What Does Justin Trudeau’s Victory Mean for Business in Canada?

A central point of reference throughout Harper’s campaign was that he embodied Canada’s best chance to steady a vulnerable economy. Trudeau, by Conservative party accounts, was simply not ready for the job. The parallels between Canada’s elections and those of the UK earlier this year therefore seem clear. Yet, in contrast to the surprisingly sweeping victory claimed by David Cameron’s Conservatives, Canada has conclusively backed change by voting Justin Trudeau into power.

The problem the new prime minister now faces is that in-country economic problems, such as household debt and rising real estate prices have been exacerbated by Canada’s reliance, for its exports in commodities such as oil, on the state of the global economy. 

“I think the global economy is worse than we were discussing a few months ago and that means the Canadian economy is worse, too,” Ivey Business School’s Mike Moffatt, who acted as an economic advisor to Trudeau, told Maclean's.

The Liberal party’s plans to remedy this look likely to center on deficit spending to a maximum of C$10 billion annually for the next three years, something designed to boost growth and with which Moffatt doesn’t envisage a problem at this stage:

“If they find out the economy is a lot worse than they thought, they can spend more because they never said they’re going to balance the budget.”

Another important item on the table is the Trans-Pacific Partnership (TPP) trade pact negotiated by Harper’s government.

If ratified, it will ease business channels between Canada and Asian nations, especially with Japan, as well as opening the door to the possibility of tariff-free imports that could lower consumer prices. However, the Maclean’s report suggests that Justin Trudeau may now wait to see if the US ratifies the agreement before going ahead with it, something which in turn may rest on the outcome of the country’s own elections. Rotman’s Soberman, on the other hand, says that he doesn’t “foresee the Liberals implementing a reversal of Canada’s commitment to the TPP as would have been the case with an NDP [New Democratic Party, which placed third in the elections] government.”

On the topic of emissions targets and climate change, something that is inexorably linked to the energy sector and its importance to business in Canada, Trudeau has come in for criticism for not displaying enough of a commitment. However, it has been suggested that he was merely being mindful of bringing up something divisive during the campaign:

“He [Trudeau] knew he would get clobbered if he proposed another carbon tax like [former Liberal leader] Stéphane Dion did. That said, I think he’s left a door open to revise his position,” said Werner Antweiler, who teaches environmental management at UBC’s Sauder School of Business, which placed inside the top 20 of a recent sustainability-focused MBA ranking.

Still, Trudeau has previously been more outspoken on the subject of climate change and has said he intends to develop a ‘carbon pricing policy’ with provincial leaders after he attends next month’s UN Climate Change Conference in Paris.

At an event held at the Rotman School back in April, Lawrence Summers - former treasury secretary to Bill Clinton and a professor at Harvard – named no names but advised against the budget balancing that the Conservatives were committed to and appeared to support the Liberal party’s thinking when he said: “The challenge of inclusive prosperity is to craft policies that can respond to today’s changes in the global environment in ways that will enable ordinary citizens to feel that they are fully sharing in the progress that is possible.”

However, with IMF predictions now cut down to 1% economic growth for 2015 and a meager 1.7% for 2016, there’s plenty of work ahead for Justin Trudeau if he wants to boost growth without having to rely on changes to the global economy improving Canada’s fortunes.