Reduce our dependence on the U.S.? Sure, but it’s a lot harder than it sounds

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Bliss is it in this dawn to be alive! The onset of the (temporarily suspended) War of Twenty-Five has produced a surge in Canadian patriotism and national feeling, of a kind not seen in many decades.

Recognizing both the gravity of the Trumpian threat and the opportunity in the public passions it has unleashed, a bevy of commentators, left and right, have emerged with prescriptions for what Canada can or must or will do in response. As always, these prescriptions tend to be restatements of whatever the speaker had previously believed, only more so.

Thus, if you are on the left, the current crisis just proves the need for an industrial strategy, with subsidies for targeted industries and tighter restrictions on foreign takeovers and forced repatriation of pension funds’ overseas investments, and so on. And if you are on the right, it clearly confirms the need to slash taxes, cut red tape, speed up approval of energy projects etc., etc.

But what everyone seems to have concluded is that our world has changed, irrevocably. The country we thought was our friend and ally has turned, inexplicably, into our enemy. Our great national advantage, the foundation of our economic, defence and foreign policy for decades – proximity to the world’s biggest superpower and largest consumer market – has turned into our biggest liability. Never have we been more vulnerable, or alone.

The sense of shock has been palpable: shock, followed by fear, followed by resolve. In the short term, there is a debate over what mix of emollience and retaliation can stave off disaster, buy us time. But in the longer term, everyone now recognizes that things must change.

Not only can we no longer rely on the Americans to defend us, or even to live by the trade agreements they sign with us, but we must at least entertain the possibility that they will seek to dominate us, to use their size and might to harass and threaten and attack us, to exploit our dependence upon them for narrow national advantage.

Perhaps the sort of overt bullying we have experienced under Donald Trump will pass when he does. But it’s also possible that it will not – that the damage he has done will be permanent, that America will never again be the guarantor of the peaceful, law-abiding, trade-based international order of which both we and they have been such beneficiaries, but instead will constitute one of the main threats to that order.

And so the cry has gone up: we must reduce our dependence on the Americans! We have been too complacent, too long – too naive about their intentions, too dependent on their protection, too invested in their markets. Now we have had our wake-up call. So: Diversify our trade! Build pipelines to the east and west! Meet our NATO defence commitments! Boost national productivity! Abolish interprovincial trade barriers!

Okay. These are lovely ideas, all of them. But they are a lot easier said than done. If they weren’t they’d have been done already. I understand the urge not to “let a crisis go to waste.” But it will take a lot more than fear of the American colossus or a rush of patriotic sentiment to make them a reality.

Diversify our trade? By all means. But successive governments have been trying to do that, in different ways, for decades – whether via the old imperial preference with Great Britain, or Pierre Trudeau’s ill-fated Third Option, or the series of bilateral and multilateral free-trade treaties negotiated under prime ministers Jean Chrétien and Stephen Harper, or the younger Trudeau’s early fantasies of a special relationship with China.

Some were good ideas, some were bad, but none could make much headway against the gravitational pull of the American market – both the largest and the nearest to us in the world. Certainly we should be doing everything we can to increase trade with other countries – the surest and simplest way would be to just drop our remaining trade barriers against the rest of the world – but we should not imagine it will make much of a dent.

Build more pipelines? Okay. But the obstacles that have prevented more pipelines from being built have not magically disappeared, just because we really really need them. Maybe we don’t care so much about the environment any more; let’s repeal all those fussy regulations, then, that we blame for holding up pipeline approval. Fine. But the consent of affected Indigenous groups will still be needed, something that cannot be so easily waved away, either as a legal or a political matter.

Neither can the objections of other provinces, notably Quebec: even if it has no legal or moral authority to prevent a pipeline from crossing its territory, it has the political clout to do so. I’d be in favour of the feds using whatever combination of carrots and sticks were needed to force it through. But I don’t have to get elected.

And if you could do that, you still face the issue of whether, in fact, there is a market for it. Federal regulations and Quebec’s intransigence may have helped do in the Energy East proposal. So did Trans Mountain, the (now probably revived) Keystone XL, and the fact that TC Energy already had more than enough capacity to get its oil to market. There is no Energy East proposal at the moment. There may never be.

