9 Key Takeaways from the McCarthy Tétrault “Our Common Frontier: What the Next President of the United States Means for Canada” Panel
On November 10, 2020, McCarthy Tétrault hosted Our Common Frontier: What the Next President of the United States Means for Canada, a panel discussion that focused on the impact that the 2020 United States Election (the “Election”) could have on Canada.
The panel included
- The Honourable Jean Charest, former Deputy Prime Minister of Canada, former Premier of Quebec and Partner, McCarthy Tétrault,
- Matthew Cumming, Managing Partner, New York office and Co-Head of National Private Equity Group,
- Martha Harrison, Partner, International Trade and Investment Law,
- Awanish Sinha, Partner, Litigation and Head of the Government Law & Political Risk group,
- Aliya Ramji, Partner and co-founder of MT>Ventures
- Moderator, Alison Smith, one of Canada’s best known and respected broadcast journalists and a senior award-winning member of the CBC News team covering provincial and federal politics, and major international current events including being the Washington correspondent from 2005 to 2009 covering Barack Obama’s first historic election.
This blog describes the top 9 takeaways from the panel.
Despite potential transition delay, Canada needs to engage early with the Biden administration
At the time of writing of this article, President Donald Trump has not conceded the Election to President-Elect Joe Biden. Mr. Trump and the Republican Party have filed a high volume of lawsuits at both the state and federal level that claim election fraud, although these appear increasingly unlikely to succeed.
Typically, the transition of power between presidential administrations is not met with partisanship of this magnitude. A delay in commencing the transition of power could result in a delay in implementing the Biden administration’s agenda. Nevertheless, it is important that the Canadian government engage now with the incoming Biden administration to understand its tone and to identify the impact that any planned policy changes would have on Canada practically.
- The Biden trade agenda will be accompanied with more transparency
The trade relationship between Canada and the U.S is of the utmost importance to the Canadian economy. Trade between the two countries accounts for approximately 75% of total Canadian exports. It is anticipated that the Biden administration will propel an “America First” trade agenda along the lines of the Trump policies, in that from a trade and procurement perspective, there will be a prioritization of American workers, companies and suppliers. However, we anticipate that the rules of engagement will likely be more transparent and predictable, which will facilitate more smooth trade negotiations on the issues that bind and separate Canada and the U.S.
- Tariffs that impact Canada may be reconsidered
Tariffs have been a real thorn in the side of Canada in terms of its trade relationship with the U.S. Canada has strongly argued that the “Trump tariffs” are an unlawful protectionist measure, instituted under the guise of “national security”. It is probable that Mr. Biden will inherit the current trade policy that is characterized in part by U.S. tariffs being applied to selected imports from Canada, Europe, and to a significant number of products from China. While Mr. Biden has been largely silent on how he will deal with such tariffs, there is a movement from certain areas of the Democratic Party for the Biden administration to reconsider or review the tariffs, perhaps with a view to repealing them. Furthermore, it is less likely that Mr. Biden will seek to use the “national security” exemptions in an effort to institute new tariffs on goods coming from trusted trading partners, such as Canada.
- Canada will continue to be impacted by U.S and China relations
While it is likely that the Biden administration will have a significant change in tone, it is expected that it will continue the previous administration’s strict approach towards dealings with China. However, it is expected that it will take a coalition approach with other countries in dealings with China. This is contrary to the previous administration’s solo approach, and may positively impact Canada. Further, the Biden administration has committed to reviewing tariffs that are attached to Chinese goods. However, at the moment it is unclear when that will happen and there has been no commitment to repeal such tariffs. As a result, to the extent that continued pressure between the U.S and China exists on such tariffs, Canada will likely continue to find itself in the middle of, and impacted by, such trade policies.
- A Biden Presidency, combined with a Republican-controlled Senate, appears to be attractive to the markets
The Republicans are currently positioned to continue to control the Senate, subject to two tightly contested run-off elections to be held in Georgia in January. A Republican-controlled Senate would be expected to block or significantly limit the Biden policy agenda. That gridlock appears to be attractive to investors on the basis that maintenance of the legislative status quo will bring relative certainty to the markets.
Competition in the tech industry will increase under the Biden administration
Contrary to the previous administration, it is expected that the Biden administration will make substantial investments in the tech industry. So far it seems like the Biden administration is in favour of using stimulus funding to spur innovation. Also, their platform suggests that a Biden government will be a large investor in R&D. Furthermore, it seems like the Biden government will be an active tech partner, and comparatively tougher regulator than the previous administration. Mr. Biden’s platform also suggests that he views infrastructure and technology spending as a means of achieving desired social policy goals. The consequences of these factors could increase competition and attract firms to tech destinations in the U.S beyond Silicon Valley. While this would likely increase competition for Canadian tech companies, it will provide them with opportunities to expand operations into previously untapped locations.
Mr. Biden has specifically committed to substantial investments in innovation funding packages to breakthrough technology and R&D programs in support of U.S competitiveness. This funding would be available to industries and technologies such as 5G, artificial intelligence, advanced materials, biotech and clean tech. This could increase competition between Canada and the U.S in the space of artificial intelligence, clean tech and Biotech. While this may cause some concern in the Canadian tech industry, competition should be welcomed because it will encourage tech companies to push the boundaries of innovation.
- Biden’s immigration policy may negatively impact Canadian tech firms and universities
Biden’s immigration policy will likely be consistent with the Democratic Party’s norms of favoring highly skilled immigration. It is expected that the Biden administration will increase the number of high skilled temporary visas available, and reform them so they do not undermine wages. It is also anticipated that the Biden administration will repeal the Trump travel ban and increase refugee admissions by 125,000. This could have a negative impact on the ability of Canadian tech firms and universities to attract foreign talent. However, over the last 4 years Canada has promoted itself as a very friendly and welcoming place for business and innovation. This could reduce Canada’s potential loss of talent to more welcoming U.S immigration policies.
There may still be hope for the Keystone XL Pipeline
During their campaign the Biden administration said it would cancel the Keystone Pipeline if Mr. Biden won the election. While this reality may now be cause for major concern for proponents of the project, it does not necessarily mean the end of the Keystone Pipeline.
The Biden administration is taking a view of addressing climate change. So far it has mentioned intentions to: (i) rejoin the Paris Accord; (ii) decarbonize the U.S electrical grid by 2035, and (iii) achieve economy-wide-net-zero carbon emissions by 2050. It is also taking a similar view as Canada that climate objectives should be combined with stimulus packages.
The Canadian government should seek to thoroughly understand the Biden administration’s focus on climate. Such knowledge could serve to be invaluable in negotiation attempts to exempt the Keystone Pipeline from cancellation. In the meantime, if the Canadian government seeks to prioritize the completion of the Keystone Pipeline, it is imperative that it makes immediate and continuous efforts to communicate its view on the importance of the project to Canada and on the measures taken to mitigate any negative climate impact. Such communications could include a focus on attractive climate packages that Canada can offer the U.S to collectively address climate issues in a manner that would allow the Keystone Pipeline to continue.
Restrictions on the Canadian-U.S border will continue until COVID-19 is under control
The border between Canada-United States (“U.S”) has now been closed to non-essential travel for approximately 7 months. Public opinion in Canada seems to object the full opening of these borders at this time. Canadian officials have indicated that the flow of trade between Canada and the United States has gone largely uninterrupted. The sooner both countries bring COVID-19 under control, the sooner the border will fully open so trade and travel can resume uninterrupted.
For further information on the Election or if you have questions about the impact of COVID-19 on your business, please contact your McCarthy Tétrault trusted advisor.