Many hope that Joe Biden’s presidency will reap big dividends for American allies and for Canada after four tumultuous years of Donald Trump. There will be less bashing of friends and fewer insults with the new president. He will also pay greater attention to nurturing alliances and multilateral institutions. But there is no going back to the future. The American polity remains deeply fractured, more so after the riotous storming of the U.S. Capitol by Trump supporters just as his presidency was ending. America’s moral authority as leader of the democratic world has taken a serious drubbing. Its credentials as a beacon of hope for the rest of the world are more than a little sullied.
Biden will abandon Trump’s harsh rhetoric about “America First” and bring a softer, friendlier tone to the White House. But make no mistake. Putting friendly rhetoric, warm hugs and high fives aside, Biden is not going to go out of his way to do Canada any special favours on the issues that really matter to Canada, even if he and Vice-President Kamala Harris get the royal treatment when they visit our nation’s capital.
It certainly helps that our prime minister has warm personal relations with Biden and that Harris attended high school in Montreal and has a better understanding of Canada than most of her fellow Americans. When the rest of the world is standing in line to get a hearing at the White House, you want to be in the front of the line, as former prime minister Brian Mulroney often liked to remind Canadians.
Biden faces a Herculean task to restore the U.S.’s economic fortunes, which have tanked with the COVID pandemic as millions of Americans have become infected and more than a quarter million have died. Restoring the health of Americans and the U.S. economy will be his first and foremost priority. Whether he has the mojo to provide inspired political leadership and unify Americans in a post-Trump nation remains to be seen.
And there is still a lot of uncertainty out there about how quickly the U.S. economy, which is Canada’s most important trading partner, will rebound from its COVID-inflicted wounds and the nosedive trade took in 2020.
The U.S. Conference Board predicts that “real economic growth will rise by 2.2 per cent in the fourth quarter of 2020 while the U.S. economy continues to wrestle with the COVID-19 pandemic.” It points out that this “deceleration in the recovery follows a contraction of 5 per cent in the first quarter of the year, a contraction of 31.4 per cent in the second quarter and a rebound of 33.1 per cent in the third.”
But all bets are off for 2021. Future recovery, says the Conference Board, is going to depend on a number of wild cards, including “a) the scale of the ongoing COVID-19 resurgence and any resulting lockdowns, b) the status of labour markets and household consumption, c) the size and timing of additional fiscal stimulus, d) the availability of a COVID-19 vaccine, and e) the degree to which volatility in the U.S. political transition affects consumer and business confidence.” If COVID is contained, lockdowns are short-lived and a vaccine(s) becomes readily available for the general population, in the best-case scenario the U.S. economy will grow at an annualized rate of 3.8 per cent. That will be good for Canada and intensify U.S. demand for Canadian goods and services.
However, if the virus continues to exact its deadly toll and there are more lockdowns and layoffs, the contraction of the U.S. economy will extend well into the first quarter of 2021 or perhaps even beyond. In the worst-case scenario, the U.S. economy won’t rebound to its pre-pandemic levels until 2022.
A key factor in any recovery scenario will be the size and scope of a stimulus package that a new administration and Congress can agree on. Trump and a bitterly divided U.S. Congress were at loggerheads about how much to spend. Whether a Biden administration fares any better will depend on the president’s negotiating skills. Although the Democrats now control both the lower and upper houses in Congress after they won two run-off elections for the Senate in the State of Georgia in early January, Biden and his party will have to work closely with Republicans in the Senate because of Senate Rule XXII (the cloture rule), which requires a supermajority of 60 per cent to end debate on key bills. This power is now somewhat circumscribed — it does not apply, for example, to votes on judicial appointments, including Supreme Court nominations, “fast track” procedures for approving trade agreements or budget reconciliation for major legislation. It nonetheless still applies to appropriation bills and major legislation in areas such as taxation, the military, health care, the environment and civil rights, giving Republicans a handy tool to thwart progressive Democratic intentions.
The crown jewel of Biden’s recovery plan is the proposed US $2-trillion “green energy” infrastructure plan. If it comes to fruition, however, Canadian companies could find themselves shut out of the action if American energy, transportation and construction companies are shielded from their foreign competitors. However, it is more likely to be whittled down for the reasons mentioned above, though this would not necessarily open doors to Canadian companies seeking business south of the border.
Biden’s first speech on U.S. economic recovery as president-elect, which he delivered shortly after the election, may be an ominous portent of his protectionist impulses. Ironically, the words could have easily come out of the mouth of the man he had just defeated at the polls. “Our plan,” Biden said, “will create millions of good-paying union jobs in manufacturing, building the vehicles, products, technologies that we’re going to need for the future to compete with the rest of the world. From autos to our stockpiles, we’re going to buy American. No government contract will be given to companies that don’t make their products here in America. To secure our position as a global leader in research and development, we’re going to invest $300 billion in the most critical, competitive new industries in technologies creating three million good-paying jobs. And the corporate American technology firms [such as] Microsoft… they all agreed. We can make sure a future is made here in America. And that’s good for business and it’s good for American workers.”
