U.S. President Joe Biden is to arrive in Ottawa this Thursday with a long agenda. Officially, he wants to talk to Prime Minister Justin Trudeau about supply chains, shared defence needs, Ukraine and Russia, the crisis in Haiti, climate change, opioids and migration.
Trudeau’s announcement of the two-day visit highlighted critical minerals and cooperation in the Indo-Pacific and the Arctic as additional Canadian priorities.
The visit has been structured to maximize Trudeau’s face time with Biden, according to senior government officials who briefed reporters about it Tuesday on condition they not be identified. A number of ministers will be involved, though, including Finance Minister Chrystia Freeland, Innovation Minister François-Philippe Champagne, Natural Resources Minister Jonathan Wilkinson and Defence Minister Anita Anand.
“We’ll be looking at how we can tackle clean economic growth together in this particular global environment. That’s critical minerals and electric vehicles, and work that benefits workers.
We’ll be looking at addressing common challenges on climate change and biodiversity and also thinking about how we protect some of our shared environmental spaces,” said one of the officials.
“Are we going to sort out every issue? Absolutely not. But our goal is to make progress,” added another.
Many of the matters on the table have profound implications for the Canadian economy. Here’s what you need to know about what’s coming.
Issue: The new industrial policy
Backstory: In August 2022, the Biden administration kicked off a global green-subsidies race with the U.S. Inflation Reduction Act (IRA). Canadian officials dubbed the US$369-billion package of clean-energy subsidies and climate-tech incentives “a gravitational black hole for international capital.” Other governments—some grudgingly—have put forward similar measures to avoid losing industrial investment to its pull.
Freeland has promised Canada’s response in next week’s federal budget. “Either Canada seizes that opportunity and seizes our share of the new industrial global economy which is being built or we get left behind,” she said at January’s cabinet retreat.
Even as it competes for foreign cash, Canada wants its industries to earn some of the IRA dollars on offer across the border. “The larger goal of the policy—besides to combat climate change—is to create U.S.-based jobs,” noted Maryscott Greenwood, CEO of the Canadian American Business Council. “That actually creates a ton of opportunities for Canadian companies” that are in U.S. manufacturing plants’ supply chains.
Ottawa has already secured legislative wording changes that qualify Canadian-made EVs for new car-buying incentives. And it’s pitching Canada as a key link in the reorganized U.S. supply chains. “Going forward, we should design our government procurement and incentive programs with friendshoring in mind,” Freeland said at the Washington, D.C.-based Brookings Institution in October, citing that concession.
Champagne is looking to do something similar with semiconductors. He plans to pitch the president on a shared chip-manufacturing “corridor” between the two countries, mirroring integration of the auto sector. The Biden administration’s US$52.7-billion U.S. CHIPS and Science Act leaves room for allied participation, by including coordinating incentives and providing packaging capacity. Semiconductors, along with critical minerals, are “big focuses of the U.S. industrial policy that we’ve seen emerge in the last couple of years,” Greenwood said.
Which side is pushing: Canada wants in on the U.S. spending spree, and Ottawa must ensure that the sectors it chooses to subsidize fit into Washington’s supply-chain plans.
Issue: Critical minerals
Backstory: Pressure to “friendshore” vulnerable supply chains has sparked geopolitical tensions surrounding metals used in defence, electric vehicles and solar panels, many of which are mined or refined in China. Canada has not only entered the race to supply these critical minerals, but is jockeying to seize a “generational opportunity” to sell to global automakers and cleantech manufacturers.
The question is, how much business will wash up on Canadian shores from its best friend in trade, the U.S.? The White House has opened critical-mineral discussions not only with Canada, but also Europe, while announcing its own “Made in America” subsidy plan that Canadian mining companies must either compete against or find ways to benefit from.
Canada has made some progress carving out space in other countries’ critical mineral plans.
At the December COP15 meeting in Montreal, Canada and the U.S. were among seven nations who announced a Sustainable Critical Minerals Alliance. Since then, there have been rumblings of further negotiation between the two countries, with Trudeau and Biden discussing progress on critical minerals at the North American Leaders’ Summit in January, and Wilkinson hosting talks with international mining ministers earlier this month. The U.S. military is also reportedly in talks with Canadian miners.
Which side is pushing: Canada’s government has run a full-court press to get its mineral suppliers into the bigger U.S. market. Its national critical-minerals strategy released in December envisions regulatory harmonization opportunities with U.S. partners.
Canada has some allies on the American side—and some skeptics. U.S. Senate energy and natural resources committee chair Joe Manchin has advocated the U.S. create an energy alliance with Canada to “source what doesn’t make sense to do domestically.” At a committee hearing last year, he said Canada is ahead of the U.S. on critical minerals refining and processing. “We have much to learn from them about how they’re able to responsibly permit these activities in timelines that blow ours out of the water,” he added.
But Canada also caught heat last year from three Republican representatives, who wrote that its approval of China’s Zijin Mining Group’s takeover of then-TSX-listed Neo Lithium raised questions about Canada’s adherence to the two nations’ joint critical-mineral action plan. Champagne has since forced three Chinese investors to withdraw from Canadian lithium companies.
