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www.policymagazine.ca April – May 2013 1 Canadian Politics and Public Policy

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CLIENT : ENBRIDGE No DE DOSSIER : EN-9041 INFOGRAPHIE DATE # D’ÉPREUVE SUJET : ANNONCE MAGAZINE NOM DU FICHIER : EN-9041 Ann_Policy Jo 5 avril 2013 2 TITRE : XXX FORMAT FINAL : 8.5 x 11 pouces CHEF STUDIO RELECTURE DIR. PRODUCTION No D’ANNONCE : EN-XXX-XXXE MARGE PERDUE : .125 PUBLICATION : Policy COULEURS : CMYK DIR. ARTISTIQUE SERVICE-CONSEIL CLIENT DATE DE PARUTION : CETTE ÉPREUVE : 100 % In This Issue

2 Editor’s Note: Trudeau: Now for the Hard Part

Canadian Politics and Public Policy

EDITOR L. Ian MacDonald [email protected]

COPY EDITOR Lisa Van Dusen [email protected] CONTRIBUTING WRITERS Thomas S. Axworthy Andrew Balfour Brian Bohunicky Photo: Adam Scotti Derek H. Burney Catherine Cano COVER PACKAGE: THE LIBERAL LEADERSHIP Margaret Clarke Martin Goldfarb Celine Cooper 3 From the to Justin’s Fen Hampson Patrick Gossage Dan Gagnier 7 The Two Trudeaus: Passing the Torch Tasha Kheiriddin Brad Lavigne Zach Paikin Liberals Need to Think Strategically Kevin Lynch 9 Jeremy Kinsman John Duffy Velma McColl 12 Three Liberal Challenges, then Seize the Day Geoff Norquay Andrew Balfour Zach Paikin 17 Rebuilding for a New Century, from the Bottom Up Robin V. Sears Gil Troy BUDGET 2013 GRAPHIC DESIGN AND PRODUCTION Kevin Lynch and Karen Miske Budget 2013: Steady as She Goes but Where To? Monica Thomas 19 [email protected] Dan Gagnier 23 Unilateralism a Drag on Federal-Provincial Relations David Nicholas, Margaret Clarke and Herb Emery Enabling the Workplace: Enhancing Integration for Policy 26 Persons with Disabilities Policy is published six times annually by LAPC Ltd. The contents are copyrighted, Derek Burney and Fen Osler Hampson but may be reproduced with permission 29 CIDA RIP: A Shift that was Long Overdue and attribution in print, and viewed free of charge at the Policy home page at DOSSIER www.policymagazine.ca, as well as at www..ca. Michael Coates 32 The Unpredictable Evolution of Canadian Investment Policy Printed and distributed by iPolitics, Brian Bohunicky 45 O’Connor St, Suite 530, , 36 Canada’s Shifting China Posture Ontario K1A 1A4. POLICY SPECIAL Robin V. Sears 40 The AFN and the PM: Retiring the Missionaries

Cover photo: Adam Scotti

April/May 2013 2 From the Editor ister of Finance and later Clerk of the Privy Council, Lynch has been there. Then, Dan Gagnier considers some the federal-provincial issues around the Trudeau: Canada Job initiative, and writes that unilateralism on Ottawa’s part raises flash points in the federation, especially Now for the between the feds and a sovereignist gov- ernment in Quebec. From the University of , David Hard Part Nicholas, Margaret Clarke and Herb Emery look at the jobs initiative from another perspective – that of persons with disabilities, and conclude it is an important step in integrating them into elcome to the first issue and ultimately the Charter of Rights and Canada’s labour force. of Policy magazine. Our aim Freedoms. is to be a must-read for Can- Finally, Derek Burney and Fen Hamp- W Patrick Gossage, who served as press son, veteran foreign policy hands, exam- ada’s policy makers and business leaders. secretary to the father and now an ad- ine the folding of the Canadian Interna- Our premier issue features a timely viser to the son, sees “substantial differ- tional Development Agency, as well as cover package on , as he ences in the political strategies of the International Trade, into one govern- assumes the leadership of the Liberal two men,” not to mention very differ- ment department, Foreign Affairs. Party of Canada. While the leadership ent styles. “ was a classic campaign turned out to be more of a top-down leader...he was no grassroots coronation than a competitive race, politician,” Gossage observes. “By con- n a Dossier, we examine the im- there is no shortage of political and trast, his son is a natural bottom-up pol- plications of the Nexen deal, in policy challenges awaiting Trudeau. In itician, with the skills of a community I which approved other words, now for the hard part. organizer.” the takeover of the Canadian oilsands player by China National Offshore Oil With the Liberals reduced to third party Zach Paikin, a graduate student and Corporation (CNOOC), but pointedly status in the House of Commons for the voice from the next generation, joins added: “When we say that Canada is first time ever, Trudeau faces a huge re- the conversation with some suggestions open for business, we do not mean that building job in the country. His time on how the Liberals can strategically po- Canada is for sale.” will probably be better spent on the hus- sition themselves and Canada in a rap- tings than in the House. One thing the idly changing world. Michael Coates advised CNOOC on the Nexen deal, and as a Conservative ac- leadership campaign proved – Trudeau John Duffy, author of the acclaimed can draw a crowd, and he clearly knows tivist also brings informed insights into Fights of Our Lives, has written about how to work one. There’s no doubt many campaigns, and lived through a the thinking of the Harper government Trudeau is the main reason the Liberals few of his own as a senior policy adviser on foreign investment and the role of have been trending up in the polls. to former Liberal leader . State Owned Enterprises, particularly However, there’s the inherent value of He offers some thoughts on the chal- Chinese SOEs. the Liberal brand, as well as the name lenges facing Trudeau in re-building the For his part, Brian Bohunicky sees Can- recognition of the family brand. Pierre Liberal Party, and putting it on a path ada’s policy toward China as one that Trudeau once famously called the Lib- to power. Andrew Balfour adds some has evolved from virtual hostility, to erals “the party of the extreme cen- thoughts on the immediate challenges let’s do business, to “Yes, but” on the tre”, and the question is where Justin facing Trudeau in taking over the Liber- Nexen deal. He writes: “While it is the Trudeau sees the Liberals on the politi- al Party, fund raising and organizing for most nuanced so far, the latest posture cal and policy spectrum. the 2015 election in a 338-seat house, is primarily transactional and political 30 more than the present House of rather than far-sighted or strategic.” r as Martin Goldfarb asks in Commons, with 27 of those new seats Finally, in a Policy Special, Robin Sears our lead article: “What is Justin west of the Ottawa River. examines the possibility of a First Na- Trudeau’s brand promise?” O tions Spring, the dialogue between A leading authority on public opinion ooking at Budget 2013, BMO Vice Grand Nations Chief Shawn Atleo and and market research, Goldfarb served as Chair Kevin Lynch and his col- Prime Minister Stephen Harper. Each is the Liberal Party’s pollster under Pierre league Karen Miske lead off our L invested in the success of this conversa- Trudeau, and suggests the Just Society analysis with an overview of the con- as a policy template for Justin Trudeau. flicting pressures on Finance Minister tion. Others, notably career bureaucrats The Just Society, he writes, was a big idea Jim Flaherty, to balance the books by in the Department of Aboriginal Affairs, that defined not only a Liberal agenda, 2015 on the one hand, and to stimulate are not. but enduring such as the economy on the other. A decidedly L. Ian MacDonald official bilingualism, multiculturalism, delicate task. As a former deputy min- EDITOR, POLICY

Policy 3

Justin Trudeau speaks to a packed hall at Queen’s University on February 13. Martin Goldfarb writes that he needs “to define the direction in which he wants to take us, just as his father did when he proposed the Just Society.” Photo: Adam Scotti.

olitics is both process and vision. From the Just Society Image is what you are, not what P you hope others think you are. Vision becomes the guide for public to Justin’s Canada policy. What we need to know from Justin Martin Goldfarb Trudeau is: what is his vision? What are his guiding standards for behaviour or values? What big ideas is he prepared to engage the public with that will be a force for change in the public inter- What are the challenges facing Justin Trudeau after est? What is his idea that defines Cana- winning the Liberal leadership on April 14 in Ottawa? dians and shapes our identity? We need to know if he has conviction – not just “What,” asks Martin Goldfarb, “is his idea that defines musing, but genuine conviction. and shapes our country?” His father, Pierre Justin Trudeau needs to define the direc- tion in which he wants to take us, just Trudeau, famously proposed “the Just Society,” which as his father did when he proposed the resulted in official languages, multiculturalism and the Just Society. That simple concept was a brilliant story. It gave Canadians a sense Charter of Rights. The inherent value of the Liberal brand, of identity – justice, transparency and Goldfarb argues, was ignored or misunderstood by the pride in themselves. It was about mak- ing Canada a fairer place to live, a place Liberal Party’s last two leaders. But brand equity is an that respects all of its citizens. The Just Society succeeded because it enabled affinity between voters and the party, from one leader to multiculturalism, respect for minorities, the next. Big, bold ideas, he concludes, win elections. as well as the will to tolerate difference and to trust strangers, which was the es- sence of our immigration policy. Even before articulating the Just Society, Trudeau was moving that way as justice

April/May 2013 4 What we need to know from Justin Trudeau is: what is him. He needs to define his promise, his his vision? What are his guiding standards for behaviour values, his attributes. What will he do to make us a better country? What is the or values? What big ideas is he prepared to engage the public big idea that he wants to challenge the with that will be a force for change in the public interest? country with? By understanding this, What is his idea that defines Canadians and we will have a good sense of the likely shapes our identity? drivers of his decision making. Trudeau needs to understand political parties are storehouses of memories, ex- periences and associations. The Liberal Party through Justin Trudeau should minister with the decriminalization of that they tried to create one. They never build on the legacy of his father, and homosexuality, as well as abortion and understood the historical roots of the add to the lustre of the Just Society. You divorce changes. As he famously said: Liberal brand and how to add to it rath- can win with big, bold initiatives. “The state has no business in the the- er than change it. The power of brand- The genius of the Liberal Party was to bedrooms of the nation,” It was the first ing and politics is like inheritance. The capture the policy initiatives that were time he said to Canadians, “This is who inheritance of the Liberal brand by a relevant and important to Canadians. I am”. He was also saying, “This is who new leader cannot be avoided or over- These policy ideas became the essence we are,” and Canadians agreed with looked. In working with the brand, one of the Liberal Party and the essence him, which created the affinity. must find the policies to extend the of the Canadian way of life; that is, brand promise but still be true to its es- The narrative of the Just Society clari- our way of thinking. In the Chrétien / sence. The Liberal brand just needs re- fied the very essence of the country. As I Martin decade we agreed that deficits suscitation, it needs to be adjusted, and wrote in Affinity: Beyond Branding: “The handicapped our country. We took updated. Just Society was a source for change in this challenge to eliminate the deficit the manner and conduct of Canadian Great companies like Ford, Toyota and and created surpluses to pay down our politics. The concept challenged our Nike evolve their brands generation debt, as Paul Martin said at the time: innate feelings of prejudice and rede- after generation. At one point, Coke “Come hell or high water.” At the same fined how we thought of ourselves, of wanted to change its brand and almost time, we grew the economy and created Quebecers, of minorities, of others. The destroyed itself with New Coke, but was wealth for Canadians and Canada itself. Just Society made the Charter of Rights fortunate to revert quickly to its origi- We were also committed to keeping the and Freedoms possible and this bold act nal brand. Political parties are no differ- country together through the Clarity of Parliament, preceded by bilingual- ent. Branding is about creating affinity, Act, requiring a clear majority in favour ism and multiculturalism, redefined the a reason to support, identify with and of a clear question on any Quebec ref- notion of Canadian citizenship.” It was believe in. The Liberal Party has values erendum proposing sovereignty. Under and still is our brand promise. that Canadians identify with. They are Lester B. Pearson we did Medicare and Values are the standards we have to derived from many years of successive the Canada-Quebec Pension Plan, both make judgments and choices in public and successful governments beginning, in cooperation with the provinces; un- life. The has for me, with Lester Pearson, followed by der Trudeau we did the Charter of Rights values Canadians identify with. What Trudeau’s Just Society, and Jean Chré- and Freedoms. These policy initiatives are the Liberal values? Trust, tolerance, tien and Paul Martin’s commitment to built the Canada that is the envy of transparency, peace, justice, prosperity, balancing the budget. much of the world. opportunity, fiscal responsibility and We must never forget that elections are some sense of economic nationalism. The Liberal leader does not about interests and Liberal Party inter- These are the building blocks of the Lib- need to invent a new brand. ests have long targeted policy initiatives eral Party. The weakness of Stéphane at core constituencies. In the elections The Liberal Party needs to create affin- Dion and Michael Ignatieff that I fought, we won because we un- ity for its brand. Affinity is the way of derstood the need to appeal to young attaching a citizen to a way of thinking; was that they tried to create people (first and second time voters), to that is to a story teller. Justin Trudeau one. They never understood those over 50 and to the middle class. needs affinity so that people can feel at- the historical roots of the tached to his thinking, to the story he Liberal brand and how to add ne bold initiative that I believe tells. The story must become a covenant to it rather than change it. Justin Trudeau should look at in words and deeds that defines a rela- would be to invest in students tionship based on expectations and per- O who accumulate debt. Trudeau should formance. Every society craves a great promise that a Liberal government storyteller. The high moments of public would share in the debt that students life of a society are reflected in the sto- hat is Justin Trudeau’s brand accumulate up to, say, a maximum of ries that great political leaders tell. promise? We don’t know $50,000 and that the government will The Liberal leader does not need to in- W yet. And, as a result, we fun- pay dollar for dollar as the former stu- vent a new brand. The weakness of Sté- damentally don’t know him. We need dent repays the debt. This would en- phane Dion and Michael Ignatieff was to know him personally if we are to trust courage more people to pursue higher

Policy 5 in the voter’s self-interest. This type of policy is not incremental: it is as chal- lenging as the Free Trade Agreement or GST that introduced, or the Charter of Rights and Freedoms or that Pierre Trudeau championed. Today, the Conservatives are coasting on incrementalism. The Liberals need to change the game with a big idea. Changing the game is key to dealing with Conservative political aggression, which includes positioning Liberal lead- ers and the Liberal Party in a pejorative way. The Conservatives successfully defined the negatives of Dion (“Not a leader”) and Ignatieff (“Just visiting”). Neither one ever got to define himself to Canadians. The Just Society positioned Canada as a truly democratic country, with a trans- Trudeau at a leadership candidates forum in . In an initial field of nine candidates he was the clear front runner, to the point where a leading opponent, , dropped out in mid-March and parent government and public policy endorsed him. Photo: Adam Scotti. process. The Harper Tories, on the other hand, have moved to dismantle education. It would be an investment households earning less than $50,000, the very essence of what many Canadi- in students and in wealth creation for Trudeau could propose an annual sub- ans admire in their country, including our country. The principle would be to sidy to compensate for the extra GST transparency and Parliamentary debate. invest in the future of young people. It they would have to pay. In prison sentencing, prison construc- would complement the Registered Edu- tion, eliminating the gun registry, rais- Combined, these tax measures would be cation Savings Plan (RESP) and help all ing the age eligibility for Old Age Secu- a way to reduce taxation for core con- students, regardless of economic back- rity, limiting Parliamentary debate on stituencies and create offsetting revenue ground. In Canada today, we spend two budget omnibus bills, obfuscating for the government at the same time. heavily on older people through pen- the F-35 fighter jet costing, and lack of This should be argued during an elec- sions and health care and not enough transparency in renegotiating the Kyo- tion. While there would always be a risk on young people who end up carrying to Accord, the Tories are changing our the cost burden of older generations. of the Conservatives defining Trudeau value system. Where the Liberals bal- And there would be no constitutional in attack ads as a “tax-and-spend Lib- anced the books and paid down debt issues around provincial jurisdiction eral,” he would have the tactical advan- every year from 1997 to when they left in higher education as former students tage of putting forward big ideas. office in 2006, the Conservatives will would have graduated by the time they run seven deficits in a row from 2009 began to pay down their debt. What is Justin Trudeau’s until 2015. Another such bold initiative I would pro- brand promise? We don’t To my mind, Trudeau must take the pose would be to eliminate income tax know yet. And, as a result, we initiative before Harper’s Conserva- for all those earning less than $50,000. fundamentally don’t know tives position him in a pejorative way, This personal income tax policy would as they did so successfully with Dion be beneficial to young people, many him. We need to know him and Ignatieff. Trudeau must also dem- older people on fixed incomes and pen- personally if we are to trust onstrate why Harper’s Tories are not the sions and many in the middle class. It is him. He needs to define party Canadians should support. Make these people who are the backbone of his promise, his values, his the Tories defend themselves; hold the Liberal Party’s historic strength and them accountable, in the House and on future success. attributes. the hustings. Citizens understand that governments Trudeau and the Liberals also need to need tax revenues. To afford this per- keep an eye on the NDP on the left. The sonal income tax policy I would, at the ig ideas, for me, are more impor- NDP is the official opposition and, in same time, raise the GST from 5 percent tant to capturing the affinity many people’s minds, that fact has not to 8 percent or 9 percent. In some ways B of voters than micromanaging really registered. convinced the GST is like a voluntary tax – you can demographics, as happened in the last Quebecers to vote NDP and reject the purchase a less expensive item or a more American election. Micromanagement Bloc Québécois. He had a compelling expensive item – you decide to tax your- can only work when neither side has a personal story – the man with the cane. self based upon the value of the items big idea. Big ideas supersede microman- He also reminded Quebecers, with his you have purchased. But, for all those agement. They are a force for change colloquial French, that while he had

