Ontario Election 2018 #2 The PC's Path to Victory

The path to victory for Patrick Brown and the Ontario PC’s is relatively straight. They just have to avoid making mistakes and avoid shooting themselves in the foot.  There’s an old adage that elections aren’t won – they are lost and the Liberals are well on their way to losing.  Just get out of the way and let it happen … at least that’s the plan, but it’s also not the full story. 

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HOWE&WYE Helps Unlock Northern BC’s Post-Secondary Education Potential

The result of nearly a year’s work had HOWE&WYE leading stakeholder consultation and engagement as well as the development of the overall strategy and project management with the myriad vendors involved in the project. Aside from generating growth for the institutions, the campaign will promote and dispel myths about living, learning and loving Northern BC. The campaign elements included brand strategy, creative execution, multinational media buy, social media execution, website development and media relations, as well as broad stakeholder communication. 

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HOWE&WYE Supports MSTA Canada’s Brand Shift

HOWE&WYE President Steve Virtue has been supporting MSTA Canada’s Managing Director Ryan McEachern deliver on his commitment to his members to modernize the organization and improve service to members with an aggressive brand transformation.  

“We are changing more than just our name and logo. For more than 35 years, we have built a strong reputation of delivering quality service to our members,” said McEachern.  HOWE&WYE partnered with MSTA Canada to undertake extensive consultation with members, stakeholders and the broader mining industry.

“I want to thank the team at HOWE&WYE – who led our engagement and brand research and have provided me with strategic counsel and communications support throughout this process,” said McEachern. The result of nearly 18-months of work had HOWE&WYE leading stakeholder consultation and engagement, developing strategy and communications management as well as the development of the overall strategy and project management with the myriad vendors involved in the project who have provided an outstanding framework to grow and expand the service offerings of MSTA Canada.

Formerly known as the Canadian Association of Mining Equipment and Services for Export the organization has a proud legacy of more than 35 years, however as the needs of the sector and its members have evolved and the organization required some deep strategic thinking to move the organization forward. MSTA Canada has adjusted their approach to business to better reflect the needs of its members. “Our members told us we needed a more modern approach to ensure we consistently deliver value to them, and we’ve done that,” said McEachern.

Do you have a strategy?

HOWE&WYE is often brought in to help evaluate how the current execution is aligned with business objectives.  Far too often we see organizations that get buried in the busy work of communications but fail to take a step back to align resources, expectations and objectives. In our practice, we often encounter organizations that have no strategy, they simply keep busy with the work of being busy. The book ends of success in our view are strategy and measurement, and far too often we see firms languishing without either.

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HOWE&WYE Celebrates Two Years

It has been an intense and amazingly rewarding two years of operation for us at HOWE&WYE. Having begun with no clients, no investor cash but a substantial passion and a great idea, our small firm has grown into a practice of 11 professionals consultants supporting our clients from operations ranging from Toronto to Vancouver to Mexico City.

We have maintained numerous long-term clients who trust our counsel and deep insights across a broad spectrum of communications and public affairs needs. The value proposition we offer remains as valid as it did 24 months ago – and that includes providing senior counsel with a significant depth of experience and expertise to support your growth needs. We maintain competitive pricing as a virtual organization, so you will always pay for the brains, and never the bricks.

We have been fortunate enough to work with multi-billion dollar firms, international governments start-ups and national non-profits and numerous organizations in between. Our own experience and expertise has grown along with our client roster. We are proud to offer consistent, senior account leadership because we think our clients deserve the best we have to offer.  Our results first approach has earned the trust and confidence of countless organizations from around the world.

So, from Nate and I, and all of us here at HOWE&WYE to our clients, friends and families, we want to thank you for investing your trust, faith and support over the past two years and we look forward to what lies ahead.  

Municipal Government Communications

A communications plan is the backbone of any government. It doesn’t matter if it’s the Government of Canada or a small municipality, the need for an effective communications plan can’t be overstated, especially during a crisis.  It sounds simple and straight forward, but without a plan the process of communicating in the midst of a crisis can often be paralyzing.     

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Failing to plan, planning to fail Pt. 2

Jan O'Driscoll, Senior Counsel
Crisis and Reputation Management 

After establishing that you have a crisis plan, the most important question is a simple one - are you confident that it will work? With virtually everyone plugged in and with access to social media and the fact that media cycles are 24/7, the potential for crisis is everywhere, making an effective Crisis Management Plan (CMP)  vital to organizations of all sorts - private and public sector, government agencies, charities, associations, etc. Even the biggest, most popular brands have disastrous failures. Lululemon's Chip Wilson's public apology is a perfect case study for what not to do. 

Sadly though, most organizations are woefully ill-equipped to deal with crisis.  Some will say that they have a communications plan or business continuity plan that covers crisis or that they have experienced professionals at the leadership levels who have dealt with and managed any and all types of crisis.  Some will even say that they are immune to crisis and that even if one arose, they would deal with it once it happens.  

