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Viewing cable 09OTTAWA161, CANADA: INFORMATION FOR LONDON G-20 MEETINGS

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Reference ID Created Released Classification Origin
09OTTAWA161 2009-03-04 20:00 2011-04-28 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Ottawa
VZCZCXYZ0000
PP RUEHWEB

DE RUEHOT #0161/01 0632000
ZNR UUUUU ZZH
P 042000Z MAR 09
FM AMEMBASSY OTTAWA
TO RUEHC/SECSTATE WASHDC PRIORITY 9162
INFO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE
RUEHDS/AMEMBASSY ADDIS ABABA 0386
RUEHAK/AMEMBASSY ANKARA 0182
RUEHBK/AMEMBASSY BANGKOK 1802
RUEHBJ/AMEMBASSY BEIJING 2311
RUEHRL/AMEMBASSY BERLIN 1152
RUEHBR/AMEMBASSY BRASILIA 0467
RUEHBU/AMEMBASSY BUENOS AIRES 0122
RUEHBY/AMEMBASSY CANBERRA 1408
RUEHJA/AMEMBASSY JAKARTA 0252
RUEHLO/AMEMBASSY LONDON 1003
RUEHMD/AMEMBASSY MADRID 2185
RUEHME/AMEMBASSY MEXICO 1934
RUEHMO/AMEMBASSY MOSCOW 2273
RUEHNE/AMEMBASSY NEW DELHI 0449
RUEHFR/AMEMBASSY PARIS 1063
RUEHPG/AMEMBASSY PRAGUE 0547
RUEHSA/AMEMBASSY PRETORIA 0312
RUEHRH/AMEMBASSY RIYADH 0268
RUEHRO/AMEMBASSY ROME 1405
RUEHUL/AMEMBASSY SEOUL 1548
RUEHTC/AMEMBASSY THE HAGUE 3488
RUEHKO/AMEMBASSY TOKYO 3413
RUCNDT/USMISSION USUN NEW YORK 0526
RUEHBS/USEU BRUSSELS 0665
RUEATRS/DEPT OF TREASURY WASH DC
RHEHNSC/WHITE HOUSE NSC WASHINGTON DC
UNCLAS OTTAWA 000161 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EEB/OMA (WHITTINGTON); WHA/CAN 
TREASURY FOR IMB (MURDEN, MONROE, BEASLEY); ERIN NEPHEW 
 
E.O. 12958: N/A 
TAGS: CA ECON EFIN
SUBJECT: CANADA: INFORMATION FOR LONDON G-20 MEETINGS 
 
REF: A. STATE 17502 
     B. OTTAWA 80 
     C. OTTAWA 116 
     D. 08 OTTAWA 1395 
     E. TORONTO 20 
     F. 08 OTTAWA 1510 
     G. 08 OTTAWA 1362 
     H. OTTAWA 84 
 
Sensitive but unclassified.  Not for distribution outside 
USG.  Please protect accordingly. 
 
1. (sbu) Ref a requested information regarding Post's outlook 
on the continuing impact of the economic and financial 
situation on Canada, as well as Canada's expected priorities 
and objectives for the London G-20 Summit on April 2. 
Econcouns John Carwile (carwilejl@state.sgov.gov) and EMIN 
Eric Benjaminson (benjaminsoned@state.sgov.gov) are post's 
primary points of contact in the run-up to the Summit. 
 
2.  The following points are keyed to ref a's inquiries: 
 
Summary of Key Issues 
------------------- 
 
-- STIMULUS:  WHAT HAS BEEN PROPOSED THUS FAR?  WHAT MORE IS 
BEING CONSIDERED?  IS THERE CAPACITY TO IMPLEMENT CURRENT AND 
POTENTIAL FUTURE MEASURES? 
 
Canada,s budget -- likely to be approved by Parliament in 
March -- provides massive (by Canadian standards) fiscal 
stimulus measures.  The government's budget provides C$40 
billion in stimulus over two years focused on infrastructure, 
tax breaks, and targeted assistance for vulnerable groups and 
individuals. (Ref b)  According to Finance Minister Flaherty, 
this "Economic Action Plan provides stimulus this year (2009) 
which, with our provincial and territorial partners, amounts 
to about 1.9 percent of GDP, and next year about 1.4 percent 
of GDP." 
 
