Produced by Hugh L. MacKinnon Q.C., Hon. John R. Baird P.C., Christy Clark, Hon. John P. Manley P.C., O.C., and Hon. A. Anne McLellan P.C., O.C., A.O.E.
In this recording from a web event following the U.S. election, Hugh MacKinnon (Chairman and CEO of Bennett Jones) moderates a panel of four of Canada's most insightful and respected leaders, and members of the firm's Governmental Affairs and Public Policy group. They discuss what the U.S. election results could mean for Canadian foreign policy, trade, our economic recovery and key sectors such as energy. The panellists in this event are the Honourable John R. Baird P.C., Christy Clark, the Honourable John P. Manley P.C., O.C., and the Honourable A. Anne McLellan P.C., O.C., A.O.E.
Transcript
... of the United States election on Canada, we have a very distinguished panel today from our public policy group. And in alphabetical order, the Honorable John Baird, John Baird spent three terms as a member of parliament, four years as foreign minister, served as president of the treasury board, minister of environment, transport infrastructure and the leader of the government and House. Prior to that, he served as a senior minister in the [inaudible 00:00:29] government. John joins us from our Toronto office. Christy Clark was the premier of British Columbia for six years, Christy after inheriting a deficit, Christy left politics with a surplus, something I don't think we're going to see for awhile anywhere else. She is based in our Vancouver office.
Hugh MacKinnon:The Honorable John Manley served in the federal government is Canada's Deputy Prime Minister, finance minister, industry minister. Prior to post politics, he was the President and Chief Executive Officer of the Business Council of Canada that noticed the Canadian council of chief executives. He's the chair of the board of CIBC and CAE and like all of our panellists on a number of corporate boards, he joins us from our Ottawa office. The Honorable Anne McLellan served as Deputy Prime Minister of Canada, minister of public safety, emergency preparedness, minister of health, the Attorney General of Canada, the Honorable Anne McLellan joins us from our Edmonton office.
Hugh MacKinnon:A few program notes. Our bipartisan webinar committee is agreed that each panellist will have two minutes for opening remarks, uninterrupted. Anyone interrupting will be muted. I promise not to do a Chris Wallace as long as no one attacks the moderator, if they do it is game on. We will again go back to alphabetical order Mr. Baird, you're muted Mr. Baird.
John Baird:Thank you very much for the introduction Hugh. I'll start off things by saying it, it does appear that we're looking at our President Biden. He only really needs to win Arizona and then in Nevada to put him at exactly 270 seats. I think there is some funny business and shenanigans going on in a few cities, Atlanta, Philadelphia, but it increasingly does look like a Biden presidency. This is going to be a challenge for him in some respects, obviously he campaigned against the Keystone XL pipeline, and I would fear that he would issue a presidential order revoking his presidential permit upon taking office. He'll also want to do a number of things which show will be deeply affected by something going on in Georgia. Senator David Perdue fell below a 50% threshold overnight which means that very likely Georgia will face to runoff elections.
John Baird:And Jon Ossoff, the Democrat in Georgia got 47.8 and it was a very, very strong showing. And there's a very real possibility that he could to defeat Senator Perdue got 49.8%. And that would mean that the Democrats could go up to 50 seats, and then with the vote of the vice president, things like core packing, adding new States and then implementing his proposal to revoke all the Trump tax cuts, so this will have a huge effect on Canada going forward. That was just some opening thoughts and look forward to questions in the decision.
Hugh MacKinnon:Thank you very much. Christy Clark, I believe you're muted [crosstalk 00:03:37].
Christy Clark:I guess what I would add to that, assuming that Joe Biden becomes the president, which I think we all are and not knowing whether or not he'll get a Supreme Court majority, which I'm assuming he is less likely than likely. And remember, I mean, we all say, gee, there's going to be loss of money spent on that, winning that Senate election. The Democrats raised historic amounts of money and Trump almost won the election. So if the president had been a little bit better or a lot better in the first debate and perhaps restrained himself a little bit throughout the campaign, he might've won the whole shooting match, but he didn't Joe Biden, despite the massive amounts of money the Democrats spent, did not get the result that they should have, or that they'd been hoping to get including controlling the Senate.
Christy Clark:So I think, if we assume for a second that the Republicans are going to continue to control the Senate, what Mitch McConnell has said, if he's going to encourage, or I guess, force Joe Biden to appoint more moderate members to his cabinet, which I think will be a great thing, I think it'd be great for the Democrats because they're clearly to the left of the American public in terms of opinion at the moment. And I think it'd be better for Canada to have people who can think more holistically about trade, about the importance of oil and gas, the importance of the strength of the relationship between our two countries.
Christy Clark:I do think though that with Joe Biden as president one thing that it's kind of an ephemeral thing, but I think it's fundamentally important for our relationship is Canada will start to see itself move itself a little bit farther away from the sort of antagonist to America, back to our traditional role of being best friends to America, which I know I do think that Biden's going to engage much more positively on an international level. And I do think that Canada being seen again across this longest undefended border in the world as a friend of America, rather than as an enemy, I think will be a really important change overall for the trade relationship, hard to define, but think that's going to make a difference for us.