What most people don't realize is that a CMP is all about execution.  My advice would be to bring in a third party to conduct an audit or of the organization's communications/crisis plan and apply a pressure test to determine if these plans will actually work as well as their ability to respond to crisis. A third party helps overcome the possibility of group think, while bringing in a broader range of expertise.  After a fulsome review, the establishment of a Crisis Response Team (CRT) is crucial.  This team should be made up of a combination of senior leadership, policy experts, communications and public affairs, as well as in-house legal counsel. Once the team is in place, anticipating and predicting crisis is the next step.  This will requires team members must be completely honest with themselves as to what exactly their company is potentially exposed to. 

From past experience, I have seen first-hand how egos have gotten in the way and have led to less than stellar team meetings and derailed any progress that had been made. This is yet another example of where an outside third party is necessary as they are not as impacted by internal office politics and egos.  Once there is an established list of possible crises, establishing holding lines and statements that can be used for each potential crisis identified is a must. These holding lines or statements are one of the most necessary parts of the entire CMP.  It has been estimated that a company has no more than 2-3 hours to make your initial response to any media reports or inquiries surrounding a crisis.  If that window of opportunity is missed, you face the unpleasant situation wherein your side of the story has been established by someone else - you're either the good guy or the bad guy or a neutral party to a bigger problem.  And even worse, you are now in reactive mode in the eyes of your stakeholders and media which make you look on the defensive.  Never a good place to be. 

Deciding who speaks on behalf of the company can be tricky.  Most will say the President or CEO, which is fine should the situation warrant their response.  Sometimes its better to have someone else respond first and should things escalate then the CEO should be the main spokesperson.  This step involves the CRT assessing the crisis and making their determination as to who will be the lead spokesperson.  In many cases there will be multiple spokespeople depending on the severity of the crisis and what stage is it at. For all designated spokespeople, monthly or quarterly media training should be done to give your company the greatest chance at successfully implementing a CMP should the need arise. When the inevitable happens and a crisis arises, a holding statement should be issued by the media relations department.  

 

Failing to plan, planning to fail Pt. 1

Jan O'Driscoll, Senior Counsel
Crisis And Reputation Management 

It has been over a month since the world was shocked to see a bloodied passenger being physically removed from United Airlines flight #3411. Last week, appearing before the House Transportation Committee, United's CEO Oscar Munoz rightly called the incident a "…mistake of epic proportions."

It doesn't take a PR expert to realize that this entire incident was bungled from the get go and ranks as one of the biggest crisis management failures in modern history. In this day and age, how on earth does something like this even happen?  You certainly don't need a PR firm to tell you that physically assaulting someone is a bad company policy and is terrible for your brand's image. 

One would think that this is just common sense. How else could brutalizing a customer and dragging him from the plane get any worse?  Logic would dictate that United’s best course of action would have been to have a spokesperson own the events, apologize and detail what steps would be taken to ensure this never happens again.  Maybe a three or four-day cycle of negative media and life will go on, right?

Sadly, United decided to at first defend what happened and followed that by a tepid apology that was completely tone deaf.  

I have tried to stay away from writing about this as many of my colleagues in the PR world have already provided their expert opinions on this matter and frankly I didn't see a need to add my two cents echoing what others have already written. That said, I would be remiss if I didn't point out a couple of observations that have jumped out at me over the past month as I've watched this saga unfold.  

Primarily, did United have a Crisis Management Plan (CMP) and if so, why didn't it work?  As a major international airline, let's assume they had a CMP and that they had basic issues management protocols in place for these types of situations. Which leads to the obvious question - how did their plan skid so terribly off the runway? The easy answer is to blame the leadership at United.  Let's face it, they failed their stakeholders and their brand in every way imaginable, and given my aforementioned fear of occupying the echo chamber, I'll just leave it at that.  

Which brings me to my other observation. In the days following this PR nightmare, I can assure you that communications professionals around the world were sharing this story within their organizations as a "what not to do in an emergency" and assuring their colleagues that they could rest easy as their respective organizations had a plan in place. Which is great and to be applauded, but there is a tried and true expression from the boxing world that "everyone has a plan until they get punched in the nose."  So the two questions every organization needs to ask: 1) do you have a crisis plan and 2) will it work? 

 

SKYPE INTERVIEWS

Media interviews can be a critical vehicle to get your messaging out. It has become quite common for the media to use Skype and other technologies to perform interviews. Skype can provide a stable and positive platform for interviews, provided you keep a few things in mind.

CHIN UP AND KEEP IT CLEAN
The best results often occur when the camera you are using is elevated and you look up into the camera. Place your laptop on a stack of books to get the camera at eye-level or even a bit higher for a more flattering angle. Your surroundings are equally important. Set up a clean background with the best lighting you can manage. We recommend you avoid noisy, chaotic public spaces such as coffee shops.  

PRACTICE
Skype your mom or your buddy in Grand Rapids. Make a few test calls well before your interview to make sure your setup is working properly. Ask them how you sound, what it looks like and if they can see you clearly, etc.

