A New Deal with Canada? “Not a snowball’s chance in hell”

Great political egos don’t rest when they retire. Without advisors and restraining consequences, they are simply freer to roar.

Former Progressive Conservative Prime Minister Brian Mulroney recently informed a hall of university students that Canada’s development on this continent effectively stopped when he stopped leading the country.

Here’s Maclean’s magazine John Geddes’s report:

“Which brings him to a broader point: any Canadian prime minister must not only nurture the U.S. president’s friendship, he must let the world know about it. ‘Look,’ he explains, ‘one of the main instruments of your strength is if you’re perceived as having influence in the Oval Office.’ He illustrates this with another story, one from the very last day of negotiations on the Canada-U.S. trade deal in 1987. James Baker, the U.S. treasury secretary who was heading the American bargaining team, called him to say talks had stalled. Mulroney replied that he would have to phone his friend Reagan at Camp David then. ‘You mention that,’ he says, grinning roguishly, ‘I want to tell you, the Americans, they’re transfixed.’ (So are the St. Thomas students.) Baker got the deal finalized, needless to say, within the hour.

“And that, kids, is why you gotta cultivate your connections. But one last point. Without mentioning Harper by name, Mulroney caps his reminiscing on U.S. relations by observing that Canada, in his opinion, these days lacks the inside-Washington credibility that ultimately secured his trade deal. ‘You try to get that agreement down there now,’ he says, ‘you wouldn’t have a snowball’s chance in hell of getting that done!’”

Brutal. The Mulroney legacy grows as history stands still? Students, don’t give up!

For one thing, don’t worry too much about the telephonic skills of your Prime Minister. Canada’s place in Washington is limited, but not by a Prime Minister’s personal rapport with the President of the day.

It’s cringingly vain for Mulroney to suggest that he could get between President Ronald Reagan and James Baker—his first Chief of Staff, his National Campaign Manager, and his brilliant Treasury Secretary—on any issue of importance to the United States. Reagan and the US Senate made a deal with Canada because it served America’s interests. Period.

And please don’t be intimidated by the idea that what a "legend" did nearly a generation ago can’t be repeated—even improved on—now. 

There wasn’t a snowball’s logic to Brian Mulroney’s entire record of economic accomplishment.

The man was considered a political junky and ruthless cynic when he was elected in 1985. His economic pronouncements appeared ghosted; he talked mostly about business-like government and never endorsed free trade with the US. Smart public servants in Ottawa never imagined that he had the discipline or courage to reform Canada’s sales tax regime, let alone negotiate a comprehensive free trade deal with the US government. 

Furthermore, the times didn’t favor such an adventure. Ontario’s government wasn’t supportive of free trade. The cheap Canadian dollar was giving Canada’s manufacturers a competitive assist. But, generally, they didn’t relish competing on an open and level playing field with the US. In addition, their Republican President wasn’t popular with Canadian voters, and their Congress was full of protectionists.

Still, into hell Mulroney went—and came out with an historic deal.

The odds that Steven Harper will try something big appear slight. Yet prospects for success could be better today than they were in 1987.

Obama is very popular and trusted in Canada. The US economy is growing again. Free traders dominate Ottawa and Washington policy circles, and they have 30 years of success to bolster their arguments. 9/11 thickened the border, but experience argues strongly that further reducing barriers and integrating economic forces is in both country’s interests. Raising middle class incomes is pre-occupying politics on both sides of the border, but it isn’t driving either side to favor protection or reliance on economic nationalism.

Tradition has it that Canada makes the first move. What does Canada need to get the ball rolling? A Canadian agenda and a Canadian Prime Minister who won’t tolerate being patronized by Brian Mulroney.

Brian Mulroney and the End of History?

Brian Mulroney’s pal Ronald Reagan is now considered one of America’s greatest presidents. For Canadians, memories of Mulroney’s two terms as prime minister are every bit as inflated. We don’t idealize the man. We grant him something even grander: we treat his accomplishments in Canada’s relations with the US—and his failures in constitutional reform—as the end of the journey.

Last week, Canadian opinion leaders celebrated the 25th anniversary of his Free Trade Agreement with the US; the FTA that eliminated nearly all Canadian and US tariffs, created a non-binding dispute settlement system, and provided national treatment for each country’s investors. This deal is not simply widely praised and sparsely reviled; it’s treated as a kind of final settlement in Canada-US economic relations.

After two centuries of progress and retrenchment, Canada’s place on this extraordinary continent appears settled: overseas, we’ll burnish our brand and sign trade deals; at home, we’ll tinker.

Like the sunny memories of Reagan’s economic policies by Reaganites, numbers don’t adequately express the FTA’s positive impacts. Kevin Lynch, once Canada’s highest-ranking civil servant and now Vice-Chairman of the Bank of Montreal, believes the real stuff is intangible:

“Free trade helped Canada to grow up, to turn its face out to the world, to embrace its future as a trading nation, to get over its chronic sense of inferiority."