April/May 2013 6 What drives choice? Choice is always based on self-interest. People vote for themselves. The Liberals need to expand their brand, make it relevant for today and position the Tories as a pejorative choice.

spent his adult life in Toronto, he had ing Canada since Mulcair put this posi- grown up in Quebec. In essence, that he tion on the table. Provincial NDP lead- was a Quebecer, one of them. Quebec- ers have also been notably silent in their ers flocked to le bon Jack, the good guy, enthusiasm for Mulcair’s 50-plus-one and rewarded the NDP with 59 seats. By gambit. It was Trudeau who called him voting for the NDP, Quebecers rejected out on this in late January. “You can- the Bloc’s politics of grievance and de- not be half pregnant on the question cided to join in the Canadian political of Canadian unity,” Trudeau declared conversation. on the leadership campaign trail. “It’s a very careful political calculation by him The issue for is whether to appeal to his strong nationalist base he can keep support in Quebec. So far, in Quebec.” he has performed quite well. The basic test of any NDP leader is whether he can The next election will see Trudeau and control the loony left wing of the party. the Liberals fight for a united Canada, With mainstream voters, this is a fun- positioning the Conservatives as ne- damental measure of the NDP’s readi- glecting Quebec’s interests and leaving ness to be a government-in-waiting. By Quebec out. At the same time they will silencing the far left, focusing his Que- position the NDP as leaning in the di- bec members on local riding issues, and rection of the separatists. building confidence that as a party they are not to be feared, Mulcair is creating a party that is no longer seen as extrem- The Just Society made ist. His challenge is to do what Liberals the Charter of Rights and As the leadership campaign unfolded, Trudeau clearly connected and drew large crowds did in the past: continue to dominate Freedoms possible and this everywhere he went. His challenge is how to Quebec and build support in Ontario as bold act of Parliament, “define his brand promise.” Photo Adam Scotti. well as in the West and the Atlantic. preceded by bilingualism Mulcair’s comments about Quebec be- and multiculturalism, the Canadian flag, Trudeau’s Just Soci- ing entitled to declare sovereignty with redefined the notion of ety, Chrétien / Martin’s balanced bud- 50 percent plus one support in a refer- gets – these are Liberal totems. These endum have raised concerns in the rest Canadian citizenship. It allowed voters to act in their own self- of Canada. “The side that wins, wins,” was and still is our brand interest and the collective consensus he declared. That’s not what it says in promise. understood that these measures were in the Clarity Act. An important piece of the national interest. Mulroney did the the Liberal legacy, it requires a clear an- same thing with free trade and the GST. swer to a clear question. On the other side of that same conversation, Mulcair Branding is the effect of forging a last- has since lost one of his Quebec MPs, ing link between voters and political Claude Patry, who bolted to the Bloc be- The collective consensus is the genius of parties. It is a creative act. There is a way cause under Mulcair’s interpretation of democracy. People have to make choic- of thinking about Canada that defines the Clarity Act, Ottawa would still have es in an election. What drives choice? its past character and present circum- a role in signing off on a referendum Choice is always based on self-interest. stances. It is this thinking that Justin question. People vote for themselves. The Liberals Trudeau needs to embrace. need to expand their brand, make it rel- Martin Goldfarb is Chairman of Goldfarb ow Mulcair handles this issue evant for today and position the Tories as a pejorative choice. Transparency is Intelligence Marketing, a Toronto-based will be critical. He could lose public opinion research and marketing support in Quebec if he moves not mysterious; it is obvious. The Harp- H er Conservatives are not transparent, firm. During the Trudeau years, he was away from his 50 percent plus one posi- the principal pollster for the Liberal tion. But if he doesn’t move away from and that is a challenge to our way of Party of Canada. He is the co-author, it he will lose votes in Ontario, as well thinking and to our way of living. with Howard Aster, of Affinity: Beyond as in English-speaking Quebec ridings Society creates artifacts and totems that Branding. in . Indeed, the NDP have define and guide collective behaviour dropped in the polls in English-speak- and thinking. Pearson’s health care and [email protected]

Policy 7

Justin Trudeau with his son Xavier James at the launch of his leadership campaign in Montreal last October 3. Where his father Pierre Trudeau had been a top- down politician, Justin’s grassroots style is very much bottom-up. Photo: .

aving worked with former The Two Trudeaus: prime minister Pierre Trudeau H as his press secretary in the late 1970s and early 1980s and being now somewhat involved in his son Justin’s Passing the Torch political ascent, I feel I can legitimately compare the two. Patrick Gossage There are substantial differences in the political strategies of the two men, al- though they share a dedication to the classic Liberal values of equality of op- From the moment Justin Trudeau first articulated his portunity for all citizens, and a belief in pragmatic, non-ideological, evidence- political ambitions, the comparisons were inevitable: Did based solutions to Canada’s social and he have the intellectual heft of his formidable father? economic challenges. They contrast most markedly in leader- Would he see the country and his relationship with its ship styles. Pierre Trudeau was a classic voters through the same – often ambivalent – lens? Some top-down leader with a commanding presence, a big intellect, and usually a of the differences are generational and some personal, clear and forthright portfolio of policies. He was no grassroots politician. Nor did observes Gossage. But don’t measure the son against the he seek consensus on areas in which he father we said goodbye to, he cautions; compare him with knew he was right – notably Quebec and the Constitution. By contrast, his son is the Pierre Trudeau Canada first got to know in 1968. a natural bottom-up politician, open to new ideas, with the skills of a commu- nity organizer. They entered public life with very dif- ferent experiences. Pierre was formed as a public intellectual when he ran for the Liberal leadership in 1968. He had launched his “Just Society”, and was seized with bringing Quebec and the French fact into the Canadian main- stream, a mission he only partly fulfilled.

April/May 2013 8 In every sense Justin is a new, thoroughly modern Trudeau. Not bored by pressing the flesh as his father was, but galvanized by meeting ordinary Canadians, the more the better.

Justin may lack a personal national mis- lar Bloc incumbent in the working class sion. But his political strategy is any- East End Montreal riding of Papineau, thing but telling Canadians what they where his name was, if anything, a det- should be concerned about. Instead, he riment. Then, in 2011, when the Lib- embraces a more contemporary strategy erals were reduced to a rump of seven – throwing out a few big ideas (on the seats in Quebec, he survived the party’s economy and education, for instance) flameout. then launching a dialogue and actually Some observers have gone so far as to incorporating the ideas of Canadians. credit his remarkable political acumen Working the crowd, Trudeau clearly enjoys retail This is one mark of the generational to his mother’s side of the family. As politics in a way his father never did. change he has launched in Canadian Photo: Adam Scotti. one organizer told : politics. “Justin’s B.C., Scottish-Canadian, James stand for”? Do we really believe there The elder Trudeau would not have been Sinclair (his grandfather) roots are clear- can be a kind of “action plan” approach comfortable with such an approach, ly demonstrated in his activities as an to leadership today? Justin’s positive and it is certainly the polar opposite of MP in Papineau, his hard work on the politics and moderate, pragmatic ap- the way the current government leads. ground, his ability to organize, pull to- proach to policy could serve him well Actually launching a democratic con- gether a team and, frankly, to win and when the time comes. versation with the party and the wider then hold a riding in the most difficult electorate seems foreign to the Ottawa election that the Liberal Party has ever lso, it is surely fairer to com- chattering classes, too. What could this faced.” pare Justin with his father conversation about policy be about? when he entered his own lead- In every sense Justin is a new, thorough- A Well, 25,000 people a day punch into ership, not with the Trudeau of the ly modern Trudeau. Not bored by press- Justin’s “Soapbox” website policy plat- 1980s. Look more clearly at where his ing the flesh as his father was, but galva- form to endorse the approach. father was in 1968. After all, a long and nized by meeting ordinary Canadians, hard fought 14 years separates the Just Pierre Trudeau communicated through the more the better. Not dragged to lo- Society of his Leadership Campaign traditional media in his leadership cam- cal political events like his dad, but the from the Charter of Rights and Freedoms paign because journalists and cameras master of them, and the master of the of 1982. During Pierre Trudeau’s own couldn’t resist his charismatic appeal. rousing stump speech – without notes, leadership campaign, he was criticized Justin gets front page coverage wher- and without a phalanx of speechwriters. for standing for very little. ever he goes in the country, but the I asked my old friend Craig Oliver, the media don’t know how to interpret his Justin has set out some major themes. dean of the Parliamentary Press Gal- natural charisma. He underpins this ap- He has said that a Liberal Party led by lery, to share some thoughts on the two peal through social media and his web- him would make its top priority to have Trudeaus from the point of view of a site. He “Tweets”, often several times Canada be the best educated country veteran journalist who knew the father daily, to keep in touch with his almost on Earth. He has said this is his goal be- well and is a keen observer of the son. 160,000 followers. As Thomas Walkom cause education is the key to progress He wrote: noted in the : “He has mas- for the middle class. To put a fine point tered the Internet’s youthful style, em- It should surprise no one that father and on his argument, he has proposed a na- ploying the air of spontaneous intimacy son are different people. At least in part be- tional goal whereby 70 percent of Ca- that convention demands…” cause of the famous name, Justin has the nadians would achieve post-secondary same magnetism as his father. He turns on education. Interestingly, a more activist a crowd and is the centerpiece of every room federal role in post-secondary education ustin’s formation was more down- was an unfulfilled dream of his father’s. to-earth and modest than his fa- he enters. But there is an open question J ther’s. In any case, it would be im- about whether he shares the same gravitas. What is and was seen as a triumph of possible today to match the intellectual He is less remote and more approachable charisma in both their cases will, with ferment of Quebec society in full self- with a casual charm which did not come Justin as with his father, morph into a liberation that his dad experienced. easily to Pierre. Does he inherit the ability more rounded appreciation of a leader- Justin attended McGill, taught at a pri- to focus intently on an issue and frame it ship of sustained values and dedication vate school in British Columbia and did in an intellectual concept that is persuasive to nation building polices. graduate work in environmental geog- with voters? Nor is it clear whether he has Patrick Gossage was press secretary to raphy. His admirable grassroots skills the judgment, as his father did, to surround Prime Minister Pierre Trudeau from seemed to emerge full blown when, in himself with the brightest people around 1979 to 1983, and later head of the 2008, he accomplished a political feat and know the difference between bad and Public Affairs Division of the Canadian his father could not have and did not. good advice. If he is only Pierre Light it will Embassy in Washington. He is the He was not handed a seat in Parliament, be a long fall for the son. founder and now Chair of Media Profile, but got there through hard campaign- Oliver reflects accurately a constant the Toronto-based communications ing. First, he won a competitive Liberal refrain from the media about Justin’s consulting and public affairs company. nomination, and later defeated a popu- leadership ambitions: “What does he patrick.gossage@mediaprofile.com

Policy 9

Starting from third place, Justin Trudeau will have the luxury of two elections. He could bolt past both the Conservatives and NDP to form a government in 2015, but the Liberals would settle for a return to Official Opposition and . Photo: Adam Scotti.

y all accounts, Canada will be Liberals Need to facing challenges over the years B ahead – both internationally and domestically – that will be both signifi- Think Strategically cant and largely unprecedented. Ottawa will be dealing with both a revenue shortage and rising program costs as Zach Paikin these feats present themselves before our country. As the third party in the House of Com- As the third party in the House of Commons, the Liberals mons, the federal Grits can speak to these challenges more freely than either are in the best position to both confound electoral expec- the Tories or the NDP. Although a Lib- eral victory in the 2015 general election tations and play the long game. With Canada eyeing a would be desirable, one should note rapidly shifting geostrategic landscape, now is the time that a defeat at the polls for the Con- servatives or for the New Democrats to build on the legacy of Pierre Trudeau’s Liberals, learn would be far more devastating for each from the narratives of NAFTA and NATO, and trans- of those two parties. The Liberals can af- ford to have their cake and eat it, too form this country into a geopolitical force for the future. – that is, they can shoot to win in 2015 while playing the long game at the same It won’t be easy, but there are creative ways for Justin time. Trudeau to achieve it. Justin Trudeau understands this. Many political commentators and federal Grits – myself included – at first equat-

April/May 2013 10 Yet the Canada-US Free Trade Agreement of 1989 also allowed a border with the world’s superpower, a Canada's economy to grow to the point where it could be a country with which we have been for- mally at peace since the Treaty of Wash- bigger player on the world stage, thus giving it the confidence ington of 1871. to expand its diplomatic and economic horizons. ven the United States has had difficulty thinking strategically E since the end of the Cold War. Washington, along with its Western al- lies, has often sought to achieve short- term commercial gain at all costs, pos- ed those who flocked to his leadership What this means is that the Liberal sibly for electoral purposes and often campaign with a “go big or go home”- Party of Canada (LPC) has to attempt at the expense of securing long-term type strategy for the party. But in fact, to provide something in Ottawa that is strategic assets. If the global superpower Trudeau’s ability to stay on message and currently missing – this must be both finds difficulty in developing a grand maintain endurance throughout a long the party’s modus operandi and its raison strategy, then one can only guess as to race demonstrates his resilience and his d’être. Much has been written already how tough it will be for Canada to re- ability to lead the party through several about the fact that the LPC must be the verse its thought funk. elections. party of both principle and pragmatism. Yet two examples illustrate the way in With the Liberal leadership race com- If, in this case, “principle” connotes so- which, although the decisions we have ing to a close, the difficult work for the cial progress and fiscal responsibility, made as a country demonstrate the sim- party now begins. This race – as Trudeau then “pragmatism” must imply strate- plicity of our national thinking to date, they have also prepared us well for the correctly surmised – has been about en- gic thought. future. gaging the Canadian people through Grand strategy has not been one of the new “supporter” class, and hence Canada’s historical strong points, as our In signing a free trade deal with the about generating renewed interest and borders naturally breed complacency. United States, Canada tied its economy excitement in the federal Liberal Party. Our country boasts the motto A Mari overwhelmingly to that of its neighbour The key now, in order to rebuild the Usque Ad Mare – we know full well that to the south, trading much autonomy party in a sustainable fashion, is to en- we are protected on three sides by large for prosperity in the process. sure that it becomes a place for ideas. bodies of water. To our south, we share The gravity model of economics stipu-

Policy 11 lates that trade, equity flows and foreign thinking in foreign policy, and thus for hat Canada requires is a direct investment emanating from one the articulation of a grand strategy for near-total re-orientation of country are destined largely for econ- Canada. itself within the global sys- omies that are either large in absolute W Although there are many ethical and tem. Although Ottawa will certainly terms, geographically proximate to the pragmatic questions on the domestic continue to enjoy close relations with first country, or both. The US is the Washington when it comes to security scene that require the attention of the world’s largest economy, and it is the and diplomatic strategy, a state’s geo- federal government, most important closest geographically to Canada’s. political weight is ultimately tied to will be those that threaten to upset Yet the Canada-US Free Trade Agree- its economic power. As the world be- most Canada’s budget balance. Con- ment of 1989 also allowed Canada’s comes increasingly multipolar, thanks trolling program spending will be key, economy to grow to the point where it to the rise of second-tier states, Canada particularly when it comes to programs could be a bigger player on the world will have to orient its economy toward stage, thus giving it the confidence to such as healthcare and pensions. As the Latin America and Asia as much as pos- expand its diplomatic and economic ’s has writ- sible – in other words, to defy the grav- horizons. ten, it doesn’t help that – after inflation ity model. and adjusted for population growth NATO is another entity to which Cana- This won’t be easy, but there are cre- – the past seven years have been the da tied itself largely due to the influence ative ways to achieve it. For instance, highest-spending for Canada’s federal of the United States. Although this or- Ottawa could work with the provinces government on programs. ganization achieved its primary purpose to push for a national language strat- – winning the Cold War – without firing egy, turning Canada’s next generation a single bullet, it has since engaged in Canada could harness into a polyglot political, diplomatic and a few operations in which Canada has its present diversity – a business army. Canada could harness had the chance to shine, most notably its present diversity – a diversity built the missions in and Libya. diversity built thanks to the thanks to the policy of multiculturalism policy of multiculturalism implemented by Pierre Trudeau’s Liber- The United States accounts for roughly als – to turn itself into a global geopo- three quarters of NATO defence spend- implemented by Pierre litical force in the future. The return on ing today, and without a clarified, mod- Trudeau's Liberals – to investment for such a strategy over the ernized mission it is possible that the turn itself into a global long term would be immense. organization does not have much of geopolitical force in the a future. Yet Canada’s increased dip- China’s aging population threatens to lomatic clout, achieved through solid future. The return on slow China’s economic growth until contributions in North Africa and investment for such a a more sizeable generation of Chinese South-Central Asia, gives it the ability strategy over the long term youth reaches working age, while Amer- to maintain influence across Europe in would be immense. ica’s fiscal coffers may be less empty the decades ahead. This influence only than originally thought – the Interna- stands to increase as Canada will be tional Energy Agency estimates that the forced to engage in a diplomatic rap- US can become energy independent as prochement with Russia in order to end early as 2020. These two facts will help the standoff over the Northwest Passage preserve the geopolitical status quo – in in the Arctic. which the US is the sole global super- Therefore, although winning over power – for a few short decades. Envi- the Canadian population to strategic ronmental change may well be no less important than geopolitical change, thought – a discipline that blends do- According to the C.D. Howe Institute, as a thawing Arctic may well create for mestic and foreign policy into a single Canada’s aging population is set to pro- Canada a border with a hostile nation grand strategy – may prove difficult, duce a budgetary shortfall comparable (Russia) for the first time since 1871. Canada is well positioned to reorient it- in size to the revenue generated cur- self when the time comes. The process rently by our entire federal income tax As a country, we cannot afford not to of bringing strategic thought to Ottawa, system. The Baby Boomer generation is think strategically. Justin Trudeau’s Lib- however, must begin now. The Liberal beginning to retire, putting more and eral Party has time on its side, as it pos- Party can and must be the vessel for this more pressure on health care and Old sesses a young and charismatic leader as process. well as third-place status in the House Age Security with each passing year. It is an old adage that foreign policy of Commons. A political party that did Finding creative ways to reduce expen- doesn’t win elections – voters naturally so much to build the country we have care about the issues that are closest ditures is most certainly a must, but it today should relish the opportunity to to them, be they economic or social. is revenue increases – achieved through become Canada’s party of ideas. Fortunately, in the list of challenges various means, including tax shifts, Zach Paikin is a graduate student at Canada must face up to, the domestic productivity gains and trade deals – that the Munk School of Global Affairs at issues are the most urgent. Winning Ca- will ultimately provide the federal gov- the . He was a nadians over to strategic thought on the ernment with the muscle and flexibil- candidate for National Policy Chair of domestic front would be a good way to ity it needs to deal with its many global the Liberal Party of Canada at the party’s set the stage for the advent of strategic challenges. 2012 biennial convention.