KNOW WHAT TO SAY
You're being asked to provide comment because your an expert or have some unique knowledge, so we recommend you know what youre going to say in advance. If you’re acting as a spokesperson and need key messages or specific facts, tape them securely to the monitor or beside the camera for reference. However don’t read them verbatim.   

EYE CONTACT IS KEY
It’s hard to do an interview staring at your computer. And while it can be awkward to stare at your webcam, you will give a better interview if you do. Looking into the camera will make you seem all the more authentic and genuine. It will also ensure your eyes don’t stray to the video of yourself, or the email notifications or other distractions.

DRESS APPROPRIATELY
For those who work remotely or in a home office, or even for those who work in office environments that don’t maintain strict corporate dress codes, we always recommend you think about your interview similar to a job interview. Dress the part. Always good to keep a suit or change of clothes in the office for such an occasion.

USERNAMES
Think very carefully if you want that 10+ year-old username to be public.  If your handle resembles 1awesomedude, UnicornDreams85 or HarryPotter79, perhaps it’s time create a ‘business’ account. It’s ok for it to be your actual name or company name.

PLUG IN
No question, image is important and while it may look a bit goofy if you have one of those over the head, McDonald's drive-through configurations, what you say is as important as how you look. The purpose is for the audience to hear what you’re saying clearly.  The mic on your computer will likely pick up a lot of background noise and using a headset can help to mitigate that.

MINIMIZE DISTRACTION
To the point about coffee shops above, try and be in control of your environment. Tell your office colleagues not to burst into your office by sticking a sign on the door “INTERVIEW IN PROGRESS”. Turning off your phone or mute your ringer and any notifications on your computer. Silencing your phone. Closing your email, Facebook and anything else that may pop up during the interview.

USE THE LOO
One thing to remember, while interviews are relatively short, they are often delayed and don’t start on time. We recommend you ensure you’ve used the washroom before going live. Nothing like someone fidgeting through an interview.

RELAX
While this can be difficult, for the best of us, try your best to relax. You don’t want to come across as stiff, or over prepared, but comfortable. This can take some getting used to, and we recommend practicing and getting some professional media training as part of your own professional development.

And while we can all laugh at it now but recognize what happens in this video can happen to any of us. 

 

 

HOWE&WYE Grows Team of Senior Advisors for 2017

HOWE&WYE is very pleased to announce the addition two new members of the team. Jan O'Driscoll and Nick Kohlmann will bring specific expertise and deliver superior results for clients in the areas of crisis and reputation management, and Investor Relations. "We are thrilled to be able to add this depth of talent and experience to the team," says Steve Virtue, HOWE&WYE President and CEO. Their experience and insights will add tremendous value to our clients"

Jan O’Driscoll 
Senior Counsel, Crisis and Reputation Management
Jan is an accomplished, bilingual public affairs professional with extensive experience in crisis communications and media relations. He has an established track record of providing strategic communications and public policy advice at the highest levels. He has an extensive network of business media contacts at outlets such as Bloomberg, Globe & Mail, BNN, CBC, BBC, CTV and more. 

Jan O’Driscoll has held leadership roles with several federal cabinet ministers and was the lead spokesman for a variety of high-profile files including the Lac Megantic rail disaster, the Attawapiskat First Nation housing crisis and the Idle No More protests, all of which received national and international media coverage. Jan is able to tell your story where it matters most. Jan takes a client first approach and throughout his career has developed a reputation as a straight shooter who is available 24/7, and can be counted on to get the job done.
Contact Jan

 

 

Nick Kohlmann M.Sc.
Senior Counsel, Investor Relations

Nick is a trained geologist, brings more than ten years experience developing and implementing Investor Relations programs for exploration and mining companies. Nick brings extensive investment and industry networks in North America, Europe and Asia.

Nick has represented numerous companies including Monument Mining, East Asia Minerals, CHF Investor Relations, Wallbridge and Tyhee.  Nick’s services include analyst, broker & investor outreach, networks & databases, presentations, investor communications, press releases, road-shows, marketing materials, conferences, site visits, trade shows and websites. Contact Nick

 

Advocacy and Engagement

By Cailey Murphy
Managing Director, Western Canada

I recently spoke on a communications panel at the Association for Mineral Exploration’s Roundup Conference in Vancouver.  Topics ranged from online presence to community engagement, public communications and crisis communications. I was there to speak about government relations and while, at first glance, the topic might seem to some a little out of place on a marketing and communications panel, there were no more important topics to be bookended by.  

Government relations is increasingly requiring proactive public awareness and community engagement building exercises alongside traditional dealings with policy and decision makers.  This is particularly true for resource industries.  In resource development there is a lot of talk about ‘social license’, a term which is often misunderstood, misconstrued or overused but refers, generally, to the level of acceptance or approval at the community level for resource development projects.  

We have heard the decades-long debate between the environment and the economy and, in Canada, parties on all sides of the political spectrum seem to be coalescing around consensus for a balanced approach.  The current federal government is using the following language around the need to “protect our environment, fight against climate change, and grow our economy.”  

