Canada got a new Prime Minister when Justin Trudeau, son of the country's longest-serving PM Pierre Trudeau, was elected on October 19th, 2015. Trudeau won a comfortable majority for the Liberal party. His campaign was helped by the nation's shrinking economy, and a discontented voter base fed up with former PM Stephen Harper's increasingly divisive and authoritarian rule. (See also: Canada In Recession)
Now that Trudeau is in office, how will his election impact the economic prospects of the United States, Canada's largest trading partner?
Here are three things that you should know about Trudeau's thinking on significant economic issues:
The Trans-Pacific Partnership
This is, perhaps, the most important discussion topic between Canada and the U.S. The Trans-Pacific Partnership Agreement (TPP) affects two protected sectors of Canada's economy: dairy and auto. The problem is especially acute in the latter category as Asian automobile manufacturers, such as Japan, have access to cheap parts and services from nearby countries, such as India. In turn, this could lead to Canada's auto sector becoming less competitive and collapsing under competition from cheaper imports from these countries. (See also: Trans-Pacific Partnership Agreement: Pros and Cons)
To make the transition easier, former prime minister, Stephen Harper handed out sops to the industries. Harper promised $4.3 billion spread over 15 years to the dairy industry and $1 billion over ten years to the auto industry. Conversely, Trudeau ran on a pro-trade platform and supports the TPP "on principle," but he has criticized the secrecy surrounding it. Trudeau also said the government has done a poor job of educating Canadian citizens about the deal's benefits and must ratify the treaty through parliamentary processes.
"(I believe) in a government that respects parliamentary processes and listens to provincial governors while talking about big issues, such as free trade," he said in a campaign speech, adding that that he would ensure that the treaty moved forward in a "responsible and robust" way forward.
A measure of Trudeau's support for the TPP agenda is evidenced by the fact that he has been cautious on the issue of free votes (or, members of parliament's ability to vote against certain party lines) regarding the TPP.
Keystone Pipeline XL
Although they differed on many issues, Trudeau, and his predecessor do agree on the Keystone Pipeline. Like most Liberals, Trudeau is widely perceived to be pro-environment and, indeed, has supported numerous carbon-related initiatives. But, ultimately he supports the controversial pipeline initiative.
It's interesting to note that Trudeau's party elected four members of parliament in the oil-rich Alberta province of Canada. This is a historic win for the Liberals who have not elected an MP in Alberta since 2004. That said, he has repeatedly said that the relations between U.S. and Canada must not be defined by any one single issue, including the pipeline. This approach differs from that of his predecessor, under whose watch relations with the United States deteriorated due to disagreements over the project.
In the end, Trudeau may not have to do much at his end. After vetoing the Keystone Pipeline bill last year, President Obama is expected to reject the pipeline. (See also: Why Is President Obama Hesitant To Approve The Keystone Pipeline Project?)
Trade and Services
There was a time when trade between U.S. and Canada reflected the former's economic fortunes. According to research by Emanuella Enenajor, an economist at Bank of America Merrill Lynch, a 1% increase in U.S. domestic demand was associated with a 0.5% boost to Canadian GDP during the early 2000s.
However, those numbers have undergone revision in recent times, as new markets have emerged in Asia and Africa. Recent economic events have also taken their toll on the Canadian economy. The country's commodity-driven boom has also slowed down due to low oil prices, and the country's attempt to revive its exports by depreciating its currency has also not had much success.
Despite the diversification of customers and trade priorities, Canada will still need support from the United States as its economy shifts to a services-driven model. This is because the United States has the finances, connections, and experience to help its neighbor make this transition.
The Bottom Line
During his campaign, incoming Prime Minister Trudeau promised to reset Canada's alliance with the United States. Given that his stand on major economic matters (with the exception of the Keystone Pipeline) aligns with that of the United States, the relationship between the two countries may receive a boost under his tenure.