The Bank of Canada has also tried to provide monetary 
stimulus to Canada,s economy, cutting its benchmark lending 
rate by 400 basis points to 0.50 percent since December 2007. 
(Ref c)  The latest Bank cut of 50 basis points came on March 
3.  With its benchmark rate near zero, the Bank is open to 
providing further monetary stimulus "through credit and 
quantitative easing." 
 
-- FINANCIAL SECTOR:  WHAT HAS BEEN THE APPROACH TO RESOLVING 
BAD ASSETS:  RING FENCING, INJECTION OF CAPITAL, 
NATIONALIZATION?  ON REGULATION:  WHAT CHANGES, NATIONAL OR 
SUPRANATIONAL REFORMS ARE BEING IMPLEMENTED OR CONSIDERED? 
 
Canada,s banks have relatively little exposure to so-called 
&toxic debt.8  In late 2008, the World Economic Forum 
ranked Canadian banks as the world,s healthiest.  No 
Canadian bank is anywhere near collapse.  Canada,s 
regulatory oversight has strict reserve and capital 
requirements -- and banks are well-capitalized.  Canadian 
investment banks are part of retail banking -- and brokerages 
meet regulatory requirements pertaining to retail banking. 
Canadian banks carry a small percentage of sub-prime 
mortgages (five to six percent of the Canadian mortgage 
market in 2008 was sub-prime; banks hold some 75 percent of 
Canadian mortgages). (Ref d) 
 
The federal government and the provincial governments of 
Alberta, Ontario, and Quebec agreed to support a 
restructuring plan for non-bank sponsored, asset-backed 
commercial paper.  Beyond this, no substantive reforms are 
being considered for the Canadian financial sector. 
 
REAL ECONOMY:  HAVE SENSITIVE AND VULNERABLE SECTORS BEEN 
IDENTIFIED AND PROTECTED?  IF SO, BY WHAT MEANS?  HAS CANADA 
COMMENTED ON WTO COMMITMENTS?  WHAT IS THE TENOR OF 
GOVERNMENT AND PUBLIC DISCUSSION REGARDING PROTECTIONISM? 
 
In addition to the federal budget,s stimulus plan, the 
federal government and Ontario province have announced a 
joint C$4 billion plan for Canada,s automotive sector worth 
20 percent of the U.S. automotive aid package.  The U.S. and 
Canadian automotive sectors are highly integrated.  The 
Canadian arms of General Motors and Chrysler plan to take 
advantage of the Canadian aid, while Ford ) for now ) has 
decided not to draw on the government funds.  The automotive 
industry is the largest segment of Canadian manufacturing, 
and 85 percent of its output is destined for the United 
States.  (Ref e) 
 
Prime Minister Harper and other officials have expressed 
strong concern that protectionism could grow as the global 
financial crisis continues, threatening a spiral down into a 
global depression and undermining progress toward addressing 
the crisis.  The Canadian government and the general public 
both criticized the &Buy America8 provisions in the 
February U.S. economic stimulus legislation and warned that 
it could spur global protectionist measures.  (Refs f, g) 
Recent developments regarding the U.S. Department of 
Agriculture's side letter on Country-of-Origin Labeling 
(COOL) were lumped into an overall "protectionist" rubric, 
along with "Buy America" by the Canadians. 
 
-- SOCIAL/LABOR IMPACT:  WHAT STEPS HAVE BEEN TAKEN TO 
ADDRESS AN INCREASE IN UNEMPLOYMENT?  HAS CANADA EXTENDED OR 
PROVIDED NEW BENEFITS TO ASSIST THE UNEMPLOYED?  HOW IS THIS 
BEING FUNDED?  WHAT IS THE LEVEL OF PUBLIC PROTEST RELATED TO 
THE ECONOMIC CRISIS AND GOVERNMENT RESPONSE? 
 