These are certainly not new ideas, however, as the concept of social license and its role have evolved over the years and, as communities become more engaged and governments more responsive, we are seeing a general trend towards a demand for robust multi-stakeholder engagement.  

How has this manifested itself? I think if we look at the events leading up to the federal government’s pipeline plan, we can see this trend, at a high level, in action.

On November 8th, Prime Minister Trudeau came to Vancouver to re-open the Kitsilano Coast Guard Station.  During that same visit the PM announced a $1.5 billion Ocean Protection Plan which included the following tenets:

  • Create a world-leading marine safety system
  • Restore and protect our marine ecosystems
  • Strengthening partnerships with indigenous communities
  • Invest in evidence-based oil spill response methods

    Less than a month later (November 29), the government announced its pipeline plan which included the approval of Kinder Morgan’s Trans Mountain Expansion Project, a rejection of Enbridge’s Northern Gateway Pipeline Project application and a new Tanker Moratorium on the North Coast.

While these pieces were announced separately and in isolation of each other, they create a compelling case when viewed as part of a whole.  There is no doubt that there was a considerable amount of engagement, consultation and lobbying by parties on all sides in the lead up to both the Ocean Protection and Pipeline Plan and the outcome seems to indicate the government trending towards a holistic approach to policy development that takes into consideration a diversity of interests; they do not just want to engage with proponents or opponents, but seek to hear from broad multi-stakeholder groups, weigh the challenges and balance the interests.

So, what does this all signal?  You need to have a total plan.  You need to know all sides of an issue and your plan must be responsive.  No, you are not going to please everyone, but you have to demonstrate that you have taken the concerns raised into consideration and your plan must address them with a balanced approach.

We have seen this approach in action in BC for a number of years.  An example is the Code Review, the government led review of the Health, Safety and Reclamation Code for Mines.  In this case the BC government brought together representatives from industry, labour and First Nations to provide input in the review process - bringing all parties to the table on the best way forward.

What does this mean for you in the context of public relations and communications?  External communications can be an absolutely critical tool in government relations.  Ultimately governments are responsive to the public, to the voter, and the more you invest in public relations, the more you will help your cause.  If you can get public buy-in, you will have a much easier go of getting government buy-in.

As such, it means you should not and cannot just reach out to your allies, you must reach out to all interested stakeholder groups.  Not engaging is not an option and as governments turn to communities as a measure of the merits of a project, so too must industry increasingly engage with broad communities of interest.

International Relations

Steve Virtue
President & CEO

After a recent trip to the State of Zacatecas in Mexico, it is now abundantly clear just how the uncertainty and instability created in the United States has provided substantial motivation for national and state level governments to solidify and expand existing economic relationships and plenty of incentive to search out new global opportunities.

Mexico has benefited from billions of dollars in the auto sector investment due to its geographic proximity to the United States market. For several decades, this close relationship with the United States has provided beneficial trade relations. The depth of the relationship has provided Canada and the United States with access to strong production quality and the ability to leverage positive economics while Mexico has gained billions in social and physical infrastructure investments. In fact, prior to the 2016 US election, Mexican officials estimated the domestic automotive sector growth included the productive of more than five million light vehicles across 13 different auto-brands through more than 30 facilities by 2020.

Currently, more than 80% of the domestic production is intended for export given generous access not only to North and Latin American markets but growing demand in both Asia and Europe. My trip to Mexico demonstrated the eager interest of States such as Zacatecas for diverse growth, not only in the auto sector but in information technology, Aerospace, tier two manufacturing among many others. The resource economy remains a strong counter with mining and agribusiness remaining strong in the State as well.  

I witnessed first hand the massive facilities built by Nissan in neighbouring Aguascalientes. The complex was built in 2013 at a cost of roughly $2 Billion ($US) and created more than 9,000 direct and indirect jobs. This plant is nearly 6.5 million square feet of state of the art production facility. The Aguascalientes complex is just one of 3 that Nissan has in Mexico and typical of the kind of investments auto manufacturers have been making in Mexico since the mid-1990’s. Every major automaker has a substantial manufacturing and assembly presence, including the North American ‘Big 3’. However, this level of production has caused very public concern north of the Rio Grande.

President Trump’s protectionist policy framework has proposed that all import vehicles would be levied with stiff tariffs is meeting with substantial resistance, and not just from Mexico. Former US auto executives are helping to spell out what this would mean for the US economy, and the results would appear to contradict Mr. Trump’s intentions. A CBC report highlighted how Mr. Trump's threat to "wall off the import of Mexican-made cars with a 35 per cent tariff would be a disaster for the U.S. auto industry, according to Marina Whitman, a former vice-president of General Motors".   The report goes on to note that 40 per cent of the parts that go into cars built in the U.S. come from Mexico.  

