and one third of our total export earnings,

00:16:48.260 and yet 90% of that is sold to the United States,

00:16:53.060 which means that we do have a little more diversification

00:16:55.820 than some of the other areas, which is good,

00:16:58.380 but we haven't really done very much

00:17:00.740 outside of some trade agreements.

00:17:02.600 But again, we're still very much dependent

00:17:06.520 on our trade with the United States, which perhaps is not surprising

00:17:11.880 because that's the shortest distance for much of our production in Canada.

00:17:17.600 You just have to hop over the border and send some things down

00:17:20.520 into that very big U.S. market, which is now 25% of world GDP.

00:17:28.120 Changing the subject very slightly, Jack,

00:17:30.840 we like to think we're a free trade country,

00:17:33.520 But, you know, as I was buttering my toast this morning, I reach into the fridge and I pull out a fresh pound of butter.

00:17:41.480 And it occurs to me that we get all head up when Trump makes these kinds of demands, but we still have supply management.

00:17:51.400 So when it comes to free trade, how clean are our hands?

00:17:56.420 Are we just talking the talk?

00:17:57.780 Well, I think, you know, I think the article that I had this morning, I think, was trying

00:18:04.500 to make the point that for years, especially after the Second World War, we adopted a principle

00:18:14.420 of free trade.

00:18:15.420 In fact, the British did through the British Empire back, you know, even earlier after

00:18:18.960 the abolition of the corn laws in Great Britain in 1846, but, you know, the idea of free trade

00:18:27.560 became very very much an objective for governments in order to keep prices lower for consumers and

00:18:36.280 also specialize in the industries that you're most able at and have the highest productivity

00:18:43.320 and lowest unit cost to sell abroad and so those were some of the things that we did

00:18:49.400 in that many countries pursue and when you go to before 2008 if you look at the kind of advice the

00:18:59.320 world bank gave the international monetary fund as well as other other in within many countries

00:19:08.600 the idea of opening up borders allowing for import competition all those things were good

00:19:13.560 they were viewed as very good things to do free trade was an objective didn't mean that we had a

00:19:18.920 perfect free trade where you know there were certainly areas that you know we did that uh

00:19:24.520 you know where we tried to you know protect industries uh but still the principle was

00:19:29.800 accepted and i think today that that's all gone now that has changed in 20 years no longer our

00:19:36.760 country's free traders so we can we can easily and canada is included there uh you know we can

00:19:42.680 blame trump for doing what he's doing and you know criticize him but on the other hand we're not pure

00:19:48.040 either and supply management is a perfect perfectly good example uh everybody will

00:19:54.840 write or any economist where's the salt will tell all the terrible things about supply management

00:20:00.280 first of all it leads to higher butter prices higher milk prices because of the restrictions

00:20:06.760 on imports coming into the country uh it also it also leads to inefficient farms you know the

00:20:14.520 typical dairy farm in canada it's got 100 cows i remember talking to somebody in oklahoma once

00:20:22.280 when i was there and he was a he was involved with dairy farming and he told me they had 2 000 cows

00:20:29.000 you know the operations are so much larger in economies of scale and they're exporting a lot

00:20:33.800 and we know that australia and new zealand got rid of their supply management i had a great student

00:20:39.480 this year at the School of Public Policy at the University of Calgary, Ben Harford, who wrote an

00:20:45.000 excellent capstone paper explaining the difference between Australia and the Canadian experience.

00:20:49.880 Australia got rid of their supply management. They did it over time by putting a tax on milk

00:20:54.840 that paid for the quotas to reimburse farmers for that. But what happened is that you not only

00:21:02.120 are able to have more sales going abroad, but you also get a consolidation that lowers

00:21:09.240 prices uh you know for milk to the benefit of consumers but also to the benefit of milk product

00:21:17.480 industries like cheese and yogurt and others that could sell more abroad as well and and but we

00:21:24.200 don't sell anything abroad no one buys canadian cheese you know because raw milk is too expensive

00:21:31.800 and so it's too expensive to export and certainly when i you know go to the store and buy cheese

