CANADA ECONOMICS

BUDGET

Department of Finance Canada. February 28, 2018. Budget 2018: Minister Morneau Brings Plan for Equality and Growth to the National Capital Region

Ottawa, Ontario – Making sure every Canadian has a real and fair chance at success is not just the right thing to do, it is the smart thing to do. Canada's future prosperity depends on it.

To face the challenges of today and tomorrow, the Government of Canada will need the hard work and creativity of all Canadians. In return, it needs to ensure the benefits of a growing economy are felt by more and more people—with good, well-paying jobs for the middle class and everyone working hard to join it.

Today, Finance Minister Bill Morneau met with the Economic Club of Canada in Ottawa to highlight Budget 2018, Equality + Growth: A Strong Middle Class, the Government's people-centred plan to strengthen the middle class and support economic growth. Guided by a new Gender Results Framework, Budget 2018 proposes several measures to ensure every Canadian has an equal and fair chance at success.

Canada's strong fiscal fundamentals—anchored by a low and consistently declining debt-to-GDP (gross domestic product) ratio—mean that the Government has the confidence to make the investments that will strengthen and grow the middle class, and lay a more solid foundation for our children's future.

Speaking at an event hosted by the Economic Club of Canada, Minister Morneau discussed how Budget 2018 builds on the Government's historic investments and proposes to:

• Put more money in the pockets of those who need it the most, by improving access to the Canada Child Benefit and introducing the Canada Workers Benefit, a stronger and more accessible benefit that will replace the Working Income Tax Benefit.
• Make significant progress towards equality of opportunity, by taking leadership to address the gender wage gap, supporting equal parenting, tackling gender-based violence and sexual harassment, and introducing a new entrepreneurship strategy for women.
• Support the next generation of researchers, by providing historic funding to increase opportunities for young researchers and provide them the equipment they need, while strengthening support for entrepreneurs to innovate, scale up and reach global markets.
• Advance reconciliation with Indigenous Peoples, by helping to close the gap between the quality of life of Indigenous and non-Indigenous people, providing greater support to keep First Nations children safe and supported within their communities, accelerating progress on clean drinking water, housing, and employment, and supporting recognition of rights and self determination.
• Protect the environment for future generations, by making historic investments to preserve our natural heritage, ensuring a price is put on carbon pollution across Canada, and extending support for clean energy projects.
• Uphold Canada's shared values and support the health and wellness of Canadians, by partnering with provinces and territories to address the opioid crisis, taking action to advance national pharmacare, and bolstering support for Canada's official languages.

By building on the Government's plan to invest in the middle class, Budget 2018 takes significant steps to ensure everyone has the opportunity to fully contribute to the economy, leading to economic growth that works for all Canadians.

Quote

"Our prosperity depends on every Canadian having the chance to contribute to and benefit from a strong and growing economy. Providing Canadians with the opportunity to realize their full potential isn't just the right thing to do, it's the smart thing to do. With Budget 2018, we are doubling down on our plan to grow and strengthen the middle class by promoting equality and investing in the economy of the future."

- Bill Morneau, Minister of Finance

Quick Facts

Budget 2018 supports Ottawa and the National Capital Region by:

• Building better communities through investments in cultural hubs by providing support to a new joint Library and Archives Canada facility in collaboration with the Ottawa Public Library.
• Providing support for the RCMP to renew radio systems in the National Capital Region to ensure that the RCMP continues to have reliable and secure voice communications and greater interoperability with other first responders.
• Investing $572.5 million over five years to enhance Canada's advanced computing and big data capabilities and deliver more open and equitable access to advanced computing resources with $52 million ongoing to implement a Digital Research Infrastructure Strategy.

FULL DOCUMENT: https://www.fin.gc.ca/n18/18-009-eng.asp

Department of Finance Canada. February 27, 2018. Budget 2018: Equality and Growth for a Strong Middle Class

Ottawa, Ontario – Making sure every Canadian has a real and fair chance at success is not just the right thing to do, it is the smart thing to do. Canada's future prosperity depends on it.

To face the challenges of today and tomorrow, the Government of Canada will need the hard work and creativity of all Canadians. In return, it needs to ensure the benefits of a growing economy are felt by more and more people—with good, well-paying jobs for the middle class and everyone working hard to join it.

Over the last two years, Canada's economic growth has been fuelled by a stronger middle class. Canadians' hard work, combined with the Government's historic investments in people and in communities, helped to create more good jobs—while more support for those who need it most has meant more money for people to save, invest, and spend in their communities.

To build on this progress, Finance Minister Bill Morneau today tabled Budget 2018—Equality + Growth: A Strong Middle Class—which supports the Government's people-centred approach. Guided by a new Gender Results Framework, Budget 2018 proposes measures to ensure that every Canadian has a real and fair chance at success.

Through Budget 2018, the Government is taking the next steps towards building an equal, competitive, sustainable, and fair Canada—where science, curiosity, and innovation spur economic growth. Budget 2018 also renews the Government's commitment to building a new relationship together with Indigenous Peoples, based on recognition of rights, respect, cooperation, and partnership. Furthermore, it remains focused on Canada's future and the things that truly matter to Canadians, with investments that protect our environment, support a sustainable low-carbon economy, and promote equality and prosperity for those who need it most at home and around the world.

Canada's strong fiscal fundamentals—anchored by a low and consistently declining debt-to-GDP (gross domestic product) ratio—mean that the Government has the confidence to make the investments that will strengthen and grow the middle class, and lay a more solid foundation for our children's future.

Budget 2018 further builds on historic investments included in previous federal budgets and proposes to:

• Put more money in the pockets of those who need it the most, by improving access to the Canada Child Benefit and introducing the Canada Workers Benefit, a stronger and more accessible benefit that will replace the Working Income Tax Benefit.
• Make significant progress towards equality of opportunity, by taking leadership to address the gender wage gap, supporting equal parenting, tackling gender-based violence and sexual harassment, and introducing a new entrepreneurship strategy for women.
• Support the next generation of researchers, by providing historic funding to increase opportunities for young researchers and provide them the equipment they need, while strengthening support for entrepreneurs to innovate, scale up, and reach global markets.
• Advance reconciliation with Indigenous Peoples, by helping to close the gap between the quality of life of Indigenous and non-Indigenous people, providing greater support to keep First Nations children safe and supported within their communities, accelerating progress on clean drinking water, housing, and employment, and supporting recognition of rights and self determination.
• Protect the environment for future generations, by making historic investments to preserve our natural heritage, ensuring a price is put on carbon pollution across Canada, and extending support for clean energy projects.
• Uphold Canada's shared values and support the health and wellness of Canadians, by partnering with provinces and territories to address the opioid crisis, taking action to advance national pharmacare, and bolstering support for Canada's official languages.

By building on the Government's plan to invest in the middle class, Budget 2018 takes significant steps to ensure everyone has the opportunity to fully contribute to the economy, leading to economic growth that works for all Canadians.

Quote

"With this budget, built by and for all Canadians, we are tackling the challenge of equality head-on—asking tough questions, and beginning to provide solutions. We will continue to double down on our plan to invest in the middle class and everyone working hard to join it. It's a plan that puts people first, builds on the hard work of Canadians, and keeps us squarely focused on the future—so that our children have better opportunities to follow their dreams, find good jobs, and give back to their community."

- Bill Morneau, Minister of Finance

FULL DOCUMENT: https://www.fin.gc.ca/n18/18-008-eng.asp

Employment and Social Development Canada. February 28, 2018. Budget 2018: Equality and growth for the middle class in Winnipeg

Winnipeg, Manitoba - The Government of Canada is building on its successful long-term plan that focuses on people and on the things that matter most to Canadians.
Providing all Canadians with opportunities to participate fully in the economy is not only the right thing to do, it is the smart thing to do—leading to stronger growth for the middle class and those working hard to join it.
Now is the right time to build an economy that truly reflects the diversity of our country, where all Canadians can contribute to—and share in—Canada’s prosperity.
Today, the Honourable Patty Hajdu, Minister of Employment, Workforce Development and Labour, was in Winnipeg, Manitoba, to highlight Budget 2018, Equality + Growth: A Strong Middle Class, the Government’s people-centred plan to strengthen the middle class and support economic growth.
Speaking at an event at the Canadian Museum for Human Rights, Minister Hajdu discussed how the Government is making new investments through Budget 2018 that ensure every Canadian has an equal chance at success.

Through Budget 2018, the Government will:

• Make significant progress towards equality by supporting equal parenting, addressing the gender wage gap, taking action against gender-based violence and introducing a new Women Entrepreneurship Strategy.
• Put more money in the pockets of those who need it the most by improving access to the Canada Child Benefit and introducing the new Canada Workers Benefit (a strengthened version of the Working Income Tax Benefit). 
• Support science and innovation by renewing the Government’s commitment to the next generation of research and researchers, providing record investments for researchers and equipment, and reforming business innovation programs to make it easier for Canadian businesses to get the information and support they need to succeed at home and abroad. 
• Advance reconciliation with Indigenous people by investing to close the gap between the living conditions of Indigenous and non-Indigenous people, ensuring First Nations children are safe within their communities and supporting the recognition of rights and self-determination.

By building on the Government’s plans to invest in the middle-class, Budget 2018 takes additional significant steps to ensure everyone has the opportunity to fully participate in the Canadian economy, leading to economic growth that works for all.

Innovation, Science and Economic Development Canada. February 28, 2018. Budget 2018: Equality and Growth for the Middle Class in Waterloo

Waterloo, Ontario - The Government of Canada is building on its successful long-term plan that focuses on people and on the things that matter most to Canadians.

Providing all Canadians with opportunities to participate fully in the economy is not only the right thing to do but also the smart thing to do, and it will lead to stronger growth for the middle class and those working hard to join it.

Now is the right time to build an economy that truly reflects the diversity of our country, where all Canadians can contribute to—and share in—Canada’s prosperity.

Today, the Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development, was in Waterloo to highlight Budget 2018, Equality + Growth: A Strong Middle Class, the Government’s people-centred plan to strengthen the middle class and support economic growth.

Minister Bains spoke to students at Wilfrid Laurier University and discussed how the Government is making new investments through Budget 2018 that ensure every Canadian has an equal chance at success.

Through Budget 2018, the Government will:

• make significant progress toward equality by supporting equal parenting, addressing the gender wage gap, taking action against gender-based violence and introducing a new Women Entrepreneurship Strategy;
• put more money in the pockets of those who need it the most by improving access to the Canada Child Benefit and introducing the new Canada Workers Benefit (a strengthened version of the Working Income Tax Benefit);
• support science and innovation by renewing the Government’s commitment to the next generation of research and researchers, providing record investments for researchers and equipment, and reforming business innovation programs to make it easier for Canadian businesses to get the information and support they need to succeed at home and abroad; and
• advance reconciliation with Indigenous Peoples by investing to close the gap between the living conditions of Indigenous and non-Indigenous people, ensuring First Nations children are safe within their communities, and supporting the recognition of rights and self determination.

By building on the Government’s plans to invest in the middle class, Budget 2018 takes additional significant steps to ensure everyone has the opportunity to fully participate in the Canadian economy, leading to economic growth that works for all.

Quotes

“It’s time to build an economy that truly reflects the values we share as Canadians. Together, we can create an economy that works for all of us and a country where differences are recognized not as a barrier to success but as a source of strength, and where we all have the same opportunity to succeed.”

– The Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development

Employment and Social Development Canada. February 28, 2018. Budget 2018: Equality and growth for the middle class in Quebec

Quebec, Quebec -  The Government of Canada is building on its successful long-term plan that focuses on people and on the things that matter most to Canadians.

Providing all Canadians with opportunities to participate fully in the economy is not only the right thing to do, it is the smart thing to do—leading to stronger growth for the middle class and those working hard to join it.