The federal government has improved access to unemployment 
insurance benefits by making them more broadly available and 
for longer durations.  Canada has also established special 
Qfor longer durations.  Canada has also established special 
funds for single-industry towns or other regions 
disproportionately affected by the crisis.  The federal 
budget also provides a wide range of social spending 
initiatives aimed at lower- and middle-income Canadians. 
 
-- DIMENSION OF THE CRISIS:  WHAT ARE THE CONCERNS REGARDING 
SCOPE AND DURATION OF THE CURRENT ECONOMIC SITUATION?  WHAT 
ARE VIEWS ON THE IMPACT ON EMERGING MARKETS?  WHAT IS THE 
EXPOSURE OF CROSS-BORDER FINANCIAL INSTITUTIONS?  HAVE ANY 
PROPOSALS BEEN PUT FORWARD TO ASSIST SUCH MARKETS AND 
INSTITUTIONS? 
 
Canada's economy is dependent on improved prices for 
commodities (energy, agriculture, forestry, and mining) and 
an upturn in U.S. demand for Canadian exports.  Canadian 
government officials emphasize that stabilization of the 
global financial system remains a precondition for Canadian 
economic recovery.  They believe that the timely 
implementation of ambitious plans in some major countries to 
address toxic assets and recapitalize financial institutions 
will be critical in this regard. 
 
Recently, Canada has paid greater attention to investment 
opportunities in emerging markets, particularly in Latin 
America, through expansion and/or fuller utilization of 
government-sponsored lending through the Export Development 
Corporation.  Canadian institutional investors, however, are 
not expected to acquire high-risk emerging market assets 
because lower-risk assets in G-7 countries are available at 
relatively low prices. 
 
About a third of the profits of the six main Canadian banks 
came from operations in the United States and emerging 
markets in Latin America and the Caribbean in 2007.  Four 
banks reported profits in the first quarter of 2009, and 
those with smaller U.S. credit portfolios performed the best. 
 Recently, some Canadian banks have complained about 
competing for U.S. assets with American banks that have 
received TARP funds. 
 
-- ROLE OF THE G-20:  HOW IS THE G-20 PROCESS VIEWED?   WHAT 
IS THE LEVEL OF SUPPORT FOR THE PROCESS?  HOW IS THE G-20 
PROCESS SEEN IN TERMS OF OTHER MULTILATERAL PROCESSES AND 
GLOBAL ECONOMIC ARCHITECTURE? 
 
Canada is supportive of and active in the G-20 process, 
seeing itself as a credible leader for greater regulation and 
transparency (while opposing more "creative" calls to wholly 
rewrite global financial structures.)  Canada has a degree of 
ambivalence about the G-20 itself, however.  On the one hand, 
Canada realizes that the size, complexity, and impact of the 
financial crisis requires the participation of economically 
important countries outside the G-7 (e.g., Brazil, China, 
India).  However, Canada is also aware that the G-20 can have 
difficulty achieving and maintaining consensus on important 
issues.  Canada believes that the G-7 is a more efficient, 
like-minded grouping ) and may at some point need to forge 
its own consensus and lead any G-20 approach. 
 
SPECIFIC QUESTIONS: 
 
I. OBJECTIVES FOR THE LONDON SUMMIT: 
------------------------------ 
Q------------------------------ 
 
A.  IN THE RUN UP TO THE LONDON SUMMIT, WHAT ARE THE ISSUES 
OF GREATEST IMPORTANCE TO CANADA? 
 
In general terms, Canada wants to help stabilize the 
international financial system and create greater 
transparency, which will lead to greater confidence and 
lending.  The Bank of Canada -- which often complements 
government actions and policy statements -- stated on March 3 
that "stabilization of the global financial system remains a 
precondition for the global and Canadian economic recoveries. 
 The timely implementation of ambitious plans in some major 
countries to address toxic assets and recapitalize financial 
institutions will be critical in this regard." 
 
Prime Minister Harper has expressed his hope that &the 
voices against protectionism will be loud at the (G-20) 
meeting.8  He believes that if countries erect protectionist 
barriers, it could plunge the world into a &deep 
depression.8 
 
B.  BASED ON PUBLIC COMMENTS MADE BY CANADIAN OFFICIALS, WHAT 
ARE CANADA'S LIKELY OBJECTIVES FOR THE SUMMIT? 
 
See D below. 
 
