Canada’s Top Banker is On Board with Diversifying Trade

The Bank of Canada reviews its policy framework every five years.  This framework review is the first since COVID-19 that resulted in severe supply-chain disruptions.  Bank of Canada governor Tiff Macklem told reporters that the world today is even more prone to supply shocks, which is making monetary policy difficult. Macklem said current events are creating a dilemma in stabilizing both growth and inflation simultaneously.

Macklem explained that the Central Bank’s first priority must look at how the Canadian economy can improve its own domestic potential.  As Prime Minister Carney has stated, Canada must become its own best customer, and Macklem seems to agree.

Many Barriers Get In The Way

“The place to start is to grow our internal market. It’s been so much easier to send stuff south to the U.S. than to send it across the country," Macklem said.  "As a result, we don’t have as well-developed east-west transportation corridors as we could. We also have many interprovincial trade barriers. Those get in the way.”

The most immediate shock hitting Canada’s economy is the Iran war-driven spike in oil prices.  While Canada’s domestic oil industries are experiencing a boom-time, gasoline consumers and diesel-driven transportation sectors are taking a severe hit at the fuel pumps.  As well, Canada’s metals-mining and softwood lumber sectors continue to be hammered by the U.S. trade war.

Macklem openly agrees with Mark Carney’s strategy to work more closely with the broader global marketplace to diversify Canada’s trade economy.  While Macklem said the realities of geography will dictate that the American market will continue to be of primary importance, Canada must streamline its strict regulatory processes to successfully increase overseas trade and foreign investment.

“The U.S. is always going to be our biggest trading partner.  But, talking to people in other countries, I can tell you there’s a lot of interest in investing in Canada.  But one of the things we’ve heard repeatedly is the time it takes to get regulatory approvals in Canada has been too long, and it’s scaring away international capital.  Streamline those, you will see more foreign investment into Canada.”

The Direction Is Encouraging

As a former Bank of Canada governor himself, it seems that Carney and Macklem are very much on the same page.  Macklem is pleased with Canada’s current foreign policy for expanding trade.   But he cautions that this broader trade strategy will only happen with a successful execution.

“I am encouraged by the directions," Macklem noted.  "These things are not going to get fixed overnight. It’s going to take a determined execution, but yes, I think the direction is encouraging. Now a lot of it is about execution.”

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