Trudeau Team Feared Trucker Protests Would Harm US Trade Ties
Trudeau #Trudeau
(Bloomberg) — Canada’s government was worried about the hit to its reputation from trucker-convoy trade disruptions as it negotiated with the US on electric-vehicle incentives.
CONSTELLATION BRANDS, INC.
Most Read from Bloomberg
Michael Sabia, the top civil servant in the finance department, told a public inquiry into Prime Minister Justin Trudeau’s invocation of emergency powers that border blockades came at an especially bad time for Canada, which was already battling US protectionist measures.
Convoy protesters shut down multiple border crossings in mid-February, including the Ambassador Bridge into Detroit that is Canada’s busiest trade corridor with the US and a vital link for the auto manufacturing sector. They also gridlocked downtown Ottawa for nearly a month, denouncing Trudeau and federal Covid-19 restrictions that included vaccine mandates.
If the border blockades “were to continue for a period of time and became an even more significant threat to the American perception of Canada as a reliable trading partner, that was something with very severe long-term consequences,” Sabia told the inquiry on Monday morning.
At least six auto plants near the US-Canada border were forced to slash production as the standoff at the bridge intensified. Toyota Motor Corp., General Motors Co., Ford Motor Co. and Stellantis NV all either idled plants or reduced capacity. Economists, meanwhile, were warning that the disruptions threatened Canada with an economic contraction while fueling inflation.
“There was concern within the American federal government, within the White House, about this issue,” Sabia said. Trudeau and President Joe Biden discussed the protests during a phone call on Feb. 11.
The bridge blockade also came amid Canada’s push against proposed Buy American tax incentives for EVs that would have favored vehicles made by unionized US workers, potentially in violation of the overhauled continental free-trade with the US and Mexico.
“There was no doubt that these disruptions, coming when they did in that process, brought with them the risk that we would not be able to get the North American treatment that we were eventually able to negotiate,” Sabia said.
Read more:
The government, including the finance department, became focused on how to end the blockades as quickly as possible, he said. Aside from the direct impact of blocking goods from crossing the border, the government feared there would also be a cascading effect on the economy as supply chains for various sectors were interrupted.
“Duration is everything here in terms of its disruptive impact on the Canadian economy,” said Sabia, who before joining government did stints as chief executive at both Canada’s second-biggest pension fund and its biggest telecommunications firm.
That led finance officials to begin examining what tools they had under Canadian legislation to cut off the flow of funding to the convoy and pressure people to end their participation in the blockades.
Sabia said he and Finance Minister Chrystia Freeland had discussions with chief executives of major banks to gauge their views on the blockades and what could be done to end them.
But the government had the problem that “pretty much anything that we could do would require a legislative change, and legislative changes by their nature take an extended period of time,” Sabia said.
Trudeau eventually decided to invoke the Emergencies Act on Feb. 14, which included giving banks the power to freeze the accounts of people deemed to be participating in or funding the convoy blockades.
Sabia and one of his deputies told the inquiry that the government wasn’t involved in deciding which specific accounts should be frozen. Instead, banks were instructed to take those decisions on their own, often on the basis of information provided by Canadian police.
Ultimately, the inquiry heard that the economic impact of the convoy was relatively small because the border blockades — particularly at the Ambassador Bridge — were not allowed to linger.
“It’s fair to say that the economic impact was limited, but it was limited because the duration of the blockades was limited,” said Rhys Mendes, a Bank of Canada official who is on secondment to the finance department.
The six-week inquiry began Oct. 13 and has heard from police officers, government officials, municipal politicians, and the convoy organizers themselves.
Trudeau, Freeland and other cabinet ministers are scheduled to testify before the inquiry wraps up at the end of next week.
Most Read from Bloomberg Businessweek
©2022 Bloomberg L.P.