Hugh MacKinnon:Thank you, John Manley.
John Manley:Thanks Hugh. I saw a poll recently of Canadians that said 75% were hopeful that Biden would be elected President of the United States. And had I been polled, I guess I would have given that answer. And I say that not out of any ideological or partisan point of view, but because for the Western world, the last four years has been exceedingly disruptive. We've had a president who has made a practice of centrally disavowing, attacking, disrupting the architecture of the international world much of which was constructed over the last 70 years by the United States itself. And I think for most Western governments, whether they're right or center or left or center, they're going to welcome the possibility that perhaps we will return to some degree of normalcy that we aren't going to have to follow Twitter, to know what the policy of the United States is. We can actually engage with serious counterparts to know what they're thinking.
John Manley:But what underlies this I think is, is also deeply worrying because I think what we've seen demonstrated in the election is a deep division in American society, one in which, and I've only even actually I've made disagree with Christy a little bit here. I don't actually think it's a left right split, I think it's more of an urban-rural split. It's a split between intellectual and cultural elites, many of whom live on the coasts in which chances are most of us on this call would be included. And rural and lower middle class Americans who as Tom Friedman in the New York Times the other day said, "The only middle finger they could find to give to the system was embodied by Donald Trump."
John Manley:Not about his politics, his policies, or his ideology, just a moment of saying we reject all of this and this man speaks for us. I don't know how America puts itself back together from that divide. I think we all need to hope that Joe Biden is a very successful mediator of that divide because in fact, I believe the world needs a strong United States of America and one that's able, willing and capable of leading. Thanks Hugh.
Hugh MacKinnon:Thanks, John. Anne McLellan.
Anne McLellan:Thank you very much Hugh. Let me say just, I think picking up on what John was saying, Trumpism is not dead and it's not going to die anytime soon. And I think the worst instincts of populism will continue to percolate through American society. And we don't know for how long, but I think while the world not only Canada, but the world probably would like with the election of Joe Biden things to go back to normal, whatever that meant for us before January, 2016, that's not going to be so easy to do. I think a lot of genies have been released in the U.S. and elsewhere and it's not going to be easy to put those back in the bottle and it is going to call upon every skill that Joe Biden and Kamala Harris and their team have to try and move America forward together, trying to unify these disparate parts and the anger that Donald Trump and even the hate, I would say that Donald Trump gave license to.
Anne McLellan:So I don't think that we should be under any illusions in terms of what has happened in America, the fragility of democracy as an institution, and the fact that Joe Biden and his team are going to have a real tough job, I think in terms of bringing a lot of these disparate pieces back together, well, I will say this, I think normalcy in one sense, or in many senses will return, but only to America but to our relationship with America and the world's relationship with America. Joe Biden's tone is going to be a tone and an approach that we recognize in terms of dealing with the rest of the world and dealing with Canada.
Anne McLellan:You're going to see a lot less use of executive orders, for example, executive orders that come out of nowhere because a president got up in the morning and he heard something on Fox News and I think that, that's good for business, that's good for all of us where in fact decision-making becomes more considered more thoughtful cabinet secretaries are responsible for their departments, they are thoughtful decision-Makers a lot of the names that will be around Joe Biden are names that all of us have been used to, whether it was with George W. Bush, whether it was with Barack Obama. I think there will be a return to some sense of normalcy in how America deals with us and the rest of the world and that is good for business. Thank you.
Hugh MacKinnon:Yep. Thanks very much Anne, so maybe we can drill down on the oil industry. Keystone has been mentioned, so four points I'd like the panel to consider. One Keystone will American workers, ally with Canada to hopefully get Joe Biden to change mind, what's the hope there? Fracking, if there's a squeeze on fracking in United States that help Canadian producers, I suspect it would hurt Canadian frackers that operate in the U.S. what's the impact there. Emissions controls, as you know they were rolled back in the last administration, what does that do for oil and gas consumption in North America and Iran. If sanctions are lifted, there was another million barrels a day coming into the world market. So this combination of events, what does that mean for the Canadian oil and gas industry? Who'd like to take that on first?
John Baird:The one thing that's very true is that the Joe Biden will take a much more progressive view on climate change. I think he actually will by presidential order roll back all of the changes that president Trump has made and return to where it was simply the day before Trump took office. I think he will be supportive of the Paris Accord, he will be supportive of tougher measures on air quality on GHG emissions. And I think that could be a potentially a benefit for Canada in that we lose the gap in our competitiveness that could be good for Canadian business. When it comes to fracking, I think he will stop all fracking on federal lands and I think he will [inaudible 00:13:22]. It's such an easy thing for him to think he could throw at the base.