Mr. Trump’s ongoing rhetoric of dismantling NAFTA remain a concern for both Canadian and Mexican officials. Trump recently noted that he has “very serious” concerns about NAFTA, stating that the agreement has been “a catastrophe for our workers and our jobs and our companies”. However, the Michigan-based Center for Automotive Research(CAR), concluded that dismantling NAFTA could cost more than 31,000 jobs in the US. Mr. Trump’s rather undisciplined approach to floating trial balloons on public policy are creating far more chaos than value.

The ongoing discussions about destabilizing of existing agreements in North America, and the potential for further dilution of the EU with several key elections this year in Europe, has created intense concern about the existing economic world order. At the national and state levels, progressive leaders such as those in Zacatecas are developing new strategies and approaches to developing progressive economic development and searching out new partnerships. Zacatecas continues its progressive approach to economic development, looking for diversification across a variety of sectors. In the face of this uncertainty, progressive leaders continue to pursue economic security and long-term development by building new relationships. 

Job Opening

HOWE&WYE is growing! We are looking for a motivated, self-starting, independent PR/Social Media/Project Manager. Ideally the right person has at least intermediate level experience. See the description below.

Role:
Associate
Fulfill day-to-day campaign execution/day-to-day client service
Support partners
 
Skills & Attributes:
Self-starter
Ability to manage own time and work independently
Confident
Organized
Can multi-task
Deadline driven
Comfort with ambiguity
 
Jobs to be done:
Conduct research
Create media lists
Monitor media
Cold call media and stakeholders
Attend client meetings with partners
Draft notes
Draft media materials and pitches
Draft progress reports and campaign wrap reports
Create meeting requests
Project manage - create timelines, monitor deadlines
Draft invoices
Liaise with clients on a day-to-day and as directed by partners
Developing social media calendars
Developing PR calendars
 
Term: Part-time contract for 6 months

Contact: nate@howeandwye.com

OBIO Partners with HOWE&WYE to Support Member Growth

 

The Ontario Bioscience Innovation Organization Announces New Public Relations & Communications Services Member Benefit

TORONTO, Dec. 7, 2016 /CNW/ - HOWE&WYE is proud to announce its new partnership with the Ontario Bioscience Innovation Organization (OBIO®). As a part of OBIO's new member benefit, HOWE&WYE will provide strategic public relations and communications services to OBIO's broad membership of world-class start-ups and bioscience companies. OBIO members will benefit from special access to top-tier agency support with optimized pricing to strengthen PR and marketing to fulfill strategic business outcomes for awareness, investment and commercialization.

As a world-class destination for innovation and investment in bioscience, Ontario's health science industry seeks to grow in an increasingly fractured media and business landscape. With communication expertise, specific to the health science industry, start-ups and technology, HOWE&WYE will support companies as a trusted advisor for sustainable long-term communications and branding.

"OBIO is acutely aware of the opportunities and challenges its members face and we are proud to expand our member benefits to include access to PR services from an outstanding firm, HOWE&WYE," says Gail Garland, CEO, OBIO. "HOWE&WYE's experience and insight is an ideal fit to help our member companies with their strategic communications priorities."

"As an upstart PR and Public Affairs firm, HOWE&WYE is thrilled to be chosen as the PR partner by OBIO for the Ontario Bioscience Innovation Organization's membership. The new partnership is proof of our commitment to business growth and delivering surprising results for our clients," says Steve Virtue, President & CEO, HOWE&WYE. "Bioscience innovation in Ontario is well-positioned to lead the future of investment in a global economy."

To address the complex business and communications needs of the health sciences industry, HOWE&WYE has assembled a senior team with deep expertise specific to the health sciences, technology, investment, start-ups and commercialization. A rapidly changing communications landscape means bioscience companies can capitalize on opportunities with the right communications strategies and tools. A communications partner that aligns with their culture and pace of growth to equip the companies with the right messaging and PR strategies to get the attention of investors and consumers alike.

"As trusted advisors, our job is to align the interests of our clients and the press. In an increasingly multi-screen media environment the press are important third-party validators," says Nate Habermeyer, Managing Partner, HOWE&WYE. "HOWE&WYE's focus on research and analysis to generate remarkable results for clients has helped us develop strong relationships with OBIO, as well as ProChile, City of Markham and others."

As the exclusive affinity PR partner, HOWE&WYE will provide data-driven strategic PR services at an optimized price. Those services will help bioscience companies with competitive analysis and branding as well as launching new products and services with go-to-market integrated communications campaigns. The goal is to accelerate commercialization of bioscience innovation in Ontario and Canada.

Based in Toronto and Markham, HOWE&WYE has established operations across Canada in Toronto, Markham, Vancouver and Calgary.

About OBIO® www.obio.ca 
The Ontario Bioscience Innovation Organization (OBIO®) is a not-for-profit, membership-based organization engaged in the development of an integrated health innovation economy for Ontario and one that will become a global leader in providing health technology products and services to the international marketplace.  OBIO advances this goal through advocacy, promotion and strategic leadership and via collaborative partnerships with industry, academia, patients and government.  For more information, visit the OBIO website and follow OBIO on Twitter @OBIOscience.