Now is the right time to build an economy that truly reflects the diversity of our country, where all Canadians can contribute to—and share in—Canada’s prosperity.

Today, the Honourable Jean-Yves Duclos, Minister of Families, Children and Social Development was in Quebec to highlight Budget 2018, Equality + Growth: A Strong Middle Class, the Government’s people-centred plan to strengthen the middle class and support economic growth.

Speaking at an event at the Musée de la civilisation, Minister Duclos discussed how the Government is making new investments through Budget 2018 that ensure every Canadian has an equal chance at success.

Through Budget 2018, the Government will:

• Make significant progress towards equality, by supporting equal parenting, addressing the gender wage gap, taking action against gender-based violence and introducing a new Women Entrepreneurship Strategy.
• Put more money in the pockets of those who need it the most, by improving access to the Canada Child Benefit and introducing the new Canada Workers Benefit (a strengthened version of the Working Income Tax Benefit).
• Support science and innovation, by renewing the Government’s commitment to the next generation of research and researchers, providing record investments for researchers and equipment and reforming business innovation programs to make it easier for Canadian businesses to get the information and support they need to succeed at home and abroad.
• Advance reconciliation with Indigenous people, by investing to close the gap between the living conditions of Indigenous and non-Indigenous people, ensuring First Nations children are safe within their communities and supporting the recognition of rights and self-determination.

By building on the Government’s plans to invest in the middle class, Budget 2018 takes additional significant steps to ensure everyone has the opportunity to fully participate in the Canadian economy, leading to economic growth that works for all.

Quotes

“It’s time to build an economy that truly reflects the values we share as Canadians. Together, we can create an economy that works for all of us and a country where differences are recognized not as a barrier to success, but as a source of strength, and where we all have the same opportunity to succeed.”

– The Honourable Jean-Yves Duclos, Minister of Families, Children and Social Development

Treasury Board of Canada Secretariat. February 28, 2018. Budget 2018: Equality and Growth for the Middle Class in Halifax

Halifax, Nova Scotia – The Government of Canada is building on its successful long-term plan that focuses on people and on the things that matter most to Canadians.

Providing all Canadians with opportunities to participate fully in the economy is not only the right thing to do, it is the smart thing to do – leading to stronger growth for the middle class and those working hard to join it.

Now is the right time to build an economy that truly reflects the diversity of our country, where all Canadians can contribute to – and share in – Canada’s prosperity.

Today, the Honourable Scott Brison, President of the Treasury Board, was in Halifax to highlight Budget 2018, Equality + Growth: A Strong Middle Class, the Government’s people-centred plan to strengthen the middle class and support economic growth.

Speaking at an event at Saint Mary’s University with local students, Minister Brison discussed how the Government is making new investments through Budget 2018 that ensure every Canadian has an equal chance at success.

Through Budget 2018, the Government will:

• Make significant progress towards equality, by supporting equal parenting, addressing the gender wage gap, taking action against gender-based violence and introducing a new Women Entrepreneurship Strategy.
• Put more money in the pockets of those who need it the most, by improving access to the Canada Child Benefit and introducing the new Canada Workers Benefit (a strengthened version of the Working Income Tax Benefit).
• Support science and innovation, by renewing the Government’s commitment to the next generation of research and researchers, providing record investments for researchers and equipment, and reforming business innovation programs to make it easier for Canadian businesses to get the information and support they need to succeed at home and abroad.
• Advance reconciliation with Indigenous Peoples, by investing to close the gap between the living conditions of Indigenous and non-Indigenous people, ensuring First Nations children are safe within their communities, and supporting the recognition of rights and self-determination.

By building on the Government’s plans to invest in the middle-class, Budget 2018 takes additional significant steps to ensure everyone has the opportunity to fully participate in the Canadian economy, leading to economic growth that works for all.

Quotes

“Together, we are building an economy that truly reflects the values we share as Canadians.  At a time when nationalism, populism and division are threatening economic and political stability elsewhere, Canada’s recipe for diversity, inclusion and shared prosperity is working.” 

The Honourable Scott Brison, President of the Treasury Board of Canada

BANK OF CANADA. February 27, 2018. Background information on the bank note legal tender initiative in Budget 2018

Ottawa, Ontario - The Bank of Canada today published additional information on the federal government’s 2018 budget initiative to seek the authority to remove legal tender status from Canadian bank notes.

Having the authority to remove legal tender status from bank notes would match the authority the government currently has for coins issued by the Royal Canadian Mint. The Bank of Canada supports this initiative because it can help the Bank ensure that bank notes used by Canadians are current, in good condition, easy to use and difficult to counterfeit.

As stated in Budget 2018, if this power is granted by Parliament, the government’s intention is to remove legal tender status from the $1, $2, $25, $500 and $1,000 bank notes. Removing legal tender status from these older notes is expected to have little impact on most Canadians, as these denominations have not been produced in decades and are rarely used in transactions. Importantly, removal of legal tender status does not mean these notes will lose their face value; the Bank of Canada will continue to honour them.

If the government is granted this power, the Bank of Canada will provide clear information to Canadians on how to redeem the affected bank notes. This will involve a period during which the notes can be redeemed through financial institutions—as Canadians can do today. After this period, the notes can be redeemed directly through the Bank of Canada.

There are currently no plans to remove legal tender status from any other bank notes.

The Globe and Mail. 28 Feb 2018. 12 THINGS YOU NEED TO KNOW. THE FEDERAL BUDGET: WHAT YOU NEED TO KNOW
MICHELLE ZILIO, TOM CARDOSO AND MATT LUNDY,  With reports from Ivan Semeniuk

OTTAWA - In the federal Liberals’ first budget, in 2016, the word “gender” appeared twice.



This time around, “gender” was used 358 times.

As expected, gender equality was a major theme of the 2018 federal budget, such that “every single decision on expenditure and tax measures was informed” by a gender-based analysis, according to the government.

To that end, the budget included new measures aimed at encouraging greater participation of women in the work force, along with a “use-it-or-lose-it” program to encourage more men to take paid parental leave.

The budget included a host of other proposals, including final details on taxing passive investment income, a pharmacare advisory council and bulked-up funding for research.

Here are 12 things you need to know about the budget.

1. BUDGET BALANCE

This year’s budget is mostly in line with previous estimates from Finance Canada that, for the foreseeable future, the federal government will be running a deficit. Budget 2018 revises the government’s deficit projections downward by an average of $167-million each year compared with the fall update. At this point, the closest Ottawa will come to a balanced budget will be in fiscal year 2022, with a $12.3billion deficit. Finance Minister Bill Morneau has repeatedly emphasized in past budgets that the government considers the federal debt-to-GDP ratio just as important as the overall balance. That measure is projected to continue to decrease, from 30.4 per cent in 2017-18 to 28.4 per cent by 2022-23.

2. GENDER EQUALITY

The budget proposes pay-equity legislation for employees in the federal government and federally regulated sectors, but fails to put a dollar amount on that plan. The legislation, which will draw on models from Ontario and Quebec, will ensure that men and women receive the same pay for equal work.

Preliminary estimates suggest the legislation could reduce the gender-wage gap by about 2.7 cents on the dollar for the federal government and 2.6 cents for the federally regulated private sector, according to the budget.

3. PARENTAL LEAVE

The government is proposing $1.2-billion over five years to create a new five-week “use-it-orlose-it” incentive for new fathers to take parental leave. The Employment Insurance Parental Sharing Benefit would increase EI parental leave to a maximum of 40 weeks in cases where the second parent agrees to take at least five weeks off. The benefit covers 55 per cent of the second parent’s income for as much as 12 months.

In cases where families have opted for the extended parental leave of 18 months, the second parent would be able to take as much as eight weeks of additional parental leave, paid out at 33 per cent of their income.

The benefit would also be offered to adoptive and same-sex couples and will be made available starting in June, 2019.

It is meant to encourage parents to share the responsibilities of raising a child and to provide greater flexibility for mothers so they can return to the work force sooner.

4. INDIGENOUS ISSUES

The government is proposing to invest $447million over five years to create a new Indigenous Skills and Employment Training Program. The program, which will replace the Aboriginal Skills and Employment Training Strategy, will help close the employment and pay gap between Indigenous and non-Indigenous people by focusing on training for higher-quality, better-paying jobs.

The budget also proposes more than $1.4billion over six years for First Nations child and family services. Indigenous children under the age of 14 make up 7.7 per cent of all children in Canada, but represent more than half of all children in foster care.

5. CANADA WORKERS BENEFIT

Ottawa wants to increase the take-home pay of low-income workers through a revamped tax credit. The budget unveiled the Canada Workers Benefit, which takes effect in 2019 and is essentially a “more generous” and “more accessible” version of the Working Income Tax Benefit, according to the government. The proposal calls for maximum benefits to increase, as well as raising the income level at which the benefit is phased out.

6. PHARMACARE

Dr. Eric Hoskins, who resigned his position as Ontario’s health minister on Monday, will chair an advisory council given the task of performing an economic assessment and running consultations on the feasibility of a national pharmacare program.

National pharmacare could represent significant savings for both patients and the government. A 2016 Parliamentary Budget Office analysis estimated that of the $28.5-billion spent on prescription drugs in 2015, $24.6-billion would be eligible for coverage under a national pharmacare program and that a true national prescriptiondrug program would cost $20.2-billion. In other words, national pharmacare could represent a savings of roughly $4.2-billion annually, in large part because governments would have a stronger position in price negotiations.

7. SMALL-BUSINESS TAX REFORM

The budget unveiled new details on the taxation of passive investment income inside private corporations.

When companies earn between $50,000 and $150,000 in a given year from passive investments, a reduced amount of their active business income will be eligible for the smallbusiness tax rate, which will be 9 per cent in 2019. The reduction will occur on a straightline basis, with eligible income decreasing by $5 for every $1 of passive income above the $50,000 threshold.

Companies exceeding $150,000 in passive income will no longer be eligible for the smallbusiness tax rate. Those with passive income under $50,000 will not be affected, as was mentioned in a revised proposal.

8. RESEARCH FUNDING

In total, the budget commits $3.8-billion more over the next five years to support science. A large share of this will be aimed at stepping up funding in physical and life sciences, social sciences and health for fundamental research at universities and other institutions. By 2023, scientists will have roughly half-a-billion more for fundamental research than they do today. That’s a far cry from the $1.3-billion increase that an independent review of Canada’s fundamental science ecosystem recommended last year, but it’s enough for the government to claim that it has just made the largest increase to fundamental science ever in Canada – about 25 per cent.

9. CYBERSECURITY

The 2018 budget has allocated $508-million, spread out until 2022-23. The funds will be used primarily by the Communications Security Establishment to create a new Canadian Centre for Cyber Security, as well as a National Cybercrime Co-ordination Unit for the RCMP. In the weeks leading up to the budget, news reports suggested the government could invest as much as $1-billion in cybersecurity resources and infrastructure. Wesley Wark, a professor at the University of Ottawa and an expert in cybersecurity, warned that this figure was lower than what the government should be spending.

10. PHOENIX PAY SYSTEM

The federal government announced in the budget that it will eventually move away from its problem-plagued Phoenix pay system – which has overpaid, underpaid or completely failed to pay tens of thousands of public servants – and invest $16-million over two years to develop a new pay system.

In the meantime, Ottawa is planning to continue to invest in Phoenix for years to come.

11. G7 SUMMIT FUNDING

Canada is planning to spend $594-million on its 2018 presidency of the G7 and the corresponding leaders’ summit it will hold in Charlevoix, Que., this June, according to the budget. The funding will also cover security and logistics for other high-profile G7 ministerial meetings across Canada throughout 2018.

12. JOURNALISM



As expected, the government will explore ways for news outlets to benefit from non-profit status. It also proposed providing $50-million over five years to one or more non-governmental organizations supporting local journalism “in underserved communities.” The funding is far less than what some groups had wanted.