John Baird:He was very clear both as vice-president and then during this campaign that he was added to Keystone and depending on what happens with that Georgia election, if it is a Republican Senate, that'll almost be a gift to Biden and then he will have to appeal to the extremists within the Democratic Party. In Canada, we have the NDP and the liberals, so the more progressive are with the NDP and in the United States, there's only one party, so that it's got both Senate or [inaudible 00:13:54] and Senator [inaudible 00:13:55]. And Biden is fundamentally a moderate, in my opinion, it's just the people around him and the people in his party that he's gotten to kowtow to which will be problematic for him and frankly, probably for Nancy Pelosi, the Speaker,
Hugh MacKinnon:Anne you're muted.
Anne McLellan:You just say sitting here in Alberta, I mean, obviously the provincial government has invested a lot in getting Keystone over the line. The government of Canada supports the building of Keystone, but I agree with John. I think pulling the presidential permit on Keystone is low hanging fruit. If he wants to give an immediate easy, "easy" signal to the left side of the Democratic Party, I do think that Keystone it... And he's been consistent, Obama did not support a Keystone, Biden did not support Keystone, nobody should be surprised as to where a President Biden will come from on Keystone. They have been absolutely consistent that they oppose the building of that pipeline.
Anne McLellan:I know that people are working hard, our ambassador James Rajotte who's Alberta's representative in Washington reaching out have been for months on Keystone with the possibility that Biden would become the president, my guess is they won't make much headway and Keystone is gone. But in relation to fracking yeah, I mean, I think Biden was misrepresented, I guess, by the president. He said fracking on federal lands, I think fracking will continue, but we've seen the market actually take a big chunk out of fracking in the United States. So it may not require Biden to do anything.
Anne McLellan:And I think on the green economy, actually there may be some parts of that that get through even a Republican controlled Senate, some of the small parts of that, where in fact it seems to make sense for everybody. But yeah, I mean the worst, at worst, most extreme parts of a potential green agenda, I think will be moderated by the fact that it will be a split government unless something remarkable happens in Georgia.
Hugh MacKinnon:John any views? Christy?
John Manley:No, I agree. I agree with comments on Keystone. It seems to me that this is one that's pretty straight forward and that's been part of the democratic lately that's been their position since the Obama years, Hillary promised not to authorize it as well in the campaign in 2016. So I think that's one that it's going to be very hard for Biden to reverse. It's worth noting though, that the presidential permit was issued by Donald Trump three and a half years ago, and the pipeline still not built for other reasons. So I think sometimes these things just can't get done. And I have to wonder whether the decision that as it been was TransCanada made way back to change the route wasn't a faithful one that finally when the books are written, will say that may have cost them to decision.
John Manley:And that leads me to a point about some of the other issues that you raised Hugh. And that is to always remember that the United States like Canada is a federal system, and some of these issues are not decided in Washington, they're decided in state capitals. It was state intervention and then judicial intervention that delayed Keystone, many of the states fracking will be a locally decided issue on non-federal lands. Likewise with emission controls, we all know that those tend to be decided to some degree by the large States that can dictate to the industry. You asked about Iran, I'm not so sure that we'll get a re constitution of the nuclear agreement with Iran, I think a lot of water has gone under the bridge since then. Iran has been, let's say they have been a force of disruption in the Middle East, they haven't won friends.
John Manley:Some of the other parties to the agreement continue to deal with them, the Chinese engagement with Iran makes it difficult for a Biden administration to begin to rewarm that relationship. So I'm not expecting a release of those sanctions by the United States, any time soon, subset of that, I suspect you'll get to this might be what about those who are accused of somehow or other violating those sanctions? Does the name Manuel Joe come to mind?
Hugh MacKinnon:Christy.
Christy Clark:Thanks, I think, let me start with fracking because I spent six and a half years of my life fracking with LNG industry to Canada, which we finally did with a $40 billion Shell investment. And so I would love to see the Americans become less competitive and do less fracking. I don't think though that they're all going to, hold on a second, I don't know what's going on with this. I don't think those [inaudible 00:19:59] happening in the background. It's the one that's going to be the huge fight that's going to go on within the democratic party around what do they do next? They made terrible campaign. They practically lost the affection, [inaudible 00:20:21], they didn't view the Senate as effective and they barely are going to win the president [inaudible 00:20:27].
Christy Clark:So I think could be a lot of soul searching internally about what they want to do and I think that politics is really going to be at the core Pennsylvania and those states where fracking is popular amongst union voters is going to be simply a big role in that decision for them. And we underestimate the power of the unions and the Democratic Party either. If you go back and look at Joe Biden's platform, almost every item in it makes a reference to the importance of unions and strengthening unions in the United States. And they are by and large, very much in favour of oil and gas. So I think the Americans are probably, I think it's Biden administration will make small moves on fracking, the amount of fracking that happens on federal land is quite small, the percentage of their production, but I do think they're going to do a lot to kill it. Perhaps some of it without intention to the regulation and to over regulation of the taxation, higher royalties, all the rest of that.
Christy Clark:I think on Keystone, I think it's a gimme that they are want to kill Keystone or try to part of the probably, the bread and butter of environmentalist in the Democratic Party and he's going to have to keep some of those folks happy. I do wonder though whether or not, and I may be disagreeing with Anne a Little bit here, he will hold himself back from using executive orders. I don't think the Democrats who have shown themselves to be the most principled people when it comes to do as I say, and do as I do, you could keep that with the way that they treated Republican Supreme Court nominees in the past. So I'm not sure that Joe Biden's going to hold to that promise that he's not going to use executive order. So you may see a lot of that around oil and gas.
