Is Justin Trudeau the Anti-Trump?

Canada’s prime minister talks trade, milk, marijuana, housing bubbles, and Donald Trump.

Businessweek Debrief: A Conversation With Trudeau

 

Prime Minister Justin Trudeau of Canada was interviewed on April 20 in Toronto by Bloomberg Editor-in-Chief John Micklethwait. Following are excerpts from their discussion, which appear in the May 1-7, 2017 edition of Bloomberg Businessweek.

John Micklethwait: On April 18, Donald Trump went to Wisconsin and promised he would protect the dairy farmers against unfair trade. And he cited Canada in particular. And he also said for good measure, “We’re going to get rid of Nafta once and for all.”

Justin Trudeau: One of the challenges that we’ve seen in the rise of populist or nationalist politics around the world over the past years is a reflection that trade hasn’t always been great for everyone. Sometimes it has benefited only the top tier of any economy, certain multinationals, not smaller businesses. The issue, however, is if you end up going down a highly protectionistic route, if you end up creating barriers and tariff walls, you end up slowing down economic growth, and everyone ends up suffering, including and especially the middle class.

But in this particular case, he was trying to get rid of the milk subsidies that you give to Canadian dairy producers.

I understand that certain politicians are speaking to certain constituencies, that it’s politics. At the same time, the U.S. has a $400 million dairy surplus with Canada. So it’s not Canada that is the challenge here. And the way we approach our very constructive relationship with the United States on trade and on other things is to base it around the facts of the issues and a shared desire to see citizens on both of our sides of the border succeed. We know that trade, Nafta, the free and open trade between Canada and the U.S. creates millions of good jobs on both sides of the border. So we’re not going to overreact.

Every Canadian family pays several hundred dollars more in their annual milk bill because of the measures you have to support your dairy industry. Surely as a protector of the middle class, on this one thing you would admit that Donald Trump has a point.

Let’s not pretend we’re in a global free market when it comes to agriculture. Every country protects, for good reason, its agricultural industries. And you know, we have a supply management system that works very well here in Canada. The Americans and other countries choose to subsidize to the tunes of hundreds of millions of dollars, if not billions of dollars, their agricultural industries including dairy. Different countries have different approaches. And we’re going to engage in a thoughtful, fact-based conversation on how to move forward in a way that both protects our consumers and our agricultural producers.

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Photographer: Gregory Halpern for Bloomberg Businessweek

Do you think it’s a legitimate subject to bring up the North American Free Trade Agreement?

Nafta has been improved a dozen times over the past 20 years, and we’re always looking for ways to improve the benefits for all of our citizens. One of the things with Canada is we’re of a modest enough size that we never feel that the ideal outcome of any given deal is, we win and you lose. I mean, I think we’re always looking for ways where there is mutual benefit. And I think we’ve been able to demonstrate time and time again that trade can benefit both partners.

Your ambassador in Washington said he thinks the proposed border tax will never happen.

I’m not going to make any predictions about what’s going to come forward on the U.S. side. I know that we have made a very clear case that adding taxes or a regulation to a given part crisscrossing the border six times before ending up in a finished automobile—the amount of bureaucratic red tape, the amount of layers of impediments to jobs on either sides—would be really problematic. And I don’t think that people who are promoting that border tax within the American Congress have fully thought through some of the consequences.

Do you think this is an area where Trump may have overreached and actually he’s going back? That this is an area that’s all hat and no cattle?

The issue facing President Trump is that he made a promise to do things that were good for the middle class. And that he was going to help people who felt like they weren’t part of the economic success of their country. Killing jobs because of thickening borders between Canada and the U.S. isn’t something that Mr. Trump is particularly interested in.

What have you learned about Donald Trump so far?

I’ve learned that he listens. He is a little bit unlike many politicians. That might be enough. Leave that sentence right there. As politicians, we’re very, very much trained to say something and stick with it.

Whereas he has shown that if he says one thing and then actually hears good counterarguments or good reasons why he should shift his position, he will take a different position, if it’s a better one, if the arguments win him over.

There’s a challenge in that for electors. But there’s also an opportunity for people who engage with him to try and work to achieve a beneficial outcome.

Do you think in a strange way he’s helped you define yourself more clearly? You’re often cited as the anti-Trump now, because you are a liberal in the Anglo-Saxon world being pro-free trade but also socially liberal. And that’s not a popular place to be.

