Last week Prime Minister Mark Carney set out two pillars of his government’s “Canada Strong” approach to a changing world.

On Wednesday, in Ottawa, he told a military-industries conference of his plans for a more muscular Canadian defence establishment. The next day, before the prestigious and influential Economic Club of New York, he noted that Canada is “weaving a dense web of international partnerships”, but focused on the benefits of Canada-U.S. economic co-operation, notably in energy. Explaining that Canada “provides the United States with the reliable power and critical minerals that help fuel American growth,” he argued that “Canada Strong will help make America great again.”

Our roundtable panel focused on the two speeches, how they intersect, and some of the implications.

Edward Greenspon: I obviously, like all of us, followed the PM’s announcement on Wednesday about the Saab surveillance planes from Sweden I think it was a a message that we, Canada, can procure defense equipment in, in, in other places than the United States, without mentioning F 35s directly.

And then on Thursday, of course, the Prime Minister made a major speech, an important speech, to the Economic Club of New York. He talked about how we can be more sovereign and less dependent - that , I quote, Canada Strong will help make America great again. It was perhaps more accommodating, a little bit of a recalibration of the rupture thesis in the run-up to CUSMA talks. I think the two things together – the planes from Sweden and the message that we can do things together in both of our interests – should be looked at as a package. I’d like to hear from you about what you make of what we’re hearing out of the Prime Minister.

Peter Harder: A couple of things come to mind. The week is entirely consistent with what his messages have been. It’s just another layer of messages. It’s not a diversion, it’s a proof point. But I think you’ll find that as we continue to utilize our defence purchasing to wean ourselves away from the 70 per cent that we have with the United States, the big test in terms of whether we’re increasing the share of defence spending going to Europe or not will be the submarines.

I also think it’s prudent for the PM not to engage directly with Trump, but with audiences in the United States that would be friendly to him. I think he did that very successfully here. He has reminded Canadians that the best for us is actually a deal. It is important for us not to get to the point in Canada where we don’t want any deal. It’s politically difficult to get a deal; a deal means we’re going to have to give up something from where we are today.

But it’s also very important to buy time and not rush. I don’t see us getting into any serious negotiations before the end of this year, at least. The PM cannot look as though he’s detached, so he’s active in prosecuting his case. Also he’s telling Canadians that there is a plan, he’s sticking to the plan, and he’s revealing the next series of deliverables on the plan. But implied in that, of course, is that there’s a lot more to deliver, and he’s got to continue to do that.

Edward Greenspon: Okay. Thank you for the opening, and I’ve got to say, I’ve watched some of the commentary last night about the speech, and you know, some of you may remember that Roger Martin book in which he talks about what he calls the opposable mind, that exceptional leaders are able to hold two thoughts at the same time. That said, there seem to be a lot of people having trouble, at least in the the commentariat, with the idea that you’re holding two thoughts at the same time, and that they are complimentary. Ok, who’s up?

Peter Nicholson: I’d like to ask Peter Harder, what do you see as a deal in the context of the CUSMA review? We don’t really have to change the text of the agreement, we don’t want to appear to be obstructive. On the other hand, why should we want to engage in any kind of really substantive negotiation with a president and administration which are manifestly untrustworthy? So what do you see as the content of a deal here?

Peter Harder: I frankly don’t see a deal until the Americans are able to back away from some of what they are demanding. But the PM has got to fill the space in Canada so nobody thinks that he’s not engaged. He is engaged, but he cannot deal directly with Trump, he should not. We’ll see what kind of political cards Trump holds after the mid-term elections, but there’s nothing on which Carney can concede at this point. But there are irritation lists that would be reasonable to deal with, you know, the tariff-rate quota issue, the marketing boards, is not an illegitimate issue on the Americans’ part. But it’s just not something we should concede on as a price of entry to negotiations.