Christy Clark:And I do agree with John Baird that that was quickly automation because I think that's, again a fairly easy thing to do. And probably not top of mind for most Americans. And I think on the Iran deal, it's going to be hard to put that back together. I just don't think that with a president that's distracted by politics all of the time as Donald Trump out there hacking away from the [inaudible 00:22:44]. I think it's going to be tough for them to put something like that together and I don't think it's particularly popular anymore.
Hugh MacKinnon:Great, thank you all. It sounds like happenings for Keystone, [inaudible 00:22:54] 8,000 employees recently hired in the U.S. would have some input, some greater political input, but it sounds like it might be an uphill battle. Why don't we move on, stimulus? And I guess some of this is going to depend on what happens with the Senate races in Georgia presuming the Democrats don't take the Senate, are we going to see a more muted stimulus or just a different stimulus? And part two is if it's not as large as anticipated by the markets, what does that mean for the fed and interest rates?
John Baird:Both incumbents in Georgia are Republican and they will sit in the Senate in the interim period. I think there will be a stimulus, but it will be demonstrably more modest than the Speaker Pelosi wants.
John Manley:Well, one of the interesting political factors in this, Hugh, is that if as we're saying Biden wins the presidency and the Senate remains controlled by the Republicans, the happiest man in Washington is Mitch McConnell. He now becomes the most powerful Republican in Washington. That's an important thing to remember and like it or not, Donald Trump is very unlikely to be the nominee four years hands. And in fact, I take Christy's point about the Democrats, the Republican party is fractured as well. Some of the most important and potent advertising in the campaign was done by unhappy Republicans that formed the Lincoln Project that took on the president tooth and nail. My former counterpart Tom Ridge was on CNN this morning. Tom Ridge has been opposed to Donald Trump from well, before he won the nomination.
John Manley:There are a lot of Republicans in that category, the McCain Republicans, you can call them or the George W. Bush Republicans. That's a fractured party as well. Where does Mitch McConnell hope to take that party over the next number of years? While the Democrats have to figure out a way to appeal to middle America, the Republicans have to figure out a way to appeal to much of urban America and a much more modern, a much more multicultural America. So I think the politics of this positioning of the parties is going to be fascinating, I think it leads to perhaps Nancy Pelosi will not get everything she wants, but I think that you will see a stimulus package will be a generous one and that it will once again avoid the markets.
John Manley:As a former finance minister, this drives me mad because I can't get my head around, who and when and how this is all going to get sorted out with deficits in the U.S. and the multi-trillion of dollars in Canada now approaching $400 billion. I don't know, it just seems like a big transfer to the older generations on the backs of the younger, but perhaps others will figure that out.
Christy Clark:Hugh, there's been some discussion that the Republicans in the period between now and the swearing in of Joe Biden, that actually in that six week period there might be some take up for what they're calling a skinny stimulus, maybe 500 billion, numbers are thrown around, certainly not the trillion and a half that Nancy Pelosi's looking for in a big deal. But I don't know whether that's possible, certainly I think there is some pressure for something to be done in the pretty short term, because if you look at what's happening in America in relation to COVID the numbers are going up, the death rate is going up, hospitals are again starting to get overwhelmed, businesses will probably have to shut down. There is going to have to be some stimulus and one might think in a relatively short-term.
Christy Clark:Now whether Republicans in the Senate have any appetite or the president himself, maybe if he wanted to go out on a high note some kind of skinny stimulus to help the American people and small and medium-sized business in this interim period would be well received and the markets would receive that well. Whether Nancy Pelosi is able to get trillion and a half dollar stimulus after Joe Biden is sworn in, I think if it's a Republican controlled Senate, that's not going to happen.
Hugh MacKinnon:I'm assuming if it's a skinny stimulus, there's real pressure on the fed, but why don't we transition to tax? Joe Biden said taxes are going up. Is that net good or bad for Canada? You know one hand, it takes away the competitive advantage they've had in recent years, on the other hand that might just give Ottawa cover to raise taxes here. And then again, it might also just slow down the U.S. economy, that's our biggest customer. So how does that play out for Canadians and Canadian businesses? [crosstalk 00:28:44].
Christy Clark:I would say Hugh, first of all, I don't think the federal Justin Trudeau's government has any need any cover to raise taxes, they haven't seemed to require that so far in Canada. But second, I would say when Trump cut regulation in the United States and he cut taxes in the United States, we saw Canada at a very distinct new disadvantage, which was terrible for us. And I know from a business perspective, regulations are actually even more of a concern, the regulatory tangle in Canada than the tax burden, but both really matter and sadly the answer we want is for Canada to be lower tax and more regulated or more smartly regulated. In the absence of that, if we want to close the competitive job, it might be the Biden way, which is higher taxes and higher regulation on America.
