The political and policy landscape in Canada is, at all times, complex and challenging. Coming on the heels of the 2019 federal election, 2020 will bring a suite of large issues of pan-Canadian consequence for us to consider and navigate.
Even though the federal parliament is a minority parliament, few observers expect any perceived instability to lead to another federal election in 2020. At this time, there are no clear incentives for any of Canada’s parties or leaders to trigger an election this calendar year. On the provincial side, an election is also not expected in the minority government-led British Columbia, and there will not be elections in Ontario, Québec, Alberta, Manitoba, Nova Scotia, or Newfoundland & Labrador in 2020. Prince Edward Island and New Brunswick both have minority legislatures and could face elections if the right dynamics cause a loss of confidence in the incumbent governments.
Beyond elections, we expect the issues outlined below to dominate politics and policy in 2020.
Canadian economy and Federal Budget 2020
According to the Conference Board of Canada, Canada’s real GDP is forecast to expand by 1.8 percent in 2020, and 1.9 percent in 2021, which is up slightly from the 1.7 percent gain in 2019. Weak global growth will challenge our exports, and business investment in Canada has been underwhelmingover the past few years.
In mid-December, Finance Minister Bill Morneau delivered his first fiscal update since the 2019 federal election. There were notable takeaways from the update, namely a large increase in the federal deficit profile, up to CA$36.8 billion over a five-year window, with no plans to mitigate growth or arrive back to balance. A major driver on fiscal pressure was the projected growth in government employee-defined benefit pensions and costs, which pushed the deficit up by a total of CA$27.8 billion through fiscal 2023-24.
Among the questions raised as a result of the new deficit figures was which of the election promises made by Prime Minister Trudeau – including proposals around childcare costs, changes to the Old Age Security System, Employment Insurance, Pharmacare, and others – will he be able to credibly deliver on in the minority parliament, and how will they be paid for.
US presidential election
On November 3, 2020, American voters will decide whether or not to re-elect President Donald Trump. Canada and the United States have the world’s largest and most comprehensive trading relationship, exchanging CA$1.9 billion in goods and services every day. Canadian access to the US market is responsible for roughly one in five Canadian jobs, so who wins the presidency of the United States is not only a curiosity, but critical to Canada’s prosperity and security.
Whether it is trade broadly, the Canada-US softwood lumber issue, tariffs, “buy America” provisions, or immigration tensions, the re-election of President Trump, or the election of an alternative, will have far-reaching diplomatic, economic and security implications across Canada, and the campaign will be followed closely.
Federal-provincial relations
Among the revealing outcomes of the 2019 federal election were the regional tensions that exist in confederation and how they were expressed electorally. The Bloc Québécois is back in Canada’s second largest province, and the Liberals were routed out of the prairies and the energy-producing parts of western Canada. In reaction to this, Prime Minister Trudeau named Chrystia Freeland, among his most capable and trusted Ministers, to the post of Minister of Intergovernmental Affairs. Since her appointment, she has actively engaged with Alberta Premier Jason Kenney, Saskatchewan Premier Scott Moe, Ontario Premier Doug Ford, and Québec Premier François Legault, among others. Regional tensions have always been a hallmark of Canadian federalism, but with a slowing economy, seeming irreconcilable policy and personality divisions, 2020 is a year of needed reconciliation between the federal and provincial governments.
Issues like pipelines, carbon pricing and pharmacare could cause further division, whereas issues like expanded internal trade, infrastructure spending, and tax policy alignment could prove pathways to greater unity. Time will tell.
Minority parliament
Through the sweep of Canadian history, roughly one-third of our federal parliaments have been minority parliaments. On average, they last about 18 months. In the current 338-seat parliament, the Liberals have 157 seats (12 short of a majority), the Conservatives have 121, the Bloc Québécois have 32, the NDP 24, the Greens three, and there is one Independent MP. The Liberals can work with any one of either the Conservatives, the BQ or the NDP to pass legislation to keep the parliament moving forward. Therefore, on the surface, passive observers would say that this is a “stable” minority parliament.
However, as with all minority parliaments, instability and chaos can arrive very quickly and unexpectedly due to a scandal, an economic crisis, a national unity challenge, an unexpected change in leadership, or a sudden swift change in public popularity that could entice opposition parties to rally together and call for a change of government.
Minority parliaments are, typically, subject to rogue waves of instability and partisan drama. Watch for this in the fall, after the June 2020 Conservative leadership race is over.
Conservative leadership
In 2019, the Conservative Party gained seats over their showing in 2015, and they won more popular votes than did the Liberals. Still, having been defeated and seeing limited growth potential in their leader Andrew Scheer, the Conservatives will choose a new leader on June 27, 2020. Already a strong group of candidates – arguably a stronger group than ran for the Conservative leadership in 2017 – has emerged, and it will be a high profile, high-stakes election with the winner in a seemingly strong position to seek the office of Prime Minister in the next campaign.
NAFTA – USMCA/CUSMA
Both the Mexican and American governments have passed the new North American Free Trade Agreement (NAFTA), or the United States-Mexico-Canada Agreement (USMCA), or the Canada-United States-Mexico Agreement (CUSMA), ,but Canada has not yet passed the necessary legislation.However, Prime Minister Trudeau stated on January 21 that the government will be tabling legislation to ratify the CUSMA the week of January 27 when parliament resumes, and he will be looking for quick passage. It is expected that both the NDP and Greens will oppose the legislation. It is further expected that the Bloc Québécois may oppose the legislation if there is not a large financial compensation package for Québec industries that are challenged by the new market access provisions of the reformed agreement.
While the Conservatives have signaled that they will support the agreement, heightened partisanship stirred by the coming leadership race, coupled with effective parliamentary tactics and demands by the BQ, NDP and Greens, could result in a challenging legislative dynamic for the Liberal government. This will be their first big legislative test in this parliament, and will require effective management and tactics to deliver on a key agreement for the Canadian economy.
Global tensions
Canada is one of the most globally connected and integrated countries in the world. We are members of NATO, the UN, the Commonwealth, the Francophonie, NORAD, partners in NAFTA, European Free Trade, Asia-Pacific trade through the CPTPP and other agreements, as well as through our multicultural global familial networks and roots. This interconnected reality means that, at all times, Canada has real obligations and a large stake in the events happening beyond our borders.
For example, US- China trade tensions have had serious domestic consequences in Canada through 2018 and 2019, and will continue in 2020. Further, there are roughly 300,000 Canadians living in Hong Kong and more than 400,000 people of Hong Kong descent living in Canada, so when there are massive pro-democracy protests in the streets of Hong Kong, it weighs enormously on the minds of Canadians and policy makers in Ottawa.
In addition, when Ukraine International Airlines Flight PS752 was struck by an Iranian missile in retaliation against an American attack, 176 people were killed, including 138 passengers en route to Canada, and among them were 57 Canadian citizens. It was a stark reminder that events happening elsewhere are of Canadian concern.
Whether it is the US Presidential election, tariffs, Iran, North Korean belligerence, Chinese trade expansion, Brexit and the future of Europe, natural disasters, or global economic insecurity, expect 2020 to be an active year of international, and therefore domestic, preoccupation with powerful political and economic currents.
As the world’s largest law firm that is deeply integrated across Canada and throughout the globe, Dentons will be watching, analyzing and providing insight into these and other issues throughout 2020.
To read the comprehensive Dentons’ pick of Canadian Regulatory Trends to Watch in 2020 report, click here.
This post was originally published on dentons.com.
