Justin Trudeau On Trade, Gender Equality, And The Pipeline He Just Bought

(Bloomberg Businessweek) -- Bloomberg Senior Executive Editor for Economics Stephanie Flanders interviewed Prime Minister Justin Trudeau of Canada at the Omni King Edward Hotel in Toronto on May 29, 2018.

Flanders: Do you worry that Donald Trump will be unpredictable at the Group of Seven summit in Quebec?

Trudeau: International relations with anyone—regardless of whether you agree with them or not—is always about finding that common ground, those common shared priorities. That willingness to make our economies work for the middle class and those working hard to join them is something that certainly unites the president and me—and many of the other members of the G-7—in our goals. We will stay focused on ways to find consensus.

The funny thing is a couple of years ago, when I was going to my first G-7, all the questions were, “Listen, you agree on everything, you and Obama, and everyone else. You’re always very aligned. What’s the point of a G-7 when you all come together and agree on everything?”

And now that there may be differences in perspective at the G-7, everyone says, “Well, you don’t agree on anything, so what’s the point of a G-7 coming together?” I think the point is the ongoing conversations and responsibility we have to shape a perspective and an engagement with the world on the big issues that we’re facing.

What do you want to focus on?

There is one big challenge that is shared not just by the G-7, but by much of the developed world. That is, how do you reassure people that all the changes we’re going through in our workplaces—from automation, to AI, to greater trade deals, to globalization in general—how do we ensure that the growth we create is fairly shared by everyone?

Aggressive nationalism, polarization, insularity, anti-trade and anti-globalization sentiments—all those facets are splintering into politics all around the world. People feel the system we have might be good at creating growth, but it’s not good at creating growth that is good for all citizens. There are places that have exacerbated the fears that people have about their future, about their kids’ future. Canada is working very, very hard to allay those fears.

We understand there is an anxiety about trade out there in large segments of the population that don’t feel that it has worked very well for them. That is why as a country we’ve been working hard to make a case for trade, working hard to demonstrate that we can find progressive trade deals where issues like protection of the environment, gender equality, workers’ rights are integral in creating growth.

The G-7 summit should be about having an honest and rigorous conversation about this shared challenge we face—and some of the solutions we should be putting forward to create growth that is better for everyone.

What’s your plan to make the summit memorable?

One of the main points we’re putting forward is understanding that gender equality and including women in our success is not just a moral argument, it’s very much an economic argument. We’ve put together a gender advisory council, put together extraordinary leaders from around the world who have been at every ministerial meeting, who are part of every ministerial meeting, who are part of every element of decision around what the G-7 is doing to make sure that we’re thinking about including women and the impact on women of everything we do.

You want to make this summit about inclusion, but the G-7 is quite a small club—less than 50 percent of global GDP and representing about 10 percent of the world’s women. Do you think that the G-7 is the right forum to really have these kind of arguments?

I think an opportunity to come together as like-minded nations to talk about shared challenges in a very frank and open manner is essential. We’re going to be moving forward significantly on protecting our oceans, particularly around the issue of plastics, even though we know that 90 percent of plastics in the world in our oceans come from 10 rivers, not one of which is in a G-7 nation.

Why should the rest of the world listen to the leadership of a group of rich countries led mostly by men?

That’s why every G-7 involves an outreach session as well where we invite a broad range of countries from around the world. We have a number of African countries, some small island states, the president of the G-20—Argentina. They’re all going to be coming.

If you’re sitting around the table at the summit wanting to talk about the importance of diversity, are you going to say to President Trump in person that he should talk in a different way about women than he has in the past?

I have highlighted to the president in many different situations where we disagree. When I went down to the White House, we put together a Canada-U.S. women’s business council that has made significant recommendations on reducing barriers to success for women in business. And President Trump was very much aligned with us.

President Trump doesn’t mind having lots of different strands of trade policy. How is it affecting Canada?