C.  ARE THERE DESIRED OUTCOMES THAT OFFICIALS HAVE IDENTIFIED 
PUBLICLY? 
 
See D below. 
 
D.  BASED ON PUBLIC INFORMATION, WHAT RECOMMENDATIONS OR 
REFORMS MIGHT CANADA SUGGEST?  FOR EXAMPLE, IS CANADA 
PROPOSING CHANGES TO INTERNATIONAL FINANCIAL ARCHITECTURE, 
REFORM OF INTERNATIONAL FINANCIAL INSTITUTIONS, OR ADVOCATING 
THE CREATION OF NEW INTERNATIONAL BODIES?  IS CANADA 
PROPOSING ADDITIONAL REGULATION OF FINANCIAL PRODUCTS OR 
INSTITUTIONS, MAKING CHANGES TO EXISTING STANDARDS, OR 
ADVOCATING NEW BEST PRACTICES? 
 
Canada wants the G-7 to remain central to global financial 
efforts and does not favor a wholesale reworking of 
international financial structures.  It believes that the 
current structures, including the International Monetary 
Fund, could be put to better use.  Finance Minister Flaherty 
has stated that &in the middle of an economic crisis, 
synchronized global recession, a crisis in some of the 
financial systems of the world, this is not the time to 
create new global entities, which would take months to get up 
and running, if not years.8  Greater oversight and 
regulation is needed, however, and Canada believes that it 
has the international credibility to lead in these areas. 
Canada sees the relatively cautious &Canadian model,8 which 
includes tight regulation and relatively high capital 
requirements, as a viable way forward for countries.  (Ref h) 
 
 
Flaherty has also reiterated "five necessary steps that have 
to be taken...globally" once individual countries get "their 
own fiscal house in order:" 
 
1)  "regulating all pools of capital that rely on leverage, 
making sure the transparency requirements are in place and 
that those transparency requirements are the price of 
Qthat those transparency requirements are the price of 
admission to the global markets; 
2)  "creating capital and liquidity buffers large enough to 
handle big shocks with strong balance sheets similar to the 
Canadian system; 
 
3)  "ensuring regulation looks at the system as a whole, not 
just individual institutions; 
 
4)  "making market infrastructure more transparent and 
resilient; and 
 
5)  "strengthening international cooperation, review and 
surveillance to create a better second line of defence." 
 
Bank of Canada Governor Carney has stated that U.S. and 
European banks should bring their asset-to-capital ratio 
(leverage ratio) to the 20-to-1 levels of Canadian banks. 
The Bank of Canada has estimated that U.S. and European banks 
would need some $1.2 trillion to do so. 
 
II.  IMPACTS OF THE GLOBAL FINANCIAL CRISIS: 
------------------------------ 
 
E. WHAT ARE CANADA'S GREATEST FINANCIAL MARKET CONCERNS 
(PROVIDING MORE LIQUIDITY TO FINANCIAL INSTITUTIONS, DEALING 
WITH BAD ASSETS, INJECTING FRESH CAPITAL, IMPROVING HOUSING 
MARKETS, GUARANTEEING DEPOSITS, MAKING TRADE FINANCE 
AVAILABLE, ETC.)? 
 
Given the relatively strong state of the Canadian banking 
sector, Canada,s greatest financial market concern is the 
state of the U.S. financial system.  Prime Minister Harper 
stated on February 23 that &it is essential that the United 
States somehow stabilizes its financial sector.  Because if 
we don,t stabilize the financial sector, in the United 
States and abroad, we will not turn this recession around.8 
 
F. WHAT ARE THE MOST IMPORTANT IMPACTS ON CANADA'S FINANCIAL 
SECTOR (WHAT SPECIFIC FINANCIAL INSTITUTIONS HAVE FAILED, 
WHICH ONES HAVE HAD LIQUIDITY/SOLVENCY PROBLEMS, HAS DOMESTIC 
LENDING TO THE CORPORATE SECTOR BEEN AFFECTED, ETC.)? 
 
