Liberals to unveil budget on Feb. 27 as Canada faces trade, competitiveness uncertainty

Liberals to unveil budget on Feb. 27 as Canada faces trade, competitiveness uncertainty
From CBC - February 13, 2018

Finance Minister Bill Morneau will introduce the federal government's next budget on Feb. 27 as the country faces persistent uncertainty around trade and competitiveness.

Morneau announced the date in the House of Commons Tuesday afternoon. And despite the dark clouds hanging over Canada's most important trade pact and its corporate tax policy, the minister struck a tone of optimism.

"We have seen real improvements over the last couple of years for middle class Canadians, more confidence and amongthe lowest unemployment rates in the last 40 years, but there's more work to do," Morneau told the House.

Still, private-sector experts are expected to press Morneau to keep his fiscal powder dry when they gather later this week for their annual pre-budget meeting.

Morneau is scheduled to sit down Friday in Toronto with leading economists at a roundtable that typically includes about a dozen experts from commercial banks, think tanks and trade associations.

Finance ministers routinely call on outside economists for input and forecasts as part of the budget-writing process. Their projections are averaged to create a fiscal foundation for the budget.

Some economists say that late-2017 improvements in the economy likelywill give Morneau more fiscal elbow room in the budget, compared to his October update. Others are less optimistic about the changes in recent months and expect the government to find itself in a similar budgetary position.

But regardless of the fiscal footing, there's agreement that the government should proceed with caution. Economists want Ottawa to make sure it's ready for the still-unknown impacts of the drawn-out renegotiation of the North American Free Trade Agreement and the U.S. move to slash corporate taxes.

"Those are definitely the big twothere's no question about itand the kind of chill that that could potentially put on the business investment climate in Canada," said BMO chief economist Doug Porter, whose colleague will attend the Morneau meeting in his place.

"That's a tough twosome to deal with."

The seventh round of the NorthAmerican Free Trade Agreement renegotiation kicks off inMexico City the same week the budget is tabled.

On Tuesday, Canada's chiefNAFTAnegotiator SteveVerheulsaid the talks between Canadian, American and Mexican negotiating teams have made limited progress to date.

The three NAFTApartners have differing opinionson key aspects of the deal,including the rules for theauto sector, the idea of adding a sunset clause and proposed changes to the investor-state dispute resolution mechanism.

On Monday, U.S. President Donald Trump openly complained about Canada's trade practices, although it's not clear what exactly he was talking about.

Last month, the Bank of Canada highlighted the widening negative impacts of NAFTA's uncertain future. The bank not only made a point of emphasizing the potential effects on trade, but also the potential damage to business investment caused by uncertainty itself.

Foreign direct investment tumbles

The central bank estimated trade uncertainty would lower investment by two per cent by the end of 2019. It said new foreign direct investment into Canada had tumbled since mid-2016a possible consequence of the unknowns around trade.

Wait and see

Will there be a plan to eliminate the deficit?


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