Ottawa is going all in on ‘friendshoring.’ Here’s what that could mean.
Minister of Foreign Affairs Mélanie Joly rises during Question Period in the House of Commons on Parliament Hill in Ottawa on Monday, March 27, 2023. Economists and geopolitical experts say this week’s federal budget is confirmation that the Trudeau government sees the future of Canadian trade as relying more on allied countries, even if it is results in more expensive goods. THE CANADIAN PRESS/Justin Tang
By Dylan Robertson in Ottawa
This year’s budget reveals the federal Liberals envision Canada relying more on its allies for trade in the future, economists and geopolitical experts say — even if that could result in higher prices or missed opportunities.
“It’s a reframing,” University of British Columbia professor Vina Nadjibulla said after the budget’s release this week. “It’s essentially saying what we’ve been doing for the last 30 years of engagement is over.”
U.S. Treasury Secretary Janet Yellen coined the term “friendshoring” a year ago, saying allies should rely on each other to make supply chains more resilient, and defang hostile actors from taxing or withholding goods.
The Liberals have sent mixed messages in the past year on the extent to which they agree with that approach. Last October, Industry Minister François-Philippe Champagne said Canada was “decoupling” from China, but days later Foreign Affairs Minister Mélanie Joly said she wanted to “re-establish ties” with Beijing.
The language in the federal budget paints a clearer picture. But some experts warn that the us-versus-them language means Canadian businesses will need to adjust in order to avoid losing out on opportunities with the developing world.
Nadjibulla, speaking at a Wednesday panel held by the Canadian Global Affairs Institute in Ottawa, said Tuesday’s budget contains the government’s clearest articulation yet of where the world is now.
“The language there is that it is a more dangerous world and a more competitive world. And in that world, Canada needs to deepen its connections with its allies,” she said.
Specifically, the document says trading with other democracies prevents “economic extortion” and being “vulnerable to exploitation” by “hostile foreign powers” who are buying up Canada’s natural resources.
“Depending on dictatorships for key goods and resources is a major strategic and economic vulnerability,” the budget reads, echoing comments U.S. President Joe Biden made during his recent visit to Ottawa.
Nadjibulla, who specializes in international security and the Indo-Pacific region, said the rhetoric marks “a big departure from previous budget documents” in its frankness.
“Even more so than in the Indo-Pacific strategy, we see the direction of travel,” she said.
Mark Warner, a Canadian and American trade lawyer, told a panel that the implementation of “friendshoring” is already raising questions from his clients.
The automotive and textile sectors have asked him how much material they can use from China before Washington labels a product made in Canada, Mexico or Guatemala as including Chinese content, he warned.
He said that question is coming up for electronics and will likely affect pharmaceuticals, too.
“The question of how much Chinese content gets called Canadian is coming,” he said. “If we’re seen as being the back door for China, or whatever, that’s going to be more problematic.”
Warner said Canada’s geography means it will always make sense to rely on Washington, even if Ottawa needs to tweak how it treats other countries under a “friendshoring” policy.
“If the Americans are serious about this, then we really have to figure out our way to be in that (space) in a way that’s coherent. And that’s how we’ll protect our manufacturers,” he said.
Yet Mary Lovely, an American economist with the Washington-based Peterson Institute, said the U.S. has been inconsistent in listing who actually qualifies as a friend.
“The U.S. language and the rhetoric can be interpreted in a lot of ways,” she said, adding that this goes back to the Trump administration’s steel and aluminum tariffs on Canada, Europe and Mexico.
“We saw some confusion in U.S. trade policy over who’s a quote-unquote friend,” she said.
For example, on Friday, the U.S. Treasury Department announced an electric-vehicle tax credit that would apply to goods from Canada, Nicaragua and Oman, but not to those from France and Germany.
Canada is already setting the stage for a cross-border salvo with Washington, announcing in this week’s budget that Ottawa is considering retaliatory policies if the U.S. doesn’t stop blocking Canadian companies from certain government contracts and green-tech programs.
