Protectionism game comes with raised economic stakes: Frum

Trade policies that hurt Canada could blow back on U.S. also

As U.S. president-elect Donald Trump’s inauguration day approaches, the business world is pondering how the new administration might affect the world economy.

Trump’s pride in his unpredictability is troubling, given he’s the president-elect, said David Frum, political commentator, former speechwriter for President George W. Bush, and a senior editor for Washington-based magazine The Atlantic.

However, it’s not necessarily all bad news, Frum told an audience at Saskatoon’s Prairieland Park on Tuesday during the CropSphere conference.

Frum, the conference’s opening keynote speaker, said he foresees big tax cuts, corporate tax reform and few spending cuts under Trump. The U.S. could turn into an “import magnet,” pulling up global economic growth, Frum said.

Given the low unemployment numbers in the U.S. and Trump’s anti-immigration stance, however, the country could also flip into inflation. The likelihood of inflation depends on whether the U.S. has already reached its capacity for economic growth. Frum was “agnostic” on whether that was the case, though he said they were in the neighbourhood.

But Trump’s commitment to protectionism, combined with his capriciousness, means trade troubles are likely on the horizon. Speaking to media on the conference sidelines, Frum said the stakes are “colossal” for the U.S., Canada, and the world.

“You blow up world trading systems, that’s not something that just touches other people. It touches everybody.”

Frum said Trump has a point about abuses by China. China does have currency problems, he said, but the problem has to be handled carefully, keeping the end goal in mind. “You don’t make a cure that’s worse than the problem.”

But will Trump’s protectionism directly impact Canada’s ag exports?

Trump has a lot of energy, Frum said, but it’s finite. He may direct his energy away from issues that would hurt Canada.

As well, the president does not form the whole of the government, Frum added. Along with Congress, there are people working for government agencies who are “very sophisticated” about trade and economic issues, he said.

Canadians have already been reminding members of the U.S. Congress about the importance of trade between the two countries, he said. The continental investment economy is so integrated that it’s not feasible to hurt Canada without blowback in the U.S., he added.

“When Canadian farmers borrow money, they borrow from Canadian banks. But where are the Canadian banks getting their capital from? They’re going to a global financial market.”

U.S.-Canada relations don’t run entirely through the national capitals, Frum said. The governor of South Dakota and premier of Saskatchewan are likely to be concerned about the same issues, and have the same views on those issues, for example.

“These are integrated relationships that look a lot like the domestic economy, frankly,” said Frum.

Frum also fielded questions from the CropSphere audience. Asked about whether Canada’s planned carbon tax will hurt exports, he said it will depend on program design. It will need to be remittable at the border to be economically neutral, he said.

Frum’s main advice to Prime Minister Justin Trudeau is to remember that Trump is “emotionally needy” and “sensitive.”

“He loves compliments. And just when you think you’ve given him enough compliments to turn your own stomach, that’s when the compliments are beginning to work.”

Frum was also asked about the likelihood of impeachment. It would take a huge financial scandal or real evidence of collusion with Russia to remove Trump, Frum said.

As for whether Trump will soften once he takes office, Frum said there was little chance of maturing at Trump’s age. “There’s only decay.”

Frum repeatedly emphasized that Trump would not be the whole government, given the role of Congress and other institutions.

“We’re going to see a test of the whole American system.”

— Lisa Guenther is a field editor for Grainews and Country Guide at Livelong, Sask.

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