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“Vive le Canada” – What President Joe Biden Means for Canada: A Vantage Perspective (January 2021)

President-elect Joe Biden became President Biden today, amid the most extraordinary security precautions since Lincoln took the oath of office in 1861, weeks before the start of the U.S. Civil War. Canadians have followed the denouement of the Trump administration — the mob attack on the Capitol, an historic second impeachment — with foreboding and hope for a new beginning. 

Bilateral relations are fundamental to Canadian interests. In November, we took a deep dive into what a Biden presidency means for Canada. Two months later: the Democrats have taken control of the Senate; Ottawa has released details of its climate change plans, appointed a new Foreign Affairs Minister, and tabled a bill to tax Internet giants; and President Biden is quickly moving against the Keystone XL pipeline.

Our renewed analysis offers updated insights into the Canada-U.S. relationship.

“Vive le Canada” – What President Joe Biden Means for Canada: A Vantage Perspective (January 2021)

Shortly after the major networks declared Joe Biden the 46th President of the United States, Prime Minister Trudeau took to Twitter to say “Congratulations…I’m really looking forward to working together.” You could almost hear the sigh of relief that accompanied the Tweet. For the last four years, the historic saying “when the US sneezes, Canada gets a cold” might have been better said as “when the President tweets, Canada gets a tariff.” The amount of instability, volatility, and, at times, downright hostility, that the Trump administration focused on the nation’s closest ally remains difficult to comprehend.

Now, with President Joe Biden sworn into office, Canadian officials are looking forward to four years of stability and predictability. They foresee a relationship still involving disputes, certainly, but disputes that are rational and calculated and communicated in such a way as to presuppose that they won’t shake the bedrock of friendship and mutual self-interest that drives bilateral relations.

COVID-19

In November, when voters went to the polls, the US was routinely reporting more than 100,000 COVID-19 cases a day. That number is now up to well over 200,000 a day. Ron Klain, the President’s chief of staff, has warned that America’s coronavirus death toll will surpass 500,000 by the end of February – a number that is so tragically high that political psychologists say our brains are compensating with a “psychic numbing” defence.

To counter the virus, President Biden has set the goal of administering 100 million vaccine doses in the next 100 days. It’s a goal that Dr. Anthony Fauci says is “absolutely a doable thing”, but one that the President acknowledges “will be one of the most challenging operational efforts ever undertaken by our country.” Biden has promised that his team “will manage the hell out of this operation” by loosening the restrictions on who can get vaccinated (and when), setting up more vaccination sites, mobilizing more medical personnel to deliver the vaccinations, and increasing the vaccine supply by manufacturing whatever is needed, whenever it is needed.

This isn’t what our federal and provincial governments seem to be doing. If President Biden is able to get the virus under control through mass vaccination faster than we can, it may be our neighbours – not us – requesting that the Canada-U.S. border stays closed well into 2021.

CLIMATE

Throughout the campaign, Biden was unapologetic in his climate action rhetoric. The President is making early moves on those promises: hours into the job and he has both rejoined the Paris agreement and rescinded the permit for the Keystone XL pipeline. The President’s appointment of John Kerry as his special presidential envoy for climate further underscores his commitment to action on this issue; Kerry’s role is fundamental: he will sit on the White House National Security Council. It is the first time that the NSC will include an official dedicated to climate change.

In November, we wrote that if bold action from the President matched the bold rhetoric from the Candidate, Prime Minister Trudeau could have more latitude to do the same. The Prime Minister, it seems, had the same idea. His government is already looking for ways to collaborate with the new Biden administration; Canada’s Climate Plan, released in December 2020, makes multiple references to “engaging”, “collaborating,” “working”, and “aligning” with the U.S. government.    

ENERGY
With just the stroke of a pen, President Biden has (once again) cancelled the controversial Keystone XL pipeline. In November 2015, the pipeline appeared dead in the water when President Obama announced that he agreed with the U.S. State Department’s decision to reject the pipeline that would ship more than 800,000 barrels per day of crude oil from Alberta to Nebraska. Then, in January 2017, President Trump signed an executive order to revive the pipeline. Now, much to the chagrin of Alberta Premier Jason Kenney, President Biden has reversed course once again.

While the move was expected, it came earlier and with a prioritization beyond what some had predicted. Pundits should refrain from reading too much into the decision: the United States will always act in its domestic interest from the perspective of those in power. It’s Canada’s job to find strategic alignments to those interests. For his part, Prime Minister Trudeau has said, “we continue to demonstrate the leadership Canada has shown in fighting climate change. We’re going to continue to make that case and I look forward to speaking with President Biden in the coming days.”

IMMIGRATION

At every turn, the Trump administration shunned immigration – a policy decision that President Biden is anxious to reverse. Today, Biden sent a legislative proposal to Congress that overhauls America’s immigration laws. The proposal, which is the most substantial attempt at comprehensive immigration reform since a failed 2013 attempt, would legislate an eight-year pathway to citizenship for about 11 million immigrants in the United States. What the proposal does not do is expand the number of available H-1B visas for high-skilled foreign workers. Canada for the past four years saw an influx of immigrants and will continue to benefit from this cap.

TRADE

While President Biden will likely put an end to politically motivated tariffs like those imposed on Canadian steel and aluminum, that doesn’t mean he won’t advocate for some protectionist policies. He campaigned on a “Made in All of America” stimulus plan, which includes a $400-billion (U.S.) “Buy American” procurement policy that would favour domestic firms in federal procurement and that could prevent Canadian companies from bidding on U.S. infrastructure projects. This would prove a big challenge for Canadian industry: Biden’s commitment to industrial policy is not unlike that of the Liberal government, but the scale of planned R&D investment—$300-billion on 5G, artificial intelligence and other cutting-edge sectors—is eye-popping. Canadian trade negotiators, who may still be confident from their NAFTA 2.0/CUSMA win, will try to find ways to qualify under the policy; the price to pay may be greater U.S. access to Canadian public contracts.

