Financial Post on "Canada After Bush"

I contributed to this article in the National Post over the weekend. – Steve

Protectionist fears waft from U.S. crisis

Experts have mixed feelings on U. S. agenda

Janet Whitman,  Financial Post Published: Saturday, November 01, 2008

Spencer Platt/AFP/Getty Images

NEW YORK – With a deepening financial crisis and a recession to worry about, Canada probably falls nowhere on the list of concerns for the next president of the United States.

But whether Democrat Barack Obama or Republican John McCain, how the winner handles the financial-market meltdown and worsening economic woes is bound to pose big implications for Canada.

“The agenda of the next president is going to be daunting, to put it mildly,” said Roger Gibbins, president of the Canada West Foundation, an Alberta think-tank. “If the American economy remains bad or worsens, then there’s a very real risk of a protectionist stance. We may end up being a bystander victim.”

The U. S. Congress, regardless of its political stripe, has a history of putting up trade barriers in tough economic times.

“Trying to protect American interests can get folded into an energy-security and a protectionist sentiment,” said Mr. Gibbins. “I probably sound overly alarmist, but these policy files are hugely important to our own economic recovery, and how they’re handled in the United States is going to be terribly important.”

Most trade and government policy experts said that even with pressure from Congress, it’s unlikely either Mr. Mc-Cain, a Senator from Arizona, or Mr. Obama, a Senator from Illinois, would do anything meaningful to damage trade relations with Canada.

“The principal concern over the next while is going to be the economy and I don’t think trade is going to be a major component of that,” said Alan Alexandroff, a trade expert at the University of Toronto. “As is often the case with Canada, we are below their radar screen.”

When Mr. Obama was fighting against New York Senator Hillary Clinton for the Democratic nomination back in February, he said he might seek to reopen negotiations on the North American Free Trade Agreement between the United States, Canada and Mexico.

But NAFTA is probably on the back burner now, given the economic and financial morass the next president is facing.

If it does reignite as an issue further into the presidency, trade and policy experts said it could wind up being a good thing for Canada, despite the defensiveness of Canadian politicians.

“NAFTA needs to be updated,” said Steven Staples, president of the Rideau Institute, an independent research, advocacy and consulting group based in Ottawa. “I think everyone would be in favour of strengthening its labour and environmental aspects. But I somehow doubt it’s going to end up at the top of the to-do list.”

Energy policy, on the other hand, may be a fairly high priority in the next U. S. administration. One big question mark is whether the United States sees Canada as part of the solution or part of the problem in its quest to be energy-independent.

Meanwhile, both presidential candidates have come out in favour of caps on carbon emissions to tackle climate change.

“There could be some real implications for Canada on climate change,” said Mr. Staples. “Both candidates have [more progressive ideas] than [Prime Minister] Steven Harper. They tend to favour a cap-and-trade position, so I believe there will be pressure, particularly from business, to harmonize policy with the United States.”

Peter Morici, a professor of international business at the University of Maryland and former chief economist at the U. S. Trade Commission, said Canadians shouldn’t worry about any hardening of relations with the United States.

“We don’t have issues with Canada, Canada doesn’t have issues with us, and it’s likely to stay that way,” said Mr. Morici, a former director of the Canadian-American Center at the University of Maine.

Still, Canada could end up the beneficiary in unintended ways as the next leader of the United States tries to bring the country out of the financial crisis and prevent a slide into a deep and long recession.

A big financial bailout of the automotive sector, for instance, could help related businesses north of the border.

And if the next president hikes taxes to pay down the ballooning deficit, it would give a boost to Canada, which suffers a competitive disadvantage because of its higher tax base.

jwhitman@nationalpost.com

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