Canada: Key Policy Initiatives From Canada's New Liberal Government You Need To Anticipate

The Canadian election last week (October 19) produced a new government under Liberal Party leader Justin Trudeau. Defying speculation of a minority government, the Liberals won a clear majority, defeating the NDP and Stephen Harper's Conservative government to mark a decisive return to a centre-left government in Canada.

Key elements of the Liberal election platform were:

  • deficit spending but with a commitment to continued reduction in the debt to GDP ratio;
  • large expenditure on public infrastructure;
  • a strong commitment to action on climate change;
  • a different and more multilateral approach to foreign policy; and
  • no increase in general corporate tax rates but tax relief for middle class Canadians and personal tax increases for those earning over C$200,000 per annum.

Here is what you need to know about how the new Liberal government's policies will affect investment in Canada:

Tax & Investment Policy

  • The economic policy of the government will be pragmatic and will be welcoming to foreign investment.
  • The government will not raise general corporate income tax rates.
  • A stimulative fiscal policy will be moderate but with a commitment to a continuing year over year reduction in the debt to GDP ratio.
  • The commitment to fostering economic growth through large infrastructure spending will create particular opportunity for international investment.

Energy & Pipelines

  • The Liberal government will be committed to getting oil to markets and breaking the current logjam.
  • The Liberal government believes that "social licence" is necessary to achieve approval for pipelines. Expect a greater collaboration with First Nations and a move away from the streamlined permitting process that had been championed by the prior administration.
  • The Keystone pipeline remains solely in the hands of President Obama.
  • The Northern Gateway pipeline in British Columbia will likely not be approved as the Liberal government is opposed to tanker traffic along the Pacific coast.
  • Energy East and Trans Mountain pipelines are difficult but not impossible projects.
  • The Liberal government will support investment in LNG export projects. LNG investment is strongly supported by the BC provincial Liberal government.

Foreign Direct Investment

  • The Liberal government will promote close relations with China and will be more open to approving Chinese investment in Canada.
  • The new government may agree to begin negotiations on a free trade agreement with China using the China-Australia free trade agreement as a template.
  • The State-owned-Enterprise (SoE) investment rules, which affected Chinese SoE investment in the oil sands, are unlikely to change in the short-term though this may be moot as there is less current interest in the oil sands from China.
  • Canada will likely join the Asian Infrastructure Investment Bank (AIIB).

Trade & Foreign Affairs

  • The Liberal government will return to a more multilateral foreign policy.
  • Improved relations with the US administration will be a priority and it is likely that President Obama will have warmer relations with Prime Minister Trudeau than with Prime Minister Harper.
  • The new government is almost certain to pass the Trans Pacific Partnership (TPP) but may not act before a vote in Congress.
  • The new government will likely lift the visa restrictions on Mexicans travelling to Canada, which has been damaging to business travel and tourism.
  • The Liberal government will support the nuclear agreement with Iran, is likely to re-open the Canadian embassy in Tehran and will encourage resumption of commercial relations with Iran when sanctions are lifted.
  • The new government will stop Canadian participation in the bombing missions in Iraq and Syria and will focus on training of Kurdish forces and particularly on humanitarian aid.
  • The new government is committed to welcoming 25,000 Syrian refugees before the end of 2015.

Climate Change

  • The new government is more aligned with the Obama administration and the EU on international climate change policy.
  • Positioning for the climate change ?conference in Paris at the end of November will be an important priority for Prime Minister Trudeau.
  • Large final emitters should expect a more stringent environmental regime.

Next Steps

  • The new government will take office on November 4 and the federal cabinet will be revealed then.
  • Unlike in the United States, the senior public service in Canada does not change with a change of government. Business dealings with the public service continue in a business as usual manner.
  • The new Prime Minister will be busy in November meeting colleagues internationally at the APEC, G-20 and Paris Summits.
  • The first budget of the Trudeau government will likely be presented in the first quarter of 2016.

Conclusion

Under the new Liberal government, Canada will remain open to foreign direct investment. There will be opportunity for investors in Canada, especially in infrastructure and public works. The decisive return to a centre-left government means it is time for foreign investors to consider their government relations strategies as they pursue continued investment opportunities in Canada.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Claire M.C. Kennedy
 
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