Canada: Focus On Government: Canadian Federal Election 2015

With polls now closed and the longest federal campaign in recent Canadian political history officially over, a Liberal government is the new reality for Canada. In winning the election, the Liberals become the first third-place party to leapfrog in one electoral cycle.

For the ruling Conservatives, the electorates' desire for change was simply too strong to overcome the Liberal Party of Canada (LPC). For the New Democratic Party (NDP), their cautious and steady campaign was unable to grant them the momentum needed to substantially increase seat count beyond Quebec. Once the majority of Canadians—particularly after the Thanksgiving weekend—decided that the LPC was the true 'agent of change', and the only party capable of unseating the ruling Conservatives, they shifted their votes to the Liberals.

Policy

Canadians can expect a change of tone in a number of areas. In foreign policy and trade, we expect to see a return to Canada's multilateral roots. This means re-engagement with international institutions and the use of more international instruments. A more balanced approach to the Middle East and enhanced engagement with China is likely. We will also see a number of political appointments in key foreign embassies replaced, and likely a reset in relations with our partners in North America, including the US and Mexico. Further, the LPC has indicated that it will review the Trans-Pacific Partnership, but in principle, it is clear that the party will ultimately support its signing.

A new federal government in Canada could offer an opportunity to accelerate the energy and climate relationship between Canada and the US. During his tenure as Prime Minister, Harper strongly advocated for the approval of the Keystone XL pipeline, opted against promulgating GHG regulations for the oil and gas sector, and withdrew from the Kyoto Protocol. While Trudeau supports Keystone XL, he campaigned on pursuing a more aggressive climate approach, including convening, within his first 90 days in office, a meeting of all provincial leaders to develop a common climate change framework. This approach could expedite coordination between the US and Canada, particularly both in the run-up to and in the aftermath of this December's United Nations Framework Convention on Climate Change conference in Paris, in which world leaders—including President Obama—are hoping to reach an international climate agreement. In North America, Trudeau's victory could spur more integration between Canada and the US on renewable energy. Notably, Environmental Protection Agency's Clean Power Plan allows states to credit Canadian renewable energy imports to the US in complying with CO₂ reduction requirements under the rule. Finally, the Canadian election may spur increased integration of North American carbon markets. California and Quebec already share a common carbon market, and they could be joined by Ontario, New York, and potentially other states and provinces.

Where there will be substantive change is in areas of taxation and economic policy. The Liberals have pledged to fund up to CA$5 billion a year in additional infrastructure spending by running budget deficits. This commitment was a centerpiece of their campaign and would see a large rollout akin to the Conservatives' 2008-2009 Economic Action Plan. The rationale for all this borrowing has been record low interest rates. Taxation for the so-called 'one percent' will increase. In reality, that means a new tax bracket and taxes of 33 percent for those earning more than CA$200,000.

Conclusion

Beyond the aforementioned policy areas (and perhaps the Syrian refugee crisis as well as inter-provincial relations), there will not be many unexpected changes in the new government's conduct. The Liberal government will maintain (with a few caveats) a largely similar approach to security, trade, energy and the economy.

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