April/May 2013 12

The field: Justin Trudeau, , Karen McCrimmon, , and , at the last leadership debate in Montreal on March 23. By then, the only question remaining was who would finish second to Trudeau. Photo: Adam Scotti.

he formation of Liberal Party policy heading towards the next Three Liberal T election will be shaped by three challenges, which are essentially stra- tegic in nature. This is not to suggest Challenges, then that normal policy development will be hijacked by a stand-alone strategic exercise. As always, a sense of what is Seize the Day best for the country, married with the party’s values, will obtain. There may be John Duffy an accent placed upon new and more democratic means of canvassing party opinion. Within that, however, meeting The Liberal Party can count on the record of seven years the strategic imperatives outlined below will be the critical challenge in shaping of Conservative government to help differentiate it as a the Liberal offering. governing alternative. But it also has to formulate rem- As with any opposition party, the first edies, sell them to an electorate hungry for change over and most compelling need is to build a clear, coherent and resonant critique of the heads of a balky policy elite and outperform the other the government’s policy and to create choices. It has the advantages of a policy history that an alternative that proposes to remedy the ills pointed out in that critique. squares with current trends in public sentiment and a A second, key challenge will be reconcil- leader who has the appeal of the late Jack Layton. An ex- ing the wide gap between the elite con- sensus and broader electoral opinion. citing, Layton-like figure atop the durable Liberal brand Third, Liberals will require clear differ- should be a formidable combination. entiation with the New Democrats.

Policy 13 Perhaps the most interesting part of Prime Minister Harper’s show- is decreasingly sustainable as the years these challenges is that the better the don’t-tell style has several in power accumulate. The governing re- Liberals do at meeting the first, the cord has inevitably come to define Mr. harder it will prove to meet the subse- advantages. One of them is Harper’s party as no campaign narrative quent two. blurring the government’s can. Mounting an intellectually coherent complexion. This has enabled The outlines of the Harper government and electorally resonant alternative vi- the government to define are now clear enough. It favours a very sion to the Harper Conservatives comes itself by whatever offering it limited role for government in the life first. Framing a resonant critique of may select to suit the political of the country, and a shrunken role for the government was a difficult chal- moment. Ottawa in the federation. After seven lenge, for the Liberals in particular, over years of tax cuts, disengagement from the past several years. (The author’s health care, retreat from environmental thoughts on the subject were detailed obligations, reduction of old-age secu- in Policy Options, February, 2012.). But, rity liability, de minimus involvement after almost a decade of Conservative Conservatives adjusted their image to- in broadcast policy, and fending off a rule, this has become a relatively man- ward ever-greater moderation, deflect- countrywide dialogue on energy strate- ageable task. It is worth revisiting the ing debate over their basic approach to gies, the debate as to the nature of this history of the Harper Conservatives’ po- governing with fuzzy blue pullovers, government is pretty much over. Move- litical offering to see where the govern- transit-user tax breaks and fitness tax ment conservatives – many of them in ment now stands, and what an alterna- credits. Pandas and Mrs. Harper may the press – may continue to gnash their tive might look like. well figure in 2015. Beyond the cosmet- teeth over how “centrist” this govern- Prime Minister Harper’s show-don’t- ics, substantive election-time offerings ment has become. This debate obscures tell style has several advantages. One have tended to be innocuous. the government’s identity amongst the of them is blurring the government’s elite audience. Canadians, however, complexion. This has enabled the gov- he longer one governs, howev- are telling one surveyor after another ernment to define itself by whatever er, the harder this manoeuver that regardless of the labels applied by offering it may select to suit the po- T becomes. Inviting the elector- pundits, they understand well enough litical moment. In the campaigns of ate to pay no attention to the rather where the Harper administration is 2004, 2006, 2008 and 2011, the Harper conservative man behind the curtain coming from.

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WWW.PWC.CA 14 Health care is also marching up the electorate’s priority list. in added value. They’ve decimated the The phenomenon of an aging society is no longer just on the manufacturing sector because of the high dollar. They don’t care, because radar; it is now winging in onto the flight deck. they look north and they see lots more pristine territory that they can rip up. And, of course, that’s why they’re so frantic about both the environmental This classical federalist role (as govern- living? Attempts to avoid the debate movement and First Nations’ rights, ment supporters term it; a certain vener- behind a veil of classical federalist dis- because those are the barriers to their able Liberal adviser prefers “deconstruc- engagement or other diversions invite economic vision.” (Dancing the World tionist”) commands the support of the a competing response. And it is reason- into Being: A Conversation with Idle No standard 30 percent CPC voting base, able to expect that the first steps to- More’s Leanne Simpson”. YES Magazine, centered in the prairies and rural Eng- wards dealing with this new reality will Mar. 2013.) lish Canada. It can also, depending on come from opposition parties. The Lib- This is not just fringe, left-wing dis- the alternatives, carry with it a degree of erals, with their estimable track record course. Those with long memories will assent in some parts of Quebec. At the in previous social-policy build-outs, recall this kind of debate occupying same time, however, the Harper Con- could do well by pivoting off Conserva- the mainstream through the 1960s and servative record of deconstructionist tive standoffishness towards health care 1970s, and into the 1980s, until the government carries with it a limitation: and other social policies, and making a advent of the Mulroney government. vulnerability to the charge of neglect positive offering. In that time, the economic nationalist when demand builds for government The openings in economic and health critique of the Canadian economy as re- policy responses. Now, considerable evi- policy present two critical opportuni- source-dominated and lacking in high- dence is accumulating that Canadians ties. Equally important are openings er-value-added processing and manufac- are finding the Harper government’s re- in environmental and aboriginal af- turing, was a powerful political engine. sponse inadequate on two vital fronts: fairs. The Conservative government has This critique dominated the thinking economic policy and health care. taken on a colour that contemporary of the and could Pollsters report growing numbers of Ca- (especially Latin American) political claim the support of a good chunk of nadians dissatisfied with the country’s scientists refer to as “extractivist”. The the Liberal Party, centered about Walter economic record and prospects under term, coined in the 1990s and derived Gordon. Major federal policies of the the Harper Conservatives. The argu- from botanical processes, refers to gov- Trudeau government arose from this ment that Canada is doing better than ernments that are focused primarily on strain of thinking, including the For- our G7 competitors has grown thin. resource-based economic development, eign Investment Review Act, the forma- Hence the 2013-14 Budget’s tax expen- generally at the expense of environ- tion of Petro-Canada, and, arguably, the ditures on stimulating manufacturing mental and aboriginal policy claims. National Energy Program itself. – the closest Harper’s Ottawa has and There is evidence that the kind of poli- perhaps can come, since the 2008 crisis, One of the many touch-points tics surrounding the extraction econo- to an activist economic policy – and the in redefining the relationship my in the 1960s and 1970s can stage a barrage of Economic Plan paid adver- of aboriginal Canada to the contemporary comeback. The foreign tising this winter. We’ll see how much ownership issues of 2011-12 in the oil these measures do to reverse the tide of country as a whole will be patch and elsewhere have re-awakened public opinion that is souring on the resource revenues and their the debate. The care and caution with government’s economic agenda. co-management by First which the Harper government has Health care is also marching up the Nations and outside interests. conducted itself around the issue is a electorate’s priority list. The phenome- testament to its latent power. On the non of an aging society is no longer just other side of the House of Commons, on the radar; it is now winging in onto Thomas Mulcair has pursued the eco- the flight deck. The developed world’s nomic counterpoint to the extractivist extension of lifespans is bringing with approach – his “Dutch disease” analy- it an entirely new form of social pres- sis, which is essentially the old argu- sure – four-generation families in which ment about a resource-based economy senior citizens seek support for the care The extractivist rubric is useful in cap- brought up to date. of super-senior parents while their chil- turing certain aspects of the Conserva- dren look after little ones. Canadians tive government. Naomi Klein links n contemporary politics, two ma- have come to expect a helping hand the language of extractivism with con- jor policy currents have widened from their governments in dealing with temporary Canadian reality: “Let’s talk I the appeal of the anti-extractivist the pressures of old age. The principal about extraction because it strikes me argument beyond the purely economic. social policy achievements of the late that if there is one word that encapsu- Environmental awareness and organiza- 1960s and early 1970s set into place lates the dominant economic vision, tion were in their infancy when the last these supports. Now, a new social policy that is it. The Harper government sees anti-extractivist political wave rolled revolution is at hand: how will govern- its role as facilitating the extraction of through in the 1960s and 1970s. Today, ments help Canadian families man- natural wealth from the ground and the green movement has its own party age the challenges of four-generation into the market. They are not interested with a parliamentarian as leader and

Policy 15 routinely commands approximately and in social policy (including health Strategic voting could well five percent of the popular vote in elec- care), and one that looks less like the play a critical role in the 2015 tions. Environmental considerations bad guys in Avatar when it comes to en- now have a major place at most gov- vironmental and aboriginal policy. campaign, and it is not clear ernments’ tables. Appealing to the en- This leads Liberals to the second chal- who the beneficiary will be. vironmentally aware voter is a critical lenge: selling the critique and the rem- The implication of these political consideration for most parties. edies to the electorate over the heads dynamics is that the electorate In this context, the addition of today’s of the policy elites. The imperatives of green movement to more traditional will confer upon either the greater economic, social and environ- Liberals or the NDP the mantle economic development arguments adds mental policy engagement enjoy broad a second, powerful engine to the anti- electoral support. Voter enthusiasm for of alternative government, extractivist political vehicle. aboriginal reconciliation is less signifi- and leave the other behind. The growth of aboriginal political cant, but evolving. So far, so good. The strength in recent years is another im- hard part is that this agenda is not at portant aspect of the new alternative to all that of the country’s policy-making extractivism. One of the many touch- elite. In these quarters, the agenda is points in redefining the relationship tightly wrapped around fiscal policy of aboriginal Canada to the country as and concern over public and household a whole will be resource revenues and debt levels, tax competitiveness, and their co-management by First Nations paving the way for significant further and outside interests. The world has increases in resource extraction and, by evolved considerably since the days of extension, the country’s reliance on it. the Berger Commission and the Mack- enzie Valley Pipeline debate. Aborigi- his means that selling an alter- nal demographic and political strength native agenda of the kind set have grown significantly but translat- T out here will have to be done ing that power into electoral results has amid elite skepticism, even outright op- not yet fully occurred. Therefore, par- position. In order to pursue this agenda ty policymakers may or may not rely for Canada, Liberals must brace them- upon First Nations to join their elector- selves for elite-opinion resistance bor- al coalitions. But it is reasonable to sur- dering on hostility and even contempt. mise that the aboriginal story will play The reception given Liberals in elite sa- a key role in the critique of the Harper lons could feel a lot more like that of government. the 1988 free trade election – angry ac- cusations and ominous warnings about Liberals can offer a federal a Liberal Party gone left-wing rogue – than the more encouraging reception government more activist in in such quarters during the Chretien- the economy and in social Martin era. policy (including health care), Even if Liberals are prepared to steel and one that looks less like themselves for this kind of reaction, the bad guys in Avatar when it they will face formidable barriers to comes to environmental and pushing their message in the face of an earned-media atmosphere that could aboriginal policy. easily be dominated by the opposing viewpoint. If the Grits are counting on earned media to deliver their genuinely alternative vision, they may find them- selves sorely disappointed. If the Liber- Taken together, these outlines of a cri- als are going to pursue a thoroughgo- tique of the Harper government have ing critique of the Harper government, some clarity. The Conservatives’ de- they will need to build a campaign constructionist government is not up apparatus that can direct-deliver their to the economic challenges facing Ca- messages to voters, rather than simply nadian families or to their evolving so- relying on press releases and a smatter- cial needs. And its extractivist approach ing of advertising. to economic development is at odds with Canadians’ preferred approach to he final challenge will be to a diversified economy, environmental draw a border between the sensitivity and reconciliation with First T Trudeau Liberal offering and Nations. Liberals can offer a federal gov- that of Thomas Mulcair’s New Demo- ernment more activist in the economy crats. The anti-Conservative majority

April/May 2013 16 One of the many touch-points in redefining the relationship of On the whole, the opportunity for the aboriginal Canada to the country as a whole will be resource Liberals is clear enough. Critique the government in economic development, revenues and their co-management by First Nations and social policy, environmental and ab- outside interests. original affairs. Offer compelling, sen- sible alternatives in these areas. Devel- op the will and the means to push the offering past an unwilling policy elite in the electorate appears impatient with Declaration – which would allow Que- towards a more receptive electorate. the rivalry between the two parties, and bec separation on a single-vote margin Contrast the likeable, charismatic Justin eager to defeat the Harper government. based on a sovereignist-drafted question Trudeau with the saturnine and volatile Strategic voting could well play a critical – is a non-starter among most Canadi- Thomas Mulcair. role in the 2015 campaign, and it is not ans outside Quebec and among anglo- Each one of these imperatives carries se- clear who the beneficiary will be. The phones and allophones within Quebec rious challenges. Framing a better eco- implication of these dynamics is that who consider the country’s unity to be nomic agenda is an easy order to make the electorate will confer upon either important. In Quebec, it can serve as a but a tougher one to fulfill. Tackling the Liberals or the NDP the mantle of rallying point to depress the NDP vote social policy in an era of limited fiscal alternative government, and leave the to its sovereignist core. resources is not for the faint of heart. other behind. During the Layton era, New Democrats Re-connecting with the environment The Grits have some advantages in this were able to blur the policy distinction will not be easy for a party recently scenario. Leadership is the first. As I with the Liberals to their advantage, traumatized by the electoral failure of have argued elsewhere, Justin Trudeau is creating the impression that their party the Green Shift. a potentially compelling political figure, was simply a more sincere, honest and To make matters more difficult, the reminiscent in many respects of the late appealing version of the Grits. This challenge seems to grow with each step Jack Layton. An exciting, Layton-like worked well enough against Stephane one takes. The clearer and more com- figure atop the durable Liberal brand Dion and Michael Ignatieff, but will be pelling the critique of the government, should be a formidable combination. a much tougher sell with Justin Trudeau the harder it is to come up with policy The Liberals also have at their disposal matched up against Thomas Mulcair. alternatives. The sharper the alterna- an issue with which to define Mulcair The bulk of the differentiation with the tives, the firmer the resistance from the negatively: his stand on Quebec and the NDP may well be accomplished for the existing elite consensus is likely to be. Constitution. The NDP’s Sherbrooke Grits by leadership. And finally, the further one goes in this direction, the closer one gets to territory already staked out by the NDP. For the Liberals, it is critical to under- stand that the space between the Con- servatives and the New Democrats is terribly limited – certainly too narrow on which to mount a national alterna- tive. In this case, a Goldilocks strategy (not too hot, not too cold) could easily result in getting eaten. The Liberals will need to pick a course and stick to it with rigour and discipline. In the party’s long and distinguished history, it has found the courage to do so many times. The Liberals were far from shoo-ins in 1926, 1945, 1993 or even in early 1968, until broke out. If the Grits are prepared to mount a tough, courageous, progressive campaign, they can open a new and exciting chapter in their his- tory and the country’s. The day is theirs to seize. John Duffy, author of the acclaimed Fights of Our Lives, was a senior policy adviser to the Rt. Hon. Paul Martin. He is a principal of Strategy Corp., a government relations, communications and management consulting firm in Toronto and Ottawa. John Duffy writes that “Justin Trudeau is a potentially compelling political figure,” which on top of “the durable Liberal brand should be a formidable combination.” Photo: Adam Scotti. [email protected]

Policy 17

Justin Trudeau faces many challenges in taking over the Liberal Party, including fund raising, finding candidates, and turning all those virtual supporters from the leadership campaign into real, live ones who can knock on doors for him. Photo: Adam Scotti.