The idea that the export of cars from Canada to the United States is somehow a national security issue for the United States is even less likely to find any real traction and legal grounds on any level than the fact that aluminum or steel from Canada might be a national security threat to the United States because they use our aluminum in their fighter jets and our steel in their armored vehicles. Canada and the U.S. are two countries—if there are any two—that have no national security implications toward each other. The level of integration of the auto industry or the steel and aluminum industries in both our countries means that these tariffs would have devastating impacts on American jobs too.

The U.S. sells more goods every year to Canada than it does to China, Japan, and the U.K. combined. We are their No. 1 customer. Any disruption of that flow of goods would be terrible for the Canadian economy, but it would also be terrible for a lot of U.S. jobs in an awful lot of industries.

One of the things that the president has prided himself on is being somewhat unpredictable, being willing to disrupt the patterns of well-established traditions and international relations. I think it certainly causes people to take notice. It encourages us in our resolve to indeed modernize Nafta. But I’ve also said very clearly, and Canadians know this of me—that I will stand up for Canadian interests. I will only sign a deal that is good for Canada, and no deal is better than a bad deal. We’ve made that very clear with President Trump.

You have this problem: a very close, difficult neighbor who’s actually doing well attracting Canadian businesses. They’re going to the U.S., which has lower corporate tax rates, doesn’t have all these regulations. What do you say to those businesses?

Business owners are free to make their own decisions about that. I certainly know that I remain focused on the long term. I mean what’s the U.S. debt approaching now, is it a trillion dollars? We have to ask the question whether the tax cuts in the United States are sustainable as a matter of long-term fiscal stability.

But it’s creating jobs. Businesses are setting up in America, because they’re worried about being able to do it from Canada.

We’re not engaging in a race to the bottom. We’re looking for where the economy is going, where it’s going to be 10 years from now, where it’s going to be 30 years from now, how we can position ourselves for the long term. The people who think that the only advantage Canada ever had against the United States was our dollar was low enough and our corporate taxes were lower are underselling and not realizing the strength that we have within the Canadian economy.

If you want to bring a top engineer or a top programmer or a top manager from your company and set them up in Canada, we’ll give you a visa in two weeks. When people realize that being more energy-efficient or being more responsible around renewable energy is a significant goal, they are setting up their shop where they can actually say, “Look, our industry or our business is run 100 percent by green power, because we’re getting more and more renewables online here in Canada.” I am very confident that over the medium term, we are going to be and continue to be extremely competitive to the United States and the world.

A few years ago, one of Canada’s strengths was it was the fourth-easiest country to do business in. Now it’s down to 18th.

The U.S. has always been much more focused on the ruthless competition of success on a single bottom line, whereas Canada, maybe it’s because of our winters, because of distance between our communities, we’ve always known that we have to be there for our neighbors. We have to make sure they’re a success for all of us.

We’re eager to lean on each other to create that success, and with that comes a mindset where we are aware of the need for good public schools, having a public health system, having an opportunity to train and retrain workers in the job market, a strong safety net for people who lose their job so that they can retrain, which we strengthened over the past year.

These are the things we’ve chosen to put forward as the right measures of success. And there are an awful lot of companies and wealthy individuals who realize that is a much more sustainable path for the long term than the short-term approach that perhaps the U.S. is taking.

There’s a lot of businesspeople listening to you probably saying this guy just doesn’t get that we are losing competitiveness.

I’ve been quite vocal about Canadians’ need to be more forward-thinking and innovating, more excited about the future, taking bigger risks around the world, taking more risks and smarter risks on investing in Canada, absolutely. But if you’re making a decision based on how you could maximize your profits in the short term, maybe Canada is not the right choice for you.

Do you think that legalizing marijuana is going to give Canada a competitive advantage against the U.S.?

That’s not why we’re doing it. We’re doing it because the current prohibition on marijuana doesn’t protect our kids from purchasing marijuana. Right now Canada has the highest rate of underage marijuana use of any of 29 different countries surveyed in a UN study. We’re not making it hard enough for our kids to buy marijuana. If we treat it at least as rigorously as we treat alcohol, it will be more difficult for young underage people to buy it. It is a C$6 billion ($4.6 billion) a year industry for organized crime in Canada. We’re not looking at it as an economic windfall. It may eventually come that way, but that certainly isn’t our main focus.

