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Glen Hodgson
Senior Vice-President and Chief Economist |
The clock is ticking toward January 20, 2009, when the keys to 1600 Pennsylvania Ave. will officially change hands and Barack Obama and his team will form the Executive Branch of the U.S. government. Of course, the recession gripping the U.S. economy and spreading across the globe means that the real-world transition is well underway. Obama’s influence as President-in-waiting is already being felt daily in Congress, which is now grappling with the elements of his fiscal stimulus package and trying to form a more bi-partisan approach to proposed massive tax cuts for the middle class and for business.
Canadians have begun the transition with a positive, if somewhat innocent, attitude toward the Obama Administration. Public opinion polls during the long U.S. election cycle gave Obama as much as 80 per cent positive support among Canadians. But the real test of Canadian attitudes toward President Obama and his Administration is yet to come, and will be driven by issues much closer to home.
The Canada-U.S. relationship encompasses scores (if not hundreds) of issues, playing out daily. We believe three issues will be top-of-mind in defining how long Canadians remain in love with Obama. The first is Obama’s success in dealing with the economic recession. Like everyone else around the globe, Canadians are waiting to see if and when the fiscal stimulus package that President Obama eventually signs into law will spark a recovery in U.S. economic growth and a positive shift in consumer and investor confidence. The fact that Congress is already debating a tax cut package that could come into effect by mid-February is a good start.
Second is the perpetual question of trade and investment between Canada and the United States. Despite deepened economic integration, North American trade has stagnated since 2000 when measured in real terms (with price effects removed). NAFTA is fully implemented and offers little scope for new dynamic energy. And Obama said some injudicious things on the campaign trail about revisiting NAFTA that prompted questions about his commitment to the Canada-U.S. economic relationship.
If the love affair is to continue, Canadians will be looking for evidence from President Obama that he understands Canada is still America’s largest trading partner, and that open trade arrangements with Canada are in everyone’s interest. Our recent paper, Making Integrative Trade Real: Creating a Value Chain Trade Policy for North America, recommended that reductions in non-tariff barriers (often regulatory differences) should be a centre-piece in a revitalized Canada-U.S. trade relationship.
And the third issue is Afghanistan. Obama made withdrawal of the U.S. military from Iraq, and expansion of its role in Afghanistan, a critical plank of his successful electoral campaign. He will be looking for support from a close political and military ally such as Canada. And Canada is already deeply engaged in Afghanistan and has clearly signaled into intention to reduce its military engagement there. The question of how Afghanistan plays out will be a key piece in defining the success of Canada’s foreign policy toward the United States and the Obama Administration over the coming years.
There are other hot files -- the border, the future of the auto industry, climate change policy – but in our view, the three questions identified here will determine how long Canadians’ love affair with Obama lasts.