While Canada stretches nearly ten million square kilometres, from the Pacific to the Arctic to the Atlantic Ocean, there are just 39 million of us—barely a tenth the size of the United States.

April 12, 2023 - Washington, D.C., United States of America

While Canada stretches nearly ten million square kilometres, from the Pacific to the Arctic to the Atlantic Ocean, there are just 39 million of us—barely a tenth the size of the United States.

So as the 39th largest country in the world by population, it is not immediately apparent that Canada would boast the tenth largest economy.

But Canada has been blessed with an endowment of what the world needs—and far more of it than we could ever require ourselves.

Furs for Europe’s wealthy became the timber and grain that helped to build and feed an empire.

Canada today is the largest exporter of oil to the United States—supplying at least twice as much as Saudi Arabia and Mexico combined—and we sell our airplanes, our AI, and our aluminum to the world.

That is why, in a country with a healthy political debate on many issues—we have five parties in parliament, and our government holds just a minority of seats—we do agree on one thing, and that is trade.

Canada is massive, but also small. Trade is necessarily central to who we are. Canada is a trading nation.

Which is why, as a political leader, I am proud to be a member of a team that secured NAFTA for a new generation. I am proud that we delivered trade deals with both the European Union and our partners in the Pacific.

And as a Canadian, I am just as proud of the comprehensive cross-party support these agreements enjoy.

But as the Deputy Prime Minister of Canada, I am also very aware that I arrive in DC at a fraught moment.

As the world’s economic leaders gather here this week, many of our conversations will be coloured by one overarching anxiety—the question of the Inflation Reduction Act, and what it means for our trade and economic relationships with this great country.

More than 90 per cent of Canadians live within 150 miles of the US border for a reason.

Our allies in Europe and the Indo-Pacific are further away—but they would be nearly as hard pressed to imagine an economic future that is not intimately linked with the United States.

That is why, as the US makes an historic investment in its clean economy, workers and business people and political leaders in the rest of the world—from Toronto, to Tokyo, to Turin—are wondering where we fit in.

So that is what I would like to speak about this morning: the IRA, and what it means from the perspective of a friend, a neighbour, and an unabashed free trader.

Let me begin by saying this: the IRA is an historic and transformative piece of legislation—one that will change the world for the better. It is good for the United States, it is good for Canada, and it is good for the world.

And to my friends, including people here today, who might bristle at this assertion, here is why I believe that to be true.

First, because this is America’s path to building a clean economy.

The global net-zero transition is the most significant transformation since the Industrial Revolution.

Since 2015, Canada has been investing heavily in building our clean economy—including with an historic investment in the budget I tabled last month, which brings our total investment to more than $120 billion.

Today, 83 per cent of Canada’s electricity is produced with clean energy, making ours one of the cleanest grids in the world. We plan to make it even cleaner, and to double—or triple—the amount of electricity we produce.

We are investing in electric vehicles and their supply chains, in hydrogen, and in carbon capture, utilization, and storage.

We will make Canada a reliable supplier of clean energy and critical minerals to the world.

We have put a price on carbon pollution since 2019—a price that has survived two national elections and been upheld by our Supreme Court. Our price went up at the beginning of this month to $65 per tonne—and the money we raise goes straight back into the pockets of Canadians, in the form of Climate Action Incentive payments of up to $1500 a year for a family of four^{Footnote 1}.

But no matter how seriously Canada takes the climate challenge—and we take it very seriously indeed—or how seriously the United Kingdom, or France, or Japan takes it—we know we do not stand a chance of building a clean global economy without the United States.

Everyone here will remember the sense of dread we felt when the US abandoned its Paris commitments—and thus, we feared, our collective chance to leave a liveable planet to our children.

But with the IRA, the most essential force for climate action is back—and I am very grateful to have America’s ingenuity and sheer, vast economic capacity alongside us in this existential effort.

Second, and perhaps even more important, is the role the IRA will play in rebuilding America’s middle class.

American working people were battered and beaten during the race-to-the-bottom era of unfettered globalization—particularly in the Great Lakes states that are so deeply interconnected with Canada.

Their pain was—and is—real. None of us should be surprised that pain has threatened to destabilize American democracy itself. The American people are smart—and they have a history of rejecting political systems that don’t work for them. Indeed, you could say, that impulse is at the foundation of America itself.

Just as we need the United States to embrace climate action if our shared efforts are to have any hope of succeeding, we need American democracy to be strong if global democracy is to flourish.

The IRA, with its strong labour requirements and a commitment to the hollowed out regions of the United States, is just as surely an investment in the middle class as it is an investment in climate action.

And measures like the child care obligations in the CHIPS Act will support working women. In Canada, in 2021, we invested more than $30 billion in a national system of early learning and child care, with a commitment to bring fees down to just $10 a day by 2025.

