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Finance Canada Gets a Report Card

…And we’re doing pretty OK. Basically, the International Monetary Fund (IMF) sends a team of economists to Canada every year, and checks in on the health and success of our financial system, and the policies that support it.

The good news? Canada posted the strongest economic growth in the G7 in 2017, and we have healthy employment numbers. The report also noted with approval some of the measures the current government has implemented to stimulate productivity and job growth – specifically re-hauling NAFTA, opening the Canadian Infrastructure Bank, and creating tax allowances for business investment. The last one is important – after Trump dramatically lowered corporate taxes and provided tax cuts for business investment last year, some economists feared Canadian businesses would pack up and move south.

The bad news? The IMF is still pretty critical of the Canadian housing situation. For one, they’re concerned that Canadians hold too much debt – in the unlikely (but still possible) case that the economy sharply declines, Canada could see massive mortgage defaults not unlike 2008.
As such, the IMF took a slight dig at Finance Minister Morneau’s new housing incentive program, announced in the most recent budget, calling any activity to stimulate home-buying at this point in time “ill-advised”.

Another ‘pain point’? Internal trade. The IMF picked up on the frustration of Canadian business owners who are finding it easier to trade their goods and services internationally than within Canada. As demonstrated by the pipeline drama below, cross-provincial trade has become more and more tricky. Trudeau recently took steps to remove regulations on cross-provincial liquor trade, but many industries still face tricky regulations.

TMX Woes and Wins

This past week, Canadians saw further developments in the ongoing battle between the provinces and the federal government over who has jurisdiction over energy and the environment (read: pipelines), with a provincial court ruling by British Columbia’s top court.  Addressing the question of whether allowing the province to create a permitting regime for companies to increase their flow of diluted bitumen would be constitutional, the provincial court ruled unanimously against proposed amendments to B.C.’s Environmental Management act.

Those amendments would require companies to apply for a provincial “hazardous substance permit”. According to the province, this would allow for BC to protect communities and the environment at a local level where federal and corporate measures fall short.

While the province argued that the proposed regulations could co-exist with federal jurisdiction Canada has over railways and pipelines through the National Energy Board (NEB), the involved judges ruled that the changes would usurp the role of the NEB in approving projects of national interest (i.e. interprovincial pipelines).

Justice Mary Newbury wrote that the legislation was also not “general”- it was targeting a very specific heavy oil project (i.e. the Trans Mountain Expansion (TMX) specifically). Yes, this again. The TMX expansion would triple the existing pipeline’s capacity to carry oil from Edmonton to Vancouver. TMX is currently on hold as the feds try to address a Federal Appeal Court ruling from last year, which identified failure of the Feds to adequately consult First Nations communities or consider impacts on marine life.

Attorney General David Eby said that the province will appeal the court decision to the Supreme Court of Canada, stating “we believe we have the right and authority constitutionally to regulate harmful substances through B.C. however they get here.”

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