What has the Trudeau Government Done? An Update

In the heat of an election campaign, after months of the SNC-Lavalin affair, it is easy to forget what the Liberal government has actually done in the past four years. I wrote two earlier posts on the subject which list what they did until December 2016. See those posts here and here.

As my contribution to the current election campaign, it is appropriate to review what the Liberals have done since 2016. What follows is not comprehensive, and benefits from my reading Aaron Wherry’s Promise And Peril: Justin Trudeau in Power (2019 HarperCollins), which I highly recommend.

International Affairs:

From mid-January 2017 until late September 2018, the government was preoccupied with renegotiating the NAFTA agreement with the United States and Mexico. At first President Trump said that the relationship with Canada only needed “some tweaking.” By late April 2017, he was talking about “triggering a withdrawal.” Over the course of the negotiations, the US wanted to rebalance the trading relationship in favour of the US, impose a “rule of origin” which would require at least 50% of all auto parts to be produced in the USA, reduce the cap on autos exported from Canada to the US, do away with the Canadian supply management system which “unfairly” hurt American dairy farmers, include a sunset clause that would cause the agreement to expire after a certain time, and do away with the dispute resolution process.

In January 2017, Chrystia Freeland was made foreign affairs minister with responsibility for Canada-US Trade, including the negotiations about NAFTA. Born in rural Alberta of Ukrainian origin, now living in Toronto, she is an accomplished journalist who speaks five languages and has written extensively about income inequality. In June 2018, she was named Diplomat of the Year by Foreign Policy magazine.

In these negotiations, the government wanted the Americans to understand that Canada is “the signal largest market for US exports in all the world,” and that “at least a portion of their prosperity depended on (the existing) good trading relationship with Canada.” To do so, they decided that the best strategy was a united front at home. Cabinet ministers were assigned to chat up their counterparts in the Trump administration, the Congress, and in the states most dependent on Canadian trade (e.g.: Indiana, Wisconsin, Michigan, Ohio, Pennsylvania, Kentucky, Iowa, New York, Texas, California, and Florida). Freeland put together a bipartisan Advisory Council that included two former ministers of Stephen Harper’s cabinet (Rona Ambrose and James Moore), an advisor to NDP leader Jack Layton, the national chief of the Assembly of First Nations, and the president of the Canadian Labour Congress. Brian Mulroney offered to help, as did Jerry Dias, president of Unifor, the largest private-sector union in Canada. All spoke with whoever would meet with them in the United States.

The bipartisan lobbying proved successful. A Canadian suggestion that some percentage of each vehicle (ultimately 40-45%) should be made by workers earning at least $16 an hour, which favoured both Canadian and American workers, was adopted. The cap on cars that could be imported to the US from Canada was set at a level well beyond that ever attained by Canada previously. American dairy producers were given access to 3.59% of the Canadian market, slightly more than the 3.25% granted to the countries of the Trans-Pacific Partnership. The existing cultural exemption for Canada’s use of foreign ownership rules and target subsidies to protect domestic broadcast, news, and culture was maintained. Chapter 19, which allows for independent arbitration of any “unfair tariff,” was retained. The sunset suggestion was dropped.

In the fall of 2018, 59% of Canadians told polls that the Trudeau government had achieved “as much as possible” in the NAFTA negotiations. There was a general consensus in the media and among the non-partisan Advisory Committee that the Liberal government did the best job possible and should be commended both for what was accomplished and the manner in which it was done. Aaron Wherry, at p. 162, concluded that, “In conspicuously expending great effort in and around the United States, the Trudeau government at least insulated itself against any charge that it should have done more to swing the negotiations in Canada’s favour. That effort also showed a government that was otherwise not always on display: comprehensive, nimble, proactive and well communicated.”

In March 2018, President Trump announced tariffs of 25% on steel and 10% on aluminum imported into the United States “as a matter of national security” but exempted Canada and Mexico “pending the completion of NAFTA negotiations.” Two months later, he changed his mind and imposed similar tariffs on Canadian steel and aluminum, even as the NAFTA negotiations continued. Both Freeland and Trudeau denounced the tariffs. Although recognizing that tariffs only increased prices for consumers, the Canadian government had no choice but to respond in kind. Canadian tariffs imposed on a host of American products covered $16.6 billion in American exports. They were targeted at areas considered politically important, and were coordinated with similar tariffs imposed by Mexico and Europe. In Freeland’s words, this was “the strongest trade action Canada has taken in the postwar era.” By the fall of 2018, the Trudeau government also allocated $2.4 billion in support for Canadian steel and aluminum producers affected by the US tariffs.