TAXES

President-elect Biden has pledged a one-two tax punch: first repeal President Trump’s tax cuts, and then raise taxes by nearly $3.5 trillion over the next ten years on corporations and individuals earning more than $400,000 annually. In November, we were skeptical that the proposal would make it through a Republican-controlled Senate. But with the Democrats’ dual wins in Georgia’s Senate run-off races two weeks ago, control of the Senate is now in Vice President Kamala Harris’ hands as the tie-breaking vote – a much needed lifeline for the President’s legislative agenda. Should Biden move ahead with his plan to raise the corporate income tax rate from 21% to 28%, that would go a long way to levelling the playing field between Canadian-based and US-based corporations.

INNOVATION

One thing much of the world – save for the United States – has been trying to figure out is how to reform the way digital multinational corporations are taxed. While there’s thought to be bipartisan agreement amongst Republicans and Democrats to protect the digital companies, which are almost exclusively headquartered in the U.S., there’s also the concern that countries will start individually imposing digital-services taxes in the absence of consensus. If that happens, Canada (which has promised a three per cent DST on the targeted-ad-sales and digital-service revenues of firms with at least $1 billion in worldwide and more than $40 million in Canadian revenue) may find itself dangerously trapped in the middle – and potentially in violation of CUSMA if it proceeds.

Other areas in the innovation eco-system with cross-border ramifications that are worth keeping an eye on include digital health platforms (which are booming in the COVID-19 era), labour protection for gig workers, and clean tech advancements.

DEFENCE

Defence is the oft-forgotten bedrock of Canada-U.S. relations. As the countries look to modernize NORAD for the 21st century, defence may return to the public eye. President Biden will be looking for Canada to make continued increases in defence spending, as well as to maintain support of international institutions like NATO.

CHINA

As U.S. lawmakers grapple with China’s change from competitor to adversary, the rising power may very well be the major issue where Democrats and Republicans share common ground. While President Biden is expected to be more stable in his China policy (and less singularly obsessed with bilateral trade balances), he’s not expected to be any softer. Canadian officials hoping for an easy end to the Meng Wanzhou affair are likely to be disappointed: a sympathetic ear is far from enough to be a solution. That doesn’t mean they won’t try. Newly appointed Foreign Affairs Minister Marc Garneau has already tied Ottawa and Washington together: “The relationship between Canada and China is a very important relationship, but it also has intersections with the relationship between the United States and China as well. So, we’re going to develop, in the coming weeks with the new administration, our ideas about the two Michaels and other issues that jointly affect our two countries vis-a-vis China.”

THE INTERNATIONAL STAGE

Yesterday, outgoing Secretary of State Mike Pompeo tweeted “multiculturalism [is] not who America is.” That sentiment – which the Trump administration has evoked time and time again – contrasts with a comment that then-outgoing Vice President Joe Biden made just over four years ago, when he visited Ottawa to say “vive le Canada, because we need you very, very badly.” The message was clear: in view of America’s incoming “America First” President, Canada would need to punch above its weight to defend the liberal order on the international stage. While President Biden will have to contend with continued domestic isolationist sentiment, his administration will be looking to re-engage with global institutions that the United States has neglected, if not bullied and insulted, over the past four years. Biden’s day one orders to rejoin the Paris climate accord and the World Health Organization are proof of this. For its part, Canada will be looking for ways to help the United States re-engage on the international stage and reunite with global leaders who have turned wary of the superpower (a role Canada has played before vis-à-vis the United States).

FRIENDSHIP

Canada, of course, will not be the first thing on President Biden’s mind. But the man knows and appreciates Canada, as do a number of his closest advisors. In Biden’s 2016 visit to Ottawa, he noted that he could say that he had worked not only with Justin Trudeau but also with Pierre Trudeau (on account of Biden’s long career in the United States Senate, having been first elected in 1972). Of course, Vice President Kamala Harris herself attended high school in Montreal. Susan Rice, a close adviser and new leader of the White House Domestic Policy Council (and who is believed to have been the runner-up to Harris for the VP nod), worked in Toronto and is married to a Canadian. And Biden’s campaign manager, Jen O’Malley Dillon, advised the 2015 Trudeau campaign. These kinds of ties will also play their part in bringing the two sides together.

CONCLUSION

The Trudeau government did an admirable job managing the capricious Trump administration. But this was made easier by Canadians’ deep dislike of all things Trump. Now, with President Biden in the White House, the Prime Minister may find that Canadians have heightened expectations for positive outcomes and results. Will this be possible? The election got rid of the Trump presidency but it did not rid the U.S. of what Trump represents. President Biden will need to navigate an agitated ex-President, 74 million Trump voters, and a protectionist left-wing faction of the Democratic Party – a possible recipe for continued political gridlock and policy stasis that could harm cross-border initiatives.

Still, Biden wrote in his 2007 memoir that likely “the single most important piece of advice I got in my career” came from the late Senate Majority Leader Mike Mansfield (D-Mont.) who told him, “Your job here is to find the good things in your colleagues—the things their state saw—and not focus on the bad.” This is important: this advice still guides President Biden in terms of his core philosophy, on issues domestic but also foreign.

Editor’s Note: Want to make sure you never miss an update from us? Got an idea for something we should cover in a future update? Drop us a line at info@mcmillanvantage.com so we can add you directly to our list.

 



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