About HOWE&WYE www.howeandwye.com 
HOWE&WYE is an independent firm specializing in advanced spokesperson strategies, communications and public affairs. The firm was founded to address the evolving media landscape as well as educate and build confidence in brand spokespersons enabling them to articulate their story to advocate for their brand and their stakeholders. The firm offers an optimized pricing structure creating access to top tier PR, communications, social media and public affairs services.

At OBIO’s APM. From l to r – Michael Ras (Senior Counsel, Public Affairs, HOWE&WYE), Steve Virtue (President and CEO, HOWE&WYE), Gail Garland (CEO, OBIO), Nate Habermeyer (Managing Partner, HOWE&WYE), Robert Eakins (Senior Counsel, Healthcare, HOWE&WYE). Photo Credit: Angela Drennan, OBIO. (CNW Group/Howe & Wye)". Image available at:  http://photos.newswire.ca/images/download/20161207_C8182_PHOTO_EN_833587.jpg

Source: http://www.newswire.ca/en/releases/archive...

Chapter 3 – What does it all mean for Canada?

Chapter 3 – What does it all mean for Canada?
Michael Ras, Senior Counsel

 "Living next to you is in some ways like sleeping with an elephant. No matter how friendly and even-tempered is the beast, if I can call it that, one is affected by every twitch and grunt."Pierre Trudeau, Speaking to the Press Club in Washington, 1969

We’ve examined the “How” and the “Why” behind Donald Trump’s rise to the Presidency and I’m quite sure that our analysis is lacking in many ways which history and closer examination of the facts will correct and modify over time.  But the most important question for Canadians and Canadian business is what the impact of a Trump presidency will be on us.  Because, as Pierre Trudeau noted in 1969, when we sleep in the same bed as an elephant, we’re going to feel his every twitch and grunt. 

As Donald Rumsfeld once said, let’s start with the “known, knowns” – the stuff Donald Trump has promised.

 

You have to look for it, but Donald’s campaign did say a few things. 

And some of it might sound simple, on the surface at least.

His Seven Actions to Protect American Workers, for example, include his promise to:

1)    Renegotiate NAFTA

2)    Withdraw from the Trans-Pacific Partnership

3)    Direct his Secretary of the Treasury to label China as a Currency Manipulator

4)    Direct the Secretary of Commerce and Trade Representative to identify all foreign trading abuses and use every legal mechanism to end those abuses

5)    Left restrictions on $50 trillion worth of energy reserves including shale, oil, gas and clean coal

6)    Lift the restrictions on key energy infrastructure such as the Keystone XL Pipeline (shout out to Canada on that one!)

7)    Cancel payments to the U.N. climate change programs and use the money to fix American water and environmental infrastructure

So that’s some of what we know … the “known, knowns”.  The “known unknowns” are where the dangerous game of prediction begins. 

The first comment is that the lack of specifics in Donald Trump’s Platform creates huge uncertainty.  There’s a lot of blanks to fill.  And that uncertainty is further exacerbated by Trump’s often erratic behaviour that seems to be driven more by his personality than by careful consideration of the issues.  He is the antithesis of another great Marshall McLuhan quote:   A point of view can be a dangerous luxury when substituted for insight and understanding.

Second, is to pick up on comments made by many other commentators that Donald Trump is America’s first “independent” President.  He owes nothing to the Republican party and probably has no interest in doing much to build that party.  Some of his key advisors like Steve Bannon, his Chief Strategist, want to use the shell of the old party to build a new one in their own image, but the traditional infrastructure and historical positions of the party is something he doesn’t care about.  This means that a lot of the experts that have been around for the past 30 years might not be given positions in the new administration.  In the short-term, that lack of institutional know-how could be a big problem as Donald and his team – whoever he gets to work for him – stumble around trying to get a handle on the levers of government.  The first few months of the Trump Administration are going to be like teenagers dating … lots of groping around and awkward moments that don’t really lead to much being accomplished.  In the long-term, the rifts in the Republican Party will become even more acute and could lead to open civil war.

On a related front, the other thing to consider when predicting policy is to point out that even though Trump has a Republican Senate and House to work with, those two bodies are not necessarily aligned with him.  A lot of that congress – and especially the Senate – despise him on a personal level.  Can you imagine John McCain doing a legislative deal with Trump?  Trump once belittled McCain’s war record saying he favoured soldiers who weren’t captured and held as prisoners of war.  Ted Cruz is a leading conservative Senator and Donald Trump once stated publicly that Cruz’s father was involved in the assassination of President Kennedy.  Senator Rubio from Florida was called “Little Marco” (and worse) by Donald Trump.  Those wounds won’t be healed quickly. 

And what happens when Donald does one of his veers left on a policy?  We saw a hint of that within days of the election Trump all but conceded that the key provisions of ObamaCare would remain in place, but just have its name changed.  The Republican Congress voted to “scrap” Obamacare; not to tinker with it.  And what happens when some of the blue-collar unions in Pennsylvania or Ohio come looking for policies that favour them? Is Trump likely to do a deal there?  How will the traditional Republican establishment react?  How will the “establishment” of the Republican party react to another “grab her by the (blank)” incident?  … and you know it’s coming!  There are tapes out there!