fter almost two years, the Liberal Rebuilding for a New Party of Canada has a permanent A leader. Justin Trudeau and his team ran a strong leadership campaign Century, from the and need to carry that momentum into the Liberal leader’s office with them. Trudeau arrives to take over a party that Bottom Up is in better shape than most would have predicted after its disastrous showing on May 2, 2011. , along with Andrew Balfour a small but experienced caucus and the party office have successfully kept As Justin Trudeau prepares to take the Liberal Party into the Liberals in the news, relevant in the Commons and competitive in the the next election, questions of strategy and messaging crucial world of fundraising. In all but one of the last eight fiscal quarters, the loom large. But the party also has to prepare for the prac- Liberal Party raised more money than tical considerations of a serious challenge to Stephen the Official Opposition NDP. On top of that, Trudeau’s leadership campaign Harper’s Conservatives. These range from forming a new easily raised $1.3 million – more than team in the leader’s office to building on fundraising suc- the $950,000 limit, more than all the other camps combined. Trudeau can, cesses to engaging the supporter class at whole new lev- quite legally, donate any surplus back to els. These are just some of the new challenges for the first the party. So, what’s next? Trudeau’s team has ap- Liberal leader from the 21st century. proximately 2 1/2 years before the next

April/May 2013 18 fixed election in October 2015, and made in conjunction with the party’s ecutives will need time to raise money should be thankful for that time. I’d directors on the direction of the party for fully funded campaigns. Moreover, prefer to focus on the operational de- office and the provincial wings of the 27 of the 30 new ridings will be west of tails, which I believe to be very impor- party. During the leadership campaign, the Ottawa River, 15 in suburban On- tant, and leave the policy, messaging Trudeau talked about change being tario and six each in and British and strategizing to the new Liberal lead- needed from the top down in the party Columbia, not exactly slam-dunk terri- er and his team. Some things to think machinery to promote more grass- roots tory for Liberals. about are the transition in the leader’s involvement. Trudeau’s team also needs to do an au- office, building the new team and then Once these operational matters have dit of the party infrastructure and how the many intricacies that will need to be been dealt with, Trudeau will undoubt- it must change. That includes upgrad- dealt with on the road to 2015. edly address big picture concerns. First, ing the IT infrastructure, reallocating Trudeau’s team has surely had many the party must determine the best way human resources, and reforming com- conversations about what the new of- to keep the people who signed up as munications with members and do- fice will look like and who’ll be joining supporters engaged, develop a strategy nors. Obviously the most important them. A transition team will need to be that can compel them to become mem- will be fundraising, especially with the put in place as well as a plan that will bers and donors and, most importantly, elimination of federal financing at $2 carry them through until the House to have them become engaged as vol- per vote per year. The Conservatives are rises in the summer, at which time it unteers at the riding association level. much better at autonomous financing would be assumed that major changes This will be where the move towards than the Liberals or NPD. would be made. Most obviously, there the supporter class will truly be judged The Conservative Party regularly raises has been and will be much thought giv- to have been a success or a failure. more money than all of the other par- en to the big picture for the future of ties combined and when the inevitable the party. This September, Canada will attacks against Trudeau are launched, Building a new team in any leader’s have a new electoral map, the Liberals will need to have a war office is not an easy task and involves with 30 ridings added to the chest at the ready, knowing they can much consideration as it relates to refill it. skills, rewarding people that helped present 308-seat House. The majority of existing ridings get him there and the key component eyond traditional party infra- of institutional knowledge. One would will also have new boundaries. structure it might be time for the assume that the senior roles like an in- This will be one of the great Liberal Party to consider the suc- terim or permanent chief of staff, direc- B challenges for the Liberal cess the conservative movement has en- tors of communications, policy and so Party on the road to the 2015 joyed with extra-political organizations on, will be put in place in short order and so called think tanks like the Man- with the other roles being rounded out campaign. For the Grits as for ning Centre, the Canadian Taxpayers as time moves on. the other federalist parties, it Federation and many others. These or- will require the creation of 30 ganizations assist in getting the conser- A small Ottawa-related tidbit new riding associations. vative message out and operate outside that helps in this regard is that the oversight of Elections Canada. The not a single person Trudeau goal of conservative think tanks is to in- hires will be affected by the fluence policy, not by directly lobbying politicians and civil servants. Instead, his September, Canada will Federal Accountability Act, they focus on the world of public opin- have a new electoral map, with which prevents former staff ion with the hope of generating support 30 ridings added to the present from working in government T among the public and having policy- 308-seat House. The majority of exist- makers exploit that support. The upstart relations for five years after ing ridings will also have new boundar- Broadbent Institute shows that the NDP ies. This will be one of the great chal- they stop working for the have recognized this and they’re clearly lenges for the Liberal Party on the road Prime Minister, a minister or building infrastructure outside the tra- to the 2015 campaign. For the Grits as the Leader of the Opposition. ditional party structure. When will the for the other federalist parties, it will Liberal Party follow suit? Why wouldn’t require the creation of 30 new riding the Liberal Party follow suit? associations. There’s no doubt Trudeau will be able The road ahead for Justin Trudeau and This will also involve Trudeau asking to attract many talented Liberals. A the Liberal Party will be fraught with incumbent MPs whether they want small Ottawa-related tidbit that helps questions and challenges. Though he in this regard is that not a single per- to run again. The party will also need is the fourth Liberal leader in the last son Trudeau hires will be affected by to set up nomination meetings that seven years, he is the first from the 21st the Federal Accountability Act, which will allow for both the recruitment of century. prevents former staff from working in strong candidates and for the winners government relations for five years after to have time to work their ridings prior Andrew Balfour is an Ottawa based they stop working for the Prime Minis- to the 2015 campaign. In the new rid- consultant and long time Liberal. ter, a minister or the Leader of the Op- ings, candidates who will be starting [email protected] position. There will also be decisions out with no money and no riding ex- Twitter: @andrewbalfour

Policy 19

Finance Minister Jim Flaherty in a lighter moment as delivers Budget 2013. He pledged that Canada’s books would be balanced in 2015. Photo: Jason Ransom, PMO.

he 2013 budget arrived later Budget 2013: than usual and somewhat un- T heralded. Commentators imme- diately dubbed it a “boring budget”, a concept with few roots in traditional Steady as She Goes public finance, while news articles ex- pended more words on the removal of the tariff on hockey equipment than but Where To? on Canada having the lowest net debt ratio in the G7 and being on track as Kevin Lynch and Karen Miske the only G7 country to balance its books by 2015, despite an unsettled global economy. Budgets matter, greatly, and the true The greatest test for any budget these days is whether it measure of a budget is not the kinetic energy of its actions, but whether it meets the twin tests of advancing both fiscal austerity and meets the test of the times. And today, economic renewal. The Harper government’s 2013 budget with most OECD countries still experi- encing atypically weak recoveries from balances the books by 2015 but does it meet the challenge the great global financial crisis and of boosting Canada’s growth potential? While the Cana- deeply impaired fiscal books, that test is advancing both fiscal austerity and dian economy is still doing well in relative terms compared economic renewal, not just one or the other, as they have become mutually to other G7 countries, we need to focus as assiduously on reinforcing. We are now more than 50 spurring GDP as we do on the bottom line. months since the onset of the global

April/May 2013 20 recession, and yet Europe is back in re- hat about global growth What is likely at play here is more than cession, the US recovery is the weakest prospects? Canada is right- a slow cyclical recovery; there are many since the 1930s, and both Europe and W ly proud that its economy reasons to believe that our growth po- the US appear to be in a bizarre compe- has performed better than the other G7 tential has declined due to slowing tition to see who can hit the fiscal wall countries during the global recession productivity growth and slowing la- the hardest before fiscal reality sets in. and in the recovery. Today, Canadian bour force growth – structural factors GDP is 4 percent higher over the period likely exacerbated by the recession here We are now more than 50 than its pre-recession peak, which was and among our main trading partners. months since the onset of reached over four years ago in the third the global recession, and yet quarter of 2008. While this performance While Canadian results are is the best of the G7 countries by far, is it Europe is back in recession, good? To put it in a somewhat different relatively good, they, in the US recovery is the weakest context, consider a “what if” calcula- absolute terms, underscore since the 1930s, and both tion in the hypothetical event there had how severe the recession was Europe and the US appear to been no recession and average growth and how tepid the recovery be in a bizarre competition had continued. This would suggest Ca- remains. nadian real GDP today of more than to see who can hit the fiscal 12 percent above Q3 of 2008, a telling wall the hardest before fiscal comparator, three times actual growth reality sets in. rates. And, as Chart 2 shows, a number of major industrial countries have yet to even return to their pre-recession lev- els of real output. In other words, while The issue of our trend growth poten- tial is crucial to understanding the In this global context, how should we Canadian results are relatively good, risks to the fiscal plan and the need interpret the 2013 budget? The head- they, in absolute terms, underscore how for economic renewal in the Canadian line news is relatively favourable: the severe the recession was and how tepid federal government will be back in fis- the recovery remains. economy. Over the last 25 years prior cal balance by 2015, Canadian govern- ment net debt as a proportion of the economy is less than half that of the Chart 1: Projected Total Government Net Debt, 2017 United States, and Canadian and US growth will outpace the rest of the G7 Japan over the next several years. All good and commendable achievements, Italy but we also need to pay attention to: United States Trends in the size of the federal gov- ernment and what they might mean; United Kingdom the increase in the public debt since the onset of the recession and how we France are going to pay for it; and the revenue Germany shortfalls in the fiscal plan, whether they are structural or cyclical and why Canada the distinction matters. % of GDP 0 20 40 60 80 100 120 140 160 180 Let’s start with the international com- parisons to provide one benchmark Source: International Monetary Fund, World Economic Outlook Database, October 2012 for the 2013 budget. Chart 1 provides a projection of total government net Chart 2: Change in Real GDP Since Pre-Recession Peak debt in 2017 for each of the G7 coun- 6.0 tries. It clearly shows a significant Ca- 4.0 nadian fiscal advantage, with US and 2.0 U.K. net debt more than double that of 0.0 Canada, provided the federal govern- -2.0 ment balances its books as planned and -4.0 the provinces, particularly Ontario and -6.0 Alberta, rein in their structural deficits. -8.0 In an uncertain world, this advantage -10.0 constitutes a form of national “fiscal Canada U.S. Germany France Japan U.K. Italy insurance”, sustaining our AAA credit Notes: The pre-recession peak was 2007Q3 for Italy; 2007Q4 for the United States; rating, and providing reassurance that 2008Q1 for the United Kingdom, France, Germany and Japan; and 2008Q3 for Canada can afford its tax and other Canada. The last data point is 2012Q4 for all countries. policies that attract and retain foreign Source: Haver Analytics investment.

Policy 21 or too small, there is less factual con- sideration of what the trends in the scale of the federal government rela- tive to the economy actually are, and how Budget 2013 will influence both the size and operations of government. Chart 3, drawing on current and previ- ous budget data, indicates clearly that the size of the federal government (to- tal program spending, which equals total expenditures minus debt service payments) has been declining since the early 1990s, with the only significant upward spike coming in recent years as a result of the recession and new spending initiatives in the Economic Action Plan. In others words, the trend has been towards smaller government – as measured by spending on programs and services – not larger, over most of the last two decades. Finance Minister Jim Flaherty is congratulated by Prime Minister Stephen Harper after the Budget speech on March 21, 2013. Photo: Jason Ransom, PMO. The 2013 budget projects a decline in the size of the federal government as a share of the economy to below pre- to the global recession, the Canadian growth for the next five years. recession levels by 2016-2017. How, economy grew on average by 2.9 per- Meanwhile, what does the budget have precisely, this will be achieved is not cent. The March 2013 survey of pri- to say about the size of government? terribly clear. What the scope is for vate sector forecasters that underpins While there is much talk these days, improving the productivity of govern- the budget economic and fiscal plan in both the United States and Canada, ment service delivery, where informa- projects only 2.3 percent average real about whether government is too big tion technology-generated innovations for providing government services are Chart 3: Program Expenses-to GDP ratio 1992-2018 possible and how to incentivize them, as well as what the impact might be of 20 18 benchmarking public service remuner- 16 ation more to private sector norms are 14 all worthy of more analysis and public 12 discussion. 10

% of GDP 8 Forecast 6 hat about the revenue take 4 of the federal government? 2 0 As Chart 4 shows, this 7

1 W trend, too, has been on a sharp down- 7-18 1

992-93 ward trajectory since 2000, reflecting 2010-11 2000-01 2011-12 2012-13 2013-14 2015-16 2016- 20 1 1993-94 1995-96 1996-97 1997-98 1998-99 1999-00 2001-02 2002-03 2003-04 2005-06 2006-07 2007-08 2008-09 2009-10 2014-15 1994-95 2004-05 large reductions in corporate tax rates, Sources: 2013 Economic Action Plan, Fiscal Reference Tables, Table 2 cuts to personal tax rates – particularly for lower income earners – and a two Chart 4: Revenue to GDP Ratio, 1992-2018 percent reduction in the GST. In Bud- 20 get 2013, revenues were unexpectedly 18 lower by an average $3 billion over the 16 2013-to-2015 planning horizon, and 14 the question naturally arises; what part 12 10 of this weakness is cyclical and what is Forecast 8 structural?

% of GDP 6 In this regard, a significant portion of 4 this tax revenue shortfall appears to 2 0 emanate from lower-than-expected oil prices and the culprit is not a decline in global oil prices. It is a large and ris- 2010-11 2000-01 2011-12 2012-13 2014-15 2015-16 2016-17 2017-18 1992-93 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2001-02 2002-03 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2013-14 1993-94 2003-04 ing discount for Canadian crude oil in Sources: 2013 Economic Action Plan, Fiscal Reference Tables, Table 2 the US, the sole export market for Ca- nadian oil and gas. What we see is a

April/May 2013 22 convergence between our longer-term plan somewhat off-course, requiring we are tackling the decline in our imperative to diversify our energy ex- new cuts to operating expenses, tight- growth potential with sufficient focus, port markets to Asia and our shorter- ening tax compliance and closing tax vigour and common cause given its im- term imperative to balance our fiscal loopholes. But lower-than-average real port to Canadians. books. The Report of the Canada-Asia growth in the recovery and beyond This was the theme of the recent Jobs Energy Futures Task Force, established will constrain our fiscal flexibility for and Prosperity Council Report in On- by the Asia Pacific Foundation and the decades unless we are able to renew the Canada West Foundation, articulated potential growth rate of the Canadian tario, namely that our competitiveness the urgency of diversifying Canada’s economy. And this is the economic re- and future living standards require a energy export markets to Asia and the newal test of any budget today. more concerted approach to economic risks to the Canadian economy of the renewal in Canada, involving not just status quo. Lower-than-average real governments but also business and the education sector. As the Report stated, Over the period between when we first growth in the recovery and the status quo is not a viable option, achieved fiscal balance after 27 years of beyond will constrain our fiscal either for Ontario or Canada, and we deficits in 1997-98, and when we went flexibility for decades unless need to go global, improve productiv- back into deficit in 2007-08, the federal we are able to renew the ity, build an innovation and entrepre- government retired $93 billion of debt. neur culture, go from “good to great” Between 2007-08 and 2015-16, when potential growth rate of the Budget 2013 projects a return to fiscal Canadian economy. And this is in talent, and have an efficient and ef- balance, government debt will rise by the economic renewal test of fective government sector. $170 billion, more than reversing the any budget today. In conclusion, Budget 2013 has Ottawa gains of the previous decade. on track to get back to budgetary bal- ance by 2015, a noteworthy achieve- In this regard, a significant ment in a world where balanced bud- portion of this tax revenue gets are a rare and valuable commodity. shortfall appears to emanate otential growth has slowed for a It also continues and extends a number from lower-than-expected oil number of reasons. Primarily, of structural measures whose intent is prices and the culprit is not a P a slowing rate of productivity to improve the long-term performance growth with poor innovation perfor- of the Canadian economy. In today’s decline in global oil prices. It mance and a slowing rate of labour world, where those longer-term issues is a large and rising discount force growth with an aging population. are becoming more immediate and for Canadian crude oil in the We also have a growing gap between more apparent, there is a case to be US, the sole export market for people without jobs and jobs without made that we need to make as much Canadian oil and gas. people, which will require moving progress on economic renewal as we towards a “public education 2.0” ap- are making on fiscal austerity. proach to K-to-Work education and training to meet the needs of a chang- Kevin Lynch, Vice Chair of BMO ing economy. Our main trading part- Financial Group, is a former Clerk of the ners are also experiencing declines in Privy Council and former deputy minister their potential growth, and while we of Finance. cannot affect their potential growth, Luckily for the fiscal plan, despite this Karen Miske is Director and Senior we can move more quickly to diversify large increase in the stock of debt, debt Advisor, Office of the Vice Chair, BMO our trade towards much more rapidly interest payments have stayed effec- Financial Group. growing emerging economies in Asia tively flat thanks to record-low levels and the Americas. The need for greater of interest rates. For example, longer security of energy demand through term interest rates are 1.9 percent to- multiple export markets is a real and day versus an average of 5.1 percent present example. in the decade before the financial cri- sis and recession. However, in the fu- The top line measures in the 2013 bud- ture, as interest rates return towards get to improve the growth potential of more “normal” levels, debt interest the economy include: A reworking of payments will rise, requiring either in- skills training into a new Canada Jobs Grant; an extension of the accelerated creases in revenues or cuts in spending M&E capital cost allowance for another to maintain fiscal balance. two years; an extension of infrastruc- The intersection between fiscal auster- ture spending for another decade; and ity and economic renewal is clear but annual increments to research and de- implicit in the budget. Lower-than- velopment support. While each mea- expected nominal income, and its im- sure is timely and leans in the right di- pact on tax revenues, pushed the fiscal rection, the bigger question is whether

