Canada govt set to fall over economic crisis

The political crisis comes even though many economists agree that Canada’s economy was well-placed among the G7 to withstand the crisis.

On Monday, federal statistics agency StatsCan reported that the country’s economy grew at an annualised rate of 1.3% in the third quarter, compared with a 0.5% decline for the US economy.

Production of goods rebounded in the third quarter following four consecutive quarterly declines. The increase was led by the mining sector, notably support activities for oil and gas extraction, as well as construction, StatsCan said.

A change in government could impact Canada’s petrochemicals and energy sectors, especially in terms of environmental policies.

The three opposition parties all favour much more activist environmental policies than the Conservatives.

In fact, the Liberals' October election platform was based on an ambitious “green shift” that called for a carbon tax while reducing income taxes. Harper has firmly rejected a carbon tax as not practicable.

But Canadian chemicals and plastics producers could also benefit, at least indirectly, from the new government’s promised stimulus measures.

The coalition may act very quickly to help the auto sector – led by the Canadian operations of the Detroit Big Three - even as US lawmakers were still weighing their options, analysts said.

The auto industry’s troubles are a top concern for the NDP, which enjoys strong backing from the Canadian Autoworkers (CAW) union.  In fact, the CAW on Monday quickly organised a petition in support of new coalition government.

Another policy issue concerns the tax treatment of income trusts. The Liberals had vowed to reverse Harper’s decision to phase out favourable tax treatment for firms organised as income trusts.

Some Canadian chemical producers, including sodium chlorate producers Canexus and Superior Plus/Erco Worldwide, as well as industrial chemicals producer Chemtrade Logistics, are organised as income trusts.

A spokesperson for the Canadian Chemical Producers Association (CCPA) was not immediately available for comment.

Last month, the CCPA welcomed steps announced by the Conservatives to encourage manufacturers to invest in new machinery and equipment.

Chemical producers are pressing for permanent accelerated capital cost allowances for new investments in machinery and equipment. 

The final decision on whether the Liberals and NDP will be able to take over and oust the Conservatives rests with Governor General Michaelle Jean.

The alternatives would be for Jean to call a new election or to prorogue Parliament until January, political analysts said.

Legal experts said while coalition governments were unusual in the Canadian political context, Jean would act well within constitutional conventions should she allow the Liberals and the NDP to form the new government.

The Canadian TSX stock market index plunged 864 points on Monday to 8,406, the largest single-day drop since the 1987 market crash.

($1 = C$1.24)

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