O, to be able to gaze upon the latest internal party poll of the BC NDP. What harrowing revelations it must possess.

We have to believe the results are responsible for Premier David Eby performing first a gobsmacking U-turn on a consumer carbon tax, a policy principle he had presented as unshakeable, and then scant days later dusting off a long-forgotten, contentious policy proposal on involuntary treatment for addicts and the seriously mentally ill. Both moves, adopted in desperation as the price of contention, bail water from a ship in a storm, and each is absurdly off-brand.

The first item is a shocker—feels so even days later—and reeks of the sudden sweat of a once-confident leader facing the realistic prospect of loss. Think of it: how desperate would any NDP leader be to disavow a carbon tax? Oh, wait, sorry, there were two of them within about six hours. But Eby was about the last person one would expect to do this. He was adamant last November: “Let me be clear. We will not back down. God forbid, if the rest of the country abandons the fight against climate change, B.C. will stand strong.” His  new message pivots to “stand with people on affordability.”

Political survivalism is activated by an acute appreciation of threats, and Eby surely apprehends them. In such circumstances, anything by anyone can happen—as Eby’s off-the-cuff $2.6-billion answer to a reporter’s question attests. Asked what the province might do about its consumer carbon tax (17 cents a litre on gas, 15 cents a cubic metre on natural gas), now that federal leader Jagmeet Singh had earlier that day abandoned support for such a tax federally, Eby had a “hold my beer” moment. As long as Ottawa scraps the provincial requirement to tax carbon emissions, an Eby government would be out, he said. Journalists did one of those wabida-wabida head shakes, thinking there’s no way he just said what he said, right? This guy? Walking away from the carbon tax? Like, no way.

Way.

A little while later, the lanky premier and his wonky improv, still with no official announcement or news release in hand, wandered over to a local radio show and was pressed to explain how the NDP would abandon the economic fulcrum of the province’s policy on climate change: “We’ll have to figure out and work through all those pieces,” he replied. Operative word here being “all.”

No one had this development on their campaign bingo cards, though—probably not even Eby until roughly a few moments before.

The carbon tax was a B.C. creation under Gordon Campbell originally opposed by the NDP, who  beat Pierre Poilievre by more than a decade-and-a-half in coining the term “Axe The Tax.” They eventually came on board and seemed inexorably tethered to the idea. What was once a revenue-neutral tax under the BC Liberals is now a revenue-generating one under the NDP.

Polls have been telling the pols for about two years that affordability is the issue that matters, but what really matters are the internal polls telling the NDP it has lost the plot. The stagnant NDP and surging Conservatives enter the writ period (tomorrow!) in a statistical margin-of-error tie, a race now between Eby and momentum.

BC Conservative leader John Rustad had been proposing the elimination of the tax since he joined the party last year, taking abuse for this from Eby when his party was at about 4 percent in polling. Now somewhere in the mid-40s, he is a practical target for policy piracy.

Consider the second item, how once again Eby announced another proposal with few details. A civil liberties lawyer pre-politics, Eby in office at first opposed, then supported, then stalled, then supported the idea of involuntarily institutionalizing those with the most serious cases of mental illness and addictions—a kind of a flip-flop-flip if you’re keeping score.

Rustad’s commitment to the policy goes as far as to invoke the notwithstanding clause if the road gets rocky. Eby has cheesed off many of his old legal colleagues as well as a cohort of health experts who say the mandatory treatment program doesn’t work. But a series of random violent attacks on city streets on the eve of an election requires something, anything, as a proposed palliative.

These about-faces came after his government earlier in the week rather stealthily, and rather unapologetically, noted it plans to run up a record $8.9 billion deficit this current fiscal year. In the seven years of NDP reign, B.C. has gone from the best-performing economy in Canada to one of its worst.

The calculus is that these policy switcheroos will generate more forgiveness than fulmination in his base, more support than suspicion in his adversaries. Even if it only staunches the bleeding,  even if it sends some voters to the Greens, it spares the premier a campaign of defending an unpopular tax and pretending that the streets are safe from the troubled, ill,  and addicted. The appeasement may not be authentic, may be downright cynical, and will only be known to have worked (or not) through the rear-view mirror some time from now.

The two pre-campaign 180s have little in common with his party’s values today and have more to do with how his party is valued today. Eby has to hope there is a net positive to his repositioning, that a broader swathe of voters focus on where he has landed on the issues instead of where he long camped. Oh yes, and then there’s the authenticity thing and whether Eby can wear that suit comfortably. It reminds me of when comedian George Burns was asked what was the key to success: “The key is sincerity,” he said. “Once you can fake that…”

But the negatives are mounting. The safe reelection is no more. Even if Eby poached policy on the carbon tax and involuntary treatment, British Columbians cite many more issues about which they believe his government is on the “wrong track”: public safety, helping one’s financial well-being, health care, expenses, housing affordability, and the opioid crisis. The election will be a referendum on Eby’s swift push of the party to the Left.

Eby had a chance to call an election in 2022 when he was acclaimed party leader. He chose to honour the fixed election date and embark on a two-year-plus charm offensive. Today he must be wishing for time travel and a do-over.

In what could be a messy battle, with Canadian consumers and entertainment producers caught in the crossfire, the United States is predictably challenging Canada’s new Digital Services Tax (DST) on American tech giants.

On August 30, the United States Trade Representative (USTR) launched a complaint against the DST (which went into force in late June) under the Canada-United States-Mexico Agreement (CUSMA)—the trilateral trade deal finalized during the Trump administration that replaced NAFTA from the 1990s.