The Canadian financial system is relatively strong and 
well-capitalized.  No major financial institutions have 
failed, although some insurance companies ) including those 
with exposure or subsidiaries in the United States ) have 
faced financial problems. 
 
The government has expressed concern that banks are not 
providing &enough8 credit to the private sector, but there 
is dispute over whether this lack of lending reflects a weak 
economy or a reluctance of banks to lend.  The government has 
used the bully pulpit to encourage greater bank lending.  In 
addition, the government has leaned on the OPIC-like Export 
Development Canada (EDC) to increase its export-related 
lending even to established blue-chip firms. 
 
G.  WHAT INITIATIVES HAS CANADA TAKEN IN RESPONSE TO THE 
FINANCIAL CRISIS (HAS THE GOVERNMENT RESCUED FINANCIAL 
QFINANCIAL CRISIS (HAS THE GOVERNMENT RESCUED FINANCIAL 
INSTITUTIONS, PROVIDED CAPITAL INJECTIONS OR CREDIT LINES, 
CHANGED ITS DEPOSIT INSURANCE GUARANTEES, ESTABLISHED ASSET 
PURCHASE PROGRAMS, TRADE FINANCE, ETC.)? 
 
In late 2008, Canada took a number of steps in response to 
the financial crisis: 
 
-- The Bank of Canada offered to provide up to C$20 billion 
in liquidity to banks and broadened the range of collateral 
that the Bank will accept. 
 
-- The Bank of Canada and the Federal Reserve instituted a 
reciprocal currency arrangement (currency swap facility) of 
US$30 billion, if needed, to maintain USD liquidity in the 
Canadian financial institutions.  To date, the Bank of Canada 
has not needed to use the arrangement. 
 
-- Finance Canada announced that it would buy up to C$25 
billion in insured mortgages through the Canadian Mortgage 
and Housing Corporation to provide Canadian banks with cash 
with an aim to maintain the availability of longer-term 
credit for consumers, homebuyers, and businesses. 
 
-- Finance Canada established the Canadian Lenders Assurance 
Facility to federally insure private interbank lending -- as 
long as the debt has at least a three-month term.  The 
Facility will expire on May 1, 2009.  Participating financial 
institutions will pay a base fee of 1.35 percent, plus a 
surcharge ranging from 25 to 50 basis points, depending on 
their credit ratings.  (Canada's action parallels steps taken 
by other countries to guarantee loans, and is designed to 
keep Canadian banks competitive in the international lending 
market.) (ref i) 
 
-- Canada has decided (so far) not to increase the C$100,000 
federal insurance on deposits in Canadian banks. 
 
III.  THE BROADER ECONOMIC CRISIS 
-------------------------- 
 
H.  WHAT ARE THE MOST IMPORTANT IMPACTS ON CANADA'S REAL 
ECONOMY?  WHAT STEPS HAS CANADA TAKEN TO MITIGATE THE EFFECTS 
OF THE CRISIS? 
 
According to Statistics Canada, 2009 fourth quarter figures 
show Canada's real GDP falling by 0.8 percent, the largest 
quarterly decline since 1991.  Corporate profits were down 20 
percent after seven years of upward trends.  Fourth quarter 
results also showed declines in plant and equipment 
investment and construction, as well as widening 
inventory-to-sales ratios, especially in the automotive, 
petroleum, and agriculture sectors.  (The auto sector, which 
usually has inventories equivalent to 50-60 days, now has 
inventory levels approaching 80 days.)  Consumer spending 
fell nearly one percent in the quarter, the first decline 
since 1995.  On the trade side, total Canadian exports fell 
4.7 percent in the fourth quarter, the sixth consecutive 
quarterly decline.  Goods exports were down 5.3 percent, with 
Qquarterly decline.  Goods exports were down 5.3 percent, with 
automotive exports falling 19 percent. 
 
Canada's broad-based fiscal stimulus focuses on 
infrastructure and social spending to until global demand for 
Canadian commodities and manufactured goods returns.  The 
Bank of Canada is also using deep cuts to benchmark interest 
rates to stimulate lending. 
 
