By Derek Lothian.
So. President Donald Trump. Let’s all take a moment to let that sink in.
Truth be told, I started writing this column on November 7. Ironically, it was all about disruptors — a common theme in this issue of Prairie Manufacturer Magazine. Little did I imagine, only 24 hours later, we’d be hit by one of the largest political disruptions in modern history.
Granted, changes to government are nothing new. Even the most surprising election results rarely throw markets or businesses into panic. But what makes the latest U.S. voting cycle particularly unnerving is the same factor driving post-Brexit instability in the U.K. and Europe: Complete, top-down uncertainty.
We are entering uncharted waters in the Canada-U.S. trade relationship — in part because we simply do not know where the incoming leader of the free world stands on so many important, integrated issues. Canada’s ambassador to the U.S., David MacNaughton, has already stated on record he would be ‘happy’ to renegotiate NAFTA with Trump, although who knows if the vision for his desired ‘improvements’ would be shared by an administration pushed into power by protectionist rhetoric and a populist desire to rip up foreign cooperation agreements.
In the worlds of comedian John Oliver: “Trump is like a magic eight ball” — every time you shake him, he seems to give a different answer.
Canadians should remember there is plenty of precedent for U.S. presidents to unilaterally withdraw from treaty obligations. A discontinuation of NAFTA doesn’t so much as require congressional approval — only six months’ advance notice from the Executive Branch.
Now, will that happen? Probably not. If the last 18 months south of the border taught us anything, however, it is to expect the unexpected.
Fortunately, as Prairie manufacturers, we are no strangers to navigating shifting currents. We’ve capitalized on emerging global growth opportunities, survived massive swings in currency, and overcome some of the most damaging bureaucratic decisions ever made (ahem, National Energy Program).
As DIRTT Environmental Solutions CEO Mogens Smed explains in the View from the C-Suite column (Page 8), our can-do attitude and willingness to roll up our sleeves is what has made this industry — and our region — different. It’s what has made us successful. It’s also what will sustain us going forward.
Indeed, the next four years will yield significant change on both sides of the 49th parallel. And we’ll need to adapt.
Here at home, the promise of a federally imposed carbon tax continues to loom like a grey sky over the Prairies — compounded by dampened commodity prices, softened investment, and a soggy, delayed crop year.
It’s a contentious issue, no doubt — one that will fundamentally impact both manufacturers and manufacturing customers, many of which are in already-weakened, carbon-intensive sectors of their own, including mining, oil and gas, and agriculture.
No one is arguing industry should not make a renewed effort to reduce greenhouse gas emissions. On the contrary, doing so is equal parts environmental and trade priority. Former French President Nicolas Sarkozy recently floated the idea of imposing a tariff of up to three per cent on incoming goods from the United States, should President Trump fail to meet European emissions standards; and, make no mistake, this style of policy will only become more mainstream.
How we reduce those emissions, though, is at the crux of the debate.
First, we need to dispose of the grandiloquence, and acknowledge a common set of facts.
Let’s begin with the argument that any carbon-pricing regime can be ‘revenue neutral.’ It can’t. Taxes, by their very nature, are expensive to administrate (CRA, anyone?). The notion that any federal carbon tax can be offset fully by the collected levies is outright nonsense. And if — as many have suggested — provinces may choose to return the funds to those from which they are collected, what in the seven circles of hell is the point?
Then there are the business implications. According to a study from Canadian Manufacturers & Exporters, 54 per cent of companies indicate they would pass along increased costs to customers (many, as I mentioned, who have already fallen on tough times). Another 16 per cent said they would move production to another jurisdiction altogether, essentially shifting all the economic benefit out-of-market while securing zero of the environmental benefit.
Talk about stimulus!
Now, to be fair, there are several examples of how stronger environmental controls have actually led to better long-term business outcomes.
Automobile production is one of them. The imposition of stiffer North American emissions rules in the early 2000s translated directly into increased international sales.
Yet, there are two main differences to that approach. Most importantly, it was a regulation that set targets and left it up to individual businesses to achieve compliance. It also harmonized the rules between Canada and the U.S. to reflect the interdependent nature of our economies. After all, as former ambassador Gary Doer so eloquently puts it: “You don’t need a NEXUS card for the movement of air.”
It’s time we learn from the successes we’ve already enjoyed, and trust in our ability to think outside the box and solve big, tough problems.
Just look at how farming has changed over the past 50 years. The way we grow food today is nothing short of a miracle.
We feed 7.3 billion people on only 11 billion acres of arable land. But we know that’s not enough. By the year 2050, we will need to expand production by 75 per cent on roughly the same mass of land.
How will we do it? The same way we will reduce our carbon footprint — by innovating.
Disruption of any kind is often uncomfortable, and there are seldom quick fixes. On the Prairies, we know that better than anyone.
So, let’s set the goals, dream up the big picture solutions, and empower the best and brightest to make them happen — right here in our own backyard.