Policy 23

Quebec Premier Pauline Marois immediately opted out of the job training program in the federal budget. Quebec was also unhappy about the end to tax credits for investing in trade union and credit union investment funds. Ottawa-Quebec relations, writes Dan Gagnier, are “on a negative trajectory.” Montreal Gazette photo. Unilateralism a Drag on Federal-Provincial Relations Dan Gagnier

The Harper government provoked a range of reactions from symmetrical federalism is a well- accepted principle in today’s provincial capitals with the labour training changes in its A Canada. But unilateral feder- 2013 budget, none more negative than Quebec’s. Dan alism corrodes relationships and pre- vents collaboration: in fact, it is divi- Gagnier proposes that the move not only did a disservice sive. It may help Ottawa in its political to Quebec’s record, it imperiled federal-provincial relations strategy going forward and it’s certainly an aid to managing cash flow and the generally by further entrenching an impose-first, negotiate deficit. But in Budget 2013, the labour training component in particular will later approach to thorny jurisdictional issues. If we con- severely test the ability of the federal tinue to proceed as though major decisions can be imposed government to effectively execute its strategy. in an un-collaborative process, he writes, we’ll be burdened The federal government’s proposition with a whole new set of problems of our own making. is to negotiate with the provinces over

April/May 2013 24 the coming year to put in place a for- ture funding, compared to Ontario, vices to workers without unemploy- mula that better aligns the needs of the and you have a potent mélange. ment insurance or who qualified under economy and the job generators (i.e. their programs. the private sector) to develop employ- ntario is holding its opinion The Quebec case of the Federal Tax able workers. How can anyone object and will react in good time. Credit removal for the FTQ/CSN and to such a laudable goal? What are some O It may choose to negotiate Desjardins funds hurt on two fronts. of the provinces objecting to? Are they while Saskatchewan and Alberta sup- The first at the level of the middle class not all being treated equally? port the labour/training approach pro- and workers who benefit from a form It is facile to conclude that because posed by Ottawa. of savings and returns in a province there are thousands of jobs going un- It is evident that there has been little or where almost 50 percent have no pen- filled that the existing programs man- perhaps no consultation with the prov- sion fund at work. The second at the aged by provincial governments are inces on this proposal, which is to take level of foregone benefits to employ- lacking in performance. Ontario and the place of the Labour Market Agree- ment creation and support for Quebec Quebec, for example, have well estab- ments expiring in March 2014. There enterprises. lished approaches to job training and will have to be provincial agreements employment requirements; their strat- to implement Ottawa’s proposal of a The Quebec case of the egies address the particulars of their three-way, $15,000 investment split Federal Tax Credit removal for markets and of their economies. among employers, the province(s) and Ottawa for workers qualifying for train- the FTQ/CSN and Desjardins Quebec reacted viscerally to the federal ing. After first serving notice that it funds hurt on two fronts. budget provisions and immediately ad- would not participate, Quebec unani- The first at the level of the opted an all-party opposition to this mously passed an all-party resolution middle class and workers unilateral intervention. Declaring it in the National Assembly. Drafted by who benefit from a form unacceptable and insulting, the Parti the Liberals with support of the CAQ, Quebecois government announced it gained the acquiescence of the PQ. of savings and returns in a that it would not participate. Ergo: This resolution leaves the door open province where almost 50 “Ottawa, you can take your money but to negotiations while stressing that la- percent have no pension fund we will not play or negotiate on this bour training is in provincial jurisdic- at work. The second at the incursion into a field of provincial / tion and calls for no preconditions to constitutional jurisdiction.” The final renewal of the Labour Market Agree- level of foregone benefits resolution is querulous but falls short ment. to employment creation of rupture, and leaves the door open to Ontario has referred to the proposal and support for Quebec talk without pre-conditions. from Ottawa as a shell game. BC is con- enterprises. cerned about the cost and Nova Scotia The salt in this wound and Newfoundland want more infor- was the simultaneous and mation. At the level of buy-in to the approach, only Alberta and Saskatch- unilateral withdrawal of the ewan have indicated support. federal tax credit for the The record of the current structure in Making changes to the Labour Market Quebec, if one judges on performance- workers’ unions and Caisse Agreements will not be easy. It could Desjardins’ investment funds, based results, is not one we should result in a patchwork quilt across sneeze at. If we use the FTQ Fonds de largely directed at Quebec the country while not or solving the Solidarite as an example, we are looking businesses. Add a dash of problem of matching of skills to jobs, at $8.8 billion in assets with no debt. vinegar over the perception thereby defeating Ottawa’s decision to The Fund has generated and sustained revisit these agreements. of reduced infrastructure 500,000 jobs since its inception. The On substance, of the $500 million dis- benefits, apart from return on invest- funding, compared to tributed annually to the provinces un- ment for subscribers, include injection Ontario, and you have a der the Labour Market Agreements, Ot- of $6.3 billion in Quebec companies potent mélange. tawa forecasts being able to redistribute over ten years in all regions of Quebec. about 60 percent directly to workers Some 67 percent of this is in venture in the form of employment subsidies. capital or risk-capital investments. This would mean that the provinces The Fund is also small-business friend- and employees will have to match, cre- ly, with some 2,239 firms having less ating an unforeseen financial outlay. than 100 employees. On the investor The salt in this wound was the simul- Under the existing agreements, Que- side, there are 600 thousand subscrib- taneous and unilateral withdrawal of bec receives $116 million, while $194 ers who have, on reaching retirement the federal tax credit for the workers’ million is disbursed to Ontario. These age, received some $4 billion over the unions and Caisse Desjardins’ invest- amounts were provided without condi- last ten years. Over the past three years, ment funds, largely directed at Quebec tions in order to allow both provinc- which we all know have been difficult, businesses. Add a dash of vinegar over es to fulfill their labour employment the Fund has returned 6.9 percent on the perception of reduced infrastruc- training strategies while offering ser- an annual basis.

Policy 25 The dynamic in federal-provincial relations is on a negative ing Quebecers in various walks of life trajectory, leading Quebecers in various walks of life to tag to tag revitalization or restructuring of federal-provincial processes as a prior- revitalization or restructuring of federal-provincial processes ity. Failure to consult or discuss can as a priority. Failure to consult or discuss can only complicate only complicate negotiations follow- negotiations following unilateral decisions. ing unilateral decisions. Workers and middle class families can- not be mobilized to contribute more to their province or to Canada when lack of collaboration convinces them that Ottawa limits their access to un- It is small wonder, then, that the credits to a phase-out in 2010, later employment insurance, uses their union-based funds see the federal extending the timeline to 2011 while contributions to create surpluses and move as an attack against an invest- increasing the maximum allowable for ment class vehicle that has been, not tax credits from $5,000 to $7,000. Si- limits their possibility to recoup losses uniquely, but more effectively, in Que- multaneously, in 2008 and 2009, two through workers’ investment funds. bec. For the Caisse Desjardins, with funds were created. The Ontario Ven- Looking forward without overly rely- five million members, the move was ture Capital Fund, with $205 million to ing on how well we have come through characterized as a “hard knock”’ and a invest in private funds, and the Emerg- the last decade, our future challenges double whammy following the provin- ing Technologies Fund, with $250 mil- are daunting well beyond the laud- cial government’s abolition of tax cred- lion to invest in new technologies in able goal of balancing our operational its for new entrants in 2013 as well as partnership with angel investors and budget deficit. Without discussion be- a 2.2 percent compensatory payroll tax existing private funds. in the co-operative sector estimated to tween Premiers and the Prime Minister From a numbers perspective, it is evi- be worth $70 million annually. on the economy, we reduce our capac- dent that the result of these two dif- ity to face shared challenges. The past Of course, there is another side to ferent approaches has seen risk invest- model of interminable first ministers’ this picture. In his editorial after the ment as a percentage of total dollars conferences belongs to a by-gone era budget, Andre Pratte of Montreal’s La under management steadily decline in but franchising discussions to Ministe- Presse labelled the reaction of Quebec’s Ontario as a result of the elimination rial Councils or bilateral conversations finance minister to the Labour Market of the Ontario tax credit in 2005. Cor- is not sustainable. Agreements “hysterical” and Ottawa’s respondingly, Quebec has seen growth choice on the funds as injudicious but to the point where, despite Ontario’s Canada is one of the most decentral- certainly not one to kill off the vari- larger economy, it is equal in numbers ized federations in the world. This is ous funds affected. The question Prat- of dollars under risk management. An both a strength and a weakness. If we te poses in terms of public policy is a OECD study on Entrepreneurship at a cannot avoid engendering more stress valid one: should the state eternally Glance in 2011 ranked Quebec third lines we will feed the fires of discon- subsidize the growth of labour-driven behind and the US, thanks to tent. If we continue to take for granted investment funds at either level of gov- labour-driven funds outstripping both that decisions and leadership can be ernment, federal or provincial? Canada and Ontario. sustained without discussion and col- Others have questioned whether these laboration, we will dissipate our ener- funds have gained a competitive ad- he Quebec legislature then gies on problems of our own making. vantage, allowing them to benefit in passed another unanimous reso- This drag within our country needs to 2012 from $145 million in federal tax T lution requesting that Ottawa be reduced and the time is now for po- credits alone. Controlling close to 40 renounce its decision to abolish the tax litical leadership. percent of the risk capital in Canada, credit on workers’ investment funds. do they not have a preferential advan- Together with the previous resolution Dan Gagnier is a former chief of staff to tage over more traditional players? on the Labour Mobility Agreements, Premier Jean Charest in Quebec, former Ottawa is generating stress lines that principal secretary to Premier David e do not have to answer this will exacerbate Quebec-Ottawa rela- Peterson in Ontario, and former deputy question immediately, as tions. Business reporters such as Jean- clerk of the Privy Council. W Ottawa has granted a two- Philippe Decarie opined that Ottawa [email protected] year phase out during which we can has unnecessarily taunted Quebec in expect to see a mobilization of union the name of polishing its image on members, shareholders and investors reaching its balanced budget objective. to try to get Ottawa to reverse or amend Decarie cites a Secor study that dem- its decision. We will also see more po- onstrates Ottawa recovers its disburse- litical rhetoric and positioning as the ments thanks to increased economic PQ budget comes down in early 2014, activity and fewer payments on unem- possibly as a precursor to an election. ployment insurance. Ontario’s path is different. With a The dynamic in federal-provincial rela- larger economy, Ontario abolished tax tions is on a negative trajectory, lead-

April/May 2013 26

Budget 2013 includes support for integrating persons with disabilities into the labour force, and they will increasingly have the satisfaction and pride of contributing to the economy. Shutterstock photo. Enabling the Workplace: Enhancing Integration for Persons with Disabilities David Nicholas, Margaret Clarke and Herb Emery

The Harper government’s 2013 budget includes an unprec- here are five sections of the edented level of support for the integration of persons with 2013 federal budget that aim T to enhance employability and disabilities into Canadian workplaces. While the level of workplace integration for persons with disabilities, including skills training, commitment at the federal level is new, existing research, enhanced opportunities and workplace particularly on the employability of individuals with au- accessibility. But the changes will re- quire concerted follow-up across both tism spectrum disorder, indicates the budget measures are jurisdictional boundaries and a range an investment in the right direction for persons with dis- of outcomes for employees, employers and government support networks. abilities, job creators and the country as a whole. The 2013 Rethinking Disability in the Pri- vate Sector Report from the Panel on La-

Policy 27 Identified Prevalence of Autism Spectrum Disorders tor Report from the persons with dis- abilities panel highlighted promising Autism and Developmental Disabilities Monitoring (ADDM) practices and government action to Network 2000-2008 build on their success. Increasingly, Combining Data from All Sites examples suggest that hiring people Surveilance Birth Number Of Prevalence Per This is About with disabilities is good business, but Year Year ADDM Sites 1,000 Children 1 In X the scale on which this hiring can oc- Reporting (Range) Children... cur will depend on increasing training and opportunities for persons with dis- 2000 1992 6 6.7 (4.5-9.9) 1 in 150 abilities, including ASD. 2002 1994 14 6.6 (3.3-10.6) 1 in 150 n additional benefit of suppor- 2004 1996 8 8.0 (4.6-9.8) 1 in 125 ting employment and increased 2006 1998 11 9.0 (4.2-12.1) 1 in 110 A independence for individuals with disabilities is a potential reduc- 2008 2000 14 11.3 (4.8-31.2) 1 in 88 tion of burden placed on Canadian families. In a recent study by Zuleyha Cidav and colleagues, average earnings bour Market Opportunities for Persons The net present value at in families with children with ASD, for with Disabilities presents compelling birth of the incremental instance, are 28 percent lower than in reasons to create new employment op- families whose children do not have portunities for persons with disabilities costs of supporting the health limitations and 21 percent less in Canada. ASD population over its than families with children with other Current employment rates among per- neurotypical peers in Canada health limitations. sons with neuro-developmental dis- can be estimated to be $3.4 In their 2007 report, Pay Now or Pay abilities – 1 in 6 Canadians – are inade- billion for each annual birth Later: Autism Families in Crisis, the quate; as an example, employment for cohort. Standing Senate Committee on Social persons with autism spectrum disorder Affairs, Science and Technology indi- (ASD) ranges in studies from 10 to 55 cated it had heard from parents and percent. In a recent study of a Cana- advocacy groups about the tremen- dian cohort, some young adults with dous emotional stresses and financial Supporting persons with disabilities to ASD with average to above average challenges faced by families with a find and succeed at work is estimated intellectual skills simultaneously ex- child with ASD. The Senate committee to yield a wide variety of social and hibited substantial challenges in adap- was told that families must substan- economic benefits, but requires an in- tive and workplace functioning. Many tially attend to the needs of their loved vestment in terms of elements such of these challenges, however, could be one with ASD. For example, one stay- addressed by modifying the workplace as employment readiness and sustain- at-home parent is often required to environment, ensuring support, and ability (e.g., training, job coaching, provide comfort, consistency, support fostering understanding among em- employer support, etc.). These costs and intervention. Accordingly, beyond ployers and the broader community. can be considerable. Based on a 2006 benefits of employment for persons Sufficient employment supports that US study by M.L. Ganz, the net present with disabilities and society as a whole, mitigate employment challenges can value at birth of the incremental costs benefits to families and communities lead to stable and positive vocational of supporting the ASD population over also emerge. Conversely, quality of life and income outcomes for the indi- its neurotypical peers in Canada can among persons with disabilities and vidual with ASD and enhanced human be estimated to be $3.4 billion for each their families may spiral downward resources for the economy. This po- annual birth cohort. from a lack of employment or other tential to increase labour supply in the Considering the cost savings and the meaningful vocational activity, with Canadian labour market is substantial productivity gain from additional potentially deleterious impacts for the given that the childhood diagnosis rate workers in the marketplace, the ben- individual, family and community. of ASD has been identified at one in 88 efits of employment for persons with persons. disabilities are substantial. Moreover, The Senate committee emerging anecdotal accounts of the was told that families must inding pathways to inclusion and effectiveness and commitment of per- substantially attend to the workplace productivity appears sons with disabilities in employment needs of their loved one invite further analysis of hypothesized F integral to individual and fam- with ASD. For example, one ily quality of life, effective community benefits of heightened productivity partnerships, organizational productiv- and employee retention. From both stay-at-home parent is often ity, and, ultimately, the strength of the economic and societal perspectives, required to provide comfort, nation. Like typical Canadians, persons considerable benefits thus emerge relat- consistency, support and with disabilities keenly desire to con- ed to employing this group of currently intervention. tribute via vocational activity and to un – and under-employed persons. The derive benefits from meaningful work. Rethinking Disability in the Private Sec-