 

Fiscal Policy Impacts on Canada

There are two main fiscal policies in the Trump plan that Canada should be looking at closely.  The first is his promise to spend $100 billion and leverage that to $1 trillion on shovel-ready infrastructure over the next ten years. His proposal is to leverage private capital through tax breaks for capital invested in infrastructure and the development of an infrastructure bank, similar to the one being proposed in Canada and in Asia. 

I think it’s safe to assume that Trump won’t be backing the pet projects of Democratic politicians like high-speed rail in California, but interstate highways through ruralMontana, you bet!  They are going to be some of the smoothest roads ever paved!  New highways around the suburbs of congested cities like Philadelphia and Charlotte?  For sure!  Rebuilding water infrastructure in “rust-belt” cities like Flint.  Absolutely. 

This policy and spending priority is generally aligned with the Republican congress, and most Democrats, so they are likely to get some of this moving quickly, though the Republican leadership in the House of Representatives have already expressed skepticism about the idea of an infrastructure bank and the notion of running up deficit financing.  This is where two competing economic ideologies within the Republican administration will be clashing. On the one hand, traditional, small-c fiscal conservatives will be calling for restraint while Trump will be looking to apply the principles of leverage and take advantage of low interest rates to build and build quickly.  What could go wrong?  Trump’s investments in Atlantic City were financed on cheap credit and they did well, didn’t they?  Didn’t they … Oh right, never mind …

On the subject of tax cuts, the Republican congress is aligned and ready to act.  But his tax plan is going to be expensive.   Some estimate that his tax plan will cost between $4  and $5 trillion over 10+ years, which could be troublesome to long-term bond yields, and therefore interest rates, if the market makers determine that it will be too expensive for the U.S. Treasury to sustain high debt and deficits.  Nevertheless, the short-term tax-cut stimulus provided by the new consumer money flowing into the economy should have a short-term stimulative impact. Some economists are already revising their projections saying that the impact of Trump on the U.S. economy will be 2/10th of a point upward in 2017 and probably more in 2018.  Every little bit of growth should be good for Canada. 

These tax cuts do present a short-term political and potentially a fiscal problem for Canada, however, in that both the government of Canada and the Province of Ontario have recently raised the corporate tax rate. If the U.S. corporate tax rate suddenly drops, a competitive advantage of Ontario and Canada will be removed.  This presents a political challenge for Prime Minister Trudeau and Premier Wynne, especially if a few high-profile companies relocate plants and investment to the U.S. 

 

Trade Policy Impacts on Canada

In the area of trade policy, we have the most “known knowns” and the most “known unknowns” at the same time. 

Undoubtedly, certain provisions of NAFTA will be renegotiated.  Both Canada and Mexico have already acquiesced on this front.  (By the way, President Obama and Jean Chretien in their respective elections once promised to renegotiate NAFTA too, but this time, I think the threat is more real and more likely to be followed through on.)

Without doubt, the biggest danger to Canada will be to the auto sector, and particularly auto-parts as Trump fulfills obligations to Ohio, Michigan, Indiana, etc.  Unresolved matters like the softwood lumber dispute … good luck!  Trump’s team has also signalled that an early target will be the agriculture sector. 

That said, the hysteria over “scrapping” NAFTA is overblown.  There is little threat, in my opinion, of a retrenchment back to pre-NAFTA days.   The integration of our two economies is so strong that I don’t think a single President can undo it completely.  He can damage it, for sure, but he can’t undo it.  And  that’s another thing:  Trump is talking about NAFTA.  His beef is mostly with jobs leaving for Mexico. Those are (mostly) the low-paying, lower-value jobs that Canada wasn’t getting anyway.  We lost those jobs to Indiana decades ago and now Indiana is losing them to Escobedo, Pueblo and Mexico City. 

The second major point to make is that TPP (Trans Pacific Partnership) is dead.  Of that there is little doubt, despite the efforts of the outgoing U.S. President and other Asia-Pacific leaders in the last few days.  Into the breach is already stepping China which is eager to extend its economic and political influence into the Asia-Pacific region.  Whether Canada decides to take that risk of a bi-lateral trade relationship with China and risk the ire of the U.S. elephant in so doing remains to be seen, but all indications are that this is the direction we’re headed. A very big “known unknown”. 

In summary, I think there will be short-term, minimal but real impacts.  Thicker borders have a cost, but the exact impact will take some time to figure out. 

In the medium term, I think the bigger impacts will be on where investment is made.  Plants will get built in Flint, Michigan instead of Sarnia, Ontario.  More customers for raw material minerals will be in the U.S. and the mineral producers here in Canada will have to figure out how to get that product across the border. 

Further, much will depend on our ability, as a nation, to negotiate bi-lateral trade deals with other nations in Asia and emerging markets.  These bi-laterals will be critical hedges for Canada in the long-term against any twitches and snorts from the U.S. beast.  It won’t be perfect, but I don’t think it will be catastrophic.

