Biden moves ahead on a ‘friendshoring’ plan amid mounting global uncertainty

OTTAWA—I’ll always be curious about what United States President Joe Biden must have thought of Prime Minister Justin Trudeau’s residence when he arrived at Rideau Cottage after driving through the employee parking lot behind the Governor General’s mansion to get there. In Biden’s world, the house where Canada’s leader lives would count as a nice summer place tucked away in the woods. No wonder the Americans didn’t seem surprised when Trudeau indicated we didn’t have the resources to lead a mission to Haiti or to speed up the overall implementation of our long-term NORAD improvements. Be that as it may, the president’s visit was historic. It was another step in the emergence of a major, game-changing development—one that is only beginning to be recognized by Canadians—that has the potential to integrate Canada’s industry into a more powerful bilateral economic future. I say “potential” because we are relying on Biden’s willingness to follow through on his commitments. In Ottawa last week, he declared his intention to include Canada in his vision of a clean energy North American economic juggernaut that would be part of Washington’s wider campaign to reduce China’s economic reach. Driven by the geopolitical realignment led by Chinese President Xi Jinping and written in blood by his Russian attack dog Vladimir Putin, the current shift in global security and economic forces has led to a pivotal U.S. reappraisal of its foreign policy with the aim of reshaping and renewing economic ties with democratic allies, including “friendshoring” closer to home. “I believe we have an incredible opportunity to work together, so Canada and the United States can source and supply here in North America everything we need for reliable and resilient supply chains,” Biden told Parliamentarians on March 24. “Our shared prosperity is deeply connected to our shared security.” In economic terms, it’s a development that for Canadians could be a turning point in our sluggish efforts to overhaul an economy weakened by a long-term slide in business investment and productivity. But building up this partnership with Washington for the green tech revolution inherently requires limiting the impact on Canada of Biden’s Buy America policies. Caught up as Biden was in the spirit of good neighbourliness during his visit, his expressed willingness to abandon Buy America where Canada is concerned was probably overstated. Nonetheless, the work at the official level where it counts is already moving along pretty seriously. Among stepped-up areas of bilateral co-operation, there’s an Energy Transformation Task Force to “accelerate co-operation on critical clean energy opportunities”; a deal to promote trade in “low emissions goods”; co-operation on developing modular nuclear reactors; and the opportunity for Canadian companies to access US$250-million for mining critical minerals and US$50-million for semiconductor packaging. “Our enduring partnership is based on a mutual commitment to shared security, shared prosperity, and shared democratic values,” the joint statement issued by Biden and Trudeau says in its opening words. None of the opportunities for Canada is a sure thing, of course. Much will depend on the ability of the federal government—beginning with this week’s budget—to use agile and targeted financial incentives to promote clean energy investment and projects in Canada, as opposed to watching business go south to take advantage of the subsidies in Biden’s nearly US$400-billion Inflation Reduction Act (IRA) climate package It can be done, as was proven with Volkswagen in its decision to build its first battery factory outside Europe in St. Thomas, Ont. A huge (unknown so far) federal/Ontario government subsidy, access to the U.S. market and IRA incentives, and the promise by Ottawa of access to key raw minerals for batteries—all of that helped bring VW on board. One challenge will be getting a full electric-vehicle supply chain in place in Canada. Ottawa is committed to addressing the investment and permitting problems holding up mining initiatives, but it will take a full-scale effort to bring these long-term projects online quickly enough to realize the potential of the new business environment. There’s also the need to capitalize on closer economic ties with the U.S. quickly, since Donald Trump could be back in the White House in 2024. At a rally on March 25 kicking off his bid for re-election, Trump heaped disdain on Biden for his talks in Canada, alleging Trudeau was laughing at the U.S. president as Canada "pulled the wool” over Biden's eyes. Of Trudeau, Trump said: “I dealt with some of his people. They treat us horribly on trade. I’m watching these different deals that they’re announcing . They are horrible, horrible deals for our country. They’re great for Canada, but horrible, horrible deals for our country. “The deals they've made,” Trump told the MAGA faithful, “I would never have made those deals.” Les Whittington is a regular columnist for The Hill Times. The Hill Times