If you’re seeing a rise of populism and nationalism, it is in response to the kinds of fears that people are feeling. So my economic approach is very much to allay those fears. How are we going to help the little guy? How are we going to help people who feel left out of success?

Trudeau.
Photographer: Gregory Halpern for Bloomberg Businessweek

Do you have any idea why populism of that sort hasn’t really taken off in Canada?

I think we can just look at what some of the narratives coming out of the leadership campaigns of the other two major Canadian parties are, and you can see that there is a strong drive towards populism. Even in our election in 2015, I made a conscious choice to try to draw people together, to work on allaying fears rather than highlight them and exacerbating them. I was up against a government that ran on snitch lines against Muslims and headscarf bans and a fear-filled narrative that Canadians chose to reject, for the large part, because there was a positive, inclusive, solutions-based alternative on offer.

During the election, you said that you wanted to get rid of the deficit, and you talked about maybe halving $25 billion worth of deficit. This year alone you’re going to run a $28 billion one.

If you actually want to do the math, we talked about $10 billion worth of deficit in our first year. It became $30 billion. But there were still only about $10 billion or $11 billion worth of new spending. It was the economic situation that fell out. And we had to ask ourselves, “Do we stick with our plan of investing in infrastructure, in education, in research, in putting more money in the pockets of the middle class, because we think it’s all the more important now that the economy’s gotten a little worse than we expected? Or do we pull back and make cuts and not make those investments?” And I think it was very clear in the election that our proposal to invest in infrastructure, in research, was not just what Canadians wanted and chose, but what was the right solution to move forward. And we’re seeing positive signs in terms of employment numbers, in terms of growth, in terms of global investment that we’re drawing in.

You have an economy that is due to grow 2.6 percent this year, faster than anyone else in the Group of Seven. Isn’t that a chance, an opportunity in some ways, to return to dealing with the deficit? You don’t need a stimulus for that.

We are in an extremely healthy situation. And we’re doing well because we are back investing in the kinds of things that are making a difference in people’s lives, not because it’s a stimulative effect, but because they’re smart things to do, both in the short term and for the long term in terms of pathways to growth.

What happens to the general long-term rate of growth in Canada? When you look at the Western world at the moment, everyone’s sort of struggling with this. There is a suspicion that we suffer from secular stagnation. What are the ideas you’ve got that will make Canada outdo that?

One of the things at the root of the worries or anxieties that so many people have is that they see their jobs being replaced by automation. By AI. By robots. By various innovations and improvements in the technology that surrounds our workplaces. Instead of saying, “OK, well, how do we slow down the pace of automation and protect—through various barriers—our workforce?,” what we’ve chosen to do, and it was at the center of the most recent budget we’ve put forward a month ago, was how do we prepare citizens, our workers, to be part of the revolution in how our workplace functions? How are we encouraging K-to-12 students to learn how to code? How are we encouraging access to university, to career colleges, to technical and vocational schools for our students? But also, how do we take people who are in the workforce already, who are looking at their industry saying, “Wow, I need to change my industry or I need to get significantly more skills if I’m gonna continue to have a job 10 years from now,” and get them back into school? We put an awful lot of money that is focused on retraining and upskilling workers.

You don’t think looking a long way forward that governments like yours or maybe your successors’ are going to have to start creating almost make-believe jobs to keep people employed who’re being pushed out by automation?

That’s a question a lot of folks are struggling with. Every time there was a big transformation, whether it was the Industrial Revolution and the steam engine, there was this worry that there were going to be no more jobs. …

There’s always a delay, though, isn’t there? At each time the jobs do come, but sometimes it’s 10, 20 years before they do.

But I think at the same time, looking at a delay that might have happened 100 years ago or 200 years ago is different from understanding that the pace of change is so rapid that if we start, and we tool up our workforce to be more flexible, more open, more skilled in seeing where the opportunities are, we’re going to be better positioned than anyone else in the world. I’m not saying there’s not going to be disruption.

Do you think Canada has moved away from the resource curse?

Canada will always have a tremendous amount of its wealth based on natural resources. We’re a country with great natural resources that the world will continue to need. And that’s a good thing. But what we’ve actually discovered is that how we draw on those natural resources has required and has engaged more and more innovative technologies, more and more creative thinking, more and more solutions that aren’t just good for here, but for around the world. How to continue to draw on the oil sands in an ever more responsible and efficient way. How to look at better agricultural and food production in a place where our winters are strong and our seasons are short. Being more innovative about how we create productivity gains in our agro-food industry. These are the kinds of things that actually show that a natural resource economy can be blended with a knowledge economy: a human capital economy.