00:21:37.160 today it's just ridiculously priced now i mean a small block of cheese costing 14 when

00:21:43.080 you know three four years ago it was like six or seven dollars and so i i think we have uh you know

00:21:48.520 real it's a really perfect example that we do protection too and there's more industries and

00:21:53.960 other examples of protection that that we give to various industries from import competition

00:22:00.760 and so we can go on about you know we might beat our chest that we're wonderful free traders but

00:22:06.280 we're not we are not free traders we like to protect our industries and it's become

00:22:11.960 a philosophy now that we have to protect industries because because of what happened

00:22:17.640 you know during the after china came in you know came you know came on after wto accession

00:22:25.000 and you know it did hurt the heartland of many industrial countries although it did

00:22:30.840 all that trade that happened with asia did lower consumer prices for people in north america

00:22:38.360 and in europe but at the same time it also reduced income inequality because

00:22:45.480 asian incomes went up quite a bit and international income inequality dropped all

00:22:51.000 all after 2000 and of course we benefited from that chinese expansion and world expansion

00:22:57.160 after 2000 with higher resource prices.

00:23:01.540 And Canada was doing very well,

00:23:03.800 especially before the financial crisis in 2008,

00:23:07.340 where the Canadian economy was really booming

00:23:10.860 as a result of that growth in world trade

00:23:13.680 and the demand for resources.

00:23:15.120 So we're now going the other way.

00:23:17.900 And that's, of course, a concern that I have

00:23:20.100 in terms of where we're moving.

00:23:22.860 So, Jack, we're almost out of time here.

00:23:25.760 I should ask you this, though.

00:23:27.060 here we are. I mean, Mr. Trump has presented his threats, demands. But you know, it seems to me

00:23:35.320 that we should have better control over our borders anyway. So why not make a virtue out

00:23:43.140 of necessity and just do a deal with Trump? Is that what we're looking at? I think in the end,

00:23:48.700 that's the best course of action. I mean, think about it. You know, one option is we do nothing,

00:23:53.360 we retaliate well retaliation is not going to do anything for us in fact it's just going to hurt

00:23:58.080 us too i mean may hurt the americans a bit but it's not going to help us uh in fact i read

00:24:04.560 one editorial today in one of the canadian newspapers this morning and they're saying

00:24:08.640 we should retaliate you know but that's that's not going to do anything we'll end up hurting

00:24:13.440 ourselves with retaliation but as we're going to be probably hurting ourselves exporting into the

00:24:19.920 u.s market so if you take that off the deal that doing nothing except retaliating then the other

00:24:27.840 option is trying to make a deal and you know and and the main point is that we shouldn't i mean

00:24:34.000 the biggest mistake that the federal government started with is trying to say oh this is a mexican

00:24:38.240 problem this has nothing to do with canada but that's wrong there are things that we should be

00:24:42.640 doing we should be uh we should be ensuring that our border is tighter and more secure

00:24:49.040 we should be worried about potential terror threats coming through canada into united states

00:24:56.400 it's not especially when you have we're the you know we're responsible for most of them being

00:25:02.640 being apprehended in the united states so i think we need to worry about that and then in the case

00:25:07.280 of fentanyl we have increased amount of production within canada fentanyl so again we we have a

00:25:14.080 responsibility ourselves not only to the united states but also to ourselves in trying to reduce

00:25:20.720 drug abuse and and the horrible deaths that have occurred with fentanyl it just seems a shocking

00:25:26.800 thing that a u.s president has to dictate terms to a canadian prime minister and actually he's

00:25:33.680 right it'd be better for all of us if we if we just did what he's suggesting yeah exactly

00:25:40.400 it's been great to talk to you again and thank you so much for coming on the show we appreciate

00:25:46.760 that i have a feeling we might be talking to you again quite soon if you're if you're available

00:25:51.140 uh but meanwhile thanks and have a great day in toronto my pleasure nigel for the western

00:25:57.920 standard i'm nigel hannigan good night

00:26:10.400 Thank you.

Western Standard - December 03, 2024

HANNAFORD： There's no choice, so do a deal with Trump, says Jack Mintz.

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