Don Wright: I broadly agree with all that, and I want to add a few little fillips: Here’s something I thought was particularly important from his speech in New York, talking about aluminum as basically embodied electricity, “electricity in an ingot”. I thought that was a really important argument to get on the table. He did it politely, but he was saying “Americans, give your head a if you think you’re going to replace Canadian aluminum.”

There was also another thing I liked last week, not in the speech: I was very happy to see that we did send a Canadian Navy frigate through the Taiwan Strait. I’m glad we did not knuckle under to intimidation from China on that one.

I do have a concern about whether his diversification strategy is too Eurocentric. Europe has its problems, and I’m not sure that they’re going to have all of what we need in a diversification strategy. What reminded me of this was when Peter Harder mentioned the submarines. Are we going to go whole hog and buy the submarines from Germany? Well, there’s a competing bid from Korea, and I’m not a defence expert by any stretch of the imagination, but I’d like to see a little more outreach to Korea, Japan, Southeast Asia, Australia, just to balance off what I think is a little bit of an overweighting on Europe.

Peter Harder: The deal with Indonesia is significant. The visit to Japan, the visit to Australia, visit to China. The statement coming out of the foreign ministry Friday about doubling our trade with China. I think a lot is being done there.

What I was referring to on the submarine side is that Canada will be the headquarters of the new NATO-affiliated Defence, Security, and Resilience Bank. And we are the only non-European members of Security Action for Europe, the new defence-industry financial instrument. And we are one of the major parties promoting the link between the EU and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. That CPTPP is the big, big set of trade agreements to link Europe and Asia and keep the Americans out, because they left. So, I do think Asia is part of the plan. Obviously the PM has spent time there, and we’ll have to spend more time.

Don Wright: I agree, Peter. My concern is that he seems much more comfortable going to Europe, and aligning with what’s going on there. I’d like to see a little more explicit attention to Asia. to balance that out.

Peter Harder: Yes, and Europe is part of our Arctic sovereignty pitch.

Edward Greenspon: I just note on the aluminum, because I’ve been talking about this aluminum thing myself for a while after I saw a presentation, I think it was probably last June, where the aluminum producers in Canada had calculated that the electricity in the quantity of aluminum that we were exporting is worth, I think the number was 460 data centers. If you are the U.S. and your competition with China is around AI and you don’t have enough electricity for data centers, industry and consumers, that’s a pretty extraordinary number to sort of be saying, ‘Okay, we’ll tariff Canadian aluminum, and we’ll forego 460 data centers, right? It just makes no sense.

Don Wright: I saw a post a month ago or so that said the aluminum tariffs were the stupidest tariffs in history.

Peter Harder: And that’s a competitive category.

Edward Greenspon: Obviously these issues connect up to an economic conversation, and today we have numbers that show we’re in a technical recession. So feel free to comment on the pressures the government is feeling to accelerate its economic growth agenda. Perhaps we have a situation as Peter describes in which the pieces are being revealed, but obviously the security and trade challenges are expressed economically and that pressure is growing, too.

Don Wright: My only comment on the technical recession is my big surprise that it took so long to arrive, and that it’s still relatively muted. I remember doing a podcast with you, Ed, way back in January 2025 I think, and I said these tariffs that Trump is talking about could be disastrous for us. Now, the tariffs got modified because we still have the CUSMA exemption. But still, there have been repercussions from all the mayhem that Trump has generated. I would have thought we would have seen a more serious downturn sooner than we have.

David Dodge: Well, it’s pretty hard to expect a lot of growth in Ontario at the moment, given the auto situation, given steel, so I don’t think we should be surprised.

But I’d like to go back to what Peter Harder said. These features he mentioned are part of a foreign-affairs plan rolling out. My problem is that we don’t have a domestic plan. We’re getting pieces, lots of the international pieces from time to time, we’re getting some specific announcements now on some of the things we’re going to do on defence. But we really don’t have an idea of how this is all going to come together. We certainly have no idea how we’re going to pay for the defence expenditure, which is now rolling out piece by piece. There are no shovels in the ground yet, but at least some particular commitments.