The federal government created the DST to combat the perception that the world’s biggest tech companies are not paying their fair share of tax; since the tech companies operate in cyberspace, they are able to locate in low-tax jurisdictions while serving clients around the world, including in Canada, where they are largely untaxed.

A multilateral treaty, crafted under the auspices of the Organization for Economic Co-operation and Development, was intended to address this issue, but it has not yet materialized. The Trudeau government could not wait and went ahead with the DST on its own, despite warnings it would anger our largest trading partner.

On its face, the DST applies to large businesses, both foreign and domestic, that meet both of two revenue thresholds: total global revenue of €750 million or more in a fiscal year; and greater than $20 million in earnings in Canada in the calendar year. The tax applies at a rate of three percent on profits over $20 million.

A particularly nasty feature is that the DST applies retroactively for revenues earned since Jan. 1, 2022; billions of dollars are already payable.

There are four DST revenue categories: online marketplace services, which would appear to target companies like Amazon; online advertising services, which catches Alphabet (Google) and Netflix; social media services, for Meta (Facebook and Instagram); and finally, user data revenue (Amazon, Alphabet, and Meta could all owe in this category, along with other giants like Apple).

Since the DST appears to only affect American companies, the U.S. is justifiably concerned the legislation is discriminatory.

Interestingly, in bringing the claim against Canada, the USTR mentioned the services chapter of CUSMA specifically as the source of its rights. The services chapter prohibits discrimination between services or services suppliers, either foreign versus local or among foreign companies from different countries.

The scope of these obligations is fairly broad, prohibiting less favourable treatment accorded to other services and service suppliers that are in “like circumstances.” Whether treatment is accorded in “like circumstances” depends on a range of factors, including legitimate public welfare objectives.

Accordingly, Canada might assert that the equitable and effective imposition and collection of taxes on digital service suppliers is such an objective. But the design of the DST, which appears to single out American companies, would surely weaken this claim. The U.S. case would be strengthened by the demonstration of some injury to the companies involved—not just in the form of their paying more tax, but ideally also that Canadians had reduced their consumption of their services.

Oddly, although the USTR’s press release did not mention it, CUSMA also includes a digital trade chapter. The U.S. might assert the DST violates the digital trade chapter’s prohibition on duties on electronic transactions. However, that obligation expressly does not preclude a party from imposing internal taxes, fees, or other charges on a digital product transmitted electronically “provided that those taxes, fees, or charges are imposed in a manner consistent with this Agreement.”

While the DST is a tax, and therefore seems excluded, the U.S. may claim that it has not been applied in a manner that is consistent with CUSMA because of its discriminatory nature, as alluded to above.

Canada might seek to defend the DST based on the “direct tax” exception, incorporated into CUSMA services chapter as a transplant from the World Trade Organization General Agreement on Trade in Services. But most commentators agree that digital services taxes are not direct taxes (imposed directly on the taxpayer, like income tax) but rather indirect (levied on goods and services).

Another conceivable means of responding to the U.S. challenge might be on the basis that the DST involves “cultural industries,” which are exempt from CUSMA. If it uses this line of defence, Canada will need to craft an argument that U.S. online services are somehow undermining Canadian culture—plausible in the case of Netflix, for example, which carries predominately U.S. and international content.

If the U.S. complaint proceeds to a formal dispute and Canada loses on the basis that the DST is discriminatory against the U.S., Canada will have to bring its legislation into conformity with CUSMA, and eliminate the discriminatory element.

Should Canada lose and fail to comply, the U.S. could retaliate with tariffs on Canadian services or goods, even in unrelated sectors. The ensuing trade war would be damaging for U.S.-Canadian relations, not to mention harmful to the Canadian economy. It is difficult to see how the Trudeau government did not see this coming.

Even if Canada were to win, the result would still be negative. Either the big American tech companies will pass on the cost of the tax to consumers (higher prices for your Amazon Prime or Netflix subscription), or they could reduce their presence in Canada. Meta famously blocked access to news on Facebook and Instagram in response to a Canadian law mandating that tech giants pay Canadian news outlets for news.

It could also spell the end of Canadian content on these platforms—no more Heartland or Schitt’s Creek on Netflix. Price hikes, reduced consumer choice, harm to the Canadian entertainment industry—the DST has very little to recommend it.

Resorting to CUSMA to resolve grievances regarding the DST represents a failure of diplomacy. The U.S. had engaged extensively with Canada over the last few years when the DST was still a proposal. The retroactive nature of the tax surely indicated that the American response would be swift.

The Trudeau government, which has enjoyed warm relations with the Biden Administration, may have felt that the U.S. would not respond, perhaps due to the distraction of the upcoming election.

Consultations will continue for the next 70-plus days before a formal dispute is launched through CUSMA’s Chapter 31. CUSMA disputes can take many years to conclude and the agreement itself is up for review in 2026. So, there is a chance the dispute could be discontinued if the rules themselves were revised.

USTR Katherine Tai emphasized the need to continue negotiations for a global tax treaty to deal with digital services, which are fast becoming a critical element of the global economy.

U.S. preference for trade multilateralism is encouraging and in many respects is a throwback to an earlier era of globalized rulemaking. But this approach, while welcome, is at odds with American refusal to rehabilitate the WTO’s failing dispute settlement system.

It is difficult to imagine a multilateral digital services tax, or functional digital trade rules of any kind, without an effective enforcement mechanism at the international level.