April/May 2013 28 here are five significant areas of 5. Canada Job Grant al support services. A better under- the 2013 federal budget that Program standing about outcomes and how will address labour market en- salient processes foster or conversely T The Canada Job Grant is anticipated hancement for persons with disabilities. impede successful vocational out- to assist in skill development through comes are important for policy and 1. Reforming Labour Market potentially matching dollars of $5,000 resource development. each (federal government, province Agreements 3. Greater clarity may be needed in the and employer). This will enhance job administration and priority setting The federal government has committed skill training and opportunity for per- of budget allocations. As an exam- $222 million to support skills training, sons with disabilities, but requires em- ple, how are persons with disabilities including for persons with disabilities. ployer and provincial engagement. defined in terms of service eligibility 2. Strengthening Federal There is a growing awareness across provinces and territories? Fed- Programming for Persons that employing a diverse erally mandated support for services workforce can be a major and outcome targets will have to be with Disabilities clearly delineated at the outset of re- The Opportunities Fund, which was factor in organizational forming labour market agreements due to end, will continue in its pres- productivity and success. and other matching programs. ent form and as of 2015-16, will grow 4. Understanding the influence of the to $40 million per year. Human Re- federal government on provincially sources and Skills Development Cana- The federal government is demonstrat- mandated programs is important da (HRSDC) will be integral in the de- ing strong national leadership in ad- yet jurisdictionally complex. Great- velopment of a national employment dressing labour force gains in Canada er clarity in program development, model for persons with disabilities that are anticipated as a result of greater delivery and markers for evaluation that can be supported out of the Op- inclusion of persons with disabilities are needed. portunities Fund. The Social Sciences in the workforce. There is a growing and Humanities Research Council awareness that employing a diverse 5. Proactive change invites multiple (SSHRC) will be given $7 million per workforce can be a major factor in or- levels of development including year starting immediately to support ganizational productivity and success. opportunities and supports to indi- research in labour market participa- Studies from DuPont indicate that dis- viduals and families, labour market tion for persons with disabilities. Also, abled workers performed comparable to shifts, and the development of more the Canadian Institutes of Health Re- or better than non-disabled peers with accepting social values and attitudes search (CIHR) will be allocated an ad- regard to safety, attendance and job regarding diversity. Engagement at ditional $15 million, which will be performance. The Labour Market Panel municipal, provincial and federal committed to strategic patient-orient- found that turnover, absenteeism, and levels is crucial in large scale change ed research (SPOR) networks. tardiness drop appreciably in organiza- that is ultimately meaningfully and tions with disabled workers. Moreover, broadly realized within Canadian 3. Creation of the Canadian customers view organizations that hire communities. people with disabilities favorably and Employers Disability A final thought. The cost of labour mar- likely prefer to patronize organizations Forum ket training programs for persons with that employ a diverse workforce even disabilities is modest compared to the The government has allotted $2 mil- if it means switching companies or economic and human return on invest- lion to support the Canadian Employ- brands. Accordingly, various metrics ment. Persons with disabilities in the ers Disability Forum. This group will increasingly favor the inclusion of a labour force contribute to the economy, offer leadership in employer training diverse workforce; however, finding ef- and have the pride and satisfaction of and awareness to create a permanent fective ways to engage and support this community of employers who will knowing it. For their families, of the workforce are critical to widespread en- one in 88 Canadian children on the strengthen their workforce by includ- gagement of persons with disabilities in ing persons with disabilities. ASD spectrum, for example, just being a the Canadian labour market. priority in the federal budget is a major 4. Extending the and highly positive development. hese are promising days as we Accessibility Fund David Nicholas is an associate professor move forward in seeking in- in the Faculty of Social Work at the This fund was allotted $15 million per T creased labour force participa- University of Calgary. year to support “workplace accommo- tion among persons with disabilities. [email protected] dations” including training and infra- To that end, we propose the following: structure assistance for persons with Margaret Clarke, former Fraser Mustard 1. We need to proactively support disabilities with accessibility needs. Chair, is a professor of pediatrics at the individuals with disabilities, their This could entail physical disability University of Calgary. families and employers in this tran- accommodations such as ramps, or ac- [email protected] sition to increased employment, en- commodations related to other types Herb Emery, is a professor and Program gagement and stability. of disability such as, in the case of ASD, Director for Health Policy in the School of accommodation for sensory issues such 2. Evidence-informed models are Public Policy at the University of Calgary. as white noise or sound clouds. needed to ensure optimal vocation- [email protected]

Policy 29

The Lester B. Pearson Building in Ottawa, home of Canada’s foreign policy establishment. The 2013 budget folded CIDA into the Department of Foreign Affairs, a welcome development according to authors Derek Burney and Fen Hampson. Photo: Ottawa Citizen.

he government’s decision to CIDA RIP: A Shift that fold the Canadian International T Development Agency into the Department of Foreign Affairs and In- was Long Overdue ternational Trade was long overdue and indeed welcomed by most. The public and media reaction to the decision has Derek Burney and Fen Osler Hampson been generally positive. Even the Globe and Mail, whose editorial page is not al- ways kind to the Conservative govern- ment, applauded the decision. Save for a few predictable critical voices, there After years of debate and speculation, the Canadian In- was surprisingly little gnashing of teeth ternational Development Agency is no longer an agency. in Canada’s development community, with most NGOs preferring to take a From its new home at the Department of Foreign Affairs quiet, “wait-and-see” attitude to the bureaucratic restructuring and the re- and International Trade, Burney and Hampson argue, the ordering of priorities that will follow. organization that long represented the tired motto that Why the government decided to act “the world needs more Canada” will be more streamlined, now is still unclear and a story yet to be told. It may also be the case that the practical and efficient. In the process, it will change the Harper government realized that Ca- way we deliver official development assistance. nadians have become a bit more cyni- cal about what we bring to the world. The tired refrain that “the world needs

April/May 2013 30 The poverty alleviation narrative became less persuasive as ing cluster of programs and whether the actual number of low-income countries (LICs) continued they are having the desired impact. to shrink. China and India, which, on a per capita basis, aren’t The untying of Canada’s aid also hit major aid recipients, have lifted themselves out of the poverty some of CIDA’s own Canadian NGO partners hard. Many have struggled trap by their own bootstraps and the workings of the global in recent years to stay in business economy. and some indeed succumbed in that struggle. Genuinely independent approaches like that of the Gates Foundation and more Canada” may have finally run its Even so, the devil is in the details and some select NGO’s tend to get higher course. in the manner in which the restructur- accolades, but the track record and ing of Canada’s roughly four billion- However, what is undeniable is that analyses of results are checkered. dollar aid program will now be imple- CIDA had become a dull knife in the mented. Questions persist about the Extra layers of administration do not drawer of the development enterprise, effectiveness of virtually all bilateral really help. In the delivery, govern- rendered increasingly obsolete by a ODA efforts by governments. Various ments too often see self-aggrandize- changing global context and a grow- models for delivery have been tried. ment by the recipients as the most vis- ing awareness that development is not The aid business is plagued by the ebb ible outcome. really about “poverty alleviation” per and flow of new fashions and fads. se, but economic growth, investment, In 2008, the Government’s Indepen- good governance, and the empower- In the 1960s and 1970s, development dent Panel on Canada’s Future Role in ment of marginalized groups like wom- aid was about supporting major in- Afghanistan noted critically the reluc- en and youth through education and frastructure programs in developing tance of CIDA to launch projects such access to opportunity. countries so that they could attain the as hospitals, schools or irrigation dams, “takeoff” speed for growth. During the preferring instead to emphasize some- The poverty alleviation narrative be- Cold War, development assistance was what opaque (and purportedly neutral) came less persuasive as the actual num- also seen and used as a tool to combat objectives like “capacity building,” for- ber of low-income countries (LICs) the rise of communism in the develop- getting that the needs were more fun- continued to shrink. China and India, ing world. In the 1980s, it shifted to damental. which, on a per capita basis, aren’t providing assistance to the poor, ad- major aid recipients, have lifted them- dressing the needs of especially vulner- CIDA’s own administrative selves out of the poverty trap by their able groups (women and children), and own bootstraps and the workings of focusing on the delivery of basic public structures also became the global economy. services (e.g., health and education). In progressively more LICs are, understandably, the target of the 1990s, the wheel turned yet again cumbersome as the official development assistance (ODA). to a focus on public sector outputs and government raised the bar But, in foreign policy terms, some the requirements of good governance. Hence, the focus on improving systems on accountability. This raised of the most politically troublesome the transaction costs for those and unstable states are lower middle- of public finance in developing coun- tries; providing budgetary support and income countries (like Pakistan, for with whom CIDA did business. strengthening systems of accountabil- example) where there are wide dispari- ity, ending corruption, and promoting ties in wealth between different parts democracy and the rule of law. of the country, lack of state control over areas where there are local insur- At the beginning of the 21st century, gencies, and chronic state failure. Yet donors began to pay much greater at- these countries are typically ineligible tention to how to make things hap- for development assistance according pen through the multilateral system to poverty-level benchmarks. through improved donor coordina- Canadian taxpayer support for ODA tion, stronger partnerships between depends on the awareness of the pub- donors and recipients, program-based ith the stroke of a pen, de- lic of tangible success stories, which approaches, and greater coherence be- velopment assistance moves are rarely trumpeted, leaving a linger- tween aid and non-aid policies in trade, from the periphery of gov- ing sense that they are far and few. W investment, and technology transfer. Constant program reviews have been, ernment (CIDA had become an orphan in our foreign policy machinery) to the at best, inconclusive, and the lessons centre (or at least that is how DFAIT anada also began to pay great- from developing countries that have would like to see it itself). Canada’s er attention to the need to made a successful transition are not three principal instruments of foreign C focus aid on a fewer number of easily transferable. policy will now be concentrated in countries. CIDA’s own administrative structures what should be a more coherent, more However, all of these shifts in priorities also became progressively more cum- complementary and more effective have left many taxpayers wondering bersome as the government raised the whole. what is being done with an ever-chang- bar on accountability. This raised the

Policy 31 transaction costs for those with whom ally into what had become by then a Derek Burney is senior associate at CIDA did business. The common re- bifurcated DFAIT. The move was resist- Norton Rose Canada LLP, a former chief frain from many NGOs was that they ed by senior bureaucrats in a manner of staff to Prime Minister Brian Mulroney, got 10 percent of their funding from that would have made the writers of and later ambassador of Canada to CIDA and yet CIDA’s reporting pro- the “Yes Minister” series proud: “Too the United States. He is the author of cedures accounted for 90 percent of complicated, likely to arouse negative Getting It Done, a memoir of his life in their paperwork. reaction, too technical and not worth the Canadian foreign and public service, the agony,” etc. Those sentiments on published by McGill-Queen’s University Undoubtedly, some these complaints Press (2005). were exaggerated, but many of CIDA’s shifting CIDA prevailed. Instead, ef- [email protected] NGO and even intergovernmental forts to reintegrate trade back into partners were joyless companions in Foreign Affairs succeeded even though the development enterprise. key instruments of trade policy were left in departments like Finance and Fen Osler Hampson, is Distinguished Fellow and Director of Global Security at Notwithstanding such complaints and Agriculture. criticisms, it is important to recognize the Centre for International Governance that CIDA has performed nobly, if not The “Yes Minister” problem will still Innovation (CIGI) and Chancellor’s always ably, over the years. There has be there in the implementation of this Professor at Carleton University. A Fellow of the Royal Society of Canada, he is the always been a consistently high de- new reorganization unless the gov- author of nine books and co-editor of gree of professionalism in its own of- ernment fights bureaucratic inertia 26 volumes on international affairs and ficer corps. and makes a concerted effort to fun- damentally change its ways of doing Canadian foreign policy. business. [email protected] Even so, CIDA’s geographic In the end, much will depend on the and functional focuses were leadership given to Canada’s ODA pro- shuffled regularly in line grams by ministers and officials, wher- with prevailing trends and ever they reside. But, if more of what its administrative back office we do is presented as reflecting or re- grew excessively. inforcing our foreign policy principles and priorities, that is as it should be. (The headquarters-to-field Monies will also have to be spent in a ratio was 4:1 versus 2:1 for manner that is accountable and trans- DFAIT). parent but efficient and cost-effective, including when NGOs and other part- ners are involved in program delivery. Funding of major multilateral institu- tions such as the World Bank and the World Food Program will continue but, even in those cases, greater rel- evance to foreign policy goals cannot hurt. The impact of what Canada is doing and why may just be better un- derstood by all. ven so, CIDA’s geographic and functional focuses were shuffled In the face of global tragedies, wheth- E regularly in line with prevailing er in Fukushima, Haiti or Sudan, the trends and its administrative back of- humanitarian response by Canadians fice grew excessively. (The headquar- has been second to none. Most of all, ters-to-field ratio was 4:1 versus 2:1 the ODA actions of our government for DFAIT). A steady rotation of junior should reinforce that commitment ministers overseeing the agency was and that spirit to assist tangibly in about the only constant, but certainly times of greatest need. not one that was conducive to coher- The organizational shift does not sig- ent strategy or impact. nal a de-emphasis of ODA. Rather, it In becoming an integral part of DFAIT, involves a recalibration of how we al- with at least one senior minister to locate and distribute assistance; ide- call on, development assistance now ally, in a more streamlined and con- has a chance of being more relevant sistent manner. and more effective. Long debated and never consummat- But this should not be left to chance ed due to bureaucratic resistance or in- alone. During the 2006 transition to ertia – the biggest obstacles to change the Harper government, an attempt in any government – this change is was made to move CIDA organization- most welcome.

April/May 2013 3232

The Nexen tower in Calgary, Alberta. Istock photo.

ne of the more surprising as- The Unpredictable pects of the Harper govern- O ment over the course of its seven years in power has been the evo- lution of its stance on foreign direct Evolution of Canadian investment (FDI). While in opposition, the Conservatives mostly advocated a policy of minimal restriction on FDI, but Investment Policy the more nuanced demands of govern- ing tested this policy early. As a result of Michael Coates several high-profile foreign acquisitions and takeover bids, the government has continued to adjust its FDI policy to meet political and economic realities. Early in its first minority mandate, two Between BHP Billiton’s unsuccessful bid for Potash major takeovers helped to shape the Corp. and CNOOC’s successful bid for Nexen, the rules Harper government’s approach to FDI, as Brazilian-owned Vale acquired Inco changed for foreign companies with an eye on Cana- and Xstrata plc acquired Falconbridge. dian assets. Increasingly, The Harper government is Against this backdrop, Prime Minister Stephen Harper launched the Compe- defining its economic policy in terms of the national tition Policy Review Panel, chaired by interest. While Canada will continue to be an open L. R. “Red” Wilson, to review Canada’s competition and foreign investment economy and to encourage foreign investment, the policies. After lengthy deliberations and days of the slogan “open for business” are over where away from public debate, the Wilson panel’s central recommendation on in- control of significant Canadian companies is at stake. vestment was a “reverse onus” test. In effect, Wilson artfully suggested that the government avoid the politics of major acquisitions by eliminating the so-called “net benefit” test in the Invest- ment Canada Act and put the onus on government to prove why an acquisi- tion should not be concluded.

Policy 33 The suggestion was ingenious, as Wil- tablish its global potash headquarters When the meltdown son knew that the preference of politi- in Canada, relocate its entire Canadian happened, U.S. Steel cians is to sidestep difficult issues. Wil- operation to Saskatchewan, spend bil- son had no doubt observed that the lions to develop the largest potash mine promptly closed its Canadian existing approval process, with its leg- in the world on the Jansen site, and use steel production but kept its islated (and lengthy) review timetables, the management expertise of PCS to US facilities open until the could force governments to bow to pub- help with the process. market readjusted. It was a lic opinion and media pressure on com- The Prime Minister’s early reaction to mercial transactions that they ought to rash decision that showed the transaction was summed up in his leave to the marketplace to decide. complete disregard for the comments in the House of Commons, company’s promises and Tellingly, the recommendation was when he said the fight for Potash Corp. never adopted. The 2008 global eco- was over “a proposal for an American- validated the concerns of nomic meltdown forced government controlled company to be taken over by those who felt that foreign and business to retrench. It wasn’t an Australian-controlled company.” acquisitions hollowed out long before foreign investors like Vale, Unfortunately for his government, the head office decision making. and most particularly U.S. Steel, which transaction grew to be a political li- had acquired Stelco in 2007, began to ability. While most Potash sharehold- reconsider many of the promises, or ers were already outside Canada, the “undertakings,” they had made to In- conservative government of Saskatch- vestment Canada to secure foreign in- ewan quickly came to the “rescue,” cit- vestment approval. In the past, inves- ing myriad concerns, from the loss of tors were largely given the benefit of tax revenue to the lack of dependabil- the doubt when it came to responding ity of foreign investment undertakings. to market changes. So when the melt- At a time when every vote counted to down happened, U.S. Steel promptly Harper’s minority government, Sas- closed its Canadian steel production katchewan Premier Brad Wall was able but kept its US facilities open until the market readjusted. It was a rash deci- to marshal enough political opposition sion that showed complete disregard to give the federal government pause. for the company’s promises and vali- Opponents of the transaction began to dated the concerns of those who felt question why Canada was so open to that foreign acquisitions hollowed out foreign investment when other coun- head office decision making. tries were more protective of locally In an unprecedented move, the Cana- owned companies. The US, that bastion dian government sued U.S. Steel and of free enterprise, had just blocked the achieved a favourable settlement. The sale of a string of US ports to a United government had concluded that Can- Arab Emirates-owned enterprise, as well ada needed to play by much tougher as the acquisition of Unocal by China rules when it came to enforcing the National Offshore Oil Corporation contractual commitments of foreign (CNOOC). Australia itself had blocked investors. More generally, it came to the sale of Woodside Petroleum to Shell the realization that it could not take an Oil. So why was Canada being so na- entirely “free market” view on foreign ïve in allowing this transaction to take investment. And Wilson’s recommen- place, particularly in an industry where dation for a reverse onus policy, made Canada is a world leader? We had al- before the 2008 meltdown, was soon lowed “our” ownership of nickel, iron forgotten – even as think tanks such ore, and aluminum companies to slip as the Conference Board of Canada away, and allowing BHP Billiton to buy had successfully demonstrated that the PCS would have given the Australian “hollowing out” argument against for- concern control of 70 percent of the eign acquisitions was more perception world’s potash production. At least, than reality. that’s how the argument went. Less hysterical observers noted that the n the summer of 2010, the Anglo- resources were not actually sold, but Australian diversified mining gi- remained provincially owned and regu- I ant BHP Billiton made an unso- lated. But in the world of politics, per- licited offer for Potash Corporation of ception matters more, and the federal Saskatchewan (PCS). Initial outreach by government was not going to spend BHP Billiton to federal decision makers any political capital explaining this to showed the offer for PCS was received the public when the politics was with positively. Even though the offer was “the crowd.” Rejecting the application, hostile, BHP Billiton promised to es- despite unprecedented economic and

April/May 2013 34

Prime Minister Stephen Harper at a news conference in the foyer of the House of Commons in December 2012, announcing approval of the CNOOC-Nexen deal. "It is important for Canadian and also foreign investors to understand that this is not the beginning of a trend but the end of trend." PMO photo.