John Baird:Comes down to Senate if Joe Biden can honor his campaign commitments to raise taxes, particularly on the rich yeah, he'll do it. There's unlimited support for hitting the rich when it comes to taxation policy and he would have an easy constituency if he has control. That would also be good for Canada because it wouldn't eliminate the differential and make us a little more competitive. But I think the reality is, if I'm advising people on tax matters, which I don't normally, I would say that the likelihood of a corporate tax increase or a capital gains tax increase, or the top marginal rate going up going even higher under the local government level, it's not always really real insignificant Christy is completely right. Justin doesn't need any cover to raise taxes, this is not the same macro economic policy of Anne McLellan and John Manley.
John Manley:Well, I never had to deal with a global pandemic or a massive recession. And while I take pride in running a surplus as minister of finance. I have a lot of sympathy for what's being faced in Ottawa today. When I look at what we've got right now and quite frankly, I'm not a critic of what the government has done with respect to trying to support Canadians and businesses during the pandemic. I think that the cost of not doing that would have been horrific and so it's been important that they do that. I am concerned about, as I said earlier, about how we end up paying for this. And I was very concerned, I have to say at the tone of the recent speech from the throne, which implied that despite the massive obligations undertaken by the government in the face of COVID, that not withstanding that they still had big plans for large new programs on spending.
John Manley:I mean, as I see it COVID has put some of those big programs, future programs, maybe we'll get to them one day out of reach for the time being. And how you would come up with the money and there are various estimates of what the new programs would cost somewhere in the 30 or $40 billion range a year. Where would you get the money for that? Well, you're going to raise taxes or John's listed some every year, and this has been true, this isn't a Trudeau government phenomenon, this goes back as long as I've been following it. The Department of Finance puts out its annual list of tax expenditures. Those are the exemptions or deductions or special treatments that are in the Tax Act. Populous politicians call them loopholes, they're not loopholes at all, loopholes are unintended.
John Manley:These are perfectly legal and they are intended, but they are expensive and high on that list is the exemption of paying capital gains on a principal residence, high on the list is the 50% rate of inclusion for other capital gains and then there's a host of other things. The only thing that the government so far said, they'll raise taxes on is stock options. Now we're talking in the millions, not in the billions, which is what's required whether it's good policy or not, another thing but I agree with John, I think there is there's very little likelihood that over the next three to five years, we won't see tax increases everywhere you can turn, because governments are going to have to start dealing with this massive amount of debt that's been built up during COVID. Sorry for the bad news folks, but that's just the reality.
Hugh MacKinnon:[crosstalk 00:33:51] Canada is and maybe, Anne, direct this one to you? The United States just approved legalize cannabis, I take it, is that I presume that's good news for Canadian cannabis companies? Is there more to come? Is there a possibility of the feds rolling over in the U.S.?
Christy Clark:I think Hugh, to your point 15 States now have legalized cannabis for recreational use, five new ones coming out of the election on Tuesday, New Jersey being a big one. And medicinal now is virtually countrywide, even the state of Mississippi, I think on Tuesday, voted to go medicinal. There should be opportunities for Canada. Canada has the edge here as only the second country and the only OECD country to legalize cannabis nationally. There is a lot of intelligence, experience, the genetics of the plant, I've never heard so many tea people talk about the love of a plant as when I was chairing the task force on the legalization of cannabis. So many people in love with the plant, the genetics of the plant, the research going into the plant, the potential both recreational use, but medicinal use of cannabis a lot more research has to be done.
Christy Clark:Canada, I am afraid though that we are not seizing that first mover advantage that we should have. And I think there are ways that we can still retrieve that situation, but there will be opportunities for Canada. And does the federal government in the U.S. tip? No, not right away. This is not high on Joe Biden's list of to do's, but I do think there's no question with more States legalizing Republican and Democrat, the pressure will grow regardless of who's the president and who controls the Senate, to actually make the move to legalize for recreational purposes, Canada, as I say, should have first mover advantage, I do think there are opportunities there and there are going to be a lot of joint ventures between Canadian and U.S. companies, a lot of research in the farmers sector, and so on.
Hugh MacKinnon:Anyone else on cannabis? I think that's the definitive word would come from Anne and having run that commission.
Christy Clark:One of my favourite topics Hugh as you know.
John Manley:But Hugh, one of the things to remember is because some of these States have legalized and the Canadian industry cannot export to those States and may be legal in the state of Washington, but a BC producer can't export to the state of Washington, that's a big market. So the producers in the state of Washington use that as an example are gaining scale, and Canadians are not able to cross that border. So this has been a problem at to why so many of the Canadians are looking at ways of investing in the U.S. because in the States where it's legal, because they can't move product across that border until the federal government makes that legal to do so.
Christy Clark:That's absolutely right.
Hugh MacKinnon:So maybe we shift out to a border issues, a couple of points. Does this change at all when the border opens between Canada and the United States for regular traffic? Point one, point two, I think we've seen in the last four years, and maybe in the last 12 years, how effective the administrative connections between Canadian and U.S. officials have been in keeping the border moving, making it happen? We haven't seen a lot of support from the administration, I don't think of Obama or Trump pushing that agenda. Do you think Joe Biden as a Northern person is more likely to drive the agenda so we have more innovation and openness on the border?