The Globe and Mail. 28 Feb 2018. Sprinkling of new spending aimed at female voters
BILL CURRY
ROBERT FIFE
BARRIE McKENNA

I would consider this to be very much a left-of-centre budget because of the focus on equality. If you look at the title of the budget, it’s equality and growth. But I would argue that it’s about equality in capital letters and growth in small letters.

CRAIG ALEXANDER

CHIEF ECONOMIST FOR THE CONFERENCE BOARD OF CANADA

OTTAWA - The Liberal government is spending the extra cash from a stronger economy on a wide range of areas – particularly scientific research and job programs for women – with a budget that also takes a new approach to its controversial tax plan for small businesses.

Finance Minister Bill Morneau’s third budget uses about $3.3-billion in new projected annual revenue that has resulted from stronger economic growth to fund the 2018 budget’s sprinkling of new spending aimed at various voting groups, particularly on the left. As a result, the government’s fiscal track is largely unchanged from the fall. An $18.1-billion deficit is projected for 2018-19, with no timeline for returning to a surplus, as the Liberals promised during the 2015 election campaign. The federal debt will reach $651.5-billion in 2017-18, rising to $730.1-billion by 2022-23.

The government titled its third budget “Equality + Growth,” but it does not include many of the measures economists and business leaders had recommended to help the economy. Specifically, it has no tax cuts or incentives that some wanted as a response to the major U.S. tax cuts approved this year . The budget also does not include measures to ease investor uncertainty over the fate of the North American free-trade agreement.

Mr. Morneau said his department will study the U.S. tax plan to see how Canada might respond. But he also pointed out that the tax cuts will lead to higher U.S. deficits.

“It’s not news to me that business is asking for lower tax rates,” Mr. Morneau told reporters. “I was in business. I would say that’s a pretty common refrain. What we need to do is to make sure we get it right. We want to make sure that we take a fiscally responsible approach. It’s interesting to me that the same people that are asking us to lower our taxes are the people that are telling me to stay fiscally responsible.”

He said Canada’s economy can be expanded through targeted federal investments in new technologies. The government plans to spend almost $4-billion over the next five years on science and research.

The budget promises to help women enter trades or get apprenticeships and to give an extra $10-million this year and $15-million next year to women’s organizations. And it says it will ensure that more women get academic funding, judicial appointments and financial help for starting businesses.

The budget backs off a controversial plan for a heavy tax on small companies’ passive investment income – money made by investing in shares, bonds or other sources unrelated to their main business.

The new plan will focus on limiting access to the lower small-business tax rate for private corporations with assets of more than $1-million.

Canadian-owned companies with annual income of up to $500,000 a year have a special, lower tax rate than larger companies do. As the government announced in the fall, the smallbusiness rate will to drop to 9 per cent in 2019, down from 10.5 per cent in 2017 and 10 per cent this year. The rate for larger companies is 15 per cent.

\ And both rates are significantly lower than what individuals pay. Under the changes announced on Tuesday, small businesses will pay the lower small-business rate on as much as $50,000 a year of the passive investment income they generate. The rate will gradually climb on any income above that level, eventually reaching the maximum of 15 per cent on income above $150,000 a year.

Ottawa had earlier proposed heavily taxing passive investment income when business owners tried to withdraw it from their companies. Doctors, farmers and other small-business owners had complained they could face combined tax rates of as much as 70 per cent – well above the top tax rates for personal income.

Small-business groups say the changes in the budget are better than the original plan, but will still take money out of the hands of entrepreneurs that they would otherwise reinvest in their companies or save for retirement.

Another key change in the budget concerns infrastructure spending. The government acknowledges that its ambitious plan to spend $180-billion over 10 years in this area is not rolling out as quickly as planned. Unspent money has been pushed ahead into future years, although Ottawa says this is largely owing to accounting issues rather than construction delays.

The budget also gives the green light for Via Rail Canada Inc. to buy new trains for its principal corridor in Quebec and Ontario. Further money is set aside to study Via’s proposed “highfrequency rail” plan, which would expand services in the Quebec City-to-Windsor corridor.

The budget’s appeal to women and the promise of a pharmacare study headed by former Ontario health minister Eric Hoskins appear to be aimed at center-left Canadians who might consider voting for the New Democratic Party.

New Leader Jagmeet Singh is promising to make a national pharmacare program part of the NDPs platform for the next election.

The budget also appears designed to shore up Liberal support in Atlantic Canada and rural areas that depend on seasonal employment. The government promised to respond to complaints from seasonal workers about the employment-insurance system to help families in fish processing and tourism make ends meet until the new work season begins. It also pledged to spend more on smallcraft harbours.

Regional development agencies will receive a total of $1.3billion over five years, with more than $900-million going to voterich Ontario.

“I would consider this to be very much a left-of-centre budget because of the focus on equality,” said Craig Alexander, chief economist for the Conference Board of Canada. “If you look at the title of the budget, it’s equality and growth. But I would argue that it’s about equality in capital letters and growth in small letters.”

Conservative Leader Andrew Scheer said big-spending Liberal budgets are not producing results.

“Justin Trudeau is failing to balance the budget by 2019 as he promised, ensuring that future generations of Canadians will have more and more debt to pay back,” he said.

The NDP’s Mr. Singh called Tuesday’s budget a “timid” document that fails to act on pharmacare or close tax loopholes that favour the rich.

“On pharmacare, what the government is proposing is not a plan. It is a fantasy,” he said, noting that the Liberals’ promised study does not come with a funding pledge.

The Globe and Mail. 28 Feb 2018. In the Liberal era, this is what an austerity budget looks like
DAVID PARKINSON

The economy is running full-out, at or very close to its peak in this economic cycle.

OTTAWA - The boat for a return to a balanced budget in Ottawa has sailed. This government has no realistic route to get there – and frankly, it’s not too worried about it. This budget cements that.

You might think that with an economic cycle near its peak, an economy running at full capacity and an election a year and a half away, a government that was elected on a promise of shortterm deficits and a return to balanced budgets would want to take its foot off the gas and restock its fiscal ammunition. There may be no better time for an austerity budget.

Well, guess what? You’ve just seen it. This is as austere as this government is going to get.

The 2018-19 budget tabled by Finance Minister Bill Morneau Tuesday has an $18.1-billion deficit gracing its bottom line – a substantial improvement over the $27.4-billion the government had forecast for the year when it issued its projections in last year’s budget.

The improvement is almost entirely a function of improved revenue expectations from a stronger economy; this isn’t a case of a government reining in its spending. But lest you start thinking this is leading to a balanced budget down the road, it’s not on any road this government is mapping. By the end of the government’s five-year projection period, 2022-23, it still figures we’ll be looking at a $12-billion shortfall. It will fight the next election, in the fall of 2019, with something like a $17.5-billion deficit – a far cry from its 2015 election promise to balance the books by its election-year budget.

The government some time ago redefined its yardstick for fiscal responsibility not as the budget balance, but rather in terms of Canada’s ratio of debt to gross domestic product – arguing that as long as it is inching debt-to-GDP lower, all is good. And it’s not an unreasonable position; most economists would agree that debt-to-GDP is a fair measure of a country’s capacity to carry debt. And Canada’s debt-to-GDP ratio, at a touch over 30 per cent and slowly falling despite the annual budget deficits, is in pretty good shape – although its decline has slowed to a snail’s pace.

But when your annual deficits keep piling onto the numerator in that equation, you’re counting on a rising denominator – GDP – to keep your head above water. And GDP growth in this cycle almost certainly already peaked, with last year’s estimated 3-per-cent spurt. We’re certainly closer to the end of the current cycle of economic expansion than the beginning. Economists see a slowdown is in our future. Should something push that slowdown over the edge and into a recession, it doesn’t take a math professor to see that debt-to-GDP ratio swelling.

The Liberals’ previous two budgets were all about changing the direction of government after almost a decade under the Conservatives, and there was a cost to that – to increasing infrastructure investment, to redistributing taxes, to generally rebuilding the role of government in areas where it felt the Conservatives had neglected it in the name of fiscal restraint and small-government idealism. There was also an urgency to spend the money early in its mandate, to provide a fiscal stimulus to an economy that was struggling.

But much of that work is now done. The fundamental shift in policy direction is now quite firmly entrenched in the budget. And significantly, the economy is now back on its feet – indeed, as Mr. Morneau was quite happy to boast, it is doing very well.

“We have an extremely positive situation in our economy right now,” Mr. Morneau said in a news conference Tuesday. “We’re in a very good position.”

Exactly. The economy is running full-out, at or very close to its peak in this economic cycle. Fiscal Policy 101 dictates that this is when a government slows the spending engines, as the economy can get by quite nicely without its additional help. It’s an excellent time to get your deficit house in order so you have as much room as possible to provide stimulus when the next downturn inevitably arrives

(and your prized debt-to-GDP ratio has room to rise). Especially when the bulk of your long-term economic redesign is already in place.

And given the uncertainties surrounding the NAFTA negotiations, there’s a very real risk that such a downturn could be accelerated by a trade-triggered economic shock. It would be prudent for the government to take maximum advantage of the current window to slash its deficit and restore fiscal space.

But this budget demonstrates the government isn’t prepared to meaningfully restrain its spending to take advantage of that opportunity.

Yes, there is evidence of some restraint. Program spending is budgeted to increase just 2.5 per cent in fiscal 2018-19, well below the pace of revenue growth (4.5 per cent) and of projected nominal GDP (4 per cent), the key economic indicator for revenue capacity. That’s a lot slower than the 6-per-centplus pace of the past two years, so at least the government is controlling itself relative to its own past tendencies.

But beyond this budget, the government anticipates program spending growth to be 3 per cent in 2019-20 – the preelection budget – and roughly 3 per cent thereafter. It tracks only modestly lower than projected nominal GDP and revenue growth; as a result, the deficit shrinks only modestly from year to year.

Indeed, the government’s appetite for spending every dollar that lands in its lap is proving hard to suppress. Since issuing updated budget projections last fall, the government found an extra $5.8-billion to put toward its 2018-19 budget balance. The budget it tabled Tuesday spends $5.4-billion of it.

In his budget speech, Mr. Morneau reminded Canadians that this is what they signed up for when they elected a Liberal government in 2015: a government committed to investing in the future, not one that saw balanced budgets as the fiscal holy grail.

But in sticking to his guns on increased investment, at a time when the economy clearly doesn’t need the additional stimulus, Mr. Morneau is missing an opportunity to jump off the spending merry-go-round while he can. If this is as restrained as his government is willing to get, it may not be nearly enough to prepare the country for the inevitable economic storm.

The Globe and Mail. 28 Feb 2018. Budget doesn’t deliver on child care
GLORIA GALLOWAY

The Liberal government’s new economic plan extolls the need to create more space for women in the Canadian work force but offers little financial assistance to make that happen.

Finance Minister Bill Morneau named the budget he released on Tuesday Equality + Growth, and many of its pages contain measures aimed at making it easier for women to get jobs and hold them while balancing family responsibilities.

“We believe that Canada’s future success rests on making sure that every Canadian has an opportunity to work, and to earn a good living from that work,” Mr. Morneau told the House of Commons. “And that includes Canada’s talented, ambitious and hard-working women.”

The Finance Minister points to some lamentable realities. On average, women earn 69 cents for every dollar earned by men on an annual basis, even though three-quarters of young women have a postsecondary certificate or degree. And even women who graduated from highdemand fields such as science, technology, engineering and math earn, on average, $9,000 a year less than their male counterparts.

The government proposes to tackle the gender gap with a variety of measures. It is promising, for instance, to take what Mr. Morneau describes as a “historic and meaningful” step by introducing pay-equity legislation in federally regulated sectors.

Making the act of paying women less than men for work of equal value illegal would go a long way toward achieving gender equality in the workplace, says Kathleen Lahey, a law professor at Queen’s University in Kingston, Ont., who has studied the issue. “Iceland seems to have done that without too much difficulty,” she said, “so why not Canada?”