The Prime Minister’s early reaction to the transaction guidelines, and was the first major was summed up in his comments in the House of Commons, investment by a Chinese company since Prime Minister Harper travelled to when he said the fight for Potash Corp. was over “a proposal China and announced that Canada was for an American-controlled company to be taken over by an “open for business.” But as time went Australian-controlled company.” on, the federal government’s support for the deal began to erode. Concerns soon arose from conservative quarters about a Chinese government-controlled other commitments, soon became the terprises (SOEs) controlling a significant company paying a premium for a expedient decision. part of our economy. publicly traded Canadian company. Out of this debate emerged an atti- CNOOC had studied the BHP Billiton Opinion polls show that acquisitions of Canadian companies by foreign ones are tude that has become a tenet of public case well, and learned from its own never broadly supported by the public, policy in the approval process, despite Unocal mistakes in the US in 2005. It but an acquisition by a company owned having no legal basis in the Investment came with a friendly deal for Nexen, in part by the Chinese government Canada Act: namely, an inherent skepti- premium-priced for shareholders and was particularly problematic. An Ipsos cism about the benefits of acquisitions with significant commitments to the poll for the Canadian Council of Chief of Canadian companies that have stra- Canadian government, including the Executives last September found that tegically significant industry positions full retention of Nexen employees and management, establishment of a North while Canadians were generally in globally. Jason Kenney, the man who favour of foreign investment, 76 percent led the internal opposition to last year’s American headquarters, and a public listing on the TSX – a significant con- of respondents were concerned about $19-billion acquisition of Nexen, Inc. ownership of the resource. by CNOOC, said as much when he stat- cession designed to clearly meet SOE ed in December 2012 that “I make no guidelines introduced by the govern- Ultimately, the government allowed ment in 2008. These guidelines stressed bones about it… I have concerns about the deal to proceed because it met its the transparency of reporting and the wanting to ensure that foreign govern- legislative and SOE test, but the trans- commercial operations of the invest- ments do not directly or indirectly end action resulted in further refinement ment. The government had correctly up with a disproportionate control of of the approval test, as it brought total anticipated the next wave of foreign key Canadian industries, or large parts Chinese investment in the oil sands to investment; indeed, the guidelines rep- above 10 percent of production, and of the Canadian economy.” resent one of the few occasions where total SOE investment, including the Not surprisingly, the CNOOC/Nexen the government anticipated a policy re- OECD-based Statoil and Total, above 20 deal has created a whole new test around quirement rather than being forced by percent. As the PM said when announc- foreign investment even though, like events into preparing one. ing the approval of the CNOOC/Nexen the BHP Billiton bid for PCS, the ini- deal: “To be blunt, Canadians have not tial reaction to the bid was positive. For he CNOOC transaction was spent years reducing the ownership CNOOC’s limited entry into Canada crafted to meet the “net ben- of sectors of the economy by our own raised the stakes aboutstate-owned en- T efit” test and existing SOE governments, only to see them bought

Policy 35 Simultaneously announcing approval of the $5.2 billion the acquirer is private or government- takeover of Progress Energy Resources by Petronas of owned, but it certainly increases with Malaysia, the PM pointedly added: “It is important the amount of government ownership in an SOE in concert with the size of the that Canadian and also foreign investors understand that this investment target and the diversity of is not the beginning of a trend but rather the end of a trend.” its shareholder base. Finally, there is no substitute for be- ing prepared. Political risk transactions need to be assessed well in advance of any announcement date, with govern- and controlled by foreign governments er government’s “Conservative Party” ment relations and communications instead.” The government then an- label. This is not a government driven planning and preparation for decision nounced it would restrict further SOE by ideology. As the Prime Minister has makers and stakeholders. An Invest- investment in the strategically impor- said, “Practical government rarely per- ment Canada outline of a package needs tant oil sands, except under “extraordi- mits such simplicity”. The Harper gov- nary circumstances.” Harper also said: ernment is highly attuned to public to be designed and in all probability the “When we say that Canada is open for opinion and will not turn a blind eye to framework announced when public business, we do not mean that Canada a foreign acquisition if it has an impact communications commence in order to is for sale.” on its own popularity. Some sort of risk mitigate political fallout. Simultaneously announcing approval mitigation for the government’s own Canada will continue to be an open of the $5.2 billion takeover of Progress interests will likely be required for any economy and to encourage foreign in- potentially controversial transaction. Energy Resources by Petronas of Malay- vestment. As Harper himself said after sia, the PM pointedly added: “It is im- the decision regarding BHP, “No one portant that Canadian and also foreign The Harper government should doubt this government’s policy investors understand that this is not the is highly attuned to public ...that, generally speaking, foreign in- beginning of a trend but rather the end opinion and will not turn vestment is in the interests of the Cana- of a trend.” a blind eye to a foreign dian economy.” That said, the days of acquisition if it has an impact the slogan “open for business” are over uch speculation has gone where control of significant Canadian into what “extraordinary” on its own popularity. Some sort of risk mitigation for the companies is at stake. In these uncertain M means, with critics trying to economic times, the current govern- anticipate the loopholes, but this misses government’s own interests ment’s assessment of its own interests the point. What is really significant is will likely be required for and the Canadian national interest will that the oil sands, like potash, are now any potentially controversial be the norm going forward. Foreign in- (at least informally) designated as a stra- tegically important asset. The CNOOC/ transaction. vestors would be wise to study the evo- Nexen transaction affected only three lution in Canada’s investment policy percent of oil sands output and has no and to do a formal political risk assess- strategic significance on production, but ment before entering into talks with a Third, the government is increasingly the concern was more for the precedent Canadian target company. defining its economic policy in terms of it set for possible future acquisitions of the national interest, and all of its ac- The government has come a long way larger Canadian companies like Encana, tions need to be seen in light of whether from the Wilson task force. Each new Canadian Natural Resources, or Suncor. the country’s wealth and power are en- acquisition will likely write a new chap- So what lessons can we learn from this hanced. If an acquisition were to seri- ter in this unpredictable evolution of unpredictable evolution in Canadian ously erode the national interest in a Canada’s investment policy. investment policy? particular industry sector, expect the Michael Coates assisted CNOOC in government to be very skeptical. First, each transaction must be assessed its successful takeover bid for Nexen as a separate event. The Investment Can- Fourth, no major takeover can expect as well as BHP on its unsuccessful bid ada Act sets out some specific criteria to be approved without significant at- for Potash. He also advised the Maple that can offer guidance but there are tention to the provinces. Support from Group on its successful acquisition of no clear rules on whether these trans- Alberta helped CNOOC in Ottawa while the TMX. He is Chairman and CEO of actions will be approved. That is not opposition from Quebec short-circuited Hill+Knowlton Strategies Canada, and necessarily a bad thing. Retaining some any formal application from Lowe’s flexibility is important for government when it was contemplating a hostile a member of H+K’s global council. He is because it is impossible to anticipate all offer for Rona, the Quebec-based Cana- also a member of the CANDU board of the implications of future transactions. dian retail hardware chain. directors and a frequent commentator on That said, the process has become very public affairs issues. To read more of his Fifth, any acquisition of a significant work, visit his blog at http://hkstrategies. political, and companies investing in brand or operation that is likely to gain ca/author/mcoates/. Canada must manage on that basis. public attention could well trigger a Second, don’t be confused by the Harp- policy backlash. This risk exists whether [email protected]

April/May 2013 3636

Suncor upgrader complex adjacent to the Athabasca River. Photo: Chris Evans, The Pembina Institute.

he recent takeover of Calgary- Canada’s Shifting based Nexen by China National T Offshore Oil Corporation (CNOOC) triggered the third distinct approach to China by Canada’s gov- China Posture ernment in just seven years. While it is the most nuanced so far, the latest Brian Bohunicky posture is primarily transactional and political rather than far-sighted or strategic. Given the importance of China for When, in the largest foreign takeover ever by a Chi- Canada’s economic future, none of the three approaches has been adequate nese firm, state-owned CNOOC made a bid to acquire to serve Canada’s long-term interests. Nexen, it quickly became a crucial test of Canada- Still, it can be argued that each ap- proach had a short-term measure of China relations. The Harper government’s ultimate success, depending on who you ask. acceptance of the bid both nuanced Canada’s open- The Harper government’s first posture ness to foreign direct investment and established its toward China, which ranged from in- difference to belligerence, has been its third posture toward China since 2006. Canadian longest-lived so far. It lasted nearly four business must look to Asia and especially China years, and was best captured when the Prime Minister boasted that he would for future growth but those opportunities will not be not “sell out (Canadian values) to the fully seized without a sustained and substantive policy almighty dollar.” The winners were in the Conservative party’s ideological focus by the national government. base, hard-core Conservative voters and opinion leaders who remain antag- onistic to “Red China”. They liked the tough talk and distance. But posture number one could not defy economic gravity forever. Indulging in a policy of grumpiness toward the world’s second

Policy 37 largest economy lacked credibility, not ent from our own. But when CNOOC the moment effectively anticipated a to mention maturity. The Prime Minis- made a well-prepared bid to acquire development like the Nexen deal, so ter signaled its demise when he made Nexen, in the largest foreign takeover both had to change. by a Chinese firm, it quickly became his first visit to China in late 2009. The Harper government announced the most serious test of Canada-China He was greeted with a highly unusual approval under the Investment Canada relations in many years, triggering deli- tongue-lashing from Premier Wen Jia- Act of the Nexen deal and another bid cate political calculations and complex bao, who said it was good that he final- by Petronas of Malaysia, together with policy issues. ly showed up, but took way too long policy changes for future application of to get there. After the verbal spanking, the Act. These moves further qualified posture number two got underway, as When CNOOC made a well- Canada’s openness to foreign direct in- a “let’s be friends, allies and business prepared bid to acquire vestment, and in so doing established partners” motif. The ensuing period Nexen, in the largest foreign the third posture toward China since saw follow-up visits by various minis- takeover by a Chinese firm, 2006. ters, some with supposedly passé Team China posture number three is a “yes, Canada style business delegations, and it quickly became the most serious test of Canada-China but...” concoction, with emphasis on eager invitations to invest in Canada, the “but”. We’re not going back to the especially in resource extraction. relations in many years, hostility of posture number 1, but we This friendly stance was a winner with triggering delicate political will be circumspect. We’re open to di- Canadian business, particularly those calculations and complex rect investment from China, but not all elements attuned to the big picture of policy issues. of it. We will explicitly prefer dealings global growth opportunities, Canada’s with private firms over SOEs. And not need for investment capital and the fu- all sectors are equal – the oil sands are ture of our export-dependent prosper- different, and presumably “strategic”, ity. The shift to amity was so complete he transaction drove straight to since outright foreign acquisitions in that when the Keystone XL pipeline the heart of not just one but that sector by SOEs will only be accept- encountered serious political difficulty T two signature gambits of Harp- able in “exceptional” circumstances. While the new investment rules apply in Washington, posture number two er-led economic strategy: warmer rela- allowed an apparently deft pivot, with tions with China, and self-proclaimed to all nations, the messages and impli- the insinuation that our good friends in “energy superpower” status. Canada cations for the China relationship were the Middle Kingdom would buy our oil had said it was wide open for busi- clearly paramount. CNOOC’s purchase if Uncle Sam gives us a cold shoulder. ness with China. And we were until of Nexen, Prime Minister Harper assert- they got serious about it. We said we ed, was “not the beginning of a trend, This friendly stance was welcomed foreign investment, but we but rather the end of a trend.” a winner with Canadian weren’t really prepared for a big move Posture number three is a more nu- business, particularly those by a large Chinese state-owned firm anced stance than the previous two buying outright a mid-sized Canadian elements attuned to the big versions. It paved the way down the oil sands firm with global assets. The middle of the road between approval picture of global growth notion of state ownership, and the na- and rejection of the Nexen deal. The opportunities, Canada’s need ture of the state in question, made this government saw the test in political for investment capital and foreign acquisition one for which our terms, and managed it accordingly. existing policies were inadequate. the future of our export- In the end, conservative China hawks dependent prosperity. The Nexen deal also dented the Cana- weren’t thrilled, but there was no eco- dian claim to be an energy superpower. nomic case for rejection, and they were If reliance on foreign investment to placated by the deliberate efforts to develop our energy resources didn’t communicate that the door was only already make the claim questionable, open wide enough for present purpos- The key feature of posture number two surely being thrown into a political tail- es. Business interests saw a measure of was rhetorical openness to expanded spin by one such proposed investment victory in the approval of a landmark two-way trade and investment flows exposed troubling cracks. That was es- deal. The Harper government, un- between Canada and China. This was pecially true given that the source of doubtedly alarmed by the prospect of tactically sound. It did not take much the investment was the most rapidly becoming a laughing stock if it rejected to impress Canadian media commen- growing one in global terms – China’s the deal after so ardently promoting tators, some of whom saw a strategic massive state-owned energy sector. The Chinese investment in Canada, rightly bold stroke. Canadian exporters saw credibility of the superpower claim was calculated that Chinese leaders would benefit in improved political relations. cast in doubt, but there was no doubt be unlikely to object strenuously to any So, posture number two was handy. about the end of Canada’s China pos- qualifications for future investment re- Until it wasn’t. ture number two. views, as long as the present deal got The rhetorical stance didn’t delve be- If you were looking, you could have the go-ahead. For a government that neath the surface. It didn’t pose the in- seen it coming. However, neither the thrives on politics more than policy evitable tough questions about deeper existing foreign investment policy and transactions over vision, the Nex- connections with a system very differ- framework nor the China approach of en decision was a success.

April/May 2013 38 While further reform is likely, the state-owned sector will economy. State entities are also often remain a guiding force for China. If you want to do business major shareholders in large private firms. If you are suspicious that a large with China, it is nonsensical to rule out the state-owned sector. Chinese acquirer might one day depart from its commercial mode of operation to pursue state policy (a suspicion itself Beyond the transaction, however, miracle of modern China over the last worth debating), it is questionable to much larger policy and strategic ques- 35 years. Of course, the entrenched worry only about SOEs. tions remain to be answered. The fol- power of the SOEs poses some serious lowing are several of the largest. challenges for China’s new leadership, National security is a legitimate con- and debate continues on whether to sideration in any foreign investment How can the policy, and recent issues and decisions claim to be open to foreign direct in- phase out SOE monopolies in key in- dustries. While further reform is likely, in Canada and other countries have vestment while discouraging it from not been confined to state-owned en- Chinese SOEs? the state-owned sector will remain a guiding force for China. If you want to terprises. A recent Conference Board of Canada do business with China, it is nonsensi- The fine print in the government’s report, Fear the Dragon? Chinese Foreign cal to rule out the state-owned sector. guidelines released at the time of the Direct Investment in Canada, cited data Is it really sound to make a distinc- Nexen decision appears to expand the confirming the emergence of Chinese definition of SOE to include firms “in- foreign direct investment as a ma- tion between state-owned firms and fluenced directly or indirectly” by a jor force reshaping global investment “private” firms from China? foreign government. It remains entire- flows. That Chinese investment is Many observers seem to apply a West- ly unclear how that will be interpreted heavily weighted in natural resources, ern distinction between public and pri- in practice, but was likely intended to and predominantly from large state- vate sectors that reflects a questionable afford the government maximum flex- owned enterprises. Before the Nexen grasp of China. The dividing line is a ibility to manage transactions case-by- bid, China was on the way to becom- different concept there, one that for- case. ing the second-largest foreign direct eigners frequently misunderstand. The investor in Canada, after the United role of the Communist Party of China Since many Canadian observers re- States, by 2020. SOEs are pillars of the is another one. The Party does not run main concerned about “reciprocity”, Chinese economy. Several phases of businesses, state-owned or private. is it tenable for Ottawa to ignore restructuring in the state-owned sec- However, it manages the placement China’s invitation to negotiate a free tor have been integral to the economic of senior personnel across the entire trade agreement?

Laureen and Stephen Harper with then Chinese Premier Wen Jiabao on the PM’s first visit to Beijing in 2009, three years after taking office. The Chinese message was that it was good the Canadian PM finally showed up, but that he took too long to get there. Photo: Jason Ransom, PMO.