“'It caused a sea change in attitudes,' he believes. The courage needed to take that free-trade ‘leap of faith’ equipped governments to tackle other seemingly insurmountable challenges: Establishing the goods and services tax, eliminating the deficit, reducing corporate taxes.

“Most important, FTA convinced Canadian governments, Canadian businesses and Canadians generally that this country had the knowledge and confidence to compete in any market.”

As it is in the US, bravado in Canada is also a sure sign of paralysis.

The right and the left see how little Canada’s economy has changed for the better. (Both Kevin Lynch and Jim Stanford, an economist with the Canadian Auto Workers union, accept that Canada’s productivity, just 74% of US levels, is actually slipping further behind the "declining" USA.) Nevertheless, neither protectionists nor free traders make much effort to either undo or outdo what Mulroney put in place.

"Trade diversification" has become the center of the action, the drug of choice by incrementalists in Washington and in Ottawa. At the same time, entrenched bureaucracies manage a Canada-US border that inhibits innovation, competition, and enterprise in both countries—as well as Canada’s security globally.

Currency unification, the physical elimination of the border, and, for instance, a common regime to manage the environment are European ideas, too radical for serious consideration in the New World.

Pros in Ottawa accept that Brian Mulroney pushed Canada about as far as Canadians would go. Indeed, on the constitution, he proved to them how dangerous it would be to try to improve on the success of the country’s last great closer, Pierre Trudeau.

This is a debasing form of respect for the good works of a different time.

Having given thanks, now let’s face it: the "coming of age" gift of the Mulroney-Trudeau years has been turned into a political straightjacket—a limiting sense of what’s possible in the very business of what is possible.

In fact, North Americans are stuck a generation behind European efforts to make their continent a more productive, efficient, and competitive economy. Furthermore, Canada’s constitution still includes two undemocratic and colonial institutions—at the very top.

Canadian optimists should stop watching for moves by the Chinese government to turn China into a law-abiding market democracy and waiting for the children of Canada’s last generation of politicians to stir their hearts.

Rather than feel left out, young Canadians should feel embarrassed. After that happens, they should look around for politicians who want to change things significantly.

Mulroney’s spin on Canada-US border: What’s the big idea this time?

The further retired politicians get away from what they did—and the responsibilities they held—the freer they are to think big. Brian Mulroney is still excited about what he did on tariffs in 1988 and is definitely working himself up over Stephen Harper’s negotiation of a possible Canada-US security pact:

“This is like a re-run of 1988,” Mr. Mulroney quipped, referring to the bitter free-trade election of that year. “Ask Canadians to choose between a big idea and this trivia and trash that goes on the other side and they’ll choose the big idea 10 times out of 10.”

Click on: http://www.theglobeandmail.com/news/world/konrad-yakabuski/mulroney-offers-harper-tip-on-how-to-get-security-perimeter-deal-with-us/article1904825/

Should we be impressed? Is Harper earning his Mulroney moment? And more importantly, is this new flashy negotiation going to do anything significant to improve our economic prospects?

 Harper certainly hasn’t made any big promises himself. Indeed, he was clear that lifting the border wasn’t even his objective. In a written statement to The Globe and Mail, Lawrence Cannon, Minister of Foreign Affairs, was equally cautious. “Keeping our common borders open to commerce and closed to criminal activity and terrorists threats” was as far as he’d go.

Keeping things the way they are has been at the heart of Canada’s feckless leadership in North America for over forty years.

As in 1988 negotiations, there is every likelihood that Canadian government spokespersons will oversell the menace of further protectionists moves in Washington and not roll back important barriers between our two economies that have accumulated over the past years.

We’ve had “historic” issue elections before that changed little. But the costs are rising.

 Today it’s a bi-partisan hymn that Canada ought to diversify its trade and not rely too heavily on the old familiar American market. Well, the American consumer at least may have got the message: US consumers are diversifying away from Canada. Foreign Affairs and International Trade Canada issued a bulletin this week announcing that “Canada’s share of US imports is falling, but not due to China.”

Canada's share of the U.S. merchandise import market has fallen from a peak of 19.8% in 1996 to 17.4% in 2005, while China's share rose from 6.5% to 14.5%. But China is not largely responsible for Canada's slump. Two-thirds of Canada's loss was in sectors or sub-sectors (like softwood lumber) where China did not experience a substantial gain. Motor vehicles alone accounted for 36% of Canada's loss—an area in which Korea and Germany, not China, were the main countries to increase share. In sectors where China did gain market share, it was not necessarily at the cost of Canada, as other countries also experienced losses. Canada's falling share of U.S. imports may be a cause for concern, but the finger cannot be pointed squarely at China.

