WASHINGTON: To date, most of the hand-wringing in Canada’s business community over the prospect of a Donald Trump White House has been over trade with the U.S.
But an expert in cross-border taxation and accounting says Canadian businesses and governments should also pay attention to Trump’s tax reform policies, which could make Canada less attractive to companies like Microsoft (NASDAQ:MSFT), which has built up a substantial presence in Vancouver. It could also trigger an outflow of talent from Canada to the U.S., which would have a much more competitive personal and corporate tax environment.
Although the Trans Pacific Partnership (TPP) appears to be dead on arrival, a former American ambassador to Canada said he thinks there is a chance Canada could get a softwood lumber agreement signed.
And even if Trump decides to withdraw from the North American Free Trade Agreement (NAFTA), former Canadian ambassador to the U.S. Gary Doer points out that the Canada-U.S. Free Trade Agreement is still there as a default trade agreement.
However, no matter how those trade negotiations go, Canada should be prepared to take some heat over the Bank of Canada’s monetary policies. Canada could be vulnerable to allegations that, like China, the country manipulates its currency to favour its own exports.
“The biggest problem with the lumber dispute is the value of the Canadian dollar,” Gordon Giffin, former American ambassador to Canada, told a sold-out crowd at a talk on dealing with Trump.
“When the value of the Canadian dollar is up over 80 or 85 cents, you don’t hear a lot of noise about [Canadian] softwood lumber. When you get the value of the Canadian dollar down around 75 cents or less, you [then] hear a lot of noise about softwood lumber,” said Giffin at the November 18 event sponsored by the Greater Vancouver Board of Trade.
Trump has singled out China as a currency manipulator, but both Doer and Giffin said Canada could face similar charges when discussing trade.
Last week, Trump listed his priorities for his first 100 days in office. Among them was withdrawing from the TPP. He did not mention NAFTA.
Softwood lumber is not part of NAFTA – it was specifically excluded at the request of the Canadian government. That means it’s possible Canada and the U.S. could get a new softwood lumber agreement signed before Trump gets around to NAFTA – possibly even by the time he is sworn in as U.S. president on January 20.
“I don’t totally object to the idea that there could be some deal struck between now and January 20,” Giffin said. “It’s not an issue that the Trump administration, I think, would desperately want to have postponed till they take government so they can grapple with it.” He pointed out the U.S. lumber lobby is strongest in the American Southeast, whereas it was the Midwest that elected Trump.
Trump wants a “hardhat” economy that is strong on job creation and construction, and access to low-cost Canadian lumber is part of that equation.
“I would focus on the fact that there are a lot of people who are trying to buy homes in the Midwest, and a lot of people that build homes in the Midwest that don’t really care what somebody who grows trees in Alabama and Mississippi and Georgia think,” Giffin said. Another dynamic at play is that a number of the sawmills now producing lumber in the AmericanSoutheast aren’t American – they’re Canadian.