But there is no dollar amount attached to the proposed law in the budget documents and there are no plans to introduce the legislation until the fall at the earliest.

A new EI Parental Sharing Benefit, based on a program currently in effect in Quebec, encourages a second parent (often the father) to share in the care-giving of a baby by providing an extra five weeks of employment insurance benefits on top of the 35 weeks that are already available to the family.

“The hope is that, in the long run, it nudges dads toward taking on more primary caregiver responsibilities,” said Tammy Schirle, an expert on gender wage differentials at Wilfrid Laurier University in Waterloo, Ont., who added she is not certain the measure will be as effective as the government hopes.

But it will not cost Ottawa much money because increases to EI premiums and other factors are expected to make the benefit revenue-neutral.

The government is also increasing the amount that low-income workers can obtain under a Canada Workers Benefit (formerly the Working Income Tax Benefit) by $170 a year next year and increasing the amount they can earn before that benefit is phased out completely.

But advocates for the working poor had hoped the government would also change the rules to allow both partners in a two-income family of low-wage earners to collect it. That did not happen.

“Right now, only one person in the family can claim the benefit and, more often than not, it’s the men,” Dr. Schirle said. “If more than one person in a family could claim it, that would make it better in terms of supporting women’s work.”

The government has promised to help women enter trades or get apprenticeships. It is giving an extra $10-million this year and $15-million next year to women’s organizations. And it says it is taking steps to ensure that more women get academic funding, appointments to the judiciary and financial help for starting businesses. But the biggest incentive the government could have offered to help women enter and stay in the work force – increased availability to affordable child care – was not in the budget.

Dr. Schirle said the government could have introduced a refundable tax credit that would have subsidized the cost of child care, even for low-income earners who do not benefit from the existing tax deductions.

Ms. Lahey said she believes the government needs to introduce, as quickly as possible, a fully subsidized child care program that would provide spaces for children of all ages.

But the budget introduced on Tuesday did neither. There is no new money for child care – only boasts about agreements that Ottawa has made with provinces to spend the money it has already committed.

The Globe and Mail. 28 Feb 2018. Liberals deliver their version of an Orange Wave budget
CAMPBELL CLARK

It’s a good bet that the first step in making this budget was figuring out how much [ Finance Minister Bill] Morneau had to spend without making people talk about the deficit.

It’s the NDP platform on a Liberal budget. Finance Minister Bill Morneau might as well have cherry-picked rubrics from the New Democrats’ policy book, changed the wording and squeezed them into the few billions that could be spent without blowing up last year’s deficit projections.

In fact, that’s pretty much what he did. The budget included a newly named Canada Workers Benefit, built out of an existing refundable tax credit, that looked a lot like the Working Canadians Guarantee in Jagmeet Singh’s NDP leadership campaign. There was a promise of payequity legislation and new parental leave aimed at achieving gender equity. There was an increase in feminist foreign aid and $1-billion a year for Indigenous services, notably family services. There was rhetoric about cracking down on tax evasion and reforming pension protections after Sears Canada employees were hit in a bankruptcy – two NDP talking points.

And then Mr. Morneau signalled that the Liberals will eventually steal an item the NDP was expected to put in their 2019 election platform – a national pharmacare plan – by announcing an advisory council to propose specifics.

The Finance Minister touched a lot of NDP themes without earmarking massive sums.

This was social-justice spending on a Liberal shoestring. That is, it wasn’t an austerity budget, because it increased spending, but it kept the spending within constraints.

It said a lot about the Liberals’ political priorities. They believe their fight in next year’s election is on the left and relies on promising equity and equality to keep the NDP from making inroads – fitting for a government led by Justin Trudeau, son of a prime minister who promised a “Just Society.” They think Canadians don’t care about eliminating the deficit, as long as they’re reassured it’s under control.

There was one major aspect of Mr. Morneau’s budget that wasn’t generic progressive politics and more big-L Liberal branding: Mr. Morneau earmarked significant sums – rising to more than $1-billion in five years – for scientific research and reorganized industrial “innovation” programs.

Some of that makes good policy sense, but the budget, titled Equality + Growth, made the Liberal economic plan seem a simplistic equation: You fund science and technology to boost economic growth and then spend the proceeds on equity.

In fact, Mr. Morneau stuck with pretty much the same deficit projections that he set in last fall’s economic update. Since then, the Finance Department has revised its estimates to project that the deficits over the next five years will actually be $3-billion or $4-billion smaller than was projected last fall, so Mr. Morneau is increasing spending by the same amount. A penny saved is a penny spent.

It’s a good bet that the first step in making this budget was figuring out how much Mr. Morneau had to spend without making people talk about the deficit.

The Finance Minister then used a variety of crafty methods to stretch the money. The Canada Workers Benefit was mostly funded by sums Mr. Morneau announced last fall. The five weeks of extra parental leave, which must be taken by a second parent, is financed from employment insurance funds, so it doesn’t have an impact on the deficit.

In the end, the budget that spent billions of dollars touched a variety of popular progressive themes and still didn’t change deficit projections. Inside Mr. Trudeau’s government, that’s probably the definition of budget success.

Some of the touted measures, such as those aimed at closing the gender gap, are too small to have a big impact.

The five weeks of use-it-or-lose-it parental leave, aimed at fathers, will encourage a lot of men to take some parental leave but not necessarily share it equitably with mothers, who take more than 40 weeks on average.

But politically, it’s a good bet that the Liberals will still get credit from many voters, notably progressive female voters, who will judge them on their motivations; even if they don’t believe it will radically change the gender gap, many will see it as a good start.

A lot of this budget is about displaying the Liberals’ progressive intentions. The Conservatives can complain they should have cut the deficit or taxes, but Mr. Morneau didn’t give them any new targets, and on Tuesday he was crowing that the economy is humming along.

The NDP can complain its measures don’t go far enough, but Mr. Morneau just stole a lot of their campaign rhetoric – and he’s coming back for pharmacare next year. It was a former corporate CEO delivering his version of an Orange Wave budget – and 20 months from voting day, the first of two pre-election budgets.

The Globe and Mail. 28 Feb 2018. EDITORIAL. Liberal budget misses the point

Speaking to reporters in Toronto earlier this month, Bill Morneau said the government wasn’t going to be “impulsive” in the face of tax reform in the United States and its serious threat to the competitiveness of Canadian business.

Well, mission accomplished. The Finance Minister has released his budget, and it doesn’t react at all. The seismic impact of Trumponomics, with its blend of low taxes and know-nothing protectionism, makes barely a ripple in the serene document the Liberals have tabled.

The budget focuses on inoffensive, broadly agreeable policies like equal pay for equal work in federally regulated sectors, and money for scientific research. But on corporate taxes and trade, the two areas where Canada’s economy is vulnerable, the government is doing very little.

Mr. Morneau has argued, and argued again on Tuesday, that we should avoid being knee-jerk in our response to shifts in American policy. He makes some good points. Details of the U.S. tax changes haven’t been fully hammered out, which makes them hard to respond to.

Mr. Morneau also points out that while business groups have been calling for a corresponding Canadian corporatetax cut, business groups are always calling for tax cuts – as a former Bay Street stalwart, he should know.

But playing it cool can easily shade into complacence. The Liberals risk crossing that line.

The U.S. will have a lower average corporate-tax rate than Canada once its reforms are fully implemented, and has lowered income taxes for the wealthy. The Trump administration has wiped out a huge part of our competitive advantage in attracting investment and investors.

Meanwhile, NAFTA negotiations are in a parlous state, with the U.S. President reportedly losing his temper at his Mexican counterpart during a phone call ahead of official talks in Mexico City, and again accusing Canada of getting the better of the U.S. on trade.

Facing the dangerous prospect of an investment exodus over taxes and investors’ concerns about where free trade is going, not to mention the wide-ranging economic pain that losing NAFTA would inflict, the government could have tabled a contingency budget, aiming for the best and preparing for the worst.

It could have regained part of our tax advantage by shaving a couple of points off the corporate rate, or by letting businesses expense capital investments more quickly, as recommended by the centrist C.D. Howe Institute (not for nothing, a think tank Mr. Morneau used to lead).

The government could have boldly scrapped high tariffs and supply management on dairy, a perpetual hindrance in trade negotiations (not to mention a thorn in the side of Canadian consumers).

And it absolutely should have made a more serious effort at bringing down the deficit, to give the country more fiscal wiggle room in case of economic disaster.

Instead, the government has made a populist pitch to distinguish Canada from the U.S., rather than to compete with it. Far from turning down the heat on trade, the Liberals plan to spend $191-million over five years on the softwood lumber industry, largely to defend it against U.S. trade complaints.

And on taxes, the budget focuses on extracting more from the rich rather than luring investors: New changes will make it harder to earn large sums of money through passive investments in your small business while claiming a preferential tax rate.

It’s true that one advantage of this approach is that it’s relatively easy on the pocketbook. Corporate-tax cuts and compensating farmers for the end of supply management would spill a lot of red ink.

Indeed, the U.S. deficit and debt burden will balloon thanks to the Trump tax cuts; our deficit and debt burden are projected to gradually decline over the next five years – although not nearly as fast as they should have in a strong economy.

Mr. Morneau is walking a fine line. He is right to note the irony that the loudest yelps for balancing the federal budget have come from some of the same people who are calling for corporate-tax cuts.

Still, the fact is that the government is doing neither. Given the economic turbulence coming out of Washington, that’s irresponsible.

The Globe and Mail. 28 Feb 2018. Seniors, low-income workers to benefit from new measures. Federal budget enhances personal security – for some.Seniors, low-income workers will benefit from new budget measures
Rob Carrick, Columnist

Seniors worried about the security of their savings and pensions received some modest reassurance in the federal budget.

There’s zero in the way of dramatic strokes in this budget in a personal finance sense. It might be the blandest of the 25 or so budgets I have covered from the personal finance and business side. But the government has announced a couple of measures to help seniors worry a bit less about money, as well as a revamped tax break to help lowincome workers.

First, the budget announces an upcoming modernization of Canada Deposit Insurance Corp., which insures eligible deposits in guaranteed investment certificates, savings accounts and other products for up to $100,000. GICs are widely used by seniors looking for a safe investing haven.

The changes draw on consultations done in 2016 on the future of CDIC. Details on the upcoming changes were not provided, but government officials said the consultations looked at adding registered disability savings plans and registered education savings plans to the list of registered accounts that are covered and adding foreign currency deposits to covered products. This would benefit snowbirds keeping large deposits in U.S.-dollar accounts.

Other reforms could add coverage for guaranteed investment certificates longer than five years. Increasing the current $100,000 coverage limit for eligible deposits does not appear to be in the government’s plans.

The budget also offered a bit of hope for workers and retirees worried about the safety of their workplace pension plan if their employer goes bankrupt. Recognizing that workers and retirees need peace of mind about their retirement savings, the government said it will consult with retirees, workers and companies to address the security of pensions.

The risk to pensions was highlighted in the recent collapse of retailer Sears Canada. The company’s defined benefit pension was underfunded when the company failed and, as a result, pension plan members are expected to receive less in benefits than they expected. Government consultations sound like a weak response, but they do signal that pension security is getting some much-needed attention.

On a pure nostalgia basis, seniors will be affected by the government’s announcement that it will remove the legal tender status of denominations no longer issued by the Bank of Canada, including $1,000, $500, $25, $2 and $1 bills. The point here is to fight counterfeiting and money laundering, but these bills are bound to be found at the back of drawers and safe deposit boxes across the country.

The Bank of Canada will continue to honour these notes and exchange them at face value. However, as of a date yet to be determined, you will no longer be able to use them for payment on goods and services. The Bank of Canada says the number of $1,000 bills in circulation at the end of last year was 741,638. The Bank of Canada stopped issuing this bill in 2000.

