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Prime Minister Justin Trudeau gave a speech in Davos on Tuesday that has largely been interpreted as a signal that his government will not lower the federal corporate income tax rate or cut environmental regulations to keep pace with similar moves in the United States.

If that proved true, it would not be a credible position for the government to take. As it is, it's a bad message to send.

Speaking to the World Economic Forum, Mr. Trudeau chided corporations that "have put the pursuit of profit before the well-being of their workers." He spoke at length about the importance of tax breaks for the middle class, of diversity, of hiring more women and of income equality.

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He also talked up the Comprehensive and Progressive Trans Pacific Partnership, the free-trade agreement Canada has agreed to sign by March.

It was a message that will clash with the one the U.S. President will deliver in Davos on Friday. Donald Trump is expected to push his America First agenda, attack free trade and boast about deregulation and tax cuts.

The contrast could not be more stark. Mr. Trudeau is calling for progressive fiscal, social and trade policies. "We're in a new age of doing business, " he said.

Mr. Trump, on the other hand, is concerned solely with America's corporate bottom line. Thanks to the reform that Congress passed last month, the U.S. federal corporate tax rate will fall from 35 per cent to 21 per cent next year. Income taxes on the wealthy will fall, too, all paid for by massive debt and reductions in social services.

The U.S. is also cutting environmental regulations and opening more public land to oil and gas development. Mr. Trump wants out of the Paris climate agreement, and has no plan to impose a carbon tax. There is no new age in sight.

These moves have been widely panned, but they will nonetheless make the U.S. a more amenable place for foreign companies to invest in North America, because investors are always looking for the lowest costs of doing business.

The tax reform is particularly worrisome: It will put the U.S. corporate tax rate on par with Canada's, while wealthy business owners will pay lower income taxes.

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It's all about competitiveness. Mr. Trump is using lower taxes and deregulation to attract new business to the U.S., and using protectionism, or its threat, to keep existing businesses from from leaving the country.

If he carries through with his vow to pull out of the North American free-frade agreement, or gets considerable concessions from Canada and Mexico, the combined effect could, over time, make Canada a distant second choice for foreign investors eyeing North American markets.

Mr. Trudeau's talk of progressive policies has its fans, including some in the business world. And Canada is and will remain a viable place to invest, thanks to its stable democratic institutions, its respect for the rule of law, its public health care, and its growing and diverse talent pool.

But all too rare is the business owner, including and especially shareholders, who willingly sacrifices the highest possible return in the name of progressive social values.

In other words, Mr. Trudeau cannot only offer a portal to a "new age." Ottawa must also show it is willing to play ball when it comes to doling out economic carrots and sticks.

The Prime Minister hasn't explicitly said he won't do that, and Finance Minister Bill Morneau was reassuring on Tuesday, saying, "We intend on staying competitive."

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But people are worried. The Bank of Canada foresaw in its latest report a "deterioration in Canadian competitiveness" thanks to the U.S. tax cuts. John Manley, president of the Business Council of Canada, argues that the U.S. tax cuts could be even more harmful to Canada's economy than the collapse of NAFTA.

Meanwhile, the Bank of Canada Governor, Stephen Poloz, says foreign investment in Canada is already stalling, as companies wait to see the outcome of the NAFTA renegotiation.

These are the realities that Canada faces. Our much bigger neighbour is abandoning progressive policies for the sake of economic competitiveness. The Trudeau government can't ignore that, or pretend that the U.S. doesn't set the rules in the North American market.

To stay competitive in this tumultuous economic moment, Ottawa needs to demonstrate that it is open to all possibilities, including lower corporate tax rates and less regulation. You can't compete if you're not playing the game.

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