We just don’t have really an indication of what international trade we think might replace what we are clearly going to lose on the in terms of trade with the United States. As time goes on we get the layout of more specific bits from time to time. But without a general plan on international trade, I think we really are in danger, and Carney is in danger. Not having laid it out, he’s going to have to come to the country at some point and say what the costs are. And without a context, so far, to fit all these pieces into, I think we’ve got a problem coming. You just can’t wait very much longer to lay out the plan of what it is we’re going to cut out of our spending to finance the stuff he’s committed to, or what taxes he’s prepared to raise.

On the investment side he’s got to come forward at some point and talk about the general tax regime that he’s going to have in place in order to encourage the investment, which he quite rightly talks about being critical to our future. How to encourage that investment outside of very specific subsidies to do very particular projects – that is a problem.

We really are going to have to count on the build-up of our capacity and investment in not just AI, but in the whole area of technology. That in the end is where the jobs are going to be, not in the goods sector. So I’m getting increasingly worried that there is no plan out there, and that there’s going to be a big shock at some point when he has to admit that a lot of bad things are going to have to happen in order to pay for what he’s committed to.

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Christopher Ragan: I agree with everything David just said. To me, the puzzle is, is, I guess, more of a political puzzle. Obviously no politician ever likes to talk about tax increases, no politician likes to talk about cutting any spending. But it is becoming increasingly obvious to everybody in the country that either taxes go up or spending gets cut, or both. Without that you just can’t do the things that he’s committed to doing.

So what puzzles me is why he is not talking about it, even though it is unpleasant to talk about. I think we have in place a prime minister whose brand it is to be prepared to talk about unpleasant things. In fact, his video from two weeks ago said exactly that: we live in a difficult world; I’m not going to sugarcoat it; I’m going to tell you the truth, and here is some truth that needs to be told.

And it’s not as if the PM knows it but nobody else does. Increasingly, everybody knows this, so to me that’s the puzzle: why doesn’t he become true to his brand say, “Okay, folks, we’ve got some tough decisions to make, but we’ve got to make them”? I think he’d go up in most people’s books, not down.

Miville Tremblay: I’d like to try to link two pieces of the conversation we have had so far. David says there’s no plan and that means that there is uncertainty regarding what indeed will be the details of the broad ideas that he has laid out. And we’ve made the point – which I agree with – that there shouldn’t be any hurry in terms of re-negotiating CUSMA with the Americans.

But I think there are two pieces of uncertainty that will disincentivize businesses to invest. I mean, they tend to sit on their hands, but if they wait for a CUSMA agreement to make investments, well, according to our line of argument they have to wait even longer. And taxation is for corporations over individuals, so it will certainly be part of calculation for other investors, both Canadian and foreign. So now there is a nice halo around Canada in terms of investments. There are projects that are mentioned that make people think more seriously about the country, but these investors would probably need more information about the fiscal situation and the commercial situation with the Americans.

Edward Greenspon: Before I go Peter Wallace, I want to read a quote from the speech, because I want some of you to come back who’ve made this point, David and Chris, and say why this isn’t adequate for you:

He says we already have the strongest fiscal position in the G7, an advantage we are reinforcing by cutting 10 per cent of the federal civil service, 20 per cent of spending on consultants, and by reducing the annual growth of operational spending from over 8 per cent to less than 2 per cent. So I’m just parking that for a moment, and going to Peter Wallace.

Peter Wallace: I want to add a kind of technical point: the government of Canada clearly speaks for Canada, owns the trade file, owns a huge number of the macro levers, and more. As Ottawa works its way through from Peter’s initial framework of trade policy into the still-absent fleshing out of industrial policy and fiscal policy, it’s put some defence policy in there, but it still needs to flesh that out, as David pointed out.

