OTTAWA — Prime Minister Stephen Harper joins other world leaders in Mexico Monday for a critical G20 summit with some blunt messages: Reduce your deficits; find innovative, sometimes politically unpopular, ways to grow your economies, and embrace international trade deals.
His emphasis on trade is so important that he will likely use the high-level summit to announce Canada’s entry to negotiations for a major international trading bloc known as the Trans-Pacific Partnership (TPP).
The TPP is currently an Asia-Pacific free-trade proposal being negotiated among the United States, Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam.
In addition to Canada, two other major countries — Japan and Mexico — have signaled they want in on the talks. That can’t happen unless they are invited by the other nine nations to join, and some have resisted Canada’s participation unless it first agrees to abandon its supply management system that protects dairy and poultry farmers – a concession that Harper has refused to make just to get to the negotiating table.
Harper flies Sunday to the ocean side resort of Los Cabos for a meeting of leaders from the world’s major economies.
The two-day gathering, like their last one just seven months ago in Cannes, France, will be dominated by the European economic crisis which has only grown worse, threatening to spiral out of control and engulf the global economy.
Indeed, although the globe’s most powerful politicians will be clustered in one room in Mexico, their attention will be focused on what’s happening hour by hour in Europe.
Amidst the drama being played out there, Greek voters went to the polls Sunday in an unpredictable election, the rest of the continent awaited the results to see if it would imperil the country’s future in the 17-nation euro, and nervous European politicians and central bankers waited to see if the markets plunge on Monday.
All the while, Harper is determined to repeat the arguments he has been voicing to the G20 and elsewhere since the European crisis emerged.
The prime minister’s aides say he will stress that Europe must fix the crisis it made by itself through a “comprehensive plan” complemented by “contingency” plans if the crisis worsens, and an overhaul to the euro currency system to give it more centralized fiscal discipline and regulatory oversight.
Moreover, he will insist that Europe, as a “rich” continent, should use its own money — and not come seeking help from Canada — for an International Monetary Fund bailout package to rescue ailing European countries.
The outlines of Harper’s message were contained in a speech he gave in Montreal last week.
“As Canadians, neither are we able nor do we desire to impose our views on the world,” said Harper.
“But Canada can demonstrate, through our actions, a model that works.”
Last fall, Harper`s emphasis — like that of German Chancellor Angela Merkel and British Prime Minister David Cameron — was on the need for austerity.
But more recently, he has re-adjusted his tone, insisting that governments can do two things — cut costs through austerity drives, while also promoting policies to create economic growth.
“Economic growth and fiscal discipline are not mutually exclusive,” he said last week. “They go hand in hand.”
Harper boasts that his government is now pursuing policies to boost economic growth, including:
– free trade agreements with other major nations and the European Union;
– a reformed immigration program to get more skilled workers into the labour force;
– changes to the Employment Insurance system to persuade more people to get off EI;
– faster environmental assessments for energy projects;
– adjustments to scientific research and development spending to get the private sector to be more innovative.
Joining Harper at the G8 summit will be Finance Minister Jim Flaherty, who will be working closely with major finance ministers if the European crisis escalates Monday and Tuesday.
As he prepared for the trip, Flaherty delivered a speech in Ottawa Friday which contained a stark assessment of what might lie ahead.
“The economic recovery in the world is really fragile,” said Flaherty.
“I am concerned about the deteriorating situation in some of the European countries.”
Flaherty said that Europe’s “debt crisis” has been brewing for four years, comparing it to the U.S. which took “bold” and ultimately successful actions with its financial system problems by recapitalizing its banking system.
Flaherty said he “wholeheartedly” agrees with a recent proposal by Mario Draghi, head of the European Central Bank, to set a “clear vision” for the euro and establish a fund to guarantee bank deposits.
This kind of action is needed now to stem the crisis, said Flaherty.
“You’re not going to have economic growth unless there’s market confidence. You’re not going to have market confidence unless you have a solid fiscal plan that’s credible and believable by the markets. And that’s where we have been encouraging our European colleagues to go.”
With so much uncertainty in play, it’s not clear how much progress — if any — G20 leaders will make at the summit.
However, experts at the University of Toronto’s G20 Information Centre are confident that the leaders will emerge from their talks with signs of success.
In a recent essay, John Kirton and Julia Kulik predict that the summit with “both control the Eurocrisis and advance most of its broad economic, financial, development, social, ecological and soft security agenda.”
“The summit will see European leaders offer the broad outlines of a big, bold, multi-stage strategy for staving off and starting to solve the crisis, rather than just contain and delay it,” they write.
If they are correct, it could be the first step towards a shift that Harper and others have been demanding for months.
Some of the sharpest language Harper has used on the matter came in a January speech he delivered in Davos, Switzerland — where he outlined plans to make dramatic changes in areas ranging from the pension system to immigration.
“As I look around the world, as I look particularly at developed countries, I ask whether the creation of economic growth, and therefore jobs, really is the number-one policy priority everywhere?” he said.
“Or is it the case, that in the developed world too many of us have, in fact, become complacent about our prosperity, taking our wealth as a given, assuming it is somehow the natural order of things, leaving us instead to focus primarily on our services and entitlements?”
The implication was clear: He was speaking about Europe. He suggested it wasn’t a coincidence that the debt crisis came after governments had developed a “general willingness” to provide social benefits that were unaffordable.
It was now time for everyone, including Europe, to make some tough choices, he said.
“Western nations, in particular, face a choice of whether to create the conditions for growth and prosperity, or to risk long-term economic decline,” said Harper.
“And, as we all know, both from the global crises of the past few years and from past experience in our own countries, easy choices now mean fewer choices later.”
Five months later, G20 leaders will learn if Europe’s leaders are prepared to make the tough choices that critics say they have been avoiding.