I.  WHAT HAS BEEN THE IMPACT ON TRADE, TRADE FINANCE, AND 
EMPLOYMENT IN EXPORT-ORIENTED SECTORS?  ARE THERE PROBLEMS 
FINANCING EXPORTS AND/OR IMPORTS?  IF SO, IN WHICH SECTORS? 
HOW IS CANADA ATTEMPTING TO ADDRESS THESE PROBLEMS? 
 
The United States is Canada's largest trading partner, and 
slumping U.S. consumer demand has hit Canada particularly 
hard. 
 
The energy sector (the backbone of the Canadian economy) has 
also been hard hit by weak oil prices.  While there are still 
marginal returns in energy extraction and natural gas 
distribution, energy support activities and pipeline 
distribution reported losses in December.  The energy sector 
as a whole fell 0.7 percent in the fourth quarter of 2008. 
 
Unemployment rates are increasing across Canada, but are 
particularly high in the trade-dependent manufacturing sector 
in Ontario.  Unemployment rates are also rising in the 
energy-focused provinces of Alberta and Saskatchewan, albeit 
after years of an energy-related employment boom. 
 
Trade finance opportunities continue to be strong through the 
government's Export Development Corporation as well as the 
Business Development Corporation.  The 2009-2010 budget added 
to the funds available through these institutions. 
 
Canada is sensitive to its trade-dependent status and is 
avoiding any trade-distorting policy measures.  A number of 
targeted tariff reductions have been announced including on 
imported industrial and agricultural inputs. 
 
J.  HOW HAS THE CRISIS IMPACTED CANADA'S OUTLOOK ON TRADE AND 
INVESTMENT?  HAS THERE BEEN A PERCEIVABLE SHIFT IN HOW THE 
GOVERNMENT AND POPULATION VIEW THE BENEFITS OF INTERNATIONAL 
TRADE?  ARE POLITICAL PRESSURES GROWING FOR PROTECTIONIST 
POLICIES?  ARE MEASURES BEING TAKEN OR CONTEMPLATED THAT 
WOULD IMPOSE COSTS ON OTHER COUNTRIES IN AN ATTEMPT TO MEET 
DOMESTIC NEEDS (E.G., TARIFF HIKES, IMPORT LICENSING OR OTHER 
TRADE RESTRICTIONS ON, OR DISCRIMINATION AGAINST, FOREIGN 
INVESTORS)?  IS CANADA CONSIDERING CAPITAL CONTROLS?  ON THE 
OTHER HAND, IS CANADA CONSIDERING EASING INVESTMENT 
RESTRICTIONS IN AN EFFORT TO ENCOURAGE FOREIGN INVESTMENT? 
 
The government and the public continue to be strongly 
supportive of free trade.  There is no discernible pressure 
growing for protectionist measures, and no measures are being 
contemplated for tariff hikes, import licensing, or other 
trade restrictions. 
Qtrade restrictions. 
 
Canada opposes capital controls. 
 
K.  DO FINANCIAL SECTOR/INDUSTRY BAILOUTS OR STIMULUS 
PACKAGES HAVE LOCAL PREFERENCES?  IS THE GOVERNMENT ACTING TO 
INFLUENCE THE VALUE OF ITS CURRENCY (FOR EXAMPLE, TO IMPROVE 
EXPORT COMPETITIVENESS)? 
 
Canada,s fiscal stimulus budget does not contain local 
preferences.  As previously noted, Canada,s auto rescue plan 
is directed solely at the Canada-based subsidiaries of the 
Detroit Three, and complements Washington,s efforts for the 
U.S. car companies. 
 
The Bank of Canada,s interest rate cuts ) along with the 
worldwide drop in commodity prices ) has contributed to the 
Canadian dollar,s fall against the U.S. dollar.  The Bank,s 
motivation has been monetary stimulus. 
 
IV.  OUTLOOK AND POLITICAL/FOREIGN POLICY RAMIFICATIONS 
---------------------------------------- 
 
L.  HOW HAS THE OUTLOOK FOR GROWTH, INFLATION, THE CURRENT 
ACCOUNT, EXCHANGE RATES, AND THE BUDGET DEFICIT CHANGED? 
WHAT ARE THE BIGGEST ECONOMIC CHALLENGES FACING CANADA IN THE 
COMING MONTHS AND YEARS?  HOW IS THIS CRISIS EXPECTED TO 
AFFECT EMPLOYMENT? 
 