For low-income people in the work force, the budget announced that the Working Income Tax Benefit will be replaced by the new Canada Workers Benefit. The WITB supplements the earnings of low-income workers by letting them keep more of their pre-tax wages. The new program will increase benefits by up to $170 a year in 2019 for single parents and couples and increase the income limit where the benefit is completely phased out to $36,483 from $32,339 for single parents and couples.

The Canada Workers Benefit remains a refundable tax credit, which means it can result in a tax refund as well as offsetting tax payable. Noting that some lowincome people haven’t in the past claimed the WITB, the government said it will allow the Canada Revenue Agency to automatically check eligibility for individuals.

The budget also introduced the EI Parental Sharing Benefit, which will provide an additional five weeks of parental benefits in situations where both parents share parental leave. The idea of this new program, which starts in June, 2019, is to encourage more men to take parental leave when a child is born.

One more personal finance measure in the budget is to expand the list of expenses eligible for the medical expense tax credit to include costs related to service animals that help people with severe mental impairments. An example would be a dog helping someone with post-traumatic stress disorder. Some service animal costs are currently covered when their owners are dealing with blindness, deafness and other conditions. The METC is a 15per-cent non-refundable tax credit.

THE GLOBE AND MAIL. FEBRUARY 28, 2018. Budget 2018: Top takeaways for small businesses
DEAN RADOMSKY, is a tax partner in EY Canada's Private Client Services practice in Calgary.

Amid a strong and growing Canadian economy, the Liberal government has delivered its 2018 budget, offering significant commitments to women entrepreneurs, research and innovation, as well as a new intellectual-property strategy and some much-awaited clarity about its proposal to tax passive corporate income.

Here are the key items in the 2018 federal budget to which small businesses should pay close attention, as well as a couple of areas in which the government decided to remain notably silent.

Passive investment income clarity

In July, 2017, the federal government proposed, among other items, to increase tax on passive investment income inside private corporations. Corporate income is taxed at a lower rate than personal income so that businesses can spend that money on job creation and growth. Ottawa took issue with the fact that some business owners and professionals had a deferral advantage whereby the lower tax allowed for greater personal savings purposes within the corporation by deferring the higher personal income taxes.

Last year's initial proposal was met with much outcry from the business and professional community, which was concerned both about a potentially significantly higher tax burden and increased administrative complexity. Budget 2018 offers a toned-down approach: Companies earning more than $50,000 a year in passive income will see less of their business income eligible for the small-business tax rate, which will be 9 per cent as of next year. The straight-line reduction of the small-business deduction limit will be $5 for every $1 of investment income above $50,000. At $150,000 of passive income, the small-business rate is eliminated and all amounts of business income is subject to the full federal tax rate. This revised proposal significantly simplifies the July approach.

In December 2017, draft legislation was introduced to address the ability for private corporations to income sprinkle as a means to utilize the lower marginal tax brackets available to a lower-income spouse or an adult child attending postsecondary education. Those proposals remain in place.

Research, science and innovation

To foster and enable future breakthroughs in research and science, the budget includes a historic $4-billion investment in Canada's overall research system, to give Canadian scientists and researchers access to cutting-edge tools, technology and facilities.

And to support innovation, the budget also allocates $2.6-billion in what the government called "incremental support" over five years. It also promises to reform, streamline and simplify Canada's various innovation programs, with the goal of creating a system where Canadian entrepreneurs have a single pathway to the government where they can get guidance on all the available government programs. These changes are expected to occur over the next one to two years. While total innovation funding is set to go up, the actual number of business innovation programs will shrink by up to two-thirds. However, all applications to existing programs will be honoured.

Women entrepreneurship strategy

The advancement of women entrepreneurs has been a priority of this government, and removing barriers to access to capital that women face is a key part of this effort. The budget makes $1.4-billion in new financing available to women-led businesses over three years through the Business Development Bank of Canada (BDC). This is on top of the government's Venture Capital Catalyst Initiative announced in 2017, which has a goal of funding up to $1.5-billion into Canada's venture-capital market, focusing on gender balance and diversity.

Ottawa is also taking a global view when promoting women-led businesses, and the budget states the goal is to support their growth "into competitive, sustainable world-class companies." It also commits $250-million over three years through Export Development Canada for export financing and insurance to women-owned and women-led companies.

In addition to the financing commitments, Ottawa will seek to increase the amount of business the federal government does with women-owned businesses. Of the small- and medium-sized businesses that take part in federal procurement, 10 per cent are women-owned, and the government plans to raise that to at least 15 per cent. There are also boot camps that BDC will offer to women looking to start a business, as well as $9.5-million over three years to accelerate the gathering and sharing of data, information and best practices for women entrepreneurs.

Intellectual-property strategy

Many startups, particularly in the technology sector, create unique, valuable and proprietary products and services. The government said that to give these businesses more confidence that their ideas and patents will be protected, it will invest $85.3-million over five years in a new intellectual-property strategy.

The strategy includes funding to give small businesses better access to legal advice about IP, as well as the creation of a patent marketplace for licensing and sale of intellectual property, and the creation of a "patent collective" to pool entrepreneurs' patents.

Notable by its absence …

While the budget covered much ground affecting the future of Canadian small business, it conspicuously did not address the competitiveness gap that has emerged between Canada and the United States following the current U.S. administration's tax-reform plan being signed into law. These changes mean corporate tax rates in the U.S. are more competitive with Canada's tax rates. Furthermore, the additional tax incentives within the U.S. government plan, such as the accelerated deduction of capital expenditures, will hurt Canadian competitiveness for foreign capital investment.

Budget 2018 appears to be more inward-looking, with the government providing the investment for growth and innovation with a hope of exploiting progressive free-trade agreements.

With the private company "tax loophole" proposals settled, for better or worse, the focus of the small-business owner for this budget is researching and identifying available innovation programs they could put to use.

THE GLOBE AND MAIL. FEBRUARY 28, 2018. Basic science makes historic gains in research-friendly budget
IVAN SEMENIUK

Going into this year's budget process Finance Minister Bill Morneau said he was already convinced of the need to boost support for Canadian scientists but that he had to think about "how we can have the biggest impact."

The nod to science was spurred by last year's landmark review of publicly funded research in Canada led by former University of Toronto president David Naylor. The review identified structural problems in the federal research funding system and pointed out a growing shortfall in how much money Ottawa allocates toward science relative to other countries. Over the past several months, scientists have rallied around the Naylor report and called on the government to act on its recommendations.

Now Mr. Morneau has partly answered that call with a research-intense budget that commits approximately $3.8-billion spread over the next five years for a range of science programs. A portion of this will be aimed at stepping up support for the three granting councils that distribute money for physical and life sciences, social sciences and health science researchers at Canadian universities and institutions. All told, by 2023, scientists can count on about $446-million more annually from the councils, including direct money for grants, research chairs and a new program to support interdisciplinary science and international collaboration.

"I think the Naylor panel did the country a great service by articulating how important investment in science and research is, and this budget reflects that," said Paul Davidson, president of Universities Canada, which advocates for academic research.

In actual dollars, the increase remains a far cry from the $1.3-billion a year that the Naylor report said is needed to bring Canada's research machine up to global standards. Anyone hoping for a bolder, more transformational move from Mr. Morneau was bound to come away disappointed. But the budget provides a 25-per-cent increase in the category of basic research, which is technically Ottawa's biggest ever and enough for Mr. Morneau to claim a historic investment in research that is "on brand" for a government that wants to be seen as pro-science.

"There are gaps, but they've listened carefully and I have a high degree of confidence that in the years ahead we can talk to them about what else would help," said Dr. Naylor.

Others noted that Tuesday's budget should give hope to early career researchers anxiously looking for signs that they have a viable future. Departing from several previous years' worth of big-ticket programs for a limited number of senior scientists, this year's budget made a point of supporting the next generation, including a pledge to establish an additional 250 Canada Research Chairs for early career researchers by 2021.

"My sense is that the time when we were seeing the trend in research chairs looking like a lot of old white guys – I think that time is over. And that's a really helpful message for young Canadians," said Jeremy Kerr, an ecologist at the University of Ottawa and co-author last year of a survey that revealed the dire funding stress many young researchers are facing across Canada.

The influence of the Naylor report can be seen in other ways, including a move to stabilize funding for the Canada Foundation for Innovation. Launched in 1997, the organization plays a crucial role as the principle underwriter of large-scale research facilities and equipment. But until now it has operated on sporadic chunks of cash doled out by successive governments every so often. With a newly annualized budget projected to reach $462-million by 2023, the CFI will finally be able to make long-term plans and dovetail its allocations with international research efforts and trends.

Another change that is likely to be consequential in the long term is a call for "a new approach" to so-called third-party research organizations. These include institutes and research centres that in the past have been favoured in an ad hoc way by successive governments sold on the need to support research specialties such as quantum computing or drug discovery, among others. Mirroring another recommendation from the Naylor report, the budget calls for a competitive process that could eventually trim back the number of boutique research entities that draw on Canada's science budget through their own dedicated funding streams.

"I think there's a message there that they're going to try to focus and consolidate around the primary funding mechanisms," said Jim Woodgett, director of research at the Lunenfeld-Tanenbaum Research Institute in Toronto.

Outside of the Naylor report, more than $600-million of the new science funding will be directed toward beefing up the government's own laboratories and bringing together federal scientific activities across departments. The budget doesn't specify exactly how this will be accomplished, but it likely offers a strong hint of how Science Minister Kirsty Duncan will be spending her time this year.

The internal science funding also encompasses what the budget document calls a "re-imagined" National Research Council, an agency previously seen as sorely in need of new direction. Whereas the Harper government pointed the NRC toward short-term commercial objectives, the new vision will draw on $180-million over the next five years to enable the NRC's own scientists to make some high-risk research bets of the kind that the agency was known for in its heyday and that anticipate business sector activities by several years.

"I'm not sure what re-imaging means," said Matt Jeneroux, Conservative Party science critic in response to the NRC-directed aspects of the budget. "Hopefully we'll find out more in the days ahead."

Katie Gibbs, president of the research advocacy group Evidence for Democracy, said she was encouraged in principle by the new direction for the NRC, adding that "traditionally one of the best uses for government funding of science is at that high-risk stage that industry often won't fund."

THE GLOBE AND MAIL. FEBRUARY 28, 2018. OPINION. Budget confirms that deficits are a feature for this government
WILLIAM ROBSON, is president and CEO of the C.D. Howe Institute.

The budget federal Finance Minister Bill Morneau delivered on Tuesday confirmed that federal deficits – far from disappearing in two years, as the 2015 Liberal election platform promised – will continue indefinitely. Economists argue that with the economy on a roll and unemployment at record lows, Ottawa should be in surplus. But that critique misses a key point. Mr. Morneau and his colleagues could easily have pursued the path toward surplus outlined in the platform. They made a deliberate decision not to. Deficits, and the overspending that creates them, are signature policies for this government.

For those of us used to debating federal fiscal priorities in terms of tempering booms and busts, keeping interest costs manageable or treating the next generation fairly, a government that treats deficits as good in themselves is disconcerting. We usually think of deficits as unfortunate byproducts of problems such as recessions, spiking interest rates or emergencies – bugs in a program of sound fiscal policy.

But what if a government sees deficits as a "wedge issue" – signalling their virtue to "progressive" voters? What if the strategists in the PMO see deficits not as bugs, but as a signal of virtue – a defining feature of their approach? For the foreseeable future, Ottawa will add to its debt, reducing its flexibility to handle a slump, boosting its interest costs and absorbing savings that could otherwise have financed productive investment. What could Canadians gain that would be worth those costs?

One answer implied in the election platform was infrastructure. But the impression that promise created – borrowing to finance capital projects – was misleading. When Ottawa issues bonds to build roads, bridges, ports, rails and so on, it creates assets that offset the borrowing. No increase in net debt; no deficit. Moreover, the infrastructure money we have heard so much about has so far generated almost no new construction. No benefit from red ink on that front.