I ask people, “Is there a black market for beer or alcohol?” No, there is not. Why? Because we have created a sufficient legal regime that works. There isn’t enough of a motivation and there’s too many penalties to have a black market that specifically targets young people, so it works for alcohol, for cigarettes.

A lot of people look at the political landscape and say you’re in a slightly weaker position than a year ago, that you have the prospect of several provinces moving over to the conservatives in the elections. You have a conservative leader in Ontario who actually is talking some of the language of Donald Trump.

On the contrary you can always say that the fact that these conversations are happening—but not taking over the body politic—that there always will be robust debates about the direction a province or country should go in. But at the same time, you don’t have the rise of successful anti-immigrant politicians. There is no anti-immigration mainstream out there in Canada, and that is because people know when we pull together we actually do a better job of creating economic growth, and that has continued to hold.

The Parti Québécois leader talks about the threat of “the other.”

The leader of the Parti Québécois has been talking about that for a long time. That’s nothing new.

One of the most popular things you’ve done recently is prevent a Chinese construction company from buying a Canadian construction firm.

We have to set up a very clear framework within which trade will happen. Blocking things on the grounds of national security is, quite frankly, just what Canadians expect us to do. We know we have to engage with China. It’s one of the world’s most important economies. We’ve engaged in discussions with China around an eventual trade deal. But how do we make sure that Canadian interests are protected?

It’s an important message to share with the Chinese—not in a malicious or an aggressive way—but in a very matter-of-fact way, that this is how you will be able to engage with Canada: abiding by important rules around our interests and the rules we abide by in the international sphere.

Have other countries opened their doors too wide?

There have been different choices. I’ve spoken with some Australian colleagues about the challenges that they’ve faced with similar purchases by the Chinese of engineering firms. It’s certainly highlighted to us the potential challenges.

Your government has just nationalized the Trans Mountain pipeline, buying it from Kinder Morgan. It will bring viscous, black bitumen from Alberta to Vancouver. When you were a little boy, did you always want to own a C$4.5 billion pipeline?

I was raised to believe that the growth of the economy and protecting the environment go together. One of the things that we’ve seen time and time again is people forcing a choice. It’s either the environment or the economy.

We wanted to demonstrate that we could get public confidence in building big projects by both protecting the environment and moving forward in a way that contributes to economic growth. That’s why our plans to fight climate change feature both a national price on pollution and also getting our oil to new markets through responsible pipelines.

One of the fundamental economic challenges we face in Canada is that because we only have one market for our oil resources—the United States—we lose about $15 billion every year. That’s a $15 billion discount, because we’re captive to their markets. So getting a pipeline to new markets across the Pacific is absolutely in the national interest.

However, the new British Columbia government decided that they wanted to try and block that pipeline. The project became too risky for a commercial entity to go forward with. That’s what Kinder Morgan told us. So because this project is in the national economic interest, we’ve stepped in.

You’re showing the public sector can do this, but is there a message here that private-sector investors like Kinder Morgan can’t get this kind of infrastructure deal through local governments?

But we have also seen a number of pipelines built over the past years, a number of large energy projects built that didn’t need this kind of extraordinary intervention. This happened because one province decided to directly contest the federal government’s authority to regulate and allow construction of interprovincial works.

If this comes up again—because you do get these kinds of conflicts on big infrastructure projects—you’re willing to nationalize again?

We will always look at things on a case-by-case basis, but as I’ve said, getting this pipeline built is in the national interest, and we are also very confident that as this pipeline gets built, the business case is certainly strong enough that there will be buyers for it. We don’t intend on holding on to this pipeline for the long term.

To contact the editor responsible for this story: Howard Chua-Eoan at hchuaeoan@bloomberg.net

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