Canada,s greatest challenge is largely out of its hands: 
the resuscitation of the U.S. (and to a lesser extent, the 
global) economy.  Given the Canadian economy,s relatively 
small size and outward orientation, government and Bank of 
Canada stimulus actions can do little to promote recovery, 
other than make marginal improvements and provide some 
protection until export demand returns.  Since the United 
States absorbs more than 80 percent of Canadian goods 
exports, Canada economic prospects are directly tied to 
recovery in the United States.  Conversely, it is worth 
noting that Canada has a domestic market of 30 million 
wealthy consumers. 
 
M.  WHAT ARE THE POTENTIAL POLITICAL RAMIFICATIONS FOR 
CANADA?  HOW MIGHT THE CRISIS DIRECTLY IMPACT LEADERSHIP?  IS 
A CHANGE OF GOVERNMENT A POSSIBILITY?  WHAT ARE THE SOCIAL 
AND SECURITY RAMIFICATIONS OF THE CRISIS? 
 
The economy has emerged as Canada's central political 
question.  The worsening economy will make the Conservative 
Party's minority government's hold on power increasingly 
tenuous and heighten prospects that the opposition Liberal 
party will seek to bring down the government and come into 
power in a federal election some time over the next year.  At 
this point, however, the Liberals' own prospects of winning a 
genuine majority are also limited.  In any scenario, a change 
in Canada's political leadership will be peaceful, 
democratic, and orderly, without social unrest or internal 
security concerns.  Crime is increasing, in some part due to 
economic conditions, with all political parties willing to 
support tougher anti-crime legislation. 
 
N.  HAS CANADA CRITICIZED AND/OR BECOME SIGNIFICANTLY MORE 
QN.  HAS CANADA CRITICIZED AND/OR BECOME SIGNIFICANTLY MORE 
CRITICAL OF THE UNITED STATES FOR ITS ROLE IN THE CRISIS OR 
FOR PROVISIONS IN THE U.S. ECONOMIC STIMULUS PACKAGE (SUCH AS 
THE "BUY AMERICAN" PROVISION)? 
 
As mentioned above, the Canadian government and the general 
public both criticized the &Buy America8 provisions in the 
February U.S. economic stimulus legislation and warned that 
it could spur global protectionist measures.  (Refs f, g) 
That said, Canada openly recognizes that its economy is 
largely integrated with (and dependent upon) the United 
States.  Canada places a high value on its coordination and 
cooperation with the United States on economic matters, from 
stimulus measures to climate change. 
 
O.  HOW MIGHT THE CRISIS AFFECT CANADA'S FOREIGN OR SECURITY 
POLICY AND U.S. INTERESTS? 
 
The crisis has reinforced Canadian awareness of Canada's 
close relationship with the United States.  The crisis has 
not significantly affected overall foreign or security 
policy, or U.S. interests in Canada.  Canada will look to 
continue its close coordination with the USG in the G-20, and 
may have some concerns about a potentially diminished role 
for the G-8, which Canada will chair in 2009-2010. 
 
P.  HOW MIGHT THE CRISIS IMPACT CANADA'S ABILITY AND 
COMMITMENT TO SUSTAIN FOREIGN ASSISTANCE LEVELS? 
 
Canada has, for other policy reasons, restricted the focus of 
its foreign assistance to 20 priority countries.  It has not 
cut its overall assistance levels. 
 
Q.  HOW MIGHT THE CRISIS IMPACT CANADIAN SUPPORT FOR GLOBAL 
PEACEKEEPING OPERATIONS AND COMMITMENTS TO NATO OPERATIONS, 
E.G., IN AFGHANISTAN? 
 
Canada's commitment to its role in Afghanistan, including 
combat troops through 2011, remains firm.  Canada will 
continue to attach importance to participation in other UN 
peacekeeping missions, especially in Haiti. 
 
Visit Canada,s Economy and Environment Forum at 
http://www.intelink.gov/communities/state/can ada 
 
BREESE