John Manley:You know, the key is, and Anne and I both have this responsibility with Tom Ridge is our counterpart for both of us, in fact. The key here is who is the Secretary of Homeland Security? And we saw a change in just in the time I think, Anne can speak to this. But when she was responsible, the change from Tom Ridge to his successor was a complete change in orientation about how the border was to work. We went from a Ridge who was governor of Pennsylvania, very, very commercially oriented, trade oriented to a new secretary who saw the border as one of the places where you enforce law and order. And it's a totally different mindset and we've had a variety of those people over the years. So I think as the cabinet gets unveiled, that is a key position. And hopefully the person on the Canadian side does what Anne and I did, which is to decide whether he likes it or not, he's going to be our best friend.
Christy Clark:No, that's exactly right. John, he's mentioned Tom Ridge. Tom Ridge was someone who said, "What's the problem and how do we get out of the way." All the unnecessary rules and regulations to make sure that we achieve our objective, which was the free flow of goods and people. Michael Chertoff actually Ridge's successor took a national security perspective to the border. And that changes everybody's thinking it's about stopping terrorism at the borders and so on. And all of a sudden you're back into a much more bureaucratic functionary driven approach. And that slowed things down at the border. Hugh, you should mention that your Wilson Center, Canada project, which you chair, right? Hugh is going to start a new project looking at the border, coming out of COVID, but looking at the border between the two countries and whether or not there are things that we should be recommending to both governments to make sure that we're facilitating the free flow of goods and people.
Hugh MacKinnon:Which was essential, yeah.
John Baird:With respect to the border, there are some opportunities here. You couldn't find two politicians who are more different than Donald Trump and Justin Trudeau. They were basically, I think that the government was very competent in dealing with the Trump for the first 18 months, and then it went South. But I think the personal relationship between Trudeau and Biden will be tremendously important. And hopefully that can assist whether it's, if I was Justin Trudeau, I might very well ask President Biden to withdraw the extradition request from Adam May so that the China issue can be successfully addressed. You also might say, listen, can you throw me a bone on softwood lumber. I mean, it was Stephen Harper working directly with George W. Bush to get the softwood lumber issue dealt with. Obama was not a friend of Canada on that issue and certainly Trump hasn't been, so anything is now possible.
John Baird:And the personal relationship will be much, much more important and there's no doubt that Trudeau will get along much better with Biden on a personal level. Plus Biden will get along well with the people on Capitol Hill. He's a nice guy, he's well-regarded, he's part of the club at the U.S. Senate. And I don't think you'll see the open hostility that you had between Pelosi and Schumer to President Trump, I think they'll be able to do business.
Christy Clark:And I don't think we should forget about the relationship between the States and the federal government in the U.S. I mean, these democratic States along the border. I mean, in my case, we think of a Washington state where there's been a fairly free flow of traffic particularly the Nexus path and all those things that were piloted began of British Columbia with Mr. Harper, Mr. Campbell's government and people of traffic and some fairly consistent policymaking for British Columbia through Washington state, Oregon down to California. Those are democratic states that now are back reconnected to their federal government. And so where you see Democrat States around the border, I think you're going to see a better responsiveness amongst the federal government in Washington, D.C. as well as, as John said, that strengthened relationship between President Biden and Prime Minister Trudeau.
Hugh MacKinnon:Great. I'd like to remind our viewers if they have questions to send them in on the Q&A chat line. Moving over to other matters at the risk of endorsing cultural appropriation, are we going to see the three leaders of North America, three principal leaders wearing some barrels anytime soon?
Christy Clark:You can't say that.
Hugh MacKinnon:Are we going to see the three amigos ride together?
John Baird:Better with over dormant or something that's for sure [crosstalk 00:43:27] toxic in Mexico.
John Manley:Yeah, I think the COVID problem is a major barrier to getting that sorted out because quite frankly, I think it's been very difficult for Mexico to afford the kinds of measures that Canada and the U.S. have taken. And consequently AMLO has kind of taken a position to bury his head in the sand on COVID and I think that makes it difficult. On trade, I'm hopeful that we will see very strong implementation of the new U.S. MCA or customer, if you want to put Canada first. And that's going to, I think require a certain amount of encouragement especially to see that Mexico complies with some of the rules that they agreed to in that negotiation.
John Manley:But I think it's key, I don't subscribe to the view that the U.S. MCA was somehow a depreciated version of the old NAFTA. I think it actually contains a lot of upgrades as a trade agreement, including much of ironically that was just taken out of the transpacific partnership and put into the new NAFTA, all of which is modernizing and good. Some things we probably wouldn't have liked to see but overall, it's a good modern agreement and I think it's very important for Canada. And I think that one of the things we've learned since 1994, when the first NAFTA came into effect is that Mexico is a big market. Mexico is middle class is the size of the total Canadian population and Canadian firms and businesses have a lot to benefit from by engaging with Mexico.