Click on: http://www.international.gc.ca/canadexport/articles/384815.aspx

Since 2005, China’s industries have only grown stronger. Also, the Canadian dollar has appreciated against the US dollar and passport requirements and other obstacles at the border have been added to frustrate north-south commerce.

Rather than postponing the day of reckoning and clouding our thinking, however, Harper’s almost non-existent capacity for bombast could serve us. A border deal laced with bureaucratic mechanisms and good intentions will not impress. And real options to integrate our economies might get some attention.  

Mulroney’s prescription for Canadian healthcare is not reform

Retired politicians often get their best press when they’re showing up their successors.

Former Progressive Conservative Prime Minister Brian Mulroney recently prodded current Prime Minister Stephen Harper to concentrate on the “big ticket items” and set up a   “blue ribbon panel of distinguished Canadians” to fix the financing of Canada’s burgeoning healthcare budgets. Click on: http://www.theglobeandmail.com/news/politics/ottawa-notebook/mulroneys-advice-to-harper-do-something-big/article1879648/

“We are facing a genuine, genuine problem of quite enormous dimensions,” Mr. Mulroney says. “We have a pretty good system here, but obviously the financing is completely out of whack.

“Someone has to provide some unbiased, thoughtful but effective leadership in the thinking on this,” he says. “Without some new thinking and some visionary approaches, health care is going to consume 70 to 75 per cent of provincial budgets.”

Classic Brian Mulroney.

Before teeing up for another favorable reference to his big ticket accomplishments, however, Mulroney could have acknowledged Harper’s radically different political circumstance. Mulroney himself went big on free trade with the US and introduced the Goods and Services tax in a majority parliament, after winning an electoral majority without reference to either issue. Indeed, in the election Mulroney was either silent on these latent issues or postured as a red-Tory nationalist.

While not always first to those issues that call for boldness, Mulroney has every right to offer bold advice and to be listened to carefully. Once committed to act, great projects did bring out in Mulroney great talent and resolve. Unfortunately, his advice on this occasion is not bold and, indeed, could lead to less change, not more.

Red Tories, like Mulroney, reflexively send big problems to Ottawa. They are the same as liberal Democrats in the US.  Once they see that a significant problem growing in every province in the country, they look for a federal response. However, in the case of healthcare costs Ottawa may, in fact, be the worst place to turn for effective solutions.

Fundamentally, the principal national challenge—universal access across Canada--has been long resolved. The federal government—through equalization payments and per capita health grants to the provinces—provides incentives and support to ensure each province maintains universal and portable healthcare services.

That federal contribution has grown with the growth of provincial costs and there is broad agreement that Ottawa maintain is share.

The provinces are almost entirely responsible for the delivery of those services and, as important, have the competence and political responsibility to manage the individual provincial systems.

In Ontario, for instance, the Ontario government operates a $47 billion health system and pays for approximately 80 % of the costs. A new national vision might end up simply increasing the federal share to above 20 % and, thereby, relieve the province of a fraction of the political and managerial challenge of keeping the system affordable and up to date.

Recent federal silence on changing the status quo, however, hasn’t necessarily been a bad thing. It’s now clearer in people’s minds that the provinces are actually responsible. And governments in Quebec, Ontario, Alberta and elsewhere are implementing and testing new ideas.

Other than re-opening demands for $billions more from Ottawa, Mr. Mulroney’s blue ribbon panel could actually distract the provinces and only confuse the public about who is accountable.

The limits of political cynicism

The following blog entry, from Andrew Spring, on so-called political cynics deserves careful reading. The year 2011 should be hard on these operators. However, we shouldn’t get too squeamish about their feelings.

 “In A Plain Blog About Politics, Bernstein embraces the political process in all its ugly, necessary glory: the posturing, the pandering, the packaging, the parliamentary maneuvering, the horse-trading, the struggle for survival and the ambition that drives it. His approach can alternately seem extremely cynical, in that it assumes that politicians are motivated almost entirely by the drive to amass and keep power, and the opposite of cynical, since it embraces the process and its outcomes so cheerfully . . .

 “Where Bernstein (judging from his blog's Comments section) does disturb many readers -- me included -- is in his suggestion that it is politicians' right, indeed their duty, to be guided entirely by such calculations. He argues, in effect, that the law of political survival is a necessary, natural, sufficient and therefore desirable prime mover of politicians' words and actions.

—Andrew Spring, “Embracing the process: Jonathan Bernstein’s joyous cynicism,” Xpostfactiod, December 26, 2010

http://xpostfactoid.blogspot.com/2010/12/embracing-process-jonathan-bernsteins.html

The professional optimism of professional political operators—their belief that good politics leads inevitably to good policies—is easily refuted historically. In many cases, the intended solution only makes matters worse—for instance, subsidizing the price of commodities in short supply.