Polls in 2018 indicated that 73% of Canadians were “extremely” or “very concerned” about “Donald Trump.” As of the fall of 2018, the American tariffs on steel and aluminum still remained in place and the new USMCA agreement was not yet ratified by the American Congress. Recognizing that the existing NAFTA agreement is still good for Canada, the Canadian government has taken the position that it will not ratify the new agreement until it is ratified by the US Congress. If the Congress delays or refuses to ratify it, NAFTA remains in place. In May 2019, the United States agreed to drop the steel and aluminum tariffs against Canada.

As for peacekeeping, the Liberal government finally sent a helicopter squadron to provide support for UN peacekeepers in Mali. Other Canadian forces were deployed in training missions in Latvia, Ukraine, Iraq, and the Middle East.

Domestic Affairs:

Wherry suggests that the “mantra of the Trudeau era… the middle class and those working hard to join it… [is] a statement of empathy and aspiration.” The Liberals focused on it initially and now all parties are doing the same. Under the Liberal government, federal income tax for those earning $200,000 or more increased from 29 to 33% while the rate for those earning between $45,000 and $90,000 dropped from 22% to 20.5%.

Of primary importance to the Liberal government was its reformed federal supports for families with children. The Canada Child Benefit transfers $23 billion to Canadian families on a progressive basis. A family with less than $30,000 income receives the maximum amount of $6,400 per child under the age of six. Families with higher earnings get smaller cheques; families earning $200,000 or more get nothing. In mid-July 2019, the Canada Child Benefit was indexed to inflation. Statistics Canada reported in February 2019 that the overall poverty rate in Canada declined to 9.5% in 2017 and that, as compared to 2015, 278,000 fewer children were living in poverty, in part due to the Canada Child Benefit payments. As Wherry indicates, this is “the most significant increase (of children out of poverty) ever accomplished by any government in Canada.” In the summer of 2017, the governor of the Bank of Canada also credited the Canada Child Benefit with being “highly stimulative” for the economy.

The Liberal government also put new funding into the Guaranteed Income Supplement and the Canada Workers Benefit, both of which were made automatic for eligible individuals who file a tax return. Student grants were increased for low and middle-income families. Money was also allocated for training for workers. New pay equity legislation has been enacted for employees under federal jurisdiction. The government also agreed with the provinces to spend $7.5 billion over eleven years on early learning and childcare.

The Trudeau government eliminated the Public Transit Tax Credit, the Children’s Fitness Tax Credit, the Children’s Arts Tax Credit and the Textbook Tax Credit. “Such micro-targeted… tax breaks were a hallmark of the Harper era, even as economists derided (them) as inefficient policies that generally rewarded people for behaviour that would have happened anyway.” (p. 83)

When the Conservatives left office in 2015, federal tax revenues as a share of GDP stood at 11.5%, a historic low and well below the pre-Harper average of 13.3%. Under Trudeau, tax revenues were set to settle at 12.4%, “exactly halfway between two different ideas of how much a federal government should properly need.” (p. 84)

Reflecting its priorities in spending, the Liberal government ran deficits of $17.8 billion in 2016-17, $14.9 billion in 2018-2019, and $19.8 billion in 2019-2020. It is argued that showing deficits in a period of economic growth is not a bad thing, and that the declining ratio of debt-to-GDP is an indication that federal finances are ultimately sustainable. In the mid-90s, the federal debt-to-GDP ratio reached 67%. Statistics Canada data as of March 2019 indicates that Canada’s overall debt-to-GDP ratio is now about 34%. To put this into context, it is interesting to note that, according to the US Bureau of Public Debt, April 17, 2019, the debt-to-GDP ratio in the United States in 2015 was 104.7% and in 2017 was 105.4%.

Wherry notes that the economy continued to grow at a decent rate (1.4%, 3.0%, and 1.8%) in the first three years of the Liberal government, and that the unemployment rate is the lowest in forty years. This is credited in part to immigration. Canada brought in between 221,000 and 280,000 immigrants annually between 2000 and 2014. In the last full year of the Harper government, Canada accepted 260,000 people. In October 2016 the Economic Advisory Council recommended that the federal government aim to increase immigration to 450,000 new residents annually. For economic growth and to counteract current demographic trends increasing the proportion of seniors per working people, the focus should be on economic immigrants and international students. The Trudeau government brought in 296,346 immigrants in 2016, 286,480 in 2017, and 321,065 in 2018. From 2010 to 2017, Canada’s population grew at a higher rate than any other G7 country. (p. 86)

 

Wherry reports that efforts to move infrastructure funding have been slow. The Parliamentary Budget Office found that only $7.2 billion moved in the first two years of the Trudeau regime, half of what was projected. The impact on real GDP was only 0.1%. In the spring of 2019, the Trudeau government moved to fast-track $2.2 billion directly to municipalities to get around the several conservative provincial governments that were moving too slowly to match the federal funds. (p. 85)

The Liberal government passed legislation more slowly than did the Tories, but their new legislative process included wide consultation beforehand and extensive review by the newly independent Senate after. Between the fall of 2015 and the spring of 2019, the Senate amended seventeen government bills, sending them back to the House for review. This compared to only one bill sent back to the Tories in the last four years of their government.