You’ve taken steps toward legalizing marijuana. You’re pushing that forward next year. Is this going to be something you tax?

The reason we are choosing to legalize and control marijuana is because the current system is not protecting our kids. Right now it’s easier for an underage Canadian, a teenager, to buy a joint than it is for them to get their hands on a bottle of beer. And you know, whatever you may think about the relative harms of marijuana vs. alcohol or cigarettes, marijuana’s not good for the developing brain. It’s not good for our kids. We need to do a better job of making it more difficult, at least as difficult as it is to access alcohol. That’s the main part of our legalization strategy, along with recognizing that criminal organizations and street gangs are making billions of dollars every single year off of the sale of marijuana, which they then funnel into other criminal activities. Can we change it? Can we put the sale of marijuana through at least a regulated and overseen frame that the government will put forward to make sure there’s quality control, make sure that profits aren’t going into illicit corners?

Do you have any idea about what sort of industry may emerge? What seems to be happening in America is maybe a consolidation around a few big companies.

We’re at the very beginning of some thoughtful conversations with the provinces. If you look to alcohol as a model, you have big global players in beer in Canada. But you also have a lot of microbreweries. And there’s that capacity and consumer choice. If you know what you want, there are options out there. Ensuring there is a range of business opportunities for small, local producers and larger producers is not an unreasonable vision for what that industry could look like. But again, we’re looking at it from a public health and safety standpoint, as opposed to some other places that legalized it on a commercial basis. That will come later. We’re going to be public health and safety right first.

Can I push you on housing? Here in Toronto, home prices have gone up almost a third over the past year. You’ve got huge growth in Vancouver as well. And the Ontario government just announced a 15 percent tax on foreigners coming to buy houses here. Is this a bubble? And is this the way to fix it? What’s wrong with someone like me coming here to buy a house?

I encourage you to come and move to Canada and settle, and spend all your money and invest and hire more people. We are open to global investment.

You can’t with a straight face say you’re open to global investment on one hand and then charge people 15 percent if they want to buy a house.

It depends whether it’s speculation or whether it’s moving in to live. The challenge that we’re facing is a dearth of data on exactly who’s doing what and what’s doing what. We did a number of things around tightening some of the mortgage rules. But I think there’s a recognition that the levers that the federal government has cover the entire country. The housing market in Vancouver or Toronto is somewhat different from that in Halifax or Saskatoon or even Montreal.

Do you see the housing market in Toronto, say, as a bubble? It looks like one from the outside.

We’re looking at a time of pressures on housing that need to be alleviated, which is why we, instead of reacting in a short-term level, are reacting with a long-term, 10-year housing strategy that’s going to build more rental units, build more affordable housing. The federal government’s investing over $11 billion. And we’re going to work with cities to create stability. People need to be able to afford their homes in the cities that they work.

Which bit worries you most, the idea of this bubble suddenly popping and there being problems that way, or of it continuing to go along and maybe pushing ever more houses out of the reach of the affordability of people?

My focus is on making sure that for the medium and long term, people in Toronto and across the country can afford their homes. That means working on the supply side, making sure that we’re investing in more rental stock, making sure that we’re investing in new constructions of affordable housing, so that the market can adjust itself without either popping or crashing.

Let’s talk about the Trans-Pacific Partnership, the trade pact that Trump has abandoned. You haven’t said you want to continue with it, which sits oddly with your general pro-free-trade stance.

We’re in favor of trade deals. We’re in favor of progressive trade deals. When we came to office, the Canada-EU deal—CETA—was in big trouble. It was basically stalled. A whole bunch of significant parties in and across Europe had decided that it was a bad thing. We had to go back to the drawing board a little bit and make it slightly more progressive, make tweaks to it that would reassure people that there was still a capacity to protect workers, protect the environment, protect labor rights, protect health benefits. So we’re always looking for good trade deals for Canada.

As we move forward in what seems to be a post-TPP world, we’re very much interested in continuing to grow our relationships with Asia, to look at how we can pull things together.

But not through TPP itself?

