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Federal, provincial, territorial finance ministers to discuss U.S. trade threats, equalization

With one week to go before Canada imposes retaliatory tariffs on a wide-range of U.S. goods, Bill Morneau has scheduled a trade-heavy agenda for Tuesday’s meeting of Canada’s finance ministers.

Canada’s Ambassador in Washington, David MacNaughton, will brief the federal, provincial and territorial finance ministers at the Ottawa gathering. Also invited are a range of private-sector chief financial officers who will talk about the risks of an escalating global trade war, as well as longer-term issues.

David MacNaughton, Canada’s ambassador to the United States.

Graham Hughes/The Canadian Press

However some provincial ministers are bringing their own priorities. While Mr. Morneau has not placed equalization on the formal agenda, Saskatchewan and Alberta have said they want to discuss the renewal of the $19-billion federal transfer program, which aims to ensure a comparable level of government services across the country.

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The complex program is a persistent source of division, in part because Quebec typically receives more than 60 per cent of the funding.

Saskatchewan Premier Scott Moe released a proposal last week for a new equalization formula, but said he was surprised to later discover that Mr. Morneau had already renewed the program on its existing terms through to 2024 in his latest budget bill.

Mr. Morneau’s office said no province should have been surprised, given that the renewal was mentioned in the February budget, in the budget bill, in letters to the provinces and was the topic of technical discussions among federal and provincial public servants.

Speaking with The Globe and Mail, Mr. Morneau’s spokesman Daniel Lauzon said there will be time during the day for ministers to raise issues with equalization, but Ottawa considers the renewal in 2024 as the next opportunity for changes.

Mr. Morneau’s goal for the meeting is to talk about longer-term economic files such as infrastructure, demographics, work force participation and innovation while also discussing the immediate expectations on the trade front.

“These are huge challenges that we’re looking at and there is uncertainty,” he said, in reference to trade. “We need to make sure that people have all the most up to date information and that we’re talking about it as a confederation. … At the same time, we don’t want to lose the focus on the longer-term challenges.”

A senior Quebec government official, who spoke to The Globe on a not-for-attribution basis, said there is not likely to be much disagreement between Ottawa and the provinces when it comes to trade. As for equalization, the official said the renewal should not have come as a surprise to any province given that it was discussed when finance ministers last met in December and has been the subject of continuing talks.

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The Quebec official said any province that is concerned about a short-term drop in revenues should be discussing applications or changes to a separate federal plan called the Fiscal Stabilization Program, rather than equalization.

On Friday, Mr. Morneau met with private-sector economists to hear their views on the state of the economy.

Conference Board of Canada economist Marie-Christine Bernard said the main topic of discussion on Friday was on the uncertainty that Canada faces regarding trade with the United States.

“On the ground, people are very concerned and aren’t necessarily planning long term to make big investments in Canada,” she said.

Canada has consulted on a list of proposed tariffs that will take effect on July 1 in response to U.S. tariffs on steel and aluminum imports that were announced in late May. U.S. President Donald Trump has mused about further tariffs on Canadian auto imports.

“Right now, it’s hard to say in terms of where trade will go,” Ms. Bernard said.

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Bank of Montreal chief economist Douglas Porter, who also attended Friday’s meeting with Mr. Morneau, said trade is the “clear and present danger” to the Canadian economy.

“Canada’s been dealing with trade uncertainty for the past year, but I think what’s really changed in the past month is that some of it has turned into reality,” he said. “I personally think we’re beyond the stage of this just being a threat.”

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