But I’m just going to encourage everybody to remember that it’s not just the government of Canada that has its hands on those levers. When we talk about fiscal context, in any real world, whenever we talk about tax policy in any real world, whenever we talk about industrial policy, well, the provinces have a huge impact on that. It makes no sense to think of it in a federal-only context, and I do hope that as the prime minister and his advisors begin to think that through, they put some weight on it. Yes, you speak for Canada; yes, you control our side of the CUSMA negotiations; yes, you have that high ground, and all of those other things. But a lot of what actually happens on the ground in terms of fiscal policy, the actual impact on tax and of course industrial policy is going to be a function of the shared space with provincial governments, and you know there are so many provincial governments, they’re not all equal, but some of them do really matter.

Edward Greenspon Okay, so David and Chris, obviously we’re talking a very economically sophisticated prime minister, perhaps the most economically sophisticated prime minister that we’ve,had, and then you’ve got, you know, these numbers - 10% of federal public service, 20% of consultants and operational spending from over eight to 2%. I take it that’s not what you mean by a plan.

Christopher Ragan: Well, let’s look at those three factoids that you quoted, that we have the best fiscal position in the G7 or whatever – so we have a lowest net debt-to-GDP ratio, I think that’s correct. And then the cuts are fine, the cuts are what they are. But it’s not as if they are making room for all of the other things that he wants to spend on, right?

We have seen the numbers for the kind of increase in the annual budget that we’re talking about: If we’re going to take seriously the idea of 3.5 per cent of GDP for core defence spending by 2035, then this implies a certain increase to the annual budget, at least in defence spending, right? Huge numbers, and those cuts that you talked about in quoting the PM’s speech just don’t come close to financing that. They do something, but they don’t come close to covering it.

So that means you still are left with an issue, which is okay. Are you going to raise taxes? Are you going to cut other spending? Are you going to put this, you know, on deficits and therefore the debt? And yes, we may have the lowest debt ratio now. It’s not irrelevant, but it’s not the full picture, you know. My concern is what starts happening, because it’s already started happening: as you know, long-term bond rates are starting to rise, and if they continue to rise, you know what happens when bond-holders around the world decide that they don’t really see the plan about how we’re going to pay this back, or service it, or reduce the debt-to-GDP ratio back to a safe zone.

And so when they stop buying or slow down buying our debt, then the rates go up a little higher, and then the shit starts hitting the fan. So, for now I don’t think we’re in a serious position. I don’t think we’re in a crisis position at all. But what bothers me is that Carney is prepared to just give those three very insufficient facts, I would call them, and then say everything’s okay. That’s what bothers me.

David Dodge: Gross debt is what you have to look at, because it’s gross debt that we pay interest on. In that we are in the middle of the pack, or in fact towards the upper end of the pack, so that factoid is just wrong. Sorry, but the PM is using the wrong factoid because he cannot go to those financial assets to help pay for something. Those Canada Pension Plan financial assets are backing up something that’s going on, so it’s just wrong to look at things that way. The department of finance continues to put out propaganda, and we have to use that word advisedly on the debt situation, because it’s the gross that matters, and it’s the gross debt that determines his interest payments, which are rising very fast and eating up the room that he claims to be saving in laying off a few public servants.

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Peter Wallace: On the same theme that I mentioned before, just remember that we’re talking about TWO big gaps in financing policy. There’s all the new stuff that we’ve talked about, but then also on the provincial side there’s all the stuff that we think we’re paying for, in terms of health, education, a variety of other things. That’s all been allowed to erode, and probably does need some re-investment. That overall drain or overall threat is probably larger than we’re seeing on the federal side. And, you know, the economic base feels the combination of the two.

Peter Nicholson: I want to come back, David, to what you said earlier about the absence of a plan. To what extent do we put some credence in the spring economic statement? I’m wondering to what extent the things that the prime minister has already announced, for between now and 2030, go beyond what was foreseen in that statement. In that regard, one of the things that certainly confuses me is going to be the distinction between what’s considered current expenditure and what’s considered to be investment.

