INTERVIEW: Canada's chem industry worries as PM loses finance minister, seeks to suspend parliament

Author: Stefan Baumgarten

2020/08/18

TORONTO (ICIS)--Canada’s chemical industry is worried after the finance minister of Prime Minister Justin Trudeau’s government resigned and Trudeau seems to be moving to prorogue, or suspend, parliament until October.

In an interview with ICIS, Bob Masterson, CEO and president of Chemical Industry Association of Canada (CIAC), said that the resignation of finance minister Bill Morneau “should worry people”.

“The fact that this happened in the worst crisis Canada has faced in nearly 80 years should worry people,” Masterson said.

“For [Morneau] to resign, that means there is no longer a meeting of minds with the Prime Minister on the direction of the government,” he said.

Morneau resigned late on Monday, saying that he was not the right person to lead Canada through the coronavirus crisis and recovery.

His resignation came after media repeatedly reported on alleged differences between him and Trudeau over Canada’s rising deficits and debt amid the pandemic, and the best way for the economy out of the crisis.

In June, credit watchdog Fitch downgraded its rating for Canada, citing a deterioration of the country’s public finances in 2020 due to the coronavirus pandemic.

Also possibly playing into Morneau's resignation is that both Morneau and Trudeau are being investigated by Canada’s ethics commissioner over their role in the award of a big government contract to a charity.

Deputy prime minister Chrystia Freeland is due to be sworn in as the new finance minister later on Tuesday.

Meanwhile, Canada’s CBC/RDI state media group, citing a high-level government source, reported that Trudeau would seek to prorogue parliament until October.

A prorogation has to be granted by Canada’s Governor General, Julie Payette, who represents the Queen in Canada.

The developments come as the Bloc Quebecois - one of three opposition parties in the federal parliament - has said it would seek a "no confidence" motion in the government because of the charity affair - unless Trudeau, Morneau and Trudeau’s chief of staff all step aside.

Trudeau’s Liberals were re-elected for a second term just 10 months ago - but they lost their majority and now form only minority government that would fall if all three opposition parties support a no confidence motion.

CHEMICAL INDUSTRY WORRIES
CIAC’s Masterson said that Morneau’s resignation came amid tensions between two factions in Trudeau’s government.

One faction, which included Morneau, is cautious about deficits and debts, and about imposing new restrictions on existing businesses that could hamper new investments to get the economy out of its coronavirus-triggered downturn.

The other faction advocates that Canada should “green the economy” and “build back better”, introduce new regulations and constraints on existing business, and spend its way out of the crisis - without really focusing on the existing economy’s troubles, Masterson said.

With Morneau’s resignation, the latter faction seems to have won - which could send a worrying message to investors in the chemical and other industries, Masterson said.

While the chemical industry was aware of the tensions, until Morneau’s resignation on Monday night it was not yet fully clear where Trudeau, as the final arbitrator, stood.

Now, with Morneau gone, the odds of new regulations that could harm the prospects of new investments in the chemical and other sectors were higher than before, Masterson said.

He pointed to government moves such as tightening fuels standards, declaring plastics toxic, or banning plastics.

While those moves had been discussed before, the likelihood of the government realising them has now become higher, he said.

“We were worried before, now we are more worried,” said Masterson.

“We are worried that the government of Canada is not paying sufficient attention on how to grow investment in the [chemical] sector – a sector that has the opportunity to contribute significantly to the recovery,” he said.

At the same time, the federal government’s policies were not aligned with those of the provinces, Masterson warned.

Canada was so far relatively successful in dealing with the pandemic - but that was because during the crisis the federal and provincial governments collaborated and respected each other’s jurisdictions, Masterson said.

In order to get the economy out of the crisis and boost investments, Canada needed federal-provincial collaboration - not confrontation, Masterson said.

“We need a unified approach to the economic recovery - that’s not happening, and the likelihood of that happening, I would say, is even lower now than in was before” Monday night’s resignation of the finance minister, he said.

Going forward, Trudeau will likely go through with prorogation, have a big cabinet reshuffle, and then bring parliament back in October, Masterson said.

There was little question that the Governor General may refuse to grant prorogation - if she did, Canada would face a constitutional crisis, on top of the health and economics crises, he said.

During prorogation the Trudeau government could not pass new laws - but it would continue functioning as a government and could put in place regulations.

While government moves to tighten fuel standards or ban plastics were not likely to happen during prorogation, “you can be sure that all those things will feature prominently” after prorogation, Masterson said.

Thumbnail photo: Bob Masterson, president and CEO of Chemistry Industry Association of Canada/Association canadienne de l’industrie de la chimie

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Interview article by Stefan Baumgarten