Meet our NATO commitments? Absolutely. We have been free-riding on our NATO partners for decades, to our eternal shame. And the world has become a much more dangerous place in recent years. Great: where are we going to get the money? Just to get to 2 per cent of GDP, the current NATO target, would require us to spend between $20- and $40-billion more on defence than we do now, every year, depending on how soon we did it.

So: spend less on other things? That’s certainly possible, even advisable. But is public opinion really on board with that, even in its current febrile state? It’s one thing to boo the American anthem at a hockey game. It’s another to give up your favourite social benefit.

All right, then: raise taxes. Only, which ones? You can always get a constituency for raising other people’s taxes, but you’ll notice no political party, whatever its stripe, calls for raising taxes on you. And you can’t raise that kind of money just by squeezing the rich harder. There are a lot more you’s than there are of them.

Borrow the money, then. But the deficit for the current year is already nearly $50-billion, even before you factor in a recession. And in the longer term, the combination of sluggish growth and an aging population is set to strain public finances to the limit. That’s mostly on the provinces, to be sure, but as the saying goes, there’s only one taxpayer.

And that was all premised on a target of 2 per cent! Our NATO partners are already looking past that, to 3 per cent or more. And if, by some heroic combination of spending cuts, tax hikes and increased borrowing, we were able to match that, we still would not have solved our fundamental, existential dilemma.

We would have made our contribution to the defence of the West. But we would not have begun to do what was necessary to defend our sovereignty in the North, where the threat is less invasion than exploitation. The only people who could do that are the Americans. And these days, they’d have to be viewed as one of the threats.

You begin to see our difficulties. The kinds of adjustments that are required of us, the things we’ve been papering over, hoping they would solve themselves – the issues we could get away with avoiding, until now – are massive and intractable.

Raise national productivity? You bet. But even to tackle that relatively mundane objective, given how far we have let things slide, will require quite extraordinary changes in policy: root and branch tax reform, especially on the corporate side, at a time when our finances are under pressure; a sweeping away of barriers to trade and investment, just when economic nationalism is in vogue; breaking up local monopolies and oligopolies, and so forth.

Oh yeah, and abolishing interprovincial trade barriers. Just that. After 158 years of trying, we’re going to get the provinces that have dug in against all change until now to suddenly abandon them, in a fit of patriotic fervour. We can’t even get agreement to give up supply management, the single craziest, most indefensible economic policy since the building of the pyramids. But we’re going to get provinces to do something really hard, like harmonize their professional licensing standards?

To make these kinds of changes, with the real sacrifices and hardships that are entailed – sacrifices for the population; hardships, potentially, for those politicians brave enough to propose them – it will not be sufficient to just hold a first ministers’ meeting and make a few speeches. These are the kinds of things that require sustained national consensus, a willingness on the part of the broad mass of the public to stick it through, and stick together, in the belief that the pain will be worth enduring, and fairly shared.

That’s hard to build, especially in this country. We eventually got there with the deficit, back in the 1990s, but not until interest costs were consuming 36 cents of every federal tax dollar, and we were all but locked out of the debt markets. But most of the time, we don’t. Most of the time, we avoid tacking difficult issues as a country, and for good reason. Because tackling them would tear us apart.

Policy making in this country involves one party or another using its support in one part of the country or another – the Liberals in central and eastern Canada, the Conservatives in the West – to foist changes on the rest. Parties win power with a third of the vote or less, and claim a mandate for sweeping change. But they soon find no such change is possible, and settle for more incremental reforms. By such caution have we avoided blowing up the place.

But now suppose we really need to make big changes, and take big risks. But we’re still stuck with the same narrowly-based, highly-leveraged, winner-take-all political system – the kind that rewards and encourages not broad consensus-building, but inflame-the-base and divide-and-rule.

And instead of a functioning national Parliament, where our differences can be negotiated – a Parliament that can serve, in a time of crisis, as the rallying point of national unity and the focus of national resolve, as parliaments have in the past – we have a Parliament that is so shrivelled and irrelevant that no one even notices when it’s closed.

We have huge challenges ahead of us. We cannot meet those challenges without enlisting the public, activated in defence of their country and unified behind their leaders. We cannot build that unity without reform of our political institutions. There’s no avoiding it now.