Now, I agree, at the end of the day, the gross debt is where the interest bill comes due. But certainly, in terms of public communication, I would imagine that Carney himself and the government generally will continue to try and paint the investment side of things as something where the expenditure is really offset by an asset. It may not be one that’s free of interest expense, but it’s going to produce growth in the long run.

For sure, look, we dug ourselves a deep hole, so some investment has got to be made in order to get out of it. The real issue in the long run is to what extent will these ambitious projects that the prime minister is talking about now, and the $1 trillion he’s hoping to attract over the next several years, have a good enough return to ultimately pay the fiscal cost. That obviously remains to be seen, but I don’t know what the alternative is.

One other point: I’m concerned that the federal government, and maybe even to a greater extent provincial governments, may not have the public-service capacity now to deliver on governments’ share of a lot of this ambition. We hope a lot of it can be and will be picked up by the private sector, but still a great deal is going to be asked of government, at a time when, at least at the federal level, we’re reducing the public service head count. That may not reduce the ultimate capacity, but it will create some discombobulation within the federal public service. And that’s a public service that I think doesn’t have the economic policy capacity that we had 30 or 40 years ago. So I think that’s a problem, and unfortunately it’s not one that can be fixed in a hurry.

Peter Harder: David, this reminds me of the conversation we had some time ago about the lack of ambition and the lack of preparing Canadians for the economic challenge we were facing. I think that continues to be a gap. I put it down at the time to the fact that we were in a minority parliament, and you’ve got to manage in a time frame that might prove to be shorter than you think.

But now I would like to see a franker and more robust conversation in the next economic statement, or certainly by the fall, one that prepares Canadians for the trade-offs we’re going to have to make. At this point the government has not done that sufficiently. It’s a bit like where the federal deficit and debt were in 1995; we now need the type of reality shower we got then. That’s going to have to come at some point, or there will be a lack of credibility about the deliverables.

A quick aside, Peter Nicholson, on your comment about the senior public service, or public service capacity: I’ve observed rather closely the work of the Major Projects Office, and I have been very impressed by the caliber of Interchange Canada people coming in and giving intellectual weight, but also working with the senior public service that’s there. It’s not competing, it’s a complementing resource, and I think the government’s going to have to engage in that kind of selective recruitment in the coming years.

Peter Nicholson: I totally agree with that.

Miville Tremblay: Okay, we take for granted now in our discussion that at one point we reach 5 per cent of GDP for defence, defined largely. There’s clearly an infrastructure part that even without any defence consideration would be a good thing. But that 5 per cent number came out of nowhere. Of course, Russia is making pressure felt in Europe, but I wonder: when Trump is gone, will that five per cent number stand? Will we stop halfway somewhere along the road when we have improved, and maybe have enough defence? Or maybe we are going to launch programs that will freeze us into something that we need to deliver until the end, like the submarines. When you’ve signed a contract, do you have to buy the whole bunch of them, or can you stop halfway? I don’t know.

Christopher Ragan: I want to respond to something Peter Nicholson said, that if you’re borrowing and your investment project generates enough revenue, then that’s good. I agree with that. This is not an argument against defence spending, but I think it’s unlikely that those defence investments will generate the GDP increase that in turn generates revenue sufficient to pay the interest on the associated debt. I have no doubt that we will have benefits from submarines and benefits from fighter jets and benefits from River-class destroyers and benefits in terms of national security, but not enough to pay the interest.

If you’re borrowing to expand a port facility, which increases trade flows and therefore maybe even increases GDP, I think you’re standing a better chance of having that investment pay off. But on defence spending, you can argue about what short-term multipliers there might be, but those are short-term multipliers. You can also argue about whether new technology embedded in the new defence spending will generate some more broadly-shared technological improvements in the economy. That’s always possible, and in fact, it’s quite likely in some cases. But if you’re going to borrow tens of billions of dollars to build River-class destroyers, we should think about that as something that’s not very likely to generate the revenues necessary to service the related debt.