It’s the cynic’s hard-faced scorn for idealists and for any principle that would disrupt their political calculators that should be seen for what it is—just an act of faith that allows confused and nervous people to sleep at night. It lets them say what sounds safe and call that enough. It allows advisors with little actual power to call their bosses amateurs.

There is no professional code of conduct that permits hacks to ignore outside realities. In the real world of the good politician, inconvenient facts and inconvenient responsibilities assert themselves.

Using your brain to separate sentiment from fact isn’t the same as believing that means are ends, that staying afloat is served by going below deck.

Of course, some higher principles are higher than others. And, at any moment, you can get into an argument about which one is first. So, recognizing their place doesn’t make politics less complicated. (Two examples that can override day-to-day political calculation: financial soundness and national unity. Serving either can entail risks to the other as well as the short-term survival of the politician.)

However, respecting a higher obligation doesn’t necessarily make dangerous times more dangerous. And the cynics’ advice to wait out uncertainty—and wait for a consensus magically to form amongst the people—doesn’t always dictate what successful leaders decide.

For instance, Canada’s former Prime Minister Brian Mulroney introduced a 7 per cent goods and services tax (GST) even though the idea had been rejected by all previous federal governments as a sound concept that made no political sense. It is now a mainstay of Canada’s public finances and a mainstay of Mulroney’s reputation.

To the surprise of many of his political allies across Canada, Pierre Trudeau did not gracefully surrender his campaign to patriate the Canadian constitution after the Canadian Supreme Court judged that he and his federalist allies had abused constitutional precedent. Canadians, he was warned, were fed up with endless constitutional debate and were satisfied that he’d already done his best. Regardless, he persisted, and in 1982 Canada  got its own constitution with an entrenched Charter of Rights and Freedoms.

In port, you can buy a boat that floats. However, you have to take it out to sea to know whether the boat—and the captain—are seaworthy.

Is Canada trimming its hopes for an open border?

“Former Prime Minister Brian Mulroney) says he believes a new security perimeter arrangement with the United States would represent no threat to sovereignty but does offer a necessary insurance policy for the Canadian economy.”

—The Globe and Mail, "Perimeter deal with U.S. good for Canada, Mulroney says,"   December 22, 2010

http://www.theglobeandmail.com/news/politics/perimeter-deal-with-us-good-for-canada-no-threat-to-sovereignty-mulroney/article1846656/

“So here we have the federal government proposing a perimeter around North America to facilitate the flow of goods and services, and prevent further thickening of the Canada-U.S. border, while, inside Canada, manifestations of Little Canada – the securities regulator being only one – are everywhere apparent.”

—Jeffrey Simpson, national columnist, The Globe and Mail, December 17, 2010

http://www.theglobeandmail.com/news/opinions/opinion/the-parochialism-of-little-canada-is-killing-us/article1841323/

Earlier this month, Canadian officials were spreading the news: the governments of Canada and the United States were negotiating a continental security perimeter in exchange for lowering the Canada-US border.  Canada would look more like America to the rest of the world, while Canadians would be treated more like Americans at the border. As pundits prepare to stick their necks out about next year’s big story, the Canadian government’s little media helpers now appear to be telling us not to expect anything very bad or very useful either.

Jeffrey Simpson sees Ottawa working to “prevent further thickening of the Canada-US border,” while Mulroney tells us not to get excited: the deal will only be an “insurance policy for the Canadian economy.”

Taking Brian Mulroney literally often understates what he’s getting at. “Insurance” against rising congressional protectionism was, in fact, his modest rationale for the Free Trade Agreement of 1988. That agreement did facilitate a meaningful expansion of trade and, for a while, an increase in Canadian productivity. At that time, as well, he also insisted that the FTA had nothing to do with Canadian sovereignty. Nevertheless, major compromises over Canada’s future economic flexibility were made, especially on the treatment of American investment.

The sovereignty issues today around security, however, are direct and immediate—not long-term and impersonal. They’d be very hard to fudge. Simpson reports, while Mulroney advises: Mr. Harper, don’t try something big.

Early in the New Year, Prime Minister Harper will have to settle for something very cosmetic and strictly at the executive level or he’ll have to invest serious political capital and time convincing US political leaders and Canadians that it’s time to take another step in integrating our two countries. That ultimately, erasing the border would be a good thing because it would allow us to be more effective as North Americans and problem-solvers.

It’s tempting to believe he will. Obama also needs something new to sell and both leaders seem temperamentally unexcited by borders and protectionist strains in the politics of both countries. (Furthermore, the issue in Washington would not divide automatically on partisan lines.) However, if the two of them go with prevailing insider opinion, they’ll say to themselves: I’m looking OK now and have enough to explain without asking people to re-think what they think of their neighbour.   

Then again, both have undertaken big gambles before and neither one sees himself as an insurance agent.