Although Biden is unlikely to play the kind of game that Trump did by slapping tariffs on Canadian (and Mexican) steel and aluminum pursuant to Section 232 of the Trade Expansion Act of 1962, he is also unlikely to revoke the agreement that Canada and the United States struck in 2019, which provides for aggressive monitoring and a mechanism to prevent surges in imports of steel and aluminum. If imports of steel and aluminum “surge” as the U.S. economy rebounds, a Biden administration would almost certainly come under pressure from U.S. producers to take retaliatory action against Canada and Mexico.
The same thing applies to critical minerals. Under the Canada–U.S. Joint Action Plan on Critical Minerals Collaboration, Canada and the U.S. agreed in 2020 to collaborate to secure supply chains for the critical minerals needed for key manufacturing sectors, including communication technology, aerospace and defence and clean technology.
Canada is the largest supplier of potash, indium, aluminum and tellurium to the U.S. and the second-largest supplier of niobium, tungsten and magnesium. It is also a major supplier of vanadium, which is used in the production of metal alloys for the aerospace, defence, energy and infrastructure sectors. Major discoveries of the mineral at Lac Doré in Quebec suggest that those reserves may be among the world’s largest. In the summer of 2020, then-U.S. commerce secretary Wilbur Ross initiated an investigation into whether vanadium imports into the U.S. threatened to impair national security. Pressure to do so came from vanadium producers in Ohio and Arkansas.
The outgoing U.S. administration also threatened trade action against Canada on dairy on the grounds that Canada has failed to abide by its Canada-United States Mexico Agreement commitments to allow more U.S. dairy imports into its highly protected market. Biden may come under pressure from U.S. dairy producers to do the same.
All of which is to say that protectionist pressures from U.S. producers seeking government redress aren’t going to disappear under a Biden administration.
The biggest bugbear is, of course, that constant cyclical trade barrier, Buy American, which former president Barack Obama deployed to dig the U.S. out of the 2008-2009 recession caused by the financial crisis, and which Biden will be tempted to use again as he tries to extract the American economy out of its COVID-induced recession.
There are no special provisions in the new free trade deal to exempt Canada from U.S. Buy American legislation, although federal governments in the two countries are governed by the World Trade Organization (WTO) agreement on federal contracts, which also applies to some — though not all — state governments. There is obviously a silver lining in Biden’s commitment to adhere to the WTO and not pull out, as Trump threatened to do. But Canada will also have to take a closer look at itself in the mirror when it complains about discriminatory U.S. policies. Our two biggest provinces have refused to open some of their big agencies — Hydro-Québec and Infrastructure Ontario — to free-trade procurement, and American officials will almost surely take notice.
Under Trump, the U.S. and Canada moved in opposite directions on climate change. The federal government’s carbon tax undercut a basic element of Canada’s competitiveness vis-à-vis the United States, especially after Trump withdrew the U.S. from the 2015 Paris Agreement on climate-change mitigation. Biden’s promise to rejoin the accords and his Clean Energy Revolution plan, if it comes to fruition, will put both countries in greater alignment on energy and climate change, although Biden’s proposed “carbon adjustment tax,” which is intended to force countries exporting goods to the United States to meet their climate and environmental obligations, could penalize Canada’s energy and resource-exporting sectors. Canada should press Washington for a North American as opposed to U.S.-centred approach if it decides to move in this direction.
Canada will also have to be vigilant about the actions of state authorities where there is more mischief afoot. Michigan Gov. Gretchen Whitmer has threatened to revoke, on environmental grounds, the 1953 easement, which allows oil from Western Canada to be carried via pipeline through her own state to refineries in Ontario and Quebec. The effects would be disastrous and would see a 40- to 50- per-cent reduction in output of gasoline and other fuels by Canadian refineries and a spike in prices for Canadian consumers at the pump.
Prime Minister Justin Trudeau, his senior officials, and our new ambassador to Washington, Kirsten Hillman, may have heaved a collective sigh of relief when the moving vans brought a switchover at 1600 Pennsylvania Avenue. But a kinder, gentler occupant in the Oval Office who doesn’t berate our prime minister on Twitter or accuse Canadians of “ripping off” American producers is no guarantee that Canada-U.S. relations will be any smoother or an easy ride.
In a world where authoritarian China is overtly challenging American power and strategic interests, Russia is resurgent and Iran spins its nuclear centrifuges to acquire enough weapons-grade material to build a bomb, Biden has his foreign- policy work cut out for him. White House officials may see Canada as more of a nuisance than a friendly neighbour to which to lend a helping hand. When our officials plead that Biden reverse himself on his election promise to kill the Keystone XL Pipeline or to carve out a corner for Canadian business on his Build Back Better Plan to put Americans back to work, they have their work cut out for them.
Fen Osler Hampson is Chancellor’s
Professor at Carleton University and a board member of the Parliamentary Centre.