Another acute concern for investors and businesses, especially since the beginning of the year, is competitiveness. The United States was already threatening Canada's attractiveness as a place to make things by undermining NAFTA. Now its tax reforms have reversed Canada's previous edge as a destination for new investments and a place to earn income. Ottawa could have used some of the fiscal room its political desire for deficits has created to lower tax rates or offer faster write-offs of capital spending. But the 2018 budget did nothing there.

Speaking of trade and competitiveness, the government could have responded to pressures from the United States and abroad with other measures. Such as cutting tariffs that hurt businesses and consumers that use imports. Or compensating farmers who will lose protection for dairy and other supply-managed products. Or raising the thresholds that make our personal income taxes so unattractive to entrepreneurs. Or removing impediments to middle-class Canadians who – unlike federal MPs and public servants with their rich pension plans – struggle to save and achieve secure retirements. No, no, no – and, again, no.

Granted, the government could point to elements in the 2018 budget that offer long-term payoffs. Increased research grants, supports for women's participation in the work force and entrepreneurship, assistance to Indigenous Canadians – even the now almost-complete reversal of last summer's tax hit on small business. But these have annual costs in the millions, not the billions by which federal borrowing now exceeds the platform commitments.

One of the most disconcerting elements in the 2018 budget was a huge increase in the cost of the federal government's own operations. It showed operating costs of $95.6-billion in fiscal 2018 – more than 8 per cent higher than projected last year, and up 16 per cent from two years ago. There are one-time factors behind this increase, but one-time boosts in federal employee costs have become regular occurrences.

If the government's red ink reflects little investment in the future, and much consumption – especially wages and pensions for federal employees – we are back to the familiar arguments against deficits. They do nothing to help an already robust economy. They build up debt Canadians will have to service at the expense of other programs and higher taxes. And they reduce the wealth we would otherwise pass on to our children and grandchildren.

To a government intent on sending a particular political signal, deficits may be a feature. But for people concerned about the future of Canada's economy and Canadian living standards, they are a bug.

THE GLOBE AND MAIL. FEBRUARY 27, 2018. OPINION. Budget doesn’t make grade in truly helping women to narrow wage gap
LINDA NAZARETH, is senior fellow for economics and population change at the Macdonald-Laurier Institute.

Please, at least let's start by using the right numbers. Of course there is a pay gap between men and women in Canada, but let's not make it worse than it is.When you play with the statistics on male-female earnings, you lose your credibility and then who knows what else some of us are going to question.

Case in point: In the 2018 budget speech, Finance Minister Bill Morneau earnestly says that women make just 69 cents for every dollar earned by men on an annual basis. It is a shocker of a statistic, the same one that sometimes has people asserting that it is as if women start working for free at 2:40 in the afternoon while men keep getting paid all day. Trouble is, it simply is not true.

Comparing the earnings of men and women on an annual basis is a red herring given that women tend to work fewer hours than men. According to a 2017 study by Statistics Canada, when you look at hourly earnings of men and women, you see that women earn 87 cents for every dollar that men earn. That is still a gap and that's not okay, but it is a lot less than the one Mr. Morneau is talking about.

Next, let's look at why that gap exists and whether any of the policies put forth in the federal budget are likely to make a dent in it.

The reasons for the pay gap between men and women are not particularly new. Women tend to be clustered in fields that traditionally pay less than the ones that men choose, and in occupations that pay less as well. They are also a lot more likely than men to take "breaks" from work (a really poor word to express what happens when you are home with small children), which does not help their long-term earnings power either. And there is straight-out pay discrimination, which is some portion of that 13 cents although it is hard to know just how much.

And so we have a smorgasbord of offerings to women in this budget. Female entrepreneurs will have $1.4-billion earmarked for them through the Business Development Bank, along with another $250-million through Export Development Canada. Given that these sums are relatively small and will be doled out over a series of years, they are not much more than a token, but a welcome one anyway. The same is true for a promise to support women entering the trades, and the $85-million allocated to investigate sexual harassment claims in the work force.

The one child-care measure in the budget is a "use it or lose it" parental leave program that can be used by men or women. That presumably will allow women to return to work earlier if they want while knowing that their partners are home on their own "break," taking care of their children. It is really not meaningful enough to change the hours worked by women very significantly, however.

Despite the hype, the measures directed at women in this budget are pretty scant, and that is actually okay. After all, according to that same Statistics Canada study, that 13-cent gap between men and women has narrowed already from 23 cents in 1977 and 18 cents in 1994. Maybe it is because over that period women have tired of waiting for help from the government and have gotten themselves loads more education and degrees, realizing that that is the best path to earning more. A just-published study from Georgetown University in Washington comes to the grim conclusion that for women to equal men's pay they need one full degree more their male counterparts. Depressing as that is, in both the U.S. and Canada, women seem to be getting on with it and making that happen.

Looking at the budget through economist-eyes shows that the thing that most threatens the economic health of women is the same thing that threatens men: There is red ink as far as the eye can see. With deficits merrily forecast for years to come, the government figures that Canadian public debt payments will grow by 37 per cent between the last fiscal year and 2022/23. That is a burden that is going to fall on millennial men and women, and on Generation Z and Generation Alpha as well.

Celebrating women is nice, but really the best way to say some things is with money and on that, this budget does not make the grade.

REUTERS. FEBRUARY 27, 2018. Canada budget holds fire amid NAFTA clouds, focuses on women
Andrea Hopkins

OTTAWA (Reuters) - Canada’s Liberal government tackled long-term growth challenges on Tuesday in a budget aimed at boosting women in the workforce and diversifying trade, while keeping its fiscal powder dry in case of an economic shock like the demise of NAFTA.

Finance Minister Bill Morneau’s third budget outlined slight deficit improvements without much in the way of new spending, refusing to blink in the face of U.S. corporate tax cuts and trade uncertainty that strike fear into Canadian companies.

“We will be vigilant in making sure Canada remains the best place to invest, create jobs and do business - and we will do this in a responsible and careful way, letting evidence, and not emotion, guide our decisions,” Morneau said in a prepared budget speech.

The budget blueprint, which is bound to be implemented given the Liberal’s parliamentary majority, maintained a C$3 billion ($2.4 billion) fiscal cushion each year to guard against any unexpected event that could hurt the government books.

Even with the cushion, the projected deficit in 2018-2019 declined to C$18.1 billion from C$18.6 billion forecast in October, a restrained target unlikely to have any impact on financial markets or the Bank of Canada’s rate tightening path.

Opposition Conservative leader Andrew Scheer blasted Prime Minister Justin Trudeau’s Liberals for maintaining budget deficits far into the future and adding to the national debt.

For details on key budget measures:

Chief among economic risks is the possible end of the trade deal between Canada, the United States and Mexico, which U.S. President Donald Trump has threatened to terminate. Negotiations to save the pact continue this week in Mexico.

The loss of NAFTA would sideswipe Canada, which sends 75 percent of exports to the United States, and the decision not to slash corporate tax rates in response to the U.S. move puts Canadian companies at a disadvantage.

“There was nothing here that addressed things like the corporate tax cut in the U.S. and what that means for business investment in Canada. There was probably a bit of disappointment on that front,” said Shaun Osborne, chief currency strategist at Scotiabank.

Still, Morneau has given the government room to maneuver should the demise of NAFTA or a housing market collapse hit the economy this year or next.

The unspoken bet is that Canadian exports will benefit from a roaring U.S. economy, even if business investment is lured away by the U.S. tax cuts. Canadian growth is already leading G7 rivals, spurring three rate hikes by the Bank of Canada since July, and the unemployment rate is near a 40-year low.

The budget did not address concerns that voters could come under pressure as rising rates increase the burden of record household debt, which the central bank has flagged as a risk.

Continuing a bid to diversify Canadian trade beyond the United States, the budget earmarked C$75 million over five years to boost diplomatic and trade presence in China and Asia, though recent high-profile trips to China and India have garnered more negative headlines than positive ones.

Focusing on long-term challenges to Canada’s economy, including the aging workforce, the budget pledged measures to boost the participation and pay of women in the workforce, including through improved paternity leave and proactive pay equity legislation in federally regulated sectors.

Morneau also announced the government would set up a panel to consider pharmacare, setting in motion the possible arrival of free drug coverage for voters - who already have access to universal healthcare - in time for the 2019 election, when Trudeau will defend his majority against Conservatives on the right and New Democrats on the left.

Additional reporting by Leah Schnurr and Fergal Smith; Editing by Denny Thomas and Chris Reese

BLOOMBERG. 28 February 2018. Morneau Seeks Drug Plan That Won’t ‘Throw Out’ Current System
By Josh Wingrove

• Finance minister says parts of existing coverage work well
• Canadian government cites need to be fiscally responsible

Canadian finance minister Bill Morneau is signaling he won’t introduce a big-ticket universal plan to cover drug costs, opting instead for a cheaper solution that helps the uninsured.

In his budget on Tuesday, Morneau announced the creation of an Advisory Council on the Implementation of National Pharmacare. On Wednesday, he drew a distinction between a “pharmacare strategy” and a “pharmacare plan,” saying he wants the former and doesn’t want to totally upend the current system that includes companies like Manulife Financial Corp. and Great-West Lifeco Inc., which is controlled by Power Corp. of Canada.

A strategy and a plan “are two very different things,” Morneau told a breakfast audience in Ottawa. “We recognize that we need a strategy to deal with the fact that not everyone has access, and we need to do it in a way that’s responsible, that deals with the gaps, that doesn’t throw out the system that we currently have.”

The net cost for the federal government to pay for pharmaceutical coverage would be C$19.3 billion ($15.1 billion), and doing so would include drugs that currently cost about C$24.6 billion, according to Canada’s parliamentary budget officer, an independent watchdog. About C$11.9 billion of that is covered by a mix of governments, while private insurance plans cover C$9 billion and patients paying out-of-pocket account for C$3.6 billion, the PBO estimated.

Morneau’s comments suggest it’s the patients’ share he wants to address. About one million Canadians don’t have access to pharmaceuticals, he said. “We recognize that we have a real gap right now,” he said, adding those who can’t get the drugs they need “are in a tough situation where they’re making choices.”

Asked by reporters afterward about the comments, he said they were his “perspective” and that the advisory council’s work will be led by former Ontario Health Minister Eric Hoskins. “There are parts of the system that are working well, there are parts of the system that really aren’t working well. We need to consider both those parts,” he said.

Morneau called the issue complicated and has repeatedly said he needs to be “fiscally responsible” in how he proceeds.

Pharmacare is a core pledge of the left-leaning New Democratic Party, which often jockeys for votes with Trudeau’s Liberals in Canada’s largely three-party system. The NDP is pushing for full universal pharmacare. “The millions of Canadians who can’t afford their prescription drugs don’t need another study; they need their leaders to find the courage to act immediately,” NDP finance critic Peter Julian said in a written statement Tuesday.

BLOOMBERG. 27 February 2018. These are the Key Takeaways from Canada’s 2018-19 Federal Budget
By Theophilos Argitis

The Trudeau government released its 2018-19 budget Tuesday in Ottawa, with a fiscal track largely in line with what Canadian Finance Minister Bill Morneau forecast in his last fiscal update in October. One major change is C$7.2 billion ($5.7 billion) less infrastructure spending through 2019, an amount that has been allocated to other departmental spending.

Deficits 

The budget forecasts the deficit will narrow to C$18.1 billion in the fiscal year that begins April 1, from C$19.4 billion in the current year. That’s little changed from the October fiscal update, and there’s still no target date for a return to balance. On a cumulative basis, including risk buffers worth C$3 billion annually, deficits over the six years including 2017-18 are projected to total C$98 billion. That’s little changed from the October forecast.

