The Hill Update: Deeper look at Fall Economic Statement, Super Clusters, NAFTA and Legislative and Political Update- October 26, 2017

Right in the middle of the Fall Session, the Capital Hill Group brings you an update on several important files – going behind the headlines of the Fall Economic Statement, taking a look at the recent Super Cluster announcements, on-going NAFTA negotiations, and political and legislative updates.

Fall Economic Statement delivers good economic news, more spending

The Emerging Shape of Canada’s Supercluster Initiative and its Contenders

NAFTA: Negotiations in Crisis

Legislative Update

Political update: Liberals snatch seat in Quebec, Jagmeet Singh begins shuffle of NDP team


Fall Economic Statement delivers good economic news, more spending

Finance Minister Bill Morneau, who has faced heavy criticism from media and the opposition for his handling of the Government’s proposed tax reforms, as well as the omission from his ethics disclosure of a corporation in France that controls a French villa he shares with his wife, and the revelation that until recently, he still controlled shares in the pension and benefits company he previously directed looked to turn the page and re-focus his attention on the business at hand of growing Canada’s economy in his fall economic update delivered earlier this week.

Strong economic growth will generate an $8.9-billion improvement to Ottawa’s finances this year, bringing the projected deficit down from $28.5 billion for the current fiscal year to an expected  $19.9 billion. By 2021-2022, the deficit will fall to $10.9 billion. Morneau’s fall economic statement pegs GDP growth at 3.1 per cent this year and 2.1 per cent next, with unemployment at rates not seen in more than a decade.
With good economic winds in their sails, the Liberals are, in Morneau’s own words, “doubling down” on supporting program spending.  The highlight of this includes more support for the Canada child benefit, which will be indexed to inflation starting in July 2018, two years earlier than expected and a boost to the working income tax benefit, a refundable tax credit for the lowest income earners, which will receive $500 million a year on the program starting in 2019.

Specific spending that may be less flashy but could be of note to our clients include:

  • $1.2 billion over the next six years for Fisheries and Oceans and the Coast Guard towards maintenance to keep the Coast Guard’s aging ships, navigational aids and communications equipment in working order.   Money will also earmarked to train new staff, monitor fish stocks, upgrade radio and information networks and for icebreaking services.
  • $760M over six years Canada’s foreign embassies and diplomatic outposts are getting new funds to bolster their security (with a peak in spending of $156 million in 2019-20. money will be used to upgrade physical infrastructure and enhance protection measures, including security guards, metal detectors, surveillance equipment, intelligence systems, and IT and cyber capabilities, primarily in the Middle East and African facilities.
  • $359 million over six years for Shared Services Canada to “support mission-critical information technology projects
  • $227 million will also be invested over six years in efforts to “better defend [Government] networks from cyber threats, malicious software and unauthorized access”, with the funding being directed specifically to Shared Services Canada and the Communications Security Establishment.
  • $48 million will over the next three years will go to promoting Indigenous self-government.
  • And with the legalization of marijuana for recreational use looming next year, the government is investing several million dollars into various efforts relation to education and enforcement across several departments.

As well, Finance officials also said how much they expect to recoup from a proposal to tighten rules around a tax planning measure called “income sprinkling,” one of the small business changes. The government has booked $1.2 billion in revenue over the next six years as a result of the new measure.

The Emerging Shape of Canada’s Supercluster Initiative and its Contenders

The government of Canada announced the $950 million Superclusters Initiative in May 2017 headed by the department of Innovation, Science and Economic Development. Since then the government has shortlisted 9 supercluster sites of which only 5 will be selected for funding. The deadline for their full application due on November 24th, 2017. To access the program guide for the Initiative click here

Here is a look at the nine shortlisted superclusters:

The Digital Technology Supercluster (BC): The proposal is backed by Telus and includes more than 70 partners. The supercluster will focus on inventing, developing and applying digital technologies.

The Smart, Sustainable and Resilient Infrastructure (SSRI) Supercluster(Alberta): The proposal is being led by Santec Consulting Ltd. and includes more than 25 partners. This supercluster aims to use advanced digital communications and interconnected applications and cutting edge tools to improve design, construction and operations in infrastructure.

The Smart Agri-food Supercluster (Alberta): The proposal is being led by Agrium Inc and includes over 50 innovation partners. This supercluster aims to make Canada the global supplier of sustainable, high quality, safe food.

The Protein Innovations Canada (PIC) Supercluster (Saskatchewan): The proposal is led by Af-West Bio Inc. and includes more than 60 partners. This supercluster would position Canada as the world’s top supplier of plant-based proteins and related products.

The Building an Advanced Manufacturing Supercluster (Ontario): The proposal is led by by Communitech Corporation and MaRS Discovery District and as well as more than 100 partners. This supercluster plans to advance collaboration between technology and manufacturing sectors to create and apply new solutions by increasing production and speeding adoption.

The Clean, Low-Energy, Engaged, and Remediated (CLEER) Supercluster (Ontario): The proposal is led by Canada Mining Innovation Council and includes over 90 partners. This supercluster aims to transform Canada’s mining sector by positioning Canada as a leader in clean resources, clean technology and responsible sourcing of metals.

