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Neither Bush nor Kerry is the Perfect Neighbour
The Globe and Mail / October 20, 2004
By Barrie McKenna
Political realities in the U.S. will count more than campaign rhetoric, economists say.
WASHINGTON -- Polls show Canadians would pick John Kerry over George W. Bush in a landslide, but an examination of the U.S. presidential rivals' economic policies suggests neither man is the perfect neighbour.
Mr. Kerry, the Massachusetts senator and Democratic challenger, wants to ban imports of Ontario garbage and has taken shots at the free-trade deals that many Canadian businesses rely on to do business in the United States. There are also fears his plan to legalize imports of Canadian drugs would limit supplies here.
Then, there's Mr. Bush, the Republican President. He talks like a free trader, but he has balked at normalizing trade in Canadian beef and softwood lumber.
On the plus side, Mr. Kerry has vowed to rebuild alliances with traditional foreign allies such as Canada -- a pledge that could open new opportunities to sell to the Pentagon and other U.S. agencies.
And, Mr. Bush has promised to continue cutting taxes in a second term, putting pressure on surplus-rich Ottawa to grant comparable relief to Canadians. Mr. Bush is also likely to continue talking down the U.S. dollar, which would help the loonie and make imports cheaper.
The definitive answer to the question "Bush or Kerry: Who's better for Canada?" may be unanswerable.
Economists and trade watchers say political realities and circumstances in the United States, more than the candidates' campaign rhetoric, will determine how Canada fares over the next four years.
"It always comes down to the politics of the moment," said William Merkin, a former top U.S. trade negotiator who helped draft the Canada-U.S. free-trade agreement. "I don't think it matters who's in the White House."
Adding to the complexity of the U.S. political landscape is the fate of the U.S. Congress. The Republicans are unlikely to lose their hold on the House of Representatives, where they currently enjoy a substantial majority. They could also add to their slim two-vote lead in the 100-seat Senate, easing the passage of contentious bills such as the long-promised energy legislation.
"Everything has to go through Congress," Mr. Merkin said.
And so while Mr. Kerry may make noises on the campaign trail that suggest he would be an unwelcome neighbour for Canada, politics may keep him at bay.
"The fact is that even if Kerry wins, it's unlikely that he'll have a Democratic Congress," said Sherry Cooper, chief economist at BMO Nesbitt Burns. "He's not going to be able to do what he wants to do."
The talk on Bay Street is that Mr. Kerry might be bad news in spite of how most Canadians feel about Mr. Bush. She noted that people in the business community are becoming suspicious of Mr. Kerry because of the things he's said about garbage exports to Michigan, prescription drugs and free trade.
Mr. Bush, on the other hand, could hasten tax cuts for Canadians by moving to slash taxes further in the United States, she said. The President has talked about additional capital gains and dividend tax breaks. He's also mused about tax reform, including a possible flat tax or a consumption tax.
"It's going to put pressure on Canada [if he's re-elected]," she said.
The Bush administration has made it clear that it isn't too perturbed about a slide in the U.S. dollar, Ms. Cooper said. A weaker U.S. dollar provides support for the Canadian dollar, which in turn improves the buying power of Canadians in world markets, she said.
Mr. Kerry, meanwhile, has been getting economic advice from Robert Rubin, who was Bill Clinton's treasury secretary and a forceful advocate of the "strong dollar policy" for the United States.
Analysts also cautioned that campaign rhetoric often doesn't come to pass. Mr. Merkin, the trade consultant, pointed out that Mr. Kerry may want to close the border to Canadian garbage, but it's "a traded commodity" and therefore protected by free-trade laws.
On the procurement side, a change of administration could be beneficial for Canada. In recent years, Canada has seen its status as a privileged defence supplier steadily eroded.
The Bush administration's relentless focus on security at the expense of "trade facilitation" has sometimes made it tough for foreign suppliers to get a fair hearing in Washington. It's also made it more difficult to ship goods.
"A Kerry administration may offer some new opportunities for Canadian suppliers, simply because they are new thinkers," said Judith Bradt, president of Summit Insight, a Washington company that specializes in helping Canadian companies navigate the U.S. government procurement maze.
Ms. Bradt acknowledged that the past four years haven't always been easy on foreign suppliers to the U.S. government, particularly military and security contractors. She said some U.S. officials have been "actively working to exclude allied nations" from procurement opportunities because of the split over the Iraq war.
The Bush administration has also shown a penchant for steering lucrative federal contracts to favoured suppliers, which tends to discriminate against foreign suppliers. In 2003, the U.S. government awarded 43,131 contracts worth $107-billion (U.S.) without competition, including more than half of all Army, Navy and Air Force contracts. That's up 60 per cent from the last year of the Clinton administration, when $67-billion in contracts was awarded without competition.
Mr. Kerry has promised to build international alliances and mend fences with allies. That alone could pay dividends to Canadian companies, Ms. Bradt suggested.
© 2004 Bell Globemedia Publishing Inc. All Rights Reserved.
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