Theme

A gender narrative is woven through much of the budget, which is titled “Equality Growth: A Strong Middle Class.’’ To promote equality and an increase in women labor force participation, new funding is included to encourage both parents to share in parental leave.

New Measures

The Canadian government has introduced a net C$20.3 billion in policy actions, net of new taxes, through 2022. Were it not for the new measures, Canada’s deficit would be C$15.4 billion in 2017-18 and as low as C$6.7 billion by 2022.

Borrowing

Canada will reduce bond issuance in 2018-19 by 17 percent from last year’s record to C$115 billion, due to fewer maturities and stronger-than-expected growth over the past year. The ratio of debt to gross domestic product will drop to 28.4 percent by 2022 from 30.4 percent in 2017-18.

Infrastructure

Lower-than-expected spending on infrastructure in the short-term is being reallocated toward departmental spending, particularly a more than C$4 billion charge for benefits for veterans in 2017-18. The government is claiming an equivalent amount of infrastructure money will be spent later in the fiscal horizon, financed by lower departmental spending down the line.

GDP Growth

The economy is forecast to average growth of 2 percent between 2017 and 2022, including a 3 percent expansion in 2017

Tax changes

The government has implemented a watered-down version of reforms for “tax planning.’’

• On passive investment, the new system only gradually reduces access to the small business tax rate for corporations with significant passive investment.
• Measures will limit tax advantages that larger Canadian- controlled private corporations can obtain by accessing refundable taxes on dividends.
• The two changes combined, including new restrictions on so- called income sprinkling announced last year, will add C$925 million to government coffers annually by 2022.
• The Trudeau government is also promising new rules to prevent banks and other financial institutions “from gaining a tax advantage by creating artificial losses.’’ The move will create C$560 million annually by 2022.
• A tax increase on tobacco is worth C$1.5 billion over six years, and levies on cannabis are expected to generate C$690 million over six years after it is legalized this summer.
• Canada has also taken a C$2.1 billion hit over six years from lost tariffs due to the Trans-Pacific Partnership agreement.

NAFTA

The Globe and Mail. 28 Feb 2018. U.S. consults Big Three auto makers on tough issue of NAFTA’s manufacturing rules. NAFTA: ‘Is the U.S. Trade Representative listening?’. The U.S. is demanding the percentage of North American content in vehicles made in the NAFTA zone be boosted from 62.5 per cent to 85.
ADRIAN MORROW, MEXICO CITY
GREG KEENAN, TORONTO

The Trump administration is consulting U.S. auto companies about manufacturing rules that have been proposed during NAFTA renegotiations, providing an opportunity for the industry to persuade the government to back off its protectionist demands, sources with knowledge of the consultations say.

Auto-industry insiders said the consultations in Washington with the Detroit Three – Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles NV – were called to talk about the NAFTA discussions and other trade issues, including possible tariffs on steel that President Donald Trump is considering, and an expected renegotiation of the country’s free-trade deal with South Korea. Among other things, the Trump administration is gathering the companies’ views on Canada’s NAFTA proposals, one source said.

Jason Bernstein, the lead U.S. negotiator on automotive-content rules, abruptly left the seventh round of North American free-trade agreement talks in Mexico City earlier this week to participate in the consultations, government and industry sources said. His departure put auto negotiations on pause.

The office of U.S. Trade Representative Robert Lighthizer did not respond to a request for comment on the developments.

The Trump administration has demanded that the percentage of North American content in vehicles made in the NAFTA zone be boosted from 62.5 per cent to 85 per cent, and that 50-per-cent U.S. content be required for autos made in Canada or Mexico that are destined for export to the United States. Both Canada and Mexico have rejected the demand.

Last month, in Montreal, Canada floated a potential compromise that would create incentives for auto companies to use North American steel and aluminum, expand existing plants in the NAFTA zone and build new ones, invest in research and development, and build electric and self-driving cars.

One source at an auto company said the industry has responded well to Canada’s suggestions. Last month, Fiat Chrysler chief executive Sergio Marchionne described the Canadian approach as “the beginning of a solution to this problem,” and the focus on new technologies in vehicles “a good thing.”

But a key issue, the auto-company source said, is that the Canadian ideas have no numbers attached, so it is difficult for companies to assess how the proposals would work.

The three governments renegotiating the trade agreement need to talk to the industry to determine if the proposals can be made to work, this source said, noting that the industry has made it clear that if new NAFTA content requirements and rules of origin are too strict, auto companies will not try to meet them and will simply pay the tariffs.

At the consultations, the U.S. government can expect to hear again about how important free trade is to the auto industry, said Mark Nantais, president of the Canadian Vehicle Manufacturers Association, which represents the Canadian units of the Detroit Three companies.

“The investments they make in Canada and Mexico are also vitally important to competitive supply chains,” he said.

Meanwhile in Mexico City, Mr. Bernstein’s absence froze auto negotiations after a single day of discussion on Sunday. Both Canada and Mexico plan to present more detailed proposals – based on Canada’s Montreal pitch – but it was unclear when they would have the opportunity.

Mexico’s chief NAFTA negotiator, Kenneth Smith Ramos, told reporters that he hoped auto discussions could resume by the end of the week. He also tried to play down the significance of the consultations.

“This does not mean that there has been a rupture or a change of signals from the United States,” he told reporters.

Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, said any consultation between the U.S. government and the auto industry is “a substantively good development for Canada.”

Mr. Volpe said it is possible the three countries could reach a breakthrough on autos in the next few weeks. Negotiators could agree to a broad framework, he said, and leave technical details to be hashed out quietly afterward.

Daniel Ujczo, an international trade lawyer at Dickinson Wright, cautioned that it is not yet clear whether the Trump administration is seriously interested in incorporating the industry’s views into its negotiating position – or if its intention is to expound to the companies on its own protectionist viewpoint.

“Any time there’s consultation with industry on a presentation made in these talks, it’s a positive story,” he said.

“The wild card is: Is the U.S. Trade Representative listening? Is it truly a dialogue, or just one side talking? That remains to be seen.”

REUTERS. FEBRUARY 28, 2018. Mexico concerns about U.S. steel tariffs hang over NAFTA talks

MEXICO CITY (Reuters) - Mexico’s trade minister will discuss the threat of U.S. steel import tariffs with U.S. Commerce Secretary Wilbur Ross on Wednesday, two sources said, adding to trade tensions during the latest push to renegotiate the NAFTA trade deal.

The meeting in Washington between Economy Minister Ildefonso Guajardo and Ross comes as U.S., Mexican and Canadian officials are meeting for a seventh round of negotiations to rework the North American Free Trade Agreement in Mexico City.

The NAFTA talks have been made halting progress in the past six months, though officials say a number of less controversial issues under discussion could be resolved in this round.

Trump is currently considering Commerce Department proposals to impose steel and aluminum tariffs on imports from China and elsewhere following a so-called Section 232 probe looking at whether imports of the metals threatened U.S. national security.

Guajardo flew to Washington on Tuesday, and an official said that the metal tariffs would be on the agenda as would tomatoes, another area of bilateral trade that has been dogged by disputes and subject to periodic renegotiation.

If the United States imposed steel tariffs on it, Mexico’s government would seek to retaliate, the official said - just as it vowed last month to act against a decision by Washington to slap tariffs on imported washing machines and solar panels.

Trump authorized the investigations in April after U.S. steel and aluminum manufacturers complained they were being forced out of business due to excessive foreign dumping.

The Commerce Department has confirmed the talks. Ross has said he expects countries will challenge any steel tariffs at the World Trade Organization.

Among the options before Trump is a tariff of at least 24 percent on steel products from all countries. However, Trump could decide to exempt some countries from any measures, including NAFTA trading partners like Canada and Mexico.

Canada’s Prime Minister Justin Trudeau said in July that Trump told him that he did not expect to subject Canadian steel and aluminum to tariffs on national security grounds.

There are concerns that stiff U.S. tariffs could raise global steel prices, which would impact Mexico. While Mexico is a large steel importer, it also exported approximately 4.5 million tonnes in 2016.

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Meanwhile, Steve Verheul, Canada’s chief negotiator in the NAFTA talks, told reporters some headway was being made.

“We’re making reasonably good progress so far,” he said, without elaborating.

U.S. trade officials met with auto industry executives in Washington on Tuesday to make progress on a major sticking point around vehicle production. [nL2N1QH1W1]

The U.S. negotiator handling rules of origin for automobiles unexpectedly returned to Washington for consultations earlier this week. It was still not clear why.

People familiar with the matter said representatives from the office of U.S. Trade Representative (USTR) Robert Lighthizer had met separately with executives from Ford (F.N) and General Motors (GM.N) on Tuesday afternoon.

The GM meeting lasted less than an hour and was routine. No major breakthroughs or policy changes were discussed, according to one source briefed on the meetings.

Reporting by Lesley Wroughton, Dave Graham and Sharay Angulo; Editing by Cynthia Osterman

REUTERS. FEBRUARY 27, 2018. U.S. trade officials meet auto executives in midst of NAFTA talks
David Shepardson, Lesley Wroughton

WASHINGTON/MEXICO CITY (Reuters) - U.S. trade officials met with auto industry executives in Washington on Tuesday, three sources said, as talks to renegotiate the North American Free Trade Agreement try to make progress on a major sticking point around vehicle production.

The U.S. negotiator handling ‘rules of origin’ for automobiles, Jason Bernstein, unexpectedly returned to Washington for consultations soon after the seventh round of NAFTA talks between the United States, Mexico and Canada began in Mexico City on Sunday.

Three people familiar with the matter said representatives from the office of U.S. Trade Representative (USTR) Robert Lighthizer would hold separate meetings with executives from Ford and General Motors on Tuesday afternoon.

USTR declined to comment.

Ford said in a statement it had an ongoing dialogue about the importance of NAFTA with the government, with an emphasis on enforceable rules prohibiting currency manipulation.

A GM spokesman said: “These regular meetings with USTR happen in the context of any major trade agreement to assure that GM’s point of view is heard.”

The GM meeting lasted less than an hour and was a routine meeting that did not discuss any major breakthroughs or policy changes, according to one of the sources, who was briefed on the meetings.

Time is running out to agree a new NAFTA before a Mexican presidential vote and U.S. mid-term congressional elections later this year. The administration of U.S. President Donald Trump has put forward an aggressive set of proposals that are complicating progress.

Among those proposals is a demand that seeks to guarantee that the United States gets more of the world’s auto business by ensuring that more of the finished product is produced in North America.

Officials have said they do not expect a major breakthrough on the auto issue during the current round of talks, though some in attendance were encouraged by the signs of greater U.S. discussion of rules of origin - even if that part of the round is now on hold while Bernstein is in Washington.

Kenneth Smith, Mexico’s chief NAFTA negotiator, said he hoped Bernstein would quickly return to Mexico City, where rules of origin discussions were meant to last from Sunday to Tuesday.

“Hopefully these consultations are positive,” Smith told reporters, referring to the industry talks in Washington.

Smith said there had been “a lot of progress” on other NAFTA chapters involving telecommunications, digital commerce, technical barriers to trade and regulatory practices.

DEFICIT FIX

Mexico’s economy minister had said the country could put forward its own automotive proposal at the round, but he is facing resistance from the industry to give any ground.

Eduardo Solis, the head of Mexico’s automotive industry association (AMIA), told reporters at the talks there was no fresh Mexican proposal and reiterated his longstanding position that the rules of origin in the original NAFTA be maintained.

“All there is is the original U.S. proposal, which we’ve said is totally unacceptable,” Solis said.

Under NAFTA, 62.5 percent of the net cost of a passenger car or light truck must originate in the NAFTA region to avoid tariffs. Trump wants the threshold raised to 85 percent and is also seeking to ensure half the total content is from the United States.

The demand reflects Trump’s belief that trade with Mexico and Canada is hurting U.S. jobs and factories.