John Manley:And we have a lot of knowledge to share with them in how to do things. So a lot of Canadian investment has flowed there, both in the financial sector, in the oil and gas sector and others. And I'm hopeful Hugh, I don't know whether it'll be the three Amigos as it, as it was back with [inaudible 00:46:02]. I think I coined that expression with Clinton and I don't present it as a deal perhaps, but I think that there's a big agenda there that could be pursued. And what President Biden brings is the whack of hostility to Mexico that was demonstrated so often by President Trump and his supporters.
John Manley:And that's an opening to try to patch up that relationship, which after all, sorry, I'm going on a bit long here, but the first NAFTA was not intended by George W. Bush so much as a trade agreement as a geopolitical agreement to turn Mexicanized North into the North American community and away from countries like Cuba and Venezuela and other troublemakers in Latin America, and to build the Mexican economy so that the immigration flows into the U.S. were normalized. And on both of those counts, the first NAFTA was a massive success. Unfortunately, a lot of Americans have forgotten that that was the real purpose. And hopefully with the revised NAFTA, we get back to that North American vision.
Christy Clark:Hugh I don't think the Americans are going to monkey much with NAFTA. I don't think they're going to pay very much attention to under Biden administration to trade within North America. I mean, I think that U.S. NAFTA is working, it's in place, I think they're going to try and avoid the politics of all that, the politics of trade within the left wing of the democratic, the so-called progressive and the Democratic Party are anti-trade, the politics of the unions or anti-free trade and the politics of the Trump people or anti-free trade. So you're really kind of have this small rump of moderate in the Republican, well, not all of the moderate and the Republicans, but there's a smaller number of those people. And then the small number of moderates that are left in the Democratic Party, who would actually care about it.
Christy Clark:So I just don't think that they're going to try and get into that. I do think that they're going to talk about trade with China, I think there'll be tough on China. Maybe not as tough as Trump was, but I think that they're going to go after that as a strong political leg of their stool. And then pursue freer trade with Europe and some of our traditional partners. I think that's where you'll start to see some action on the trade front, I think you'll see a lot of moderation on it, just because it'll become more rational. But if the best we're hoping for is that they don't monkey with what we've got now, that's not the worst thing in the world because a Trump presidency would probably mean a lot more change that wouldn't be in the right direction for Canada.
Anne McLellan:Hugh, one thing I would say is people do need to remember that Joe Biden and Christy is just, I think made this point, what did he talk about? Whether it was in relation to the green economy or the big infrastructure deal, which he would like to do and actually the Republicans may buy into in the Senate, it was about buy American, America first. And that rhetoric is not that different than that, which we were hearing from the president. But then you've got this other orientation in Joe Biden, which is as a multilateralist, as someone who believes in multilateral relationships, whether it is the North American multilateral relationship, which we would all argue as unique or other multilateral relationships.
Anne McLellan:I don't think Joe Biden is going to rush out and sign onto the TPP anytime soon, don't misrepresent what I'm thinking. But I do think these are, they're conflicting sentiments within the man himself, but at the end of the day, he made some pretty strong statements and commitments about buy American, America first and he would have to deliver jobs, jobs in America he talked about. He is going to have to deliver on those agendas, and I think that's not going to necessarily be all that easy for either Canada or Mexico. Although if we actually got our act together and where this North American juggernaut there could be mutual benefit for everybody.
Hugh MacKinnon:So if we were to think of manufacturing in central Canada, couple of points, buy America, can't be very good, I presume so that's not getting any better. Immigration, are we going to have to compete for the Asian H1B tech workers with Silicon Valley again or do we still have a bit of a luck? John you're muted. [crosstalk 00:50:56]
John Manley:I'll jump in.
John Baird:The anti-immigration sentiment of the Trump administration will dissipate and we're going to have to fight harder and harder to get the best and the brightest for the high-tech sector, especially. And I just to echo what Anne said on buy America, I mean, President Obama would have been very popular in Canada, but he put buy American every one of his budget bills and the administration was pushing it and I think Biden will do the same. The Democrats are hardcore protectionists and unfortunately for us as the biggest Republican who was a protectionist is leaving office, so that's can only to be positive.
Hugh MacKinnon:John.
John Manley:Yeah, I think that's basically right. I think though that the Americans have been mercantilists forever and Donald Trump wasn't the inventor as John was saying of the buy America policy. And we've been very good at working through that often province to state, sometimes the use of the supply chain mechanism to make sure that we continue to produce and the U.S. continues to buy but we're just a component of their production. So that typically buy America is not intended to be targeted at Canada, it's usually targeted at China and we just need to be very attentive and clever and careful. And every once in a while, Christy would know this, the premier of a province has to get tough and say to a bordering governor, if you do that well, then your people are going to have trouble doing business in my province.
John Manley:And in some of those cases, the balance of trade actually favours the Americans. So it's not just us trying to get into their market, they want to be in our market and that works our way. I agree with John on the immigration issue though, I think it's one of the things to watch actually is that competition for talent and the impact that higher taxation rates, especially at the higher end of the income scale can have on attracting talent because it's not so much that our top tax rates are way out of line with U.S. tax rates sort of depends on what state and sometimes what city you look at. But you get to the top rate in Canada, 220,000 Canadian dollars, which is roughly half of what it takes in the U.S, to get to the top rate.
