Janice Stein and Edward Greenspon on how to deal with America

At PPF’s Fall Lecture on Canada-U.S. relations, PPF President and CEO Edward Greenspon and Janice Stein, the Founding Director of the Munk School of Global Affairs & Public Policy, sat down with POLITICO’s Luiza Savage to talk about their Matter More report.

The following conversation has been edited for length and clarity.

Q: PPF’s recent Matter More report argues in favour of a — to completely misappropriate a phrase —America First approach. Canada needs to matter more to the U.S. So, can you convince the skeptics in the audience that a) Don’t we matter? and b) Why do we need to double down on this particular relationship at this time? 

Stein:  As we’ve changed, the world has changed too, and I think that’s a big part of this story. It’s not a mantra that’s been with us for 10 years, it has been with us since Pierre Elliot Trudeau talked about the Third Option. We have made an effort to diversify. And over those 65 years, depending on how you count a little less, our exports to the United States have gone from 75 percent to 78 percent. So we have 40 years of a track record of failing to diversify. So let’s call it what it is, a mantra rather than a reflection of what Canada’s relationship has been.I can well imagine a scenario in Canada, if one of the candidates wins, where it will be very, very difficult to say to Canadians, embed yourself with the United States. Make yourself more important to the United States. I think it’s all the more important to do so under those circumstances.

What’s changed for the United States? Many of the economic issues are now national security issues. That is not going away. Frankly, I think that’s the rest of the decade, and our economy is completely intertwined with the United States. This is not a function of Trump. This is just as much the case under the Biden administration as it is under the Trump administration. That’s number one.Number two, when you look at the use of tariffs, that is not exclusively a Trump issue. Here’s best way, I think I can make the argument. There is no country in the developed world that is as dependent on a single export market as Canada is on the United States, not even Germany and the European Union. So we have to grow up.

Q: Well, Ed, what is the evidence that we don’t matter enough?

Greenspon: Let me just build on on what Janice said and come back. You know, we did canvas the possibility of the question that you asked: Well, is there an alternative? What is the alternative? So a lot of people think the alternative is growing Canada’s population big time and having a greater domestic GDP. Well, I don’t think that’s been going very well for the last year. So that doesn’t seem like a very easy, viable alternative. We have tried, as a country, to diversify our trade over many years, and that’s a good thing, to diversify your trade. We have worked very hard to grow trade with China, and I recognize the relationship with China has certainly changed in the last several years markedly, but we have grown it a lot, to the point now where our trade with China in a year is equal to our trade with the United States every 19 days. So we looked and we said, ‘okay, there really isn’t a realistic alternative.’

And then we went to a second point, which was that diversifying used to be an alternative, you know, the broadening versus deepening. You do have the China problem and you do have the Russia problem, and you do have the friends trying to figure out not being so dependent on those two countries. If the United States is selling gas to Europe, let’s say, and we’re selling gas to Asia, is that deepening or broadening? You know, it’s the same if we develop critical minerals, and people are less reliant on China or Russia for those, is that deepening or broadening? So we thought it’s a false dichotomy in today’s world.

Q: One of the big planks of your paper is you argue for what you call an Auto Pact 2.0, which is basically a sector specific approach that you describe as a deeper arrangement than a trade agreement, which would consist of co-production, co-investment and co-procurement. You talk about areas such as energy and critical minerals. What would this look like?

Greenspon: So we did want to get beyond the question of just a trade arrangement, or, you know, a classic border type of discussion. And we said, ‘Okay, what is the equivalent today, in some way, that oil was in the 1989 free trade agreement?’ We had a lot of oil. The United States had an energy security crisis. So we looked around — what are the leverage points that those themselves punch above their weight? And two of the four were critical minerals and energy. Still, even though shale gas has changed that equation, what it looks like is not what can we trade, but what can we do together? How can we build together the way we do in NORAD and the way we do in the Auto Pact and supply chains?

China controls more than 80 percent of the critical mineral trade and processing in the world. That’s twice what OPEC controlled of oil at the height and so the Western countries, the friends, are going to have to get together and become less dependent. And Canada happens to be one of the great storehouses in the world of minerals. We need to have a North America approach.

And in energy we could do things together and then we could do it with our allies in the world, Canada and the United States together. To start with, pump more oil. I realize oil is on the decline in the world. Nonetheless, we pump more oil together, or the same amount of oil together, as Russia and Saudi Arabia. You know, that’s pretty extraordinary. We are together a superpower. We are together, superpower in gas.

Canada has a lot of uranium. The United States is way too dependent on Russia. I think by 2028, Canada is ready to answer to that.

Q: This all feels like deja vu. The reality is, building a mine, building a refinery, building a pipeline, these are things that successive governments have struggled to do. So how do we even begin to have this conversation if we can’t permit, build, extract things here?

Greenspon: Deepen, broaden and accelerate. We need to accelerate building things. We cannot face the geopolitical crisis and other crisis at the pace we’re going.

Stein: We don’t have a sense of urgency in Canada that is appropriate to the way the world has changed in the last, certainly, five years. We live next door to a friendly country, and our northern communities are our friends, our deep friends on our northern border. we don’t have the experience of worrying about national security in the way that mopst countries in the world do. We had two world wars, but the muscle memory of World War I and World War II is gone.