Trump has repeatedly threatened to pull out of NAFTA unless the deal can be reworked in a way that favors the United States.

The U.S. president said in Washington on Monday that his country was probably losing “$130 billion a year” to Mexico.

“For years, I’ve been saying ... (it is) $71 billion, but it’s really not,” Trump said, adding that the United States also loses “a lot” with Canada. “People don’t know it. Canada is very smooth. They have you believe that it’s wonderful. And it is — for them. Not wonderful for us,” he added.

U.S. data show the country’s 2017 trade deficit in goods with Mexico was $71.1 billion and $17.6 billion with Canada.

Critics of Trump’s stance say the deficit reflects robust U.S. consumption, not unfair trade.

It was unclear how Tuesday’s U.S. automotive discussions might affect the debate on rules of origin, but the people briefed on the matter did not expect a major change in position.

If USTR was going to announce a radical shift on the rules, the auto companies believe the meetings would be held at CEO level, according to two of the people familiar with the matter.

Solis said automakers were still evaluating ideas put forward by Canada to include newer technology in the calculation of a vehicle’s value, and that innovations such as hybrid and electric cars could end up with different rules because they were not contemplated in the initial accord.

The auto industry has opposed Trump’s demands on increased content, arguing it will disrupt supply chains and raise costs. Mexican officials say the issue must largely be resolved between the White House and U.S.-based industry bosses.

Additional reporting by Noe Torres, Anthony Esposito and Sharay Angulo in Mexico City; Editing by Dave Graham and Rosalba O'Brien

REUTERS. FEBRUARY 27, 2018. Ford stresses NAFTA importance, backs rules to curb forex manipulation

(Reuters) - Ford Motor Co (F.N) said on Tuesday it continued to have ongoing dialogue with the U.S. government on the importance of the North American Free Trade Agreement, particularly on the need to include enforceable rules prohibiting currency manipulation.

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“That is a top priority for NAFTA modernization and all future trade agreements,” Ford added in a statement, which came as trade negotiators from the United States, Mexico and Canada met in Mexico City for a fresh round of talks to overhaul NAFTA.

Reporting by David Shephardson

REUTERS. FEBRUARY 27, 2018. USTR meetings 'regular' part of treaty negotiations, GM says

(Reuters) - General Motors confirmed on Tuesday it was meeting with the office of the U.S. Trade Representative (USTR) in the context of NAFTA talks, saying such meetings were a regular part of trade negotiations.

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Reuters reported earlier on Tuesday that U.S. trade officials will meet automakers Ford (F.N) and General Motors (GM.N) later in the day. The meetings will take place after a negotiator returned from NAFTA talks in Mexico for talks on rules governing the thorny issue of regional content in cars.

“These regular meetings with USTR happen in the context of any major trade agreement to assure that GM’s point of view is heard on behalf of our employees, customers and all stakeholders,” General Motors spokesman Pat Morrissey said.

Reporting by David Shepardson in Washington, Editing by Gabriel Stargardter and Rosalba O'Brien

INTERNATIONAL TRADE

The Globe and Mail. 28 Feb 2018. Peter Navarro poses a problem for Canada’s trade goals – and he’s not going anywhere. Peter Navarro is Ottawa’s worst nightmare – and he’s gaining influence
LAWRENCE MARTIN

In the stiff-headed Navarro world view, free-trade talk is globaloney. Canadian officials have long shuddered at the nativist creed of the wiry and abrasive 68-year-old. And with good reason.

WASHINGTON - Was anyone surprised, taken aback, by the news that U.S. President Donald Trump put his signature on a White House economic report that undercuts his own statements on trade with Canada?

Mr. Trump repetitiously states that the United States runs a trade deficit with Canada. It is very bad, very bad, he says. But the document he signed in recent days, Economic Report of the President, states clearly that Canada is one of just a few countries with which the United States runs a surplus.

As contradictions go, this one, schoonersized, ranks right up with the President’s most priceless. But hypocrisies being such a frequent feature of this White House, it is viewed as a mere rib-tickler. It didn’t even make the news down here.

What is news, ominous news for Ottawa, is that Mr. Trump is expected to promote the man on his team who would happily have the report shredded. Peter Navarro, the administration’s protectionist zealot, has outfoxed Mr. Trump’s globalists on trade and will soon be named assistant to the President.

In the stiff-headed Navarro world view, free-trade talk is globaloney. Canadian officials have long shuddered at the nativist creed of the wiry and abrasive 68-year-old. And with good reason.

He was a leading force in the torpedoing of the Trans-Pacific Partnership agreement. He was the same in persuading Mr. Trump to impose tariffs on softwood lumber from Canada, a decision which incensed the Liberal government in Ottawa.

He has long demanded the abandonment of the North American free-trade agreement, almost succeeding last spring, only to have Justin Trudeau and Mexican President Enrique Pena Nieto save the deal with lastminute appeals to the President.

Currently, the maverick Harvard-credentialed economist is waging a battle to have the President impose across-the-board tariffs on steel and aluminum in the name of national security. The tariffs could hit Canada hard, especially Ontario. Premier Kathleen Wynne was in Washington last week, lobbying with governors and administration officials on the issue. A decision must be made by April.

Mr. Navarro also favours a border-adjustment tax, which Mr. Trump considered imposing last year. Author of the book Death by China, he is the administration’s leading basher of the Middle Kingdom. Trade moderates fear that, if he gets his way, he’ll touch off a global trade war as countries retaliate with tariffs of their own.

Reports used to depict Mr. Navarro as stalking the halls near the

Oval Office waiting for opportune moments to slip in and bend the President’s ear. Apparently, he succeeded. No longer is he second fiddle to trade moderates such as Gary Cohn, director of the National Economic Council. Senior Trump adviser Rob Porter was also in his way but Mr. Porter recently resigned over domestic-abuse allegations.

Now, Mr. Navarro would have a seat at the daily senior staff meeting.

He may team well with NAFTA lead negotiator Bob Lighthizer, who is also hard-edged. With so many vital Canadian trade files in play, his ascendancy could not come at a worse time.

The fact that the U.S. economy is in good shape and that jobs are returning to the manufacturing sector does not appear to faze the protectionists.

Nor does a study recently released by the National Bureau of Economic Research that warns that “protectionism is not an effective tool for macroeconomic stimulus and/or to promote rebalancing of external accounts.”

That Mr. Trump now appears to be heeding the hardliners was evident on Monday in a meeting with state governors, wherein he lashed out at several countries’ practices, Canada included. Of trade relations with Ottawa, he said, “They have you believe that it’s wonderful. And it is, for them. Not wonderful for us.”

“Canada is very smooth,” he added, the suggestion being that Justin Trudeau was the snake-oil salesman, not himself.

In response to the report Mr. Trump signed, Mr. Trudeau might wish to get on the blower to the Oval Office and, document in hand, have a little chat. He could point out that the report, prepared by Mr. Trump’s Council of Economic Advisers, is very welcome, that it lays out things quite nicely. “So glad you’re on board with it, Mr. President. Thank you.”

The call probably wouldn’t have much impact. It’s a good bet the President didn’t even crack open the 563-page report. As for Peter Navarro, it’s probably in his trash can.

CANADA - INDIA

THE GLOBE AND MAIL. THE CANADIAN PRESS. FEBRUARY 28, 2018. India denies role in Atwal controversy during Trudeau visit
JOAN BRYDEN

OTTAWA - Justin Trudeau doubled down Wednesday on his support for a senior government official who suggested factions in the Indian government sabotaged the prime minister's trip to India last week – despite a flat denial from India's external affairs ministry which labelled the theory "baseless and unacceptable."

Trudeau's insistence that the official – revealed by the Conservatives to be the prime minister's national security adviser, Daniel Jean – is a member of the professional, non-partisan public service whose advice should be respected and believed, prompted howls of outrage from opposition parties.

They accused Trudeau of provoking a diplomatic crisis with India in a desperate bid to deflect blame for his trouble-plagued eight-day tour of the country, which hit bottom with the revelation that a convicted attempted murderer and one-time Sikh separatist extremist had been invited to two events with the prime minister.

"There has never been a government, Liberal or Conservative, who has used a national security official to clean up an embarrassing mess that was self-inflicted by this prime minister," Conservative Leader Andrew Scheer told the House of Commons.

NDP foreign affairs critic Helene Laverdiere said Trudeau has managed to make a "botched" trip even worse by supporting the sabotage theory.

"Is the prime minister trying to create an international diplomatic crisis?" she asked.

Jaspal Atwal – a B.C. Sikh convicted of trying to kill an Indian cabinet minister in 1986 – attended a reception in Mumbai, where he was photographed with Trudeau's wife. An invitation to a later reception in New Delhi was rescinded as soon as news broke that Atwal was on the guest list.

In a background briefing arranged by the Prime Minister's Office in the midst of the furor over the invitations, Jean suggested Atwal's presence was arranged by factions within the Indian government who want to prevent Prime Minister Narendra Modi from getting too cosy with a foreign government they believe is not committed to a united India.

An official spokesman for the Indian ministry repudiated that theory Wednesday.

"Let me categorically state that the government of India, including the security agencies, had nothing to do with the presence of Jaspal Atwal at the event hosted by the Canadian high commissioner in Mumbai or the invitation issued to him for the Canadian high commissioner's reception in New Delhi," Raveesh Kumar said in a brief statement posted on the ministry website.

"Any suggestion to the contrary is baseless and unacceptable."

But Trudeau did not back down on his support for Jean, whom he described as "a distinguished public servant who's served governments, regardless of their political stripe, for over 35 years." Indeed, he said the previous Conservative government "so valued Mr. Jean's service" that it chose him to represent Canada in a speech to the United Nations.

Unlike the Conservatives, whom he accused of politicizing the public service at every opportunity, Trudeau asserted that his Liberal government respects and appreciates the work done by professional, non-partisan public servants, "particularly those in the national security and information areas."

"When they make recommendations or when they make statements to Canadians or to this government, we on this side of the House choose to believe them," he told the Commons. "On that (Conservative) side of the House, who knows?"

Scheer questioned how Trudeau can simultaneously blame rogue elements in the Indian government for Atwal's presence on the trip as well as British Columbia Liberal MP Randeep Sarai, who has taken responsibility for inviting Atwal and apologized for his lack of judgment. Trudeau accepted late Tuesday Sarai's resignation as chair of the Liberals' B.C. caucus.

"Is the prime minister actually saying that (Sarai) has taken sole responsibility for a scheme concocted by the Indian government? ... How can they both be true?" Scheer asked.

Conservative MP Deepak Obhrai, a former parliamentary secretary to the minister of foreign affairs who travelled to India twice with former prime minister Stephen Harper, called the Liberals' suggestion that someone in the Indian government was behind Atwal's attendance "nonsense."

"Who was responsible for taking the picture with his wife? Who was responsible for taking the picture with (Liberal Infrastructure Minister Amarjeet) Sohi? Who was responsible for sending out that invitation? Are you telling me that the government of India was? No," Obhrai said.

Atwal, a one-time member of a Sikh separatist group that is banned in Canada and India as a terrorist organization, was convicted of attempting to kill Indian cabinet minister Malkiat Singh Sidhu on Vancouver Island in 1986.

He was also charged, but not convicted, in connection with a 1985 attack on Ujjal Dosanjh, a staunch opponent of the Sikh separatist movement, who later became B.C. premier and a federal Liberal cabinet minister.

The Conservatives chose Alberta MP Jim Eglinski to lead off their questions during Wednesday's question period. Eglinski, a former RCMP officer, revealed he was one of the first police officers on the scene after Sidhu was shot.

"I helped him and his wife into the ambulance. It's a day I'll never forget," Eglinski said.

"The victims of terrorism, they have names, they have faces and they have families. To the prime minister, why would he ever meet with Jaspal Atwal?"

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LGCJ.: