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Canada's Finance Minister Jim Flaherty listens to a question during a news conference in Ottawa March 1, 2013. The slowing Canadian economy means the government will have lower revenues than it initially forecast as it draws up the next budget, which is due soon, Flaherty said on Friday. (CHRIS WATTIE/REUTERS)
Canada's Finance Minister Jim Flaherty listens to a question during a news conference in Ottawa March 1, 2013. The slowing Canadian economy means the government will have lower revenues than it initially forecast as it draws up the next budget, which is due soon, Flaherty said on Friday. (CHRIS WATTIE/REUTERS)

Flaherty concerned about impact of looming U.S. cuts on exports Add to ...

Jim Flaherty says he is concerned about the impact on Canadian exporters from the latest budget battle in Washington, and appealed to U.S. lawmakers to bring to an end the drumbeat of confidence-sapping fiscal crises.

The finance minister told reporters Friday he believes the so-called sequestration crisis — involving about $85-billion in spending cuts — will be a tempest in a teapot in terms of U.S. economy.

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But the potential for tie-ups at the Canada-U.S. border if guards are affected could slow trade routes between the two countries and have an impact on Canada’s economy, he said.

“I do know the size of the U.S. economy, I know the size of our trading relationship,” he explained.

“It concerns me a great deal to hear some of the speculation about border delays because we have the largest trading partner[ship] in the world, and a lot of the trade moves by border crossings on land.”

Flaherty said he could not put a hard figure on the potential loss to trade, but said Canadian and U.S. policy-makers will need to keep any disruptions at a minimum.

U.S. homeland security chief Janet Napolitano projects the cuts could affect the equivalent of about 5,000 border patrol agent positions, many on the Canada-U.S. border. As well, the equivalent of 2,750 inspectors is on the chopping block.

The U.S. Customs and Border Protection agency estimates the cuts could result in waits for as long as five hours at larger ports of entry, most of them in Ontario, Quebec and British Columbia.

The Canadian Council of Chief Executives and the Canadian Manufacturers and Exporters group both warn about repercussions to trade.

In a memo sent to its members this weekend, the CME noted there’s no evidence that any border contingency plan has been worked out between the U.S. and Canada.

Flaherty appeared more frustrated with the ongoing political squabbling over budget issues in the U.S., mostly due to the inability of Democratic and Republican lawmakers to come to an agreement on a wide array of issues, from taxes to debt limits to spending.

Few regard the current impasse to be on a level with December’s so-called fiscal cliff crisis, which had the potential to shave about four percentage points from U.S. growth and was averted literally in the final hours. By contract, sequestration is estimated to trim only 0.4 percentage points from the world’s largest economy, a relative trifle.

But economists say the succession of crises, and doubts about if and how they will be resolved, has contributed to growing uncertainty among business and consumers, and damaged the recovery. America’s barely visible 0.1 percentage growth rate in the last three months of 2012 was mostly blamed on risk posed by the fiscal cliff issue.

“It is regrettable ... that the U.S. continues to move from crisis to crisis in fiscal terms,” Flaherty said.

“I’m not blaming anybody except everybody who is responsible for developing a medium-term plan in the largest economy in the world, because it effects all of us in the world, including Canada.”

Still, Flaherty said he still regards Europe as the biggest threat to the global outlook, not the U.S.

Analysts said Friday that Canada’s disappointing 0.6 per cent growth rate, as reported by Statistics Canada, was also at least partially attributable to the climate of uncertainty posed by the fiscal cliff battle. They note that most of the weakness came from a drawdown in stockpiled inventories, suggesting firms were concerned about future sales should the U.S. economy take a hit.

Also Friday, an influential cabinet minister took an unexpected swipe at the United States, saying it was up to its ears in debt because it had followed big-spending policies similar to those advocated by the NDP.

The comments by House Leader Peter Van Loan were a surprise, given that Ottawa is currently pressing Washington to approve the Keystone XL pipeline from the oil sands of Alberta to Texas.

Van Loan made his comments while criticizing the federal New Democratic Party. “If they want to see an example of what happens when you adopt NDP spending plans ... they can just look south of the border and see what happens when you’re in debt up to your ears,” Van Loan told the House of Commons.

A few minutes later Van Loan renewed his attack on the NDP’s spending plans, saying they would pile up huge government debts.

“If they want to know where you go when you hit that black hole of debt, just look south of the border and see real crisis,” he said.

Harper’s chief spokesman, Andrew MacDougall, did not immediately respond to a request for comment.

Canada sends 75 per cent of its overall exports to the United States, including 100 per cent of its natural gas exports and 98 per cent of its oil exports.

The Conservatives want Washington to approve TransCanada Corp’s proposed Keystone XL pipeline from Alberta to Texas. Obama is under heavy pressure from environmentalists to veto the project.

With a report from Reuters

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