I know there’s lots of discussions whether there’s going to be a TPP minus the U.S., whether there’s gonna be different clusters or clumpings or more bilaterals. We’re just happy to be engaged in these discussions, because we know that trade will benefit both Canadians and our trading partners.

It’s interesting to me that whilst you’ve been fairly outspoken on behalf of free trade and globalization, the one person who seems to have said more is Chinese President Xi Jinping, an odd ally for you.

China has played a very positive role around climate change. They have recognized a need for real leadership there and stepped up in a number of ways. They’ve showed themselves to be on the side of international players trying to fix the environment or improve the environment for the long term around the world.

Photographer: Gregory Halpern for Bloomberg Businessweek
Photographer: Gregory Halpern for Bloomberg Businessweek

Is there a possibility of a free-trade deal with China? How would that work?

We’re certainly sitting down with China to explore possibilities of free-trade deals. There’s a number of challenges, not least of all is the difference in scale between our economies. But also challenges around values and approaches and a recognition of the expectations that Canadians have around labor rights and health rights and environmental protections that aren’t necessarily quite aligned where China is, for example, or where many developing countries are.

Are you happy with the idea of China almost as a co-equal global leader with America?

Rather than trying to make grand pronouncements, we look at what we can do to bring people along and bring ourselves along in constructive ways. Are there ways to improve Chinese labor laws and behaviors through better engagement with Canada?

Are there ways of demonstrating to this new administration in the States that being climate leaders is actually really good for jobs and for the economic bottom line?

You know, that’s what we’ll do. Frankly, as we engage with the world and highlight what we have going on here, a lot of people are looking to invest in Canada. We’ve had a number of big companies come and say, “You know what, we want to be part of what Canada’s doing. Your emphasis on education, on training, on responsible economic development, on sustainable growth.” These are the kinds of things that in a world of tremendous uncertainty seem to be on a long-term path that is interesting for a lot of investors.

You have a third party in Nafta, which is Mexico. If America pulls out of Nafta, will Mexico and Canada begin to go it alone?

We’re always going to look through whatever structures exist on how we create better opportunities to trade and to work with our closest partners. And Mexico will always be an important and close partner for us. As we engage in Nafta discussions, we’ll see how it goes. But there’s certainly things on which Canada and the U.S. are uniquely compatible. Other things in which Canada and Mexico will be able to find common ground and common approaches. Other things in which it’ll be a U.S.-Mexico conversation. And this is all natural for moving forward in responsible, thoughtful ways.

You seem to be a champion of immigration, but you’ve also been happy for there to be caps on it. Where do you stand on that for things such as Syrian refugees?

There are 60 million-plus refugees around the world. Lots of countries can do more and will be doing more. But there are a lot of things that need to be done internationally to allow people to return home rather than just say the solution is to welcome in everyone. Canada can’t take in 60 million people, obviously. One of the things that is extraordinary about Canada is that we’ve managed to keep a tremendously strong public support for immigration. And that has happened over generations, whether it was welcoming Ismaili refugees from East Africa in the early ’70s, whether it was the Vietnamese boat people in the early ’80s, whether it was successive waves of refugees fleeing from Eastern Europe and Kosovo and elsewhere. Within a few years they get integrated, they get good jobs, their kids become full Canadian while still proud of their own culture. And Canadians know that that path works. And the limit we have on how many people we can bring in is related not to some arbitrary number, but how well can we support the newcomers and integrate them effectively and quickly. If we do a good job of making sure that there’s a path to success for people who come here, public support will continue for immigration.

You look at America, you look at Britain, they were both, at least statistically, fantastic examples of immigrant success stories. And yet they’ve both elected or supported people who have been less pro-immigrant.

Canada is a country that has always accepted, from the very beginning, English vs. French, that someone different from you was just as much and just as legitimately a Canadian as you were. So we’ve managed to make of this pluralism the core of our national identity, rather than a shared history or language or superficial identity that we all have to ascribe to. And that, combined with a sense that success also includes your neighbor, that when your neighbor is doing well, you’re likely to do well, and a zero-sum game is not part of the Canadian psyche.

Isn’t that the point where you’re the most anti-Trump? A lot of the new president’s rhetoric is exactly about “I win, you lose,” or vice versa.

I think what we’ve been able to highlight to the new administration is that with Canada, at the very least, it’s not a zero-sum game. That a lot of great jobs on both sides of the border depend on this great relationship and will continue to. It is a way of moving forward that is very much one of the things I’m trying to push.