That’s not an argument against it, because we’re getting benefits in the form of national security, but we shouldn’t be assuming that those investments will pay for themselves over the long haul, in an economic sense.

Peter Nicholson: That’s a really good point, Chris. And there is an ambition, I suppose, in terms of a defence-based industrial strategy that, in fact, you will get these longer-term payoffs. But you could say that defence is one of the few direct- economic-investment levers that governments do have – or at least the federal government has – that could in the long run pay for itself through building export potential, in certain niches.

And then there’s also the question of the dual-use of defence technologies. Particularly in the IT area, that could lead to a lot of things that are unforeseen now. But in the near term, until you develop those capacities, it’s going to be pretty much a dead weight cost.

Christopher Ragan: And if there are going to be longer-term benefits from expanding our defence-contracting industry, and I’m not saying that there won’t be, they’re probably working through a different mechanism, right? You know, if you’re improving port facilities, what that’s going to do is reduce wait times, and it’s going to increase trade, and you’re going to get more benefits that come from more trade. That’s kind of familiar stuff, but I think you know, if you think about the longer-run technological benefits that came out of World War Two, they were very substantial, but there was a very different mechanism of benefits, and very uncertain as well.

Edward Greenspon: There was a part of a conversation earlier where Peter Nicholson and Peter Harder, particularly, talked about the U.S. midterm elections, and I just want to come back to the timing around CUSMA, and Canada’s strategic preferences on what that timing would or should look like. I was in a conversation with somebody earlier this week who was quite worried that we only have a window to get CUSMA done by September, because then the midterms would intervene. I want to know what you think.

Peter Harder: It is not in our interest, unless the U.S. position changes 180 degrees, to either respond or put on ourselves that expectation. First of all, I don’t see any of the parties wanting to pull out of CUSMA, which means the review cycle can go on for a long time, and I wouldn’t think that there would be any review cycle that gets serious before the end of this year. The challenge for Canada is whether or not there is a bilateral U.S.-Mexico component that adds pressure on us, and at this point I don’t see that, but I would watch for that very carefully.

Peter Nicholson: I wonder how much credence we should give to this idea of a customs union. I guess that idea was floated by the Americans recently I’ve always felt that if I were advising the American trade people, that’s what I’d be after. I wonder if that, or an ability to talk about that at least, will become one of the principal U.S. demands to really get the review underway.

Peter Harder: If that is their objective their politics suck, because their politics have made that conversation much more politically difficult to have.

Edward Greenspon: I guess we kind of had a small de facto customs union on Chinese EVs for a little while.

Peter Harder: And how did that work out?

Edward Greenspon: Well, as you say, their politics undermined it, even if it made sense otherwise.

Christopher Ragan: But does anybody think that people are thinking about that in Ottawa? It seems to me that if accepting their tariffs on anything else from the rest of the world is the price we pay for getting unrestricted access to the U.S. market, isn’t that a slam dunk for Canada? What am I missing? Wouldn’t that be a very good thing for us? I mean, politically, I can imagine people would say we’re giving up sovereignty, right? But if we actually secure good access to the U.S. market, that’s good.

Miville Tremblay: It means that we increase our dependence on the U.S., and what does that mean for our free-trade agreements we have signed with Europe and with Asia? Do they disappear?

Christopher Ragan: That’s a good question. I don’t know the answer, but again, if this gives you unrestricted access to the U.S. market – I’m one of those people who believes that, as much as you may want to trade more with other countries – and I’m all in favor of more trade with other countries – forevermore we will want to be doing more and more trade with the United States, and we should secure that access if we can. Whether we can, I don’t know.

Peter Harder: It was a serious proposition before 9/11 and has become unserious, particularly in the Trump years.

Christopher Ragan: Within the U.S., you mean?

Peter Harder: Yes.

Edward Greenspon: Thanks, everyone.

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The Sage Roundtable: Canada Strong, But at…