Canadian Prime Minister Justin Trudeau meets soldiers in the Canada-led multi-national NATO enhanced Forward Presence Battle Group in the Adazi military base in Riga, Latvia, on July 10, 2023.GINTS IVUSKANS/AFP/Getty Images
Lawrence Herman is an international lawyer with Herman & Associates and senior fellow at the C.D. Howe Institute in Toronto.
Canada is a trading nation. Trade keeps the economy working, vital to the well-being of every Canadian. Securing and maintaining the country’s trade is thus one of the topmost responsibilities of the federal government, requiring skill, determination and a strategic focus on the national interest.
That means ensuring, among other things, that Canada’s weak performance in defence and security doesn’t spill over and harm the country’s key trading relationships, particularly when it comes to dealing with the United States, our biggest economic partner. The danger is that this spillover could well happen.
Former U.S. president Donald Trump caused a stir recently with his threat to NATO allies for not spending enough on defence. But he’s not wrong that we have been laggards.
For years, successive federal governments – Conservative and Liberal – have refused to put serious, sustained money into the defence portfolio. Canada has continually failed to meet NATO expenditure commitments and has fallen behind as a contributor to North American defence in NORAD. There’s a woeful history of defence procurement delays.
This decline in defence spending isn’t just a security problem. It’s an economic problem, too.
The risk is that being a laggard in military and defence expenditures weakens Canada’s standing in foreign capitals and reduces the country’s ability to resolve disagreements in trade and other critical areas. This is especially vis-à-vis the U.S., with whom goodwill and influence are essential – all the more important given that a review of the Canada-United States-Mexico Agreement, or CUSMA, will be starting late next year.
Public attitudes are at the source of Canada’s lacking defence spending. A recent Global News Ipsos poll showed that military matters are of concern of a mere 7 per cent of Canadians, while almost half say that the cost of groceries should be the top government priority, followed by inflation and interest rates (45 per cent), and access to affordable housing (39 per cent).
It’s very different in the U.S., where a 2023 PEW Research Center survey showed that 40 per cent of Americans put strengthening the military on top. This isn’t surprising. The U.S. is the world’s paramount superpower, and American public attitudes are shaped accordingly. As Canada’s position is of a much smaller dimension, there’s a lower-level concern over defence.
But Canadians should be concerned. For a nation that derives its prosperity from trade, the front-of-mind, bread-and-butter economic issues ultimately tie back to defence.
When the public does not have that recognition, the result is that the federal government pays little attention to defence spending, meaning Canada is continually criticized abroad as a laggard. The country’s reputation as a serious player in international affairs diminishes, and trade suffers as a result.
Last spring and summer, there was a flurry of international opprobrium over Canada’s poor performance, coming near the bottom of the list in meeting its NATO commitments to spend 2 per cent of GDP on defence. There was a hugely damaging report in The Washington Post in April that Prime Minister Justin Trudeau said Canada would never meet those targets.
Former U.S. ambassador to Canada, David Jacobson, said at the time that Mr. Trudeau’s comments risk making it harder for the two countries to resolve bilateral irritants: “It’s one of those things that causes governments to lose confidence,” Mr. Jacobson said. “It’s a perfect example of what not to do in order to help solve some of the bilateral issues in both directions.”
Canadian experts, including former senior officials, have spoken out about the dangers of the country’s poor defence performance weakening its international standing. As Mr. Jacobson indicated, it has effects on Canada’s weight in Washington, where influence is a critical commodity. Canada’s recent exclusion from U.S.-led trade and economic initiatives in the Asia-Pacific region is a reflection of how that commodity has been depreciated.
There is no easy solution. The problem is that for Canada to come close to meeting NATO commitments and boosting its much-reduced international reputation, it would require a major change in public expenditures. But that would put the Liberal government up against its supply-and-confidence deal with the NDP, a party loathe to do anything on defence matters. And then there’s the political reality reflected in polling about the absence of interest in defence matters among Canadians.
To change public attitudes, determined political leadership is necessary. For Canada to secure and enhance its trade and economic interests – and ultimately the standard of living of Canadians – respect and influence in foreign circles, especially in Washington, are required. That means a serious, increase in military spending to meet NATO and other commitments, embracing a long-term strategy combining defence, security and trade.
It comes down to political courage, something successive Canadian governments have failed to display. It’s time for that to change.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