Energy & Environment Policy Impacts

On this file, I see the biggest threats to Canada’s economy because of the spread that will (or could) exist between our two countries.  The impact, however, all depends on which side of the energy equation you stand.  Are you an energy producer or an energy consumer? 

If the restrictions on coal and shale are lifted in the U.S. (and this aligns with the wishes of a Republican Congress) then the spread between Ontario electricity prices and Ohio/Pennsylvania/New York/Michigan will grow even more and this puts even more pressure on Ontario manufacturing.  That spread, which is already large and the cause of the number one political headache for the Ontario government, could lead to a further flight of manufacturing industry.  Simply put, the metal bashing industries will have a distinct competitive advantage in the U.S. because their energy input costs, tax on capital investment and labour cost will all be lower.  Over our shared history, Ontario has been able to compete relatively well when it could overcome the cost spread on one or two fronts and occasionally take advantage of currency differences as well.  Looking forward, can Ontario compete when the dollar, higher energy inputs and lower taxes on capital all exist to advantage the U.S. side? 

Second, Canada and Ontario will no doubt be out of step with the U.S. on carbon pricing, whether through a carbon tax or a carbon market, and this will undoubtedly further exacerbate the cost spread for energy production.  The governments of Ontario and Canada will simply have to determine whether they want to be competitive in these areas or whether they want to be competitive betting on green industry and advanced technologies to drive the economy.  Another thing to watch for is whether the government of Canada uses some of its political capital to delay policies and play a longer-game hoping that Trump is a one-term President or that the congress flips in 2 years.

Third, I think Trump and the Republican Congress’ push forward on the Keystone XL pipeline will actually make it harder for the Canadian pipelines (Kinder Morgan, Trans Mountain, Energy East, et. al.) to receive the “social license” that they need to move forward.  On the one hand, there will be even greater economic pressure to get the pipelines to the Canadian coasts so that we can serve new customers in Asia.  On the other hand, environmental and social activists and average citizens who are skeptical will be energized by the focus on the U.S.  If Canadian’s see Trump supporting a pipeline, do they reflexively oppose pipelines?  I think that’s a real possibility and threat. 

Looking for Silver Linings

When looking for silver linings in all of this, I see two big opportunities for Canada. 

First, is the global effort to attract the best talent.   Canadian Colleges and Universities are already predicting spikes in foreign enrolments.   Foreign students are simply not going to study in the U.S. in the current environment.  On a related note, can a Canadian company compete against a U.S. company for that top-flight engineer from India, Mexico, UAE or Egypt?  If that engineer thinks they are going to be harassed on the street for wearing an abaya or hijab, bet on Canada! 

Second, the global effort to attract foreign capital is intense and notwithstanding the likely tax advantages in the U.S., the relative stability and inclusiveness of Canada should be an advantage in efforts to attract capital.  Foreign capital, particularly if the investor is looking to move with their money, should see Toronto, Vancouver, Montreal or Mississauga as a better place to settle than much of the U.S.  If a foreign investor is looking for stability, a welcoming culture and a good school to send their kids, does Chicago or Charlotte look like that destination today?

My conclusions:

First, we as Canadians should take a deep breath and R E L A X …

The election of Donald Trump is most certainly a bad thing if you are an African American, a Muslim, a woman ... Your rights as an equal citizen in the U.S. are certainly under threat.  And that’s ugly and cannot be diminished.  But we’re not in America … we’re in Canada, and for that we can be thankful. 

The election of Donald Trump is most certainly going to be disquieting to the economy.  He will shake things up and when the elephant stirs, Canada feels it.  The election of Donald Trump will have a profound impact on trade policy … but most likely only at the margins.  The core of our trading relationship is far too intertwined and integrated to go back.  It might retreat a bit – and that’s a bad thing – but we’re not heading for 200% tariffs and trade wars. 

The election of Donald Trump could force Canada to look back to Europe and increasingly to Asia for trade and cultural ties, but this was a trend we’ve been seeing for years already.  If anything, this election may be accelerating that trend and that’s not necessarily a bad thing.  My investment advisor has always advised me to diversify.  It’s good advice for a country too.  

And finally, lets make sure that we as Canadians – as leaders in business and politics and media and culture – take a hard look at the lessons that Donald Trump’s election teaches us as we seek to avoid making the same mistakes.  Let’s work harder to ensure that the modernization of our economy doesn’t leave people in the hard-working middle-class behind.  Let’s make sure our population has the educational and economic opportunities to deal with a changing world.  Let’s make sure our domestic policies don’t inadvertently disadvantage our own economy just to make a principled stand and allow our leaders to say they are better than Donald Trump. 

It won’t be easy and the relationship between Canada and the U.S. will never be the same, but Canada could – and I emphasize could - even benefit in the long-run from a Trump presidency … and after all the gnashing of teeth and wringing of hands in the last two weeks, that’s a pretty extraordinary conclusion to reach!