Still, Washington has successfully been wedging countries against China, such as with language in the United States-Mexico-Canada free-trade agreement that forbids Canada from signing a trade deal with Beijing without U.S. consent. The same language has appeared in recent agreements with Japan and Taiwan.
Last October, the Biden administration announced sweeping restrictions on China’s access to semiconductor chips made in any country using U.S. technology, in order to slow Beijing’s technological and military rise.
Washington is already talking about similar restrictions on biotechnology and quantum tech, Nadjibulla said. She added that this is causing consternation in Southeast Asia, where countries want to maintain economic links with China, Australia, Europe and the world.
But Lovely said many countries are willing to go along with these rules because they crave American investment and a guarantee they won’t be suddenly frozen out of the world’s largest economy.
“They fear coming a closure of the American market, and they want to be on the right side of that door,” she said.
Lovely expresses skepticism about governments combining “friendshoring” policies with subsidies for their domestic businesses. She said this imposes a necessity to make subsidized companies succeed even when they’re inefficient, and positions foreign trade as a threat to local firms.
“We can think of these (partnerships) as secure, like-minded, that speak to our values — however you want. But they are going to be higher-cost,” she said.
“We do need to be aware of the fact that closing markets will lead our own economies to be less competitive on the export side.”
She said this will further isolate countries and make it harder to rally global investment to counter climate change.
South Africa’s high commissioner in Ottawa expressed a similar view.
In an interview, Rieaz Shaik argued that Yellen’s term lets rich countries divide the world without acknowledging the realities of developing countries and the need to address the climate crisis.
“It is the most dangerous term in the history of global political relationships, ‘friendshoring,’ because it’s exclusionary. Worse, it says that your non-friend is the other,” Shaik said in a wide-ranging interview.
“We know how apartheid South Africa dealt with the other. They dehumanized us and they removed all our rights to exist. As the other, they could do whatever they want. So I detest ‘friendshoring.'”
In any case, Nadir Patel, a senior strategic advisor with Norton Rose Fulbright Canada, said Ottawa’s simultaneous rhetoric around shoring up trade with allies and developing deeper ties with regions such as Southeast Asia will only come to fruition if corporate Canada follows suit.
“Canadian business needs to step up and do more in other parts of Asia, where we’re not active,” said Patel, a former Canadian high commissioner to India, during the panel.
“Businesses need to step up and want to leverage that, and not just kick tires once in a while, but really be out there with a presence on a regular basis.”
This report by The Canadian Press was first published April 1, 2023.
StatCan report casts clouds on claims of a widespread labour shortage in Canada
A new report is casting doubt on the idea that Canada is facing a widespread labour shortage, bolstering arguments by labour economists who say the country has more than enough workers. A sign for help wanted is pictured in a business window in Ottawa on Tuesday, July 12, 2022. THE CANADIAN PRESS/Sean Kilpatrick
By Nojoud Al Mallees in Ottawa
A new report is casting doubt on the idea that Canada is facing a widespread labour shortage and bolsters the arguments by some labour economists that high job vacancies aren’t due to a shortage of workers.
The Statistics Canada analysis finds there are no labour shortages for jobs that require high levels of education, suggesting other factors, such as a mismatch in skills and pay, might be to blame for a high number of empty positions.
In the aftermath of the COVID-19 pandemic, labour shortages have grasped headlines from coast to coast as businesses have advertised more job openings than ever. Job vacancies skyrocketed to more than one million at one point last year.
The perceived countrywide labour shortage has put pressure on governments to help businesses find workers, including by increasing Canada’s immigration targets.
But the report published this week compares unemployment and job vacancies by education level and paints a more nuanced picture of the labour market.
“Things look really different depending on whether you look at vacancies that require a high level of education, versus those that require a high school diploma or less,” said René Morissette, the assistant director of social analysis and modelling division at the federal agency.
The report, which looked at labour data between 2016 and 2022, found for jobs requiring a bachelor’s degree or higher education, there were always fewer jobs available than people to fill them.