Already, child care fees have come down by 50 per cent, and the labour force participation rate for Canadian women in their prime working years has hit an historic high of 85.7 per cent—that’s compared to just 77.1 per cent south of our border.

At a time when labour shortages are constraining our economy and contributing to inflation, affordable child care is both making our economy stronger and helping our families thrive. And that is of paramount importance.

Because in Canada and in the United States—and, indeed, in all of the world’s democracies—the first and last and most fundamental measure of the success of our policies is whether they work for working people.

You can forget about Paris targets and emissions reductions—to say nothing of GDP or geopolitics—if you are failing on this most important metric.

We all need to build our middle class at home, and every single one of us has an interest in a strong American middle class—and therefore in policies, like the IRA, that support it.

As a cabinet minister who regularly criss-crosses my country, and a door-knocking constituency MP who has been elected four times, I have found that Canadians from ocean to ocean to ocean value the same things.

A job that pays them well, doing work which is respected. The ability to live a dignified and prosperous life, and the confidence that their children’s lives will be better than their own.

Capitalist democracy succeeds when we can deliver on these essential promises. And it falters when we do not^{Footnote 2}.

President Biden’s approach—of building the economy from the bottom up and the middle out—is one that Canada most assuredly shares. At its heart, it is an approach shared by our democratic allies around the world.

The IRA is about building the prosperity of what Prime Minister Trudeau would call the middle class and those working hard to join it.

It is industrial policy and climate policy that works for working people.

It is economic policy that will strengthen American democracy at a time when all democracies need a strong America.

But just as America’s allies have an interest in America’s success, I believe that America also has an interest in ours.

In his address to Canada’s parliament last month, President Biden told us that we are at an inflection point in history.

He is right.

Taken together, the global fight between democracy and dictatorship, and the existential threat of climate change, make today the most consequential moment since the Second World War.

President Kennedy said that with increased ability comes increased responsibility. And in its ability to address today’s challenges to democracy and our planet, the United States is indeed unique among nations.

History has proven that in the face of the most difficult missions, the United States can undoubtedly do a very great deal—more than any single country on earth today. But while you can do a lot alone, the scale of today’s demands is so great as to overwhelm even your own sole capacity.

And what history also shows us is that the United States is able to meet the very greatest of challenges only when working with allies. A strong United States is necessary for the world today, but it is not sufficient. Your allies must be strong, too.

So while I absolutely understand the value and the power of the IRA, as legislation that can help save the planet and shore up American democracy, let me offer a few cautions—or, perhaps, polite reminders—I am a Canadian after all—from a friend, from a neighbour, and from someone who truly believes in the United States as a unifying force for good.

First of all, we all know that building our clean economies and creating good middle class jobs will require a lot of capital. So let us be aware of one danger: it will be all too easy for us to get drawn into a race to the bottom to attract it.

That is exactly what happened when, in our individual efforts to promote investment and spur economic growth, we drove corporate tax rates down around the world, and weakened the domestic tax bases that are essential to investing in the middle class.

The three decades following the Second World War were a time of opportunity when the democratic promise of prosperity, dignity, and hope for the future came to fruition.

The French economist Jean Fourastié was right to dub this period Les Trente Glorieuses—a time when the countries of the G7 grew at an average pace, over an entire generation, of three per cent per year.

But in recent decades, growth slowed. And at the same time, median wages stagnated and income inequality soared. That was a betrayal of the promise of democratic capitalism.

We have all been working to reverse that trend. In Canada, since 2015, income inequality has declined by 11 per cent, and there are 56 per cent fewer Canadians living in poverty.

A strong domestic tax base is essential to this ongoing effort. That is why the OECD two-pillar tax deal, championed by Secretary Yellen and agreed to in 2021, is so important—and why Canada is working enthusiastically to bring these two pillars into force. And that is all the more reason not to begin a new, mutually sabotaging competition to provide ever richer corporate subsidies.

Because just as the corporate tax race to the bottom may have enhanced bottom lines but impoverished our middle classes, a corporate subsidy war might be good for some shareholders, but it would deplete our national treasuries and weaken the social safety nets that are the foundation of effective democracies.

It is in our collective interest—as friends, as partners, and as allies—to work together to ensure that our incentives drive innovation and investment, rather than create a vicious beggar thy neighbour spiral.

Now that, of course, is much easier said than done. And so here, I think, we could all benefit from the historic experience, and current expertise, of our allies in the European Union.

For decades, within their union, they have balanced the need to drive industrial investment in their national economies against the danger of corporate subsidy wars. That is what we must try to do today, on a broader scale.
My second polite reminder would be that free trade—when it is fair and therefore truly free—does actually work.

The stagnant middle class incomes of recent decades have made many understandably skeptical of the neoliberal formula of free trade and low corporate taxes.

