Policy News

The effect of Covid-19 on the U.S.-Canada relationship

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POLITICO Pro reporters on Friday held the latest in a series of subscriber-only conference calls to discuss the coronavirus pandemic.

Pro’s Sue Allan, Andy Blatchford and Maura Forrest in Ottawa were joined by Lauren Gardner, POLITICO Pro Canada’s reporter in Washington. The team talked about the workings of government in this time of Covid-19, checked in on the Canada-U.S. relationship and discussed what comes next in an economy on hold.

Here are three main takeaways:

1. It’s going to get worse before it gets better — but it will get better.

Here is some of what we know about the socially distanced economy:
— More than a million people have lost their jobs.
— Two million more people had hours cut significantly in March.
— Unemployment in Canada is 7.8 percent, up from 5.6 in February.
— April’s employment reading is likely to be worse because shutdowns only really began in earnest around the middle of March.

In response and to support Canadians, Finance Minister Bill Morneau has suggested the government has done five years of policy in the past five weeks. Details are still being added — like today’s announcement designed to shore up the country’s struggling energy sector.

Bank of Canada governor Stephen Poloz, who appeared in front of the Finance committee last night, has compared the unfolding economic crisis to a natural disaster rather than any recession Canada has experienced in the past. He’s said to watch for a V-shaped trajectory — “down very sharply, then of course back up, but not all the way,” said Poloz. More of a “cursive V” where it curls up at the end, he added.

Poloz has suggested it could take a year for the economy to return to the same path it was on before the crisis started.

2. Best-case scenarios suggest the economy could reopen in late May or early June, meaning the activity will pick up its pace before the start of the third quarter.

Of course, not all provinces have been affected by Covid-19 to the same extent. Even as most of the country remains at home, we’ve seen some provinces — British Columbia, Alberta, New Brunswick — expressing a desire to come back online. The development is certain to create political and policy challenges for all levels of government to negotiate.

Canadian leaders always pay keen attention to the Canada-U.S. relationship. The Covid-19 crisis has provided them with plenty to watch.

3. The coronavirus crisis has certainly tested the terms of Canada’s relationship with the U.S.

The two countries collaborated closely on details around the closure of the border to all but non-essential travel. But in the same month, U.S. Donald Trump mused about amassing American troops on the border. He also moved to cut off Canada from 3M, its only U.S. supplier of crucial N95 medical respirators.

Trump has talked about opening the border, a notion that Trudeau and Deputy Prime Minister Chrystia Freeland have shut down. “Decisions about Canada’s border are taken by Canadians, full stop,” Freeland said this week.


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