The Liberal government has faced continuing controversy on the pipelines as the political and legal scene has changed. Trudeau killed the Northern Gateway pipeline that was to go to Kitimat and banned large tankers from transporting crude oil along the north coast of BC. With the election of Donald Trump, TransCanada abandoned its Energy East proposal, which would have carried oil to Quebec and New Brunswick, in the expectation that their Keystone XL pipeline in the United States would be approved. That left only the Kinder Morgan proposal to twin its existing pipeline from Edmonton to Burnaby on the BC coast which would triple the capacity of the line.

In November 2016, the Liberal government approved the Kinder Morgan proposal in exchange for Premier Rachel Notley’s reducing Alberta’s carbon emissions. Their intention was to mesh two ostensibly competing objectives: impose pricing on pollution to fight climate change in the long run, and build a pipeline to “create responsible and sustainable ways to get (Canadian) resources to market” in the short run. (p. 185). This delicate balance was undoubtedly difficult, guaranteed to concern environmentalists as much as it dissatisfied Albertans.

To win support of the BC government, the Trudeau government agreed to spend over $1.5 billion to improve marine safety and local spill responses and to protect the killer whale population. But, emerging from the May 2017 B.C. election, the NDP formed a government with the support of the Greens based on an agreement to oppose the Trans Mountain project. A year later, Kinder Morgan wanted to pull out of the pipeline project, and, to keep it going, the Liberal government bought the pipeline for $4.5 billion minus the capital gains.

In August 2018, the Federal Court of Appeal ruled that the National Energy Board had wrongly declined to consider the increase in tanker traffic related to the project and also that the Trudeau government’s consultations with the Indigenous were insufficient. In response to the court decision, the government ordered the National Energy Board to complete a review of marine impacts within twenty-two weeks, and appointed former Supreme Court Justice Frank Iacobucci to oversee new consultations with those Indigenous groups still opposed to the pipeline. The National Energy Board ultimately concluded that notwithstanding potential damage to the environment, twinning the pipeline was in the national interest and, in June 2019, the federal government again approved the Trans Mountain expansion project. The government committed that everything it earns from the pipeline will be invested in clean energy projects. Work is now underway on the pipeline, although legal appeals over the project continue.

In the fall of 2018, the Liberal government passed the Greenhouse Gas Pollution Pricing Act (GHGPPA) which required all provinces to place a minimum price of $20 per ton on GHG emissions by January 1, 2019. Provinces have the flexibility to create their own solutions to deal with GHG emissions in their jurisdiction. If they do so, the federal government will not intervene. If they fail to do so, the federal government will impose a price on pollution and provide an annual rebate to families living within their jurisdiction. Although economists agree that putting a price on carbon is the most efficient way to combat carbon emissions, the newly-elected Jason Kenny government in Alberta, the Doug Ford government in Ontario, other conservative provincial governments, and the federal Tories are fighting what they call “the carbon tax” both on the hustings and in the courts.

The Trudeau government dealt with housing in two ways. For potential home buyers, it introduced between 2016 and 2018 the mortgage stress test which set stricter standards that federally-regulated lenders are to apply to borrowers seeking mortgages. The object is to ensure that buyers could still afford to carry their mortgages in the event that interest rates were to rise. In 2019 the Liberals also announced a $55 billion, ten-year National Housing Strategy led by the National Mortgage and Housing Corporation for renters. After several decades of little market attention to rental housing, the object is to create up to 125,000 affordable housing units and refurbish more than 300,000 public housing units.

With respect to the Indigenous community, the Trudeau government has taken initial steps to implement the recommendations of the Truth and Reconciliation Commission. Long-term water advisories have been lifted in 87 First Nation communities as of August 2019. The government has also committed to implementing the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP), which includes provisions that protect Indigenous peoples from harmful and unwanted encroachment on their lands and resources without their free, prior, and informed consent. Putting that commitment into practice has been more difficult, leading to criticism of how these standards were not applied to the Trans Mountain project and to their support of the Muskrat Falls project in Labrador. In the spring of 2019, they enacted legislation providing support to Indigenous peoples trying to protect their languages, and also returning jurisdiction for child welfare services to First Nations communities.

It strikes me that the Trudeau government has done a great deal since it in came into office, notwithstanding drastically changing conditions both abroad and at home. The election of Donald Trump threatened the most important relationship Canada has with any other country. The Trudeau government has negotiated that to their credit. The cooperation which characterized federal-provincial relations in the first couple years of the Trudeau mandate has disappeared. Whose fault is that? Promoting change is not easy, takes time, and the results can be insufficient and even messy. I’m satisfied, however, that activism at the federal level on the various issues promoted by the Trudeau government is preferable to none at all. It will be up to Canadians to decide.

 

 

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