For example, there were 113,000 vacant positions requiring a bachelor’s degree or higher education in the fourth quarter of 2022, but 227,000 individuals who held such an education were unemployed during the same period.
But for positions that required a high school diploma or less, the shortage of workers only started in the third quarter of 2021.
Morissette said the findings don’t mean that there are no labour shortages in some markets, but shortages may not be as extensive as previously assumed.
“It’s certainly conceivable that there are local shortages in some in some positions,” Morissette said. “What we’re saying is that the shortages may not be as widespread as initially assumed in the early discussions about the high vacancy rates in Canada.”
For employers trying to fill vacancies that require a post-secondary education, the report says their hiring challenges cannot be attributed to a lack of workers available with those qualifications.
Instead, the difficulties may be the result of a mismatch in skills required for the job and those possessed by candidates. Another factor could be that employers aren’t offering wages that are on par with what job seekers expect.
The report also casts doubt on the hiring challenges facing firms trying to recruit workers with lower levels of education.
“The degree to which these job vacancies can be attributed to labour shortages in specific low-skilled occupations instead of relatively low-wage offers and fringe benefits or other factors remains an open question,” the report says.
Jim Stanford, an economist and the director of the Centre for Future Work, says the report from Statistics Canada busts “long-standing myths” about labour shortages in the country.
“If you were really short of labour, and you couldn’t find someone to do that minimum wage job at a McDonald’s restaurant, then why aren’t they either increasing the wage or trying to replace the work with machinery?” Stanford said.
“Neither are happening, which suggests to me that employers in general are quite happy with the current state of affairs, no matter how much they complain about labour being in short supply.”
So what explains the high number of job vacancies?
Morissette said for low-skilled industries, businesses may be choosing to keep wages low and accept higher vacancy rates.
“For employers that have negligible training costs, a human resource strategy that combines relatively low wages with high worker turnover and some vacancies might actually … maximize profits,” he said.
The federal government has kept an open ear to business groups raising alarm bells about labour shortages.
In the fall, Ottawa announced new immigration targets that would see the country welcome 500,000 immigrants annually by 2025. Immigration Minister Sean Fraser has touted the new plan as a solution to the country’s labour woes.
Canada has also experienced a surge in the number of temporary foreign workers brought into the country to help businesses fill vacant positions.
The apparent shortage of low-skilled workers could push policymakers to think that even more temporary workers are needed, but Stanford said that would be a “disastrous” conclusion to draw from the report.
Many economists have reservations about temporary foreign worker programs that they worry can suppress wages domestically, if used excessively.
“The goal of immigration policy should not be to solve the recruitment problems faced by low-wage employers, or any employers for that matter,” he said.
This report by The Canadian Press was first published May 27, 2023.
WestJet pilots deal grants 24% pay raise over four years
WestJet pilots are poised to get a 24 per cent pay bump over four years under an agreement-in-principle between the company and the union. Members of the Air Line Pilots Association demonstrate amid contract negotiations outside the WestJet headquarters in Calgary, Alta., Friday, March 31, 2023.THE CANADIAN PRESS/Jeff McIntosh
WestJet pilots are poised to get a 24 per cent pay bump over four years under an agreement-in-principle between the company and the union.
A copy of the tentative agreement summary obtained by The Canadian Press states that pilots will receive a 15.5 per cent hourly pay raise this year retroactive to Jan. 1 upon ratification of the deal.
It also lays out a cumulative 8.5 per cent hike to their hourly wage over the remainder of the contract, from 2024 through 2026.
Bernard Lewall, who heads the Air Line Pilots Association’s WestJet contingent, said last Friday after reaching a deal that the union achieved its main goals of better pay, job security and work-life balance.
Aviation expert Rick Erickson says the deal marks a new standard for labour negotiations in Canadian aviation, and could also make it tougher for budget airline competitors to retain pilots.
Bargaining came down to the wire last week, with WestJet cancelling more than 230 flights in preparation for job action before a deal was reached hours ahead of the strike deadline Friday morning.
This report by The Canadian Press was first published May 26, 2023.
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