Issue: Defence
Backstory: Besides buying a fleet of 88 new F-35 fighter jets from Lockheed Martin and Pratt & Whitney, Canada is in the market for “multi-mission aircraft” to replace its decades-old CP-140 Auroras. The new planes are meant to be long range, and useful for intelligence and reconnaissance, command and control, and anti-submarine warfare.
The procurement is still in early stages, with the government soliciting information about products from potential bidders last year. But U.S. supplier Boeing is in a bit of a hurry with its P-8 planes, assembling a consortium of subcontractors and reportedly making a proposal to Canada years before the actual bidding was to begin.
Champagne and Anand met executives from numerous U.S. defence vendors, including Boeing, on a February trip to Washington. “Reinforcing and further integrating North American defence industrial supply chains creates well-paying jobs, growth, and resilience on both sides of the border,” said a joint statement the ministers issued afterward.
Canadian plane-maker Bombardier, which sells military versions of its Global and Challenger jets, has been publicly cross about the Boeing situation, as has Unifor. “Moving to a sole-source contract without considering the vast experience, capability and talent of Canada’s workers or the advanced technology they build would be a grave mistake,” the huge union’s president wrote to the ministers in January.
Canada has also promised billions of dollars to modernize joint North American air defences and is buying a $406-million missile-defence system for Ukraine, partly made by U.S.-based Raytheon.
Which side is pushing: Each in different ways. The U.S. wants allies, including Canada, to live up to long-disregarded commitments on defence spending. Biden is expected to try to get Canada to lead a stabilization mission to Haiti, where failing government and civil institutions have led to street violence and political chaos.
Though it’s still falling short—the Canadian Forces, understaffed and heavily committed to Ukraine-related tasks, might simply be incapable of taking on the Haiti mission—Canada wants the U.S. to see it as a reliable military partner, and to use defence procurement as live evidence of the intertwining of the two countries’ industries.
Issue: Canada’s digital measures
Backstory: The Liberals have a blizzard of bills attempting to regulate the internet in Canada, after decades of governments’ having chosen largely to keep their hands off it. One is a particular irritant to the Americans: Bill C-11, the Online Streaming Act, which would require platforms like Netflix and YouTube to include and promote Canadian content the way traditional broadcasters have to.
In Canada, discussion of the bill has been about censorship and what happens to Canadian creators if other countries follow suit. In the U.S., it’s a trade matter.
The U.S. Computer and Communications Industry Association, a lobby group that includes Google, Amazon and Apple, has publicly argued that Bill C-11 discriminates against American companies and would violate the U.S.-Mexico-Canada free-trade agreement USMCA. U.S. Trade Representative Katherine Tai has made the same claim to Trade Minister Mary Ng.
In that same virtual meeting in November, Tai’s office reported, she raised concerns about Bill C-18, the Online News Act, which would require Facebook and Google (or their parent companies Meta and Alphabet) to send money to approved Canadian journalism organizations. Meta has mused publicly about barring links to Canadian news, and Canadian publishers believe the company is serious; Google has been experimenting with keeping news links from appearing in Canadian users’ search results, annoying Heritage Minister Pablo Rodriguez.
In late February, the House of Commons heritage committee summoned four Alphabet executives to account for themselves, including CEO Sundar Pichai. Only one, its country manager for Canada Sabrina Geremia, showed (though others later agreed to attend).
Tai and her team have also let it be known that Washington is unhappy about Ottawa’s plans for a digital-services tax (DST), which her office says would “discriminate against U.S. companies.” The Liberal government has promised that the levy is a stop-gap measure until a new global agreement on how to tax multinationals takes effect. But with the OECD, the deal’s orchestrator, pushing back deadlines, the DST is scheduled to take effect next year.
“I expect the U.S. to raise its concerns on that basket of issues,” said Greenwood, noting the public comments from Tai and USTR on the bills and tax.
Which side is pushing: The United States.
Issue: The Indo-Pacific
Backstory: In May 2022, the U.S. threw a party, and Canada wasn’t there. The Biden administration-led Indo-Pacific Economic Framework for Prosperity (IPEF) brings together 14 countries to coordinate cross-border data flow rules, e-commerce market access and supply chains.
The Liberal government initially downplayed the importance of participating, citing Canada’s existing and in-negotiation trade agreements in the region. But in October, Foreign Affairs Minister Mélanie Joly asked to join. The U.S. and Japan have signalled support for Canada’s bid, but no formal accession process has been announced. A second IPEF negotiating round concluded in Bali last week.
Participating in IPEF is “potentially economically significant,” said Greenwood. “And also Canada never wants to be left out.” The Biden administration is “not doing new, full-on trade deals, but they are doing new cooperative agreements,” she noted. That includes IPEF; an Americas equivalent; and the AUKUS defence deal with Australia and the U.K. “We see the U.S. do big government procurement and big partnerships with its global partners to advance its foreign policy objectives,” Greenwood said.
In the meantime, Ottawa has its own Indo-Pacific Strategy to implement. Announced in November 2022, the plan includes promoting interoperable digital regulations and increasing exports of technology, energy and minerals within the region. U.S. ambassador to Canada David Cohen welcomed the document, touting collaboration opportunities.
Which side is pushing: It’s on Trudeau’s agenda for the visit, but neither side has signalled any imminent news on Canada’s participation in IPEF or any of the Biden administration’s other new regional blocs.