Q: As I was saying, we have an incredible audience of very experienced and knowledgeable people, and I was speaking with one of them in the reception before this panel, and he asked me not to say his name, but he’s a very erudite person. And he gave me a very technical term for his analysis of your paper, and it was quote, unquote “bananas.” And his objection was that you’re focused on sectoral agreements, where, in his view, broader free trade agreements are the way to go. Because you don’t give up your leverage, you’re able to use different trade, different concessions, etc. He thought it was “bananas” to exclude Mexico, which is so important to the United States. And he’s his assessment was, it would be a much better strategy to eliminate supply management, the digital services tax and other irritants. So I want to give you a chance to respond.

Stein: Bananas is a great technical description, which I really appreciate but if we look at where trade agreements have been going for the last 20 years, they’re not broad free trade agreements. The WTO is, frankly broken. Global trade agreements are frozen. All we had is regional agreements. That’s where we’re seeing regionalization right across the world, in the Indo Pacific, in Europe and Canada.

We all know that regardless of who wins this election, there will be a very tough renegotiation of NAFTA or CUSMA or whatever you want to call it, which is going to begin in 2026. We need to get ready, and we need to get prepared, frankly, right now. But there’s a broader point here. If you build institutional partnerships, that’s what the Auto Pact did. Think about what the Auto Pact did, it transformed our economy.

Q: Do you think we’re on that path anyway with the Inflation Reduction Act (IRA)?

Stein: Yes. You look at that and this is all about supply chain. It is all about improving the security of critical supply chain that the United States thinks is imperative.

Greenspon: The IRA is drawing capital out of Canada as we haven’t been able to concede to the same level of subsidization. We were looking and saying, ‘How can we avoid arbitrary measures or discriminatory measures against Canada?Where are the points where we could matter more and therefore have a better argument when CUSMA comes up and other things come forward?’ And people aren’t irrational about this. President Trump did bring actions against steel, did bring actions against aluminum. When his Commerce Department recommended actions on uranium, he rejected for security.

Q: The way I read your paper is you’re basically saying, ‘Look, America and Europe, too, are doing industrial policy, and we want to be a part of their planning, a part of their industrial policy.’

Stein: It’s more. I mean, you’re right that it’s industrial. We are in an age of industrial policy, and Canada’s always had an industrial policy. Sometimes we talk about it, sometimes we don’t, but we wouldn’t be a country if we hadn’t had an industrial policy of building railways. It’s an old story for us, but it’s not only us now. It’s everyone. All the developed world is now investing seriously in industrial policies, our only partner in this is the United States.

Q: Another plank of your paper is a major initiative in security. And interestingly, you pick the Arctic, and I want to give you one minute to explain why, and then I’m going to quote from my friend who thinks it’s bananas.

Stein: Just think about who’s in NATO now, all the Arctic countries, but one: Russia. So the Arctic is now a second front line for NATO, and when we look at our investments in the Arctic, it is not enough. Now the United States has one icebreaker. We are now in the process of building four, thank goodness. But Russia is out spending by up to 50 percent combined of all the NATO members. You walk into the Pentagon or the State Department and they say, ‘What are you doing in the Arctic? This is the single most important thing that you can do for us. We have our hands full. You have to do it.’ They are looking at Canada right now with an undefended Arctic.

Greenspon: We went down to Washington as part of our research, and we talked to people from both parties, and I remember in one Republican conversation, somebody said, ‘You know, the 2 percent isn’t your problem. Your problem is you don’t know what role you want to play in global security.’

This was a role which we could play and which we thought was sellable in Canada. People don’t like spending money on (foreign aid and defence spending) but maybe they would accept if it was for the homeland, for our territory, for our Arctic.

Q: Why not focus it on the Indo Pacific, or why not focus it on NATO’s eastern flank?

Stein: Because we will have a much bigger impact in what we spend in the Arctic and the United States will count that spending as part of our 2 percent commitment. We will not have the same impact in the Indo Pacific.G

Greenspon: I would just add that we’re not saying there shouldn’t be spending on an expeditionary force like in Latvia. We’re saying that incremental spending should go where we can have impact and kind of build brand. We’re saying, let’s stand out and take leadership in a part of the world that is becoming contestable, and that is our territory.

Q: Both the energy and critical minerals plank of your proposal and the Arctic security plank obviously will have a major impact on Canada’s Indigenous peoples. How do you envision them playing a role in a Canada-U.S. strategy?

Stein: I think one of the under-appreciated things is a very, very important change in the way Indigenous leaders are thinking about partnering with Canada. There was a lot of serious discussion about equity partners, in which our Indigenous communities become equity partners, both in the investments we make in Canada, but particularly in the North. So if you think about our defense policy update, the minister has said they will be, over the next 10 years, building Arctic hubs. But it’s not connected to civilian infrastructure, and there’s no budget for it. We have to think about this in an entirely different way, where co-investing with our Indigenous partners in building the infrastructure in the Arctic, which will be environmentally friendly, which will improve living conditions, the opportunities for Indigenous partners, and will also meet the expectations of those other seven Arctic powers who now see Canada as a front-line state in this conflict now, because we face Russia.

Greenspon: None of these things can be done without Indigenous consent. And there’s no Indigenous consent anymore without Indigenous ownership and equity in the Arctic. An economic development element, social development elements, this cannot be divorced from the aspirations of Indigenous peoples.