John Manley:And when you're trying to attract those bright, young, talented people into the technology sector, and they're typically making 200, 250, $300,000 a year that tax rate is pretty steep for them. So just something for Canadian policymakers to keep in.
John Baird:It's even worse than that, the top marginal rate it kicks in, in Canada at 165 U.S. where in Texas and Florida kicks in at 565, and that's only 36%. So this is a huge challenge we're looking at that talented doctor, that talented high-tech engineer at retaining them. And that's a big problem in this country.
Hugh MacKinnon:Especially in [crosstalk 00:54:28].
Christy Clark:You know, I do think the Biden administration will be better on the immigration stuff. I am not sure though, that the people that are intended to receive that message, which are potential immigrants from countries where they may be worried about the results of this election and the feeling of Americans and express, and may still feel more comfortable in coming to Canada. So I think I agree with both Johns that it's really up to Canada to figure out how we're going to exploit what I think is still an immigration opportunity. And our federal government has made things a little bit easier, this current federal government, which has surprised me, but it's great. We still have a long, long way to go, I mean, provinces should be running immigration, not the federal government and tech companies should be getting, they should be able to get some kind of a certification so that they can manage most of the process on looking at immigrants that are going to be applying to work for them.
Christy Clark:We still have an advantage on the Canadian dollar for employers, we still have an advantage in that healthcare doesn't cost employers anything when they come here, they pay Canadians less than they do Americans that most of those tech companies. So we still have some advantages if we can find a way to get there. I mean, there were things like, for example, Canada I should say, if you earned a PhD in Canada and you don't have a criminal record where you come from, you automatically become a Canadian citizen. Those kinds of things would attract the best and brightest from around the world but we're not really applying that kind of imagination to the problems ahead of us. And talent is the number one challenge that Canada faces.
Anne McLellan:To Christy's point, as I think everybody knows the government last week made a move in that direction Christy to facilitate ease of citizenship for a wide range of people who are currently here, either as students or employees on short-term visas and so on. But Christy said something else that I think is really important. The fact that Joe Biden is president is not going to change all those ugly pictures that people in other parts of the world have of violence against those of different colours and ethnicities, that general tone and rhetoric that you see in too much of social media in America, I actually think, while Joe Biden will obviously come from a very different place, personally, that we on image to the rest of the world, I do believe Canada still has a substantial advantage in terms of providing a comfortable, inclusive environment in spite of the tax Asian issue and a place.
Anne McLellan:What do I hear a lot is where people from other parts of the world want to raise their kids and where they think those kids will be safe, right? Which is something we as Canadians don't always think about because we take safety pretty much as a given,day in, day out for ourselves and our kids. That's really important to a lot of people around the world when they think about where they want to live and pursue not only a career, but a family life. So to Christy's point, I think we still have advantage and we need to pursue it vigilantly.
Hugh MacKinnon:Right now I would assume the PMO is considering its initial moves. I take it's likely that it's hopeful that Biden's first trip will be here, given his popularity in Canada would probably be well-received and will be given a Royal reception with lots of red surge. Is there an opportunity for Canada at that moment, maybe to get some early favours while there's still a bit of a glow and Biden's reaching out to the world again, is there an opportunity for Canada?
John Baird:Absolutely, we're going to try, anything now is possible, I mean even Keystone. So I'm sure on the PMO as alumnus. They were very smart the PM and his cabinet, they stayed and the elections had shut up, Canada being an election issue in United States, there's no way we can win. So we were fortunate that they kept quiet, but now it's just a new world.
Christy Clark:And don't forget Justin Trudeau is still very, very popular in the United States with a lot of folks. I mean, his star power is you know popular, kind of at a mass level he's still pretty strong around the world. So he'd be a good guy for Biden to be seen with.
Anne McLellan:And keep in mind Hugh, as I said earlier, a lot of the people around Biden, his secretaries his staff are going to be people well-known to official Canada, whether it's Ottawa or a lot of the provinces, and that the government of which John was apart, the governments of which John and I were apart, that goes back way too far, but some of those people are going to be around Biden. Some of the people around Obama who had strong relationships with Canadian officials, elected and unelected, you're going to see those relationships reemerge and I think that will provide a strategic for Canada to reset this relationship.
Hugh MacKinnon:All right, we're hitting up against time. Unfortunately, we didn't get to all of the questions, but I think we got to most of the themes. I should say our next public policy event is going to be in December when we release the annual economic report, that's prepared and long anticipated in the financial community written by David Dodge, [inaudible 01:00:39], Michael Horgan, Valerie Hughes and others, it covers off the economy trade and many issues. Look for that on our website on December 9th, panelists, thank you very much, very polite group, no one had to be muted. Viewers, thanks very much for joining us and let's hope Canada comes through this as well as it possibly could. Have a wonderful day.
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