In The Weekly Wrap Sean Speer, our editor-at-large, analyses for Hub subscribers the big stories shaping politics, policy, and the economy in the week that was.
A true Team Canada response wouldn’t outsource Trump’s tariff pain to one province
In the aftermath of this week’s First Ministers meeting most of Canada’s political and pundit classes have to come stand in opposition to Alberta Premier Danielle Smith and her efforts to defend the province’s oil and gas sector. I’m inclined to stand with her.
Since Donald Trump announced his threat of economy-wide tariffs against Canada, the premier has sought an exemption for the sector—and for good reason. It’s a massive source of investment, employment, and economic activity in her province, and at something like 7 percent of GDP, it’s a major driver of the national economy.
Every Canadian should want it exempted from U.S. tariffs. That would be self-evidently good for the country. That this is seemingly lost on the prime minister and other premiers exposes a fundamental problem that we’ve had in the country for too long: a mistaken assumption that the sector’s economic benefits are somehow constrained to Western Canada in general and Alberta in particular.
We’re all invested in the success of the oil and gas sector if for no other reason than its contribution to government revenues that are transferred from Ottawa to every region in the country. Ottawa’s own analysis for instance recognizes that it contributes something like $12 billion per year to federal, provincial, and territorial governments.
But the truth is there are plenty of strong arguments in favour of the sector’s national significance, including its leading role in Indigenous employment, its huge part in protecting against middle-class decline, and its major contribution to exports and national productivity.
As a leading industry voice recently said to me, if Canada’s oil and gas reserves were concentrated in Ontario and Quebec, the industry would be rightly held up as the country’s most important economic engine. But it isn’t and so it isn’t. Instead it has consistently been targeted and vilified by the federal and provincial governments as well as various anti-development intellectuals and stakeholders.
Now many of these same voices are calling on the sector to play a disproportionate role in Canada’s retaliation against the anticipated Trump tariffs. There’s been talk of curtailing production or even cutting oil and gas exports to the United States altogether. The assumption seems to be that by targeting Canada’s largest export to the U.S. by far—it’s about 30 percent higher than the next one—it will have the greatest retaliatory harm on American businesses and consumers.
Yet for Albertans, this focus on the sector is understandably frustrating. Prime Minister Trudeau has gone from talk of “phasing out” the oil sands to now seemingly wanting to make them the tip of the spear of a costly response to Trump’s tariffs.
If Canada is going to retaliate, which itself should be a matter of some debate, then the goal should be to maximize pressure and minimize harm. A big challenge with such an exercise is who gets to define harm. One gets the sense that what we’ve seen this week is Central Canadian premiers and a Central Canadian-dominated federal government deciding that the best way to minimize harm is to outsource the pain to Alberta.
A true Team Canada response would equitably distribute the costs across the country, including Ontario’s auto sector or Quebec’s hydro sector or whatever. That would be a sign that we really are all in it together.
Right now, however, one gets the sense that some of the premiers are privately rooting that the oil and gas sector doesn’t obtain an exemption so that they can use it as leverage. This is the definition of short-sightedness. Backing out oil and gas exports from Trump tariffs would reduce the share of affected exports by something like 25 percent. That’s good for Canada.
I’ve been critical of Premier Smith in the past but in this case, she’s in the right and her critics, including Prime Minister Trudeau and Premier Ford, are wrong.
A Petro Canada station in Toronto on April 29, 2008. Frank Gunn/The Canadian Press.
Economic nationalism is still a bad idea
In December, I posted on X that one of my biggest fears about Donald Trump’s provocations against Canada is that it would create the pretext for a revival of economic nationalism. It didn’t take long. This week, Canadian business leader Jim Balsillie announced the creation of a new public policy think tank to promote the case of greater economic sovereignty for Canada.
The argument and the context have changed a bit—today the case for economic nationalism is focused on technology and Trump—but the basic ideas and assumptions have long-standing pedigree in Canadian history. In the absence of an activist state (with close proximity to entrepreneurs and business leaders), Canada’s economic aspirations must be limited to “hewers of wood and drawers of water” or as a “branch-plant economy.” Old left-wing intellectuals like Mel Watkins, James Laxer, or Kari Levitt could have signed onto Balsillie’s National Post op-ed.
