Liberal budget seeks to look beyond Trump, but is it blind to him?

Trump the elephant in Liberals' fiscal room

OTTAWA — If there’s an example in Wednesday’s federal budget of challenges President Donald Trump presents to the Liberal government’s lofty goals, it’s in the measly five paragraphs dedicated to Canada’s newly fraught relationship with the United States.

After the usual platitudes about common values and interests, there’s a promise to continue to build on long-standing environmental co-operation with the U.S. to “address climate change, as well as enhance the quality of our air and water.”

The document was likely already at the printers when word surfaced this week that any day now, Trump plans to start dismantling the very projects in the U.S. designed to tackle those things.

Chief among them: gutting funding for the U.S. Environmental Protection Agency, withdrawing from the Paris climate change accord and axing a Great Lakes safe drinking water program for 40 million people on both sides of the border.

The 2017-18 budget seeks to guard against the same surge of anger that propelled Trump to victory last fall, laying out plans and strategies to bolster the skills and confidence of Canadians anxious about what lies ahead.

But to what extent Trump’s actions could fuel those fears, the Liberals have so far steered clear of trying to address.

The most obvious example is taxes. Trump is poised to overhaul the U.S. tax system in a bid to increase competitiveness. How the Liberals could move in response to that isn’t in the budget; they’ve only plucked the low-hanging fruit identified in the broad tax expenditure review.

“It is the one area of the budget where they are moving more slowly than they said they were going to,” said Scotiabank economist Jean-Francois Perreault.

Wednesday’s fiscal projections note repeatedly that Canada’s economy depends on the broad global state of affairs, yet the fact that the Liberals are aiming to shrink deficit levels in the coming years hints they’re betting on strong global economies.

As part of its focus on skills and innovation, the government sets out a target: grow Canada’s goods and services exports — from resources, advanced manufacturing and others — by 30 per cent in 2025, a modest increase from what they are now.

While the focus is on markets in Asia and the Canada-EU free trade agreement, the U.S. market is still number 1 in Canada’s books.

“Canadian export growth could remain modest and possible U.S. policy actions affecting trade could restrain exports to the U.S. even further,” the budget said.

A pledge to make U.S. policy all about “Buy American, Hire American” was one of the signature lines of Trump’s first address to Congress and the fight is already on in the U.S. for tougher Buy American rules.

Trump also sounded a warning in that speech about military funding:

“We expect our partners, whether in NATO, in the Middle East, or the Pacific, to take a direct and meaningful role in both strategic and military operations and pay their fair share of the cost. “

How Canada is going to respond to that, if at all, is partially wrapped up in the now-delayed release of the defence policy review, a long-term planning document for the military that should have been out before Wednesday’s budget.

But it was pushed forward by Trump; any move made with the American military will have a spin-off effect here.

Meanwhile, Wednesday’s budget postponed another $8.5 billion in spending on new military equipment over the next 20 years, including $933 million over the next six years.

There were signs in the budget that perhaps the Liberals are aiming for some positive spin-offs from the Trump effect.

They’re making permanent $37.5 million per year to attract more tourists to Canada, and also spending $7.8 million to help companies bring in talent from around the world and promising $117.6 million over eight years for high-ranking research positions.

Trump is starting to sound like a convenient excuse, complained opposition MPs.

“I think poor Trump is starting to have wide shoulders — he is responsible for all the disappointments, incompetence and negligence of Justin Trudeau’s government,” said NDP leader Tom Mulcair.

“It’s time for the government of Canada to start managing the government of Canada.”

On the environment, the Liberals seem ready to forge ahead no matter what happens in the U.S. The budget lays out billions in everything from research to green infrastructure to help Canadian companies take advantage of international demand for clean technologies.

“Trump’s politics, like climate change, is a risk multiplier; both turn difficult situations into disasters,” said Keith Stewart, senior energy strategist with Greenpeace Canada.

“Investing in a greener, fairer economy is a smart hedge against both of them.”

Stephanie Levitz, The Canadian Press