Working people—in Canada, in the United States, and in democracies around the world—have long understood that they draw the short straw in a competition with the voiceless proletariat on the factory floors of authoritarian economies.

There is a reason the Industrial Heartland became the Rust Belt.

We should do everything we can to level the playing field for our own working people. Canada’s determined commitment to ban goods produced by forced labour from our supply chains is one such example—as are similar measures in the US and the EU.

But it would be a huge and historic mistake to react to the abuses of the global trading system by embracing autarky.

I said earlier that the effort to build the clean economy of the 21st century is the most significant economic transformation since the Industrial Revolution, and that is true.

It is therefore also true that no single country—not even the United States—can invent all of the new technologies, or possess all of the natural resources that the net-zero global economy requires.

Canada fought hard to secure our eventual place in the IRA’s EV and battery requirements. We did so because it was essential to the future of the Canadian auto industry, but also because a vehicle and its parts cross the Canada-US border at least seven times before it is fully built. You need us as much as we need you.

Our Asian and European allies have made similar arguments—and we are glad that the US has heard them. Our individual economic success will depend on our ability to navigate this transition together—and US leadership will be essential.

And where the US embeds Buy America into its procurement or incentives in support of its bruised middle class, it will be appropriate for America’s partners to respond with requirements of our own.

That is the intention of the reciprocal procurement measures that Canada proposed in our budget last month.
At the end of the day, all of us are seeking to build clean economies that protect working people. We should never forget that, when done right, free and fair trade can help us do exactly that.

And today, there is a further, equally pressing challenge we must consider as we craft our economic policies and design our trading relationships: national security, and the great struggle between dictatorship and democracy that is being waged in the world today.

The global economy was fundamentally changed on February 24, 2022.

In turning his guns on Ukraine, Putin also opened fire on the interconnected global economy so many of us believed would be a shield against war.

His marching criminal armies—and the hostage-taking of European energy supplies—clarified a lesson that China had likewise been attempting to teach us for years: that economic security is a matter of urgent national security.

Russia controls energy and China controls many critical minerals. Last winter, Europe learned a bitter lesson in the folly of depending so greatly on Russian gas. Yet, today, our reliance on Chinese lithium and nickel sulphate is even more exclusive.

Beijing, as President von der Leyen said last week, has been working steadily and over decades to make “China less dependent on the world, and the world more dependent on China.”

These strategic vulnerabilities to authoritarian economies put our own security in jeopardy.

We need to de-risk our economies, which means working more closely together. Where we must be strategically vulnerable, we should choose to be vulnerable to each other—an approach Secretary Yellen has described as friendshoring.

It is here where the United States is and must continue leading the way.

The US Defence Production Act funding for the production of Canadian critical minerals, which President Biden announced last month, will make both of our economies more secure.

Carving Japan and South Korea into the IRA’s clean vehicle provisions will create jobs for Americans, and reinforce the economic security of two of our most important  partners.

An IRA accommodation for Europe can speed up the de-risking of Europe’s most essential supply chains—while creating new opportunities for workers and businesses on both sides of the Atlantic.

And we need to think ahead—and have a plan to work together—when it comes to economic coercion.

Europe rallied admirably this winter when deprived of Russian gas. But long before that, smaller economies—Norway, Australia, my own country—faced economic punishment for displeasing Beijing.

The EU’s internal initiative on economic coercion—a direct response to the bullying of Lithuania—is important both as an insurance policy and a deterrent. We should work to adopt a similar measure among a wider group of allies.

Finally, we need to remember that the interconnected challenges I have been discussing today—addressing climate change, building our middle class, strengthening our democracy—are by no means the exclusive province of the non-geographic west.

Indeed, they are even more acute in the Global South. That is why efforts like the Bridgetown Initiative are so important, and why our work needs to embrace and invite the widest possible group of partners.

The events of the past year have proven true what Prime Minister Trudeau said last month: that climate policy is economic policy is security policy.

The challenges and opportunities we face today are the most significant in our lifetimes, and they are deeply intertwined.

Defending democracy on the battlefields of Ukraine while deepening its roots in our own countries—and the bonds between us all. Rebuilding the middle class while saving our planet—and working together to build the clean economies of the 21st century.

Clean economies with good jobs that pay well. Where our citizens can live dignified and prosperous lives, and have the confidence that their children will do even better.

Because that is the promise of democracy.

If we do it right—if our national efforts to build our clean economies and grow our middle classes are complementary, rather than in conflict—we can all deliver on that fundamental promise.

So let that be our work—as leaders, as intellectuals, as citizens: to build a world where we look after our friends.

Because President Biden was right when he said in the Canadian parliament last month that there is nothing we cannot do when we do it together.

Thank you very much.