Policy 39 Specific transaction decisions are not they tax those firms and regulate how China has expressed clear opportunities to formally address fair they do business, and – if they choose – interest in a bilateral free and reciprocal treatment of unrelated those governments can use their exist- investments seeking to move in the ing powers to influence the nature and trade negotiation, but other direction (though if good person- pace of development of the resource. Canada has shied away from al relationships existed between lead- The federal government also has rel- the opportunity to be one of ers, there could be ways to address the evant existing powers. If Canadians are the first developed countries issue informally). A broad, formal deal uneasy about control of our precious with such an arrangement. between national governments would resources, we should get serious about be the best way to advance equitable how our governments exercise their If we continue to ignore treatment and a rules-based environ- powers over exploitation and stew- China's invitation, we will ment for trade and investment. China ardship of those resources. It may be not only miss a pivotal has expressed clear interest in a bilat- only a slight exaggeration to say that opportunity but also find eral free trade negotiation, but Canada the preoccupation about the owner- has shied away from the opportunity ship nationality of extraction firms is a ourselves at a disadvantage to be one of the first developed coun- mere distraction. after less timid competitors tries with such an arrangement. If we These are just some of the questions take our place at the continue to ignore China’s invitation, that illustrate the limits and missed op- negotiating table. we will not only miss a pivotal oppor- portunities of the current and recent tunity but also find ourselves at a dis- approaches to China by Canada’s fed- advantage after less timid competitors eral government. The frequent shift- take our place at the negotiating table. ing is itself a major impediment to the trust and respect among senior leaders If Canadians are uneasy that is necessary for fruitful relations in about control of our precious the long term. resources, we should get Today, few would dispute that Cana- serious about how our dian business must look to Asia and governments exercise their especially China for future growth. It is powers over exploitation happening, but the opportunities will not be fully seized without a sustained and stewardship of those and substantive policy focus by the na- resources. tional government. As the foreign in- vestment issues illustrate, seriousness about China will not be without chal- Given China’s explicit interest in a lenge and controversy. Their system is trade deal, it might even be possible fundamentally different than ours, and to take a slightly creative approach, China will continue to steer its own perhaps focusing on certain sectors of development on its own terms. That Canadian strength, or perhaps going gives rise to tough questions. But surely beyond conventional models to man- we have reached a level of political ma- date and frame collaborative interac- turity sufficient to go in with our eyes tions that complement and broaden open, to engage Canadian business and trade relations, for example in the field the public on the trade-offs and pur- of education. sue a consistent and confident policy If a resource like the oil sands requires that advances our long-term interest in special treatment, shouldn’t we focus mutual economic benefits, rather than on how it is regulated, not just on who just fearfully managing the local poli- can buy companies that extract it? tics of transactions on a one-off basis. The federal government seems to be As decisions around the Nexen deal sensitive to fears – found both among demonstrate, a narrow and disciplined oil patch heavyweights and the gen- transactional approach might suffice in eral public – that foreign or foreign the short term, but the issues and op- state presence in the oil sands will take portunities left unaddressed are likely away something from Canada. That to hurt us down the road. fear animated the politics around the Nexen decision, and it remains a fac- Brian Bohunicky is president of Baker tor. It also reflects an important mis- Group International, a consulting and understanding. Resource companies, business development firm focused on regardless of their nationality, do not China. He was previously a federal public own the resource. Provincial govern- servant and a senior political adviser to ments do. They license firms, foreign the Liberal leader and cabinet ministers. and domestic, to extract the resource; [email protected]

April/May 2013 40

Grand Chief Shawn Atleo in a pensive moment at an Ottawa news conference. “Not yet 50,” Robin Sears writes, “Atleo is at the leading edge of this new generation. He has nearly 30 years of experience as a leader, first locally, then in British Columbia and for the past four years at the national level.” Photo: Matt Usherwood, iPolitics.

hat Canada’s enormous aborigi- The AFN and the PM: nal bureaucracy has failed to T deliver despite dispensing bil- lions of dollars a year for decades is not hard to explain – their values and Retiring the methods differ little from their forbears of two centuries earlier. Just as Angli- can and Catholic missionaries used a Missionaries combination of carrot and stick to re- place local languages and culture with Robin V. Sears English and Victorian values, so today’s zealous bureaucrats use grants, project funding – and the threat of their with- drawal – to reward ‘good Indians’ and The federal First Nations bureaucracy has challenged punish the recalcitrant in defense of a prime ministers, confounded ministers and enriched classic clientist welfare agenda. The department changes its name ev- battalions of lawyers and consultants. What it has ery decade or so, in the apparent belief done lately for First Nations comes in a federal budget that new paint will disguise the an- cient, rigid superstructure it conceals. delivered amid the eruption of Idle No More, the ex- No more responsible for “Indian Af- plosion of law suits and roadblocks against resource fairs,” the newest packaging is about aboriginal peoples and northern devel- development in the North and in opment. To its friends and enemies it is and the mobilization of young Cree to march hun- always simply, “The Department.” dreds of kilometres to Ottawa. As both the Harper Local chiefs who attack the depart- ment’s diktat for its failure to supply government and the First Nations leadership weigh clean water or safe schools risk plac- ing themselves outside the “circle of their options, powerful templates for change exist grace,” as a patient missionary would right in their backyards. have explained to their ancestors. Money has replaced the threat of force as the state’s preferred means of ensur-

Policy 41 ing compliance. Although the depart- is Canada’s First Nations policy, and he core gatekeepers of Canada’s last 19th ment selectively leaks the abuse of its or she decides to take on the depart- century welfare bureaucracy. His early funds by some First Nations commu- ment. They announce measures that declarations, both to the First Nations nities – as a caution to those tempted will deliver real change in health, edu- leadership and to his officials, have to “get off the reserve” as it were – it cation and economic possibility on re- been refreshing. In effect: “I am here rarely offers a view of its own internal serve and among Canada’s burgeoning to deliver the changes that the Prime use of taxpayers’ funds, nominally des- urban aboriginal communities. What Minister has promised for Canada’s ignated to address Canada’s indigenous follows is like a poorly scripted episode aboriginal peoples and I do not intend peoples’ social and economic issues. of “Yes, Minister,” as the department’s to fail.” His ability to deliver, however, enormous ranks of mid-level bureau- It would surely horrify the diminishing will be determined by events and deci- crats adopt their best passive-aggressive and battered cadre of Reform Party true sions outside the department, the gov- postures, smiling and nodding at the in- believers to know that their govern- ernment and his control. nocent politician’s stern admonitions. ment has overseen a rapid growth in They’ve seen off a half-dozen of his the hundreds of millions of dollars that The eruption of Idle No More, the department spends on outside con- predecessors and know that slow – sultants – a large percentage of them walked production of strategic plans, the explosion of law suits and former employees of the department seminars and consultations will be roadblocks against resource itself, rewarded with contracts by their enough to ensure the preservation of development in the North former colleagues. The most recent fig- the status quo ante, until the arrival and in western Canada, the ure is $350 million dollars a year and of a more pliable supervisor. The list of growing rapidly. well-meaning but ultimately frustrated mobilization of young Cree to ministers is long: Jean Chretien, Bryce march hundreds of kilometres It is this army of consultants who are Mackasey, Bob Nault in days of old; sent to disaster zones such as Attawapis- to Ottawa are the storm Chuck Strahl and Jim Prentice more warnings of a confrontation kat, at a cost of thousands of dollars a recently. day, to usefully report that, indeed, just over the horizon. there remains mould in children’s bed- rooms and classrooms, poisonous wa- The arrival of a seasoned ter, domestic violence and substance old-hand in the form of abuse on reserve. The causes that their Bernard Valcourt, is a token expensive reports predictably cite are not only of Prime Minister bad band management and weak bud- getary controls, never departmental Harper’s frustration with the policy or funding – after all, like a cer- department’s intransigence, s Assembly of First Nations Na- tain class of consultants everywhere, but also of his recognition tional Chief Shawn Atleo has they know what their clients expect of that he must break it if he is repeated ad nauseam in the them and they understand that their A not to wear the political cost past year, Canada truly is at a cross next contract depends on their expert roads. The eruption of Idle No More, stroking of those expectations. of a complete breakdown in relations between the Crown the explosion of law suits and road- blocks against resource development in ext to the accountants and the and Canada’s First Nations. the North and in western Canada, the management consultants, the mobilization of young Cree to march profession that dines most N hundreds of kilometres to Ottawa are sumptuously on the riches of the the storm warnings of a confrontation broader aboriginal bureaucracy is – just over the horizon. Its roots lie in the no prizes for guessing – lawyers. Bil- The arrival of a seasoned old-hand in centuries of broken treaties, residential lions of taxpayers’ dollars have been the form of Bernard Valcourt, is a to- schools, and abusive federal “Indian wasted on legal battles funded by the ken not only of Prime Minister Harp- officers.” Today’s trigger is a new gener- federal Department of Justice, backed er’s frustration with the department’s ation of well-educated, confident First by several provincial governments, intransigence, but also of his recogni- Nations leaders and the threat of doz- to frustrate resolution of hundreds of tion that he must break it if he is not outstanding land claims. A generation to wear the political cost of a complete ens of mines and pipelines crisscross- of lawyers’ entire careers have been breakdown in relations between the ing their lands. funded by Canadian taxpayers in this Crown and Canada’s First Nations. In- Atleo is at the leading edge of this new bizarre exercise. Regularly smacked credibly, he has taken the step of dress- generation. Not yet 50, he has nearly by the Auditor-General and even the ing down both the former Minister and 30 years of experience as a leader, first Supreme Court, no Canadian govern- his Deputy in front of outsiders, for locally, then in British Columbia and ment – no federal or provincial gov- their collective failure to implement for the past four years at the national ernment – has yet had the will to force policies he has agreed and had directed level. Like a Martin Luther King in con- an end to the circus. them to execute. trast to a Malcolm X, he is genuinely Once a decade or so, a brave or naive Valcourt has already sent a frisson committed to the path of negotiation new minister is handed the mess than through the department’s most hard- and civil disobedience if necessary.

April/May 2013 42 However, like King he is surrounded his people. He has attempted to se- For reasons that are hard to understand by a much more hawkish group of cure it by keeping public pressure on strategically, he has permitted a set of advisers and competitors, convinced Harper to keep his promise to break the legislative initiatives that seem de- that only the threat of violence and department’s iron grip and to force ne- signed to rub salt in First Nations yet- economic disruption will wrest power gotiation of real resource sharing agree- unhealed wounds. On issues as sensi- from the department that controls life ments and treaty implementation. tive as matrimonial rights, local chiefs’ on the reserve, and force the resource compensation, property rights and the sector to share the billions earned on Atleo and Harper have election of band leadership, he has their territories. stuck a legislative finger in the eye of established a relationship that the First Nations establishment again The National Chief has made a cou- is a credit to both politicians. and again. A sympathetic observer rageous gamble that he can keep this might conclude it is the necessary sop government’s feet to the fire about On Atleo’s side, he has to his more knuckle-dragging, anti-First delivering real change. He has a very gambled his reputation and Nations political base. A more cynical limited ability to ensure the delivery of his future on his being able to view is that he sees it as a means of gra- good schools and housing, or real eco- deliver real change, not simply tuitously demonstrating how tough he nomic opportunity for tens of thou- angry rhetoric, in the lives of is to his negotiating partner. sands of unemployed and angry young people – unless he lets slip the dogs his people. Unlike Paul Martin, whose commit- of war. As the fiasco surrounding the ment to change on these issues was Chief Spence protest and the efforts of equally authentic and determined, several political competitors to use it as Harper is keenly focused. Not for him a platform to undermine the National the broad Magna Carta of a Kelowna Chief and his agenda demonstrated, Accord. This prime minister is a quint- the pressures to move in that direction he risks on the Prime Minister’s essential etapiste: choose a short-term are powerful and growing. side are no less real. Failure to achievable goal, deliver it, and only deliver could mean violence for then set out the next. His vision of a He backstops his gamble in two ways. T which he will pay the political price. long term goal of an economically First, in a constant tour of venues and Failure also means no new resource de- and socially transformed Canadian associations across Canada, taking a velopment and the riches it will bring First Nations network of communities simple and powerful call for justice to for governments and investors alike. in cities and on reserve may not look groups of Canadians. He’s grown into Harper is nothing if not a capable po- that different than his predecessors’. a compelling speaker, and has per- litical strategist – even if some of his His path to achieving it seems likely to fected the TV sound bite. Secondly, he minions’ fascination with day-to-day have a greater prospect of success. consciously reaches over the heads of dead-end tactics might lead one to the First Nations establishment to the His formidable Chief of Staff, Nigel young and frustrated members on re- conclude otherwise. He understands Wright, a seasoned Bay Street deal serve and in urban Canada with a mes- that an important part of his legacy – maker, schooled in a business where sage of hope and self-empowerment. new resource development successes the bonus comes only on the success- His poll numbers among both groups and his Western Canadian political for- ful delivery of a profitable transaction, are impressive. tress – are hostage to making progress is now charged to do battle with a de- on the First Nations file. partmental bureaucracy where survival His internal challenge is that he is merely the voice of, not the empow- ered leader of, the several hundred chiefs who elect him. National Chiefs before him, faced with the scarce re- sources and authority of a role that sounds more powerful than it has ever been, have retreated to complaint and regular criticism. Atleo knows he has the power of a bully pulpit that he uses well, but among his constituents are an older generation who long ago made their peace with the Department. Ben- eficiaries of its largesse, they have little incentive to support dramatic changes that might undermine their authority. Atleo and Harper have established a re- lationship that is a credit to both politi- cians. On Atleo’s side, he has gambled his reputation and his future on his Prime Minister Stephen Harper and PMO Chief of Staff Nigel Wright in the PM’s Centre Block office. The personal engagement of Wright and Privy Council Clerk Wayne Wouters on the First Nations file being able to deliver real change, not has sent a message that Harper is serious about the dialogue with AFN Grand Chief Shawn Atleo. simply angry rhetoric, in the lives of Photo: Jason Ransom, PMO.

Policy 43 There are two missing players during these fateful days for “Pipelines can always be patched, a Canada and its relations with its first peoples. The first is the power dam can’t...” business community, especially those with the most at stake: hat round of negotiations in the resource sector. the 1970s established the trust T for an even more far-reaching and impressive second agreement ne- and therefore success is marked by resource development is concerned, it gotiated by the Charest government how many cans you can kick down the is not First Nations communities that covering political governance, revenue road to your successor. Together with will be the biggest losers. sharing, and shared legal jurisdiction Privy Council Clerk Wayne Wouters, and accountability with the province, Similarly, the provinces need to step up they have sent lightning bolts through municipalities and Cree-led political to the plate. The ‘pass the potato’ be- the system about the Prime Minister’s institutions. This improbable success haviour the provinces and the always- seriousness. was patiently and adroitly pushed territorial department officials have across the finish line by one of Cana- The time to act on the promises made indulged for decades has secured the da’s great public servants, Dan Gagnier in the January meetings with Atleo careers of the bureaucrats and the poli- – the only person ever to have served as and his leadership team in the first ticians involved: “You’re responsible for chief of staff to premiers in two prov- Crown/First Nations Gathering last clean water!” “No, I only do testing.” inces and as a deputy minister in each year, in their smaller and more intense “But I delivered a water tank, and you as well as Ottawa. Those involved in discussions this past January, and in failed to inspect it.” And on and on. that torturous process on each side at- the promises in last month’s Budget is When provinces believe it is in their in- test that their biggest challenge, their running out. If the money promised terest to assert their authority in areas most formidable opponent, was the for new schools, investigating missing of shared or even exclusive federal juris- Machiavellian federal department and and murdered women, infrastructure diction, few hesitate. Their hesitancy in its cousins at the provincial level. The development on reserve and new job joining a movement for change where next generation of negotiators would training does not begin to flow soon, First Nations issues are concerned is be wise to seek his counsel. and deliver visible change, the clock purely political risk aversion. will have run out for both the National Bob Rae’s agreement to attempt a simi- Chief and the Prime Minister by this lar process on behalf of Northern Ontar- time next year. It is the province of Quebec io bands in the province’s “Ring of Fire” development plan bodes well, given his Both men will be in their pre-election that has negotiated, not once history as a supple and creative nego- seasons. Whether one or both chooses but twice, enormous agendas tiator – but only if he has a negotiating to seek another term from their respec- for change with its Cree partner as committed to overcoming tive electorates, their internal and ex- peoples. Driven by the reality resistance as were the several premiers ternal opponents will use the failure to of Quebec who backstopped its surpris- deliver as a powerful political cudgel. that its dream of an economy ingly successful process. secured by American hydro This is a classically glass half full or here are two missing players power revenues was forever empty political spring on the First Na- during these fateful days for hostage to the First Nations tions file. We have a prime minister in- T Canada and its relations with peoples whose lands would be vested in it, supported by two exceed- its first peoples. The first is the business flooded, they negotiated hard ingly capable lieutenants and a new community, especially those with the minister not easily duped or bullied. most at stake: the resource sector. Scat- and seriously. The National Chief of the Assembly tered efforts by various corporations, of First Nations is the most impressive business associations, and aboriginal leader of his generation and a seasoned business groups notwithstanding, no veteran of governmental and business one has succeeded in mobilizing a high- negotiation. We have an increasingly level commitment to a negotiating pro- There is positive history here as well, focused and implementable agenda. cess to establish a code of best practices, for those who are genuinely commit- For those who believe that our future a model of resource revenue sharing, ted to change. It is the province of Que- is forever imprisoned by our centuries and a consultative process that is ac- bec that has negotiated, not once but of failure, the glass is more than half ceptable to First Nations communities. twice, enormous agendas for change empty. with its Cree peoples. Driven by the The forestry sector did it in British Canadians should hope that those reality that its dream of an economy Columbia more than a decade ago – a who have gambled their own futures process a younger Shawn Atleo was a secured by American hydro power rev- on success can break the bonds of that keen participant in. The template for enues was forever hostage to the First bitter history. success is available in that history and Nations peoples whose lands would be the counsel of the leaders who made flooded, they negotiated hard and seri- Contributing Writer Robin V. Sears it happen. If competitive jealousies or ously. The incentive to deal was power- is a principal of the Earnscliffe anxiety about the risks in being a ‘first ful. As one Cree leader of the first gen- Strategy Group. mover’ block a similar effort when new eration of negotiators observed drolly, [email protected]

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