The Mobility Systems and Technologies for the 21st Century (MOST21) Supercluster (Quebec): The proposal is led by CAE Inc. and includes more than 170 partners. This supercluster’s goal is to leverage digital technologies to advance Canadian industrial leadership in next-generation mobility products and services.

The AI-powered Supply Chains Supercluster (Quebec): The proposal is led by Optel Group and includes over 80 partners. This supercluster’s goal is to define a new global supply chain platform and bolster Canada’s leadership in artificial intelligence and data science to impact the manufacturing, infrastructure and retail sector.

The Oceans Supercluster (Atlantic): The proposal is led by Petroleum Research Newfoundland and Labrador and is supported by over 25 partners. The goal of this supercluster is to expand the economic potential and sustainable development of Canada’s ocean economy.
For an in depth description of the superclusters please refer to this article found in the National Post.

NAFTA: Negotiations in Crisis

The latest round of NAFTA negotiations, held in the U.S., left negotiators and observers with many questions and concerns about the future of the trade agreement. The U.S. named many demands that have been labeled as “poison pills” by experts. These include a “sunset clause”, changes to dispute resolutionmechanisms, the end of Canadian supply management, restrictions on access to U.S. government procurement, and tighter rules of origin surrounding auto manufacturing.

Simultaneously, the negotiators agreed to extend the time before the next round of negotiations, scheduling them for November 17-21 in Mexico. They also agreed to hold negotiations into early 2018, admitting that they won’t be able to reach an agreement by the end of the year. Taken together, these developments have made most observers skeptical that a successful renegotiation will occur. This pessimistic outlook is only worsened by President Trump’s continued threats to leave the agreement.

However, American businesses are responding by affirming their support for NAFTA. More than 130 representatives from a variety of industries stormed the Senate on October 24 to demonstrate the importance of NAFTA. Similar lobbying occurred at the House of Representatives on October 11. While these demonstrations of industry support for NAFTA are positive developments, it is unclear whether they will prevent the President from leaving NAFTA or putting forward proposals that will stall negotiations.

Legislative Update

Bill C-23: Preclearance Act, 2016
This bill is currently in its second reading in the Senate after passing through the House of Commons. This bill would allow US boarder officials open more preclearance areas. Previously only in major airports in Canada, US boarder officers would now check at other forms of transportation including shipping port and train stations. The bill would also expand US boarder officers’ powers in Canada.

Bill C-45: The Cannabis Act
The standing committee on Health finished its examination of bill C-45 in early October after a marathon session in September and submitted its report to the House of Commons on October 5th. The committee heard from over 100 witnesses in total including police, international witnesses, medical groups, and cannabis advocates. The results of which appeared in the amendments made to the bill, the most notable being the legalization of edible products and the removal of high restrictions on plants grown at home. The newly amended bill now requires that after the first 12 months of the bill coming into force, edibles and concentrates will also be included as a legal form of recreational cannabis. The removal on high restrictions means that there is no longer a limit of 100cm on cannabis plants grown at home. This was largely a response to police complaints that it would be difficult to enforce. The bill is expected to come up for its third reading debate soon.

Bill C-55: The Oceans Act
Bill C-55 is currently in the Fisheries and Oceans committee after passing its second reading in the House of Commons. This bill would allow the Minister of Fisheries, Oceans and the Canadian Coast Guard to establish a network of marine protected areas.

Bill C-59: An Act Respecting National Security Matters 
Bill C-59 is seen as the Liberal version of the former Conservative bill C-51 which was heavily criticized for infringing on privacy rights of Canadians. This bill is intended to insure oversight over Canada’s security agencies including CSIS through an independent oversight agency and an intelligence commissioner. The bill completed its first round of debate in June and will be coming up for its second debate in the House of Commons soon and will then be referred to the Standing Committee on Public Safety and National Security.

Political update: Liberals snatch seat in Quebec, Jagmeet Singh begins shuffle of NDP team

Two new Members will soon be welcomed into the halls of Parliament, as Liberal Richard Hébert and Conservative Dane Lloyd won by-elections in Lac-Saint-Jean, Quebec and Sturgeon River-Parkland, Alberta earlier this week. The two by-elections were held following the resignation of former Conservative Deputy Leader Denis Lebel and Interim Leader Rona Ambrose earlier this year. In the first electoral tests for new Conservative leader Andrew Scheer and new NDP leader Jagmeet Singh, the Conservatives easily held onto the Alberta seat with more than 75% of the vote, but the Liberals were successful in targeting the Lac-Saint-Jean seat, with local mayor Richard Hébert grabbing the traditionally nationalist and conservative seat away from the Conservatives, with the NDP, who had finished in 2nd in 2015, down to a distant 4th. It is the first time a Liberal has won the riding, which in 2015 had the lowest vote share for a Liberal candidate in Quebec, since the 1980 election.

Shortly before the by-election, new NDP leader Jagmeet Singh re-shuffled in some of his former leadership rivals back into the NDP frontbenches, with second place finisher Charlie Angus named as Indigenous Youth critic, third place Niki Ashton returning as jobs critic, and Peter Julian, who dropped out before voting began, as House Leader. Quebec MP Guy Caron, who finished fourth in the leadership race, has been serving as Parliamentary Leader of the NDP, as Singh lacks a seat in the House of Commons.