They were among the key figures in the last great expression of economic nationalism during the late 1960s and early 1970s. The combination of Canadians’ aversion to the Vietnam War, the Nixon administration’s punitive tariffs, and post-Centennial fervour created the conditions for nationalistic arguments in favour of cultural protections, the creation of new Crown corporations, foreign investment restrictions, and various other policy interventions designed to protect the Canadian economy from the influence of American capital and companies.
Over time, we eventually came to see the folly of this thinking. It was distortionary, parochial, and wealth-destroying. We were poorer for it. As economist Harry Johnson famously put it: economic nationalism was “diverting Canada into a narrow and garbage-cluttered cul-de-sac.”
A better part of the past fifty years has therefore been marked by efforts to reverse those policy trends, including free trade, privatization, foreign investment liberalization, and other so-called “neoliberal” policies that have reflected the famous line from the 1985 Macdonald Commission report: “there is less and less place to hide.”
One can swap Trump for Nixon and today’s tech sector for previous high-growth sectors and the conditions seem rather similar to the last bout of economic nationalism. Balsillie and others are now once again advocating for a state-directed economic model and new (or old) places to hide. The whole exercise seems unironically ahistoric—even though they argue that it’s their critics who fail to understand the modern economy.
The inherent flaws of economic nationalism are the same today as they were in the past. A state-driven economic model with limited competition is itself anti-innovation. It rewards proximity to government rather than the best business model or superior technology. Do we really want an entire economy that functions like our current protected sectors? Think of it as Laurentian capitalism at scale.
The right response to Canada’s economic stagnation isn’t old-fashioned nationalism. It’s a renewed commitment to free markets and competition. Forty years after the Macdonald’s report was first released, there are still few places to hide.
Former Bank of Canada governor Mark Carney after speaking to reporters at the Liberal caucus retreat in Nanaimo, B.C., Sept. 10, 2024. Darryl Dyck/The Canadian Press.
Mark Carney puts himself first
Mark Carney’s official launch of his Liberal leadership campaign this week finally has him crossing the threshold from central banker into a politician. At least in Canadian history, it represents an unprecedented transition. Until now, the role of Bank of Canada governor has been carefully distanced from politics.
Friend of The Hub, Cardus’s president Brian Dijkema, recently had a series of posts on X on why Carney’s jump into politics is a bad development for the perceived trust and independence of the Bank of Canada and its leadership.
He’s of course right. We shouldn’t want prime ministers considering the partisan instincts of prospective candidates before they are appointed or Canadians wondering if the bank governor’s communications or policy choices are influenced by their own political ambitions.
Carney’s foray into politics isn’t the first time that the blood-brain barrier between independent functions with our system of governance and raw politics has been broken. It’s a long-standing problem. And the biggest culprit is the Supreme Court of Canada.
Not only have retired Supreme Court justices entered the political fray as advocates and consultants, but the court itself has evolved into a political body by substituting its political preferences for those of our elected officials and the country as a whole. Its judicial activism has elevated the court’s nine members into Canada’s most powerful policymakers—which is to say, politicians.
The best (or worst) example is the Supreme Court’s decision in 2015 in favour of the constitutionality of physician-assisted death. One can agree or disagree with the decision as a matter of policy. But as a matter of law, it was a mess.
The court had previously taken up the issue in 1993 and determined in a 5-4 decision that there was no constitutional right to assisted death. Twenty-two years later, the court unanimously ruled that there was indeed such a right.
What had changed to produce such a divergent outcome? Nothing of course. There had been no changes to the Charter. It hadn’t been amended to add a new right. The justices just unanimously found one themselves.
It was an unprecedented expression of institutional hubris that has done tremendous harm to the Supreme Court as an institution. It’s not a coincidence for instance that we’ve since seen the growing use of the notwithstanding clause. If the court is going to act as a political body, then it seems reasonable for our actual political body to defend its unique political role in our system of government.
Herein lies the risk of Carney’s candidacy. If we come to view Bank of Canada governors as essentially political actors, then why should their judgement on monetary policy trumps those of actual politicians? Why would a finance minister defer to someone who may be vying for his or her job? Why would their independence be protected and respected?
Dijkema’s warnings are likely to fall on deaf ears. But if one cares about this issue—including those who lament the growing salience of the notwithstanding clause—then you ought to think twice about making a former central banker our next prime minister.
Sean Speer is The Hub's Editor-at-Large. He is also a university lecturer at the University of Toronto and Carleton University, as well…
