Canadian Prime Minister Trudeau's State Visit, March 2016

Canadian Prime Minister Trudeau's State Visit, March 2016

CRS INSIGHT
Canadian Prime Minister Trudeau's State Visit, March
2016
March 7, 2016 (IN10459)
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Related Policy Issue
North America: Canada and Mexico
Related Authors
Peter J. Meyer
Ian F. Fergusson
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Peter J. Meyer, Analyst in Latin American Affairs (pmeyer@crs.loc.gov, 7-5474)
Ian F. Fergusson, Specialist in International Trade and Finance (ifergusson@crs.loc.gov, 7-4997)
Canadian Prime Minister Justin Trudeau is scheduled to make a state visit to the United States on March 10, 2016. It
will be the first state visit by a Canadian leader since 1997, when then-President Clinton hosted then-Prime Minister
Jean Chrétien. Occurring less than five months after Trudeau's Liberal Party regained power following 10 years of
Conservative Party rule, the state visit may provide an opportunity to reset the U.S.-Canadian relationship, which has
been strained in recent years.
Canada's Domestic Scene
Trudeau was sworn in as prime minster on November 4, 2015, after his Liberal Party won 184 of 338 seats in October
2015 parliamentary elections. Trudeau and the Liberals have moved forward on several campaign pledges since taking
office, enacting a middle-class tax cut, withdrawing Canadian aircraft from combat missions in Iraq, and resettling
more than 25,000 Syrian refugees. They also established an independent board and a nonpartisan, merit-based process
to advise Trudeau on candidates for Canada's appointed Senate. The Liberal Party's platform included additional
pledges to reform the electoral system, legalize marijuana, enhance civil liberties protections in the country's
antiterrorism legal framework, and work with Canada's provinces and territories to develop a plan to reduce carbon
emissions.
Trudeau's agenda may be constrained, however, by Canada's lackluster economic conditions. Canada's economic
recovery since the 2007-2008 financial crisis largely was predicated on a commodity boom fueled primarily by China's
development. The slowing Chinese economy and the recent oil price collapse have taken a toll on the Canadian

economy.
Canada was in recession in the first two quarters of 2015 and finished the year with 1.2% GDP growth. During the
boom, the high value of the Canadian dollar made Canada's manufacturing sector relatively uncompetitive, and the
sector has struggled to recover despite the precipitous fall in the Canadian currency's value in the last few years.
Trudeau campaigned on a pledge to run modest deficits in order to spend an extra C$10 billion a year on infrastructure
to jump-start the economy. He likely will follow through with the infrastructure pledge in his March budget, but a
deeper deficit will be required because of Canada's economic downturn.
U.S.-Canadian Relations
The U.S.-Canadian relationship is "one of the closest and most extensive in the world," bound together by a 5,500 mile
border, more than $2 billion per day in bilateral trade in goods and services, and mutual security commitments under
the North Atlantic Treaty Organization (NATO). (See CRS Report 96-397, Canada-U.S. Relations.) During the state
visit, President Obama and Prime Minister Trudeau are expected to announce a strategy to address climate change and
a border pact designed to facilitate travel and trade while bolstering security. The border pact may build upon the
preclearance agreement covering all modes of transportation that the United States and Canada signed last March.
Defense, trade, and energy ties also are likely to be discussed.
Defense
In accordance with a campaign pledge, Trudeau ended Canada's combat mission in Iraq in February 2016, withdrawing
six CF-18 fighter jets that had conducted 251 airstrikes as part of the U.S.-led bombing campaign against the Islamic
State. Despite the departure of personnel associated with the CF-18s, the total number of Canadian Armed Forces
members deployed to the region will increase from 650 to 830. Canada will continue to provide a refueling aircraft and
two surveillance aircraft to support coalition operations and will increase the number of Special Forces troops training
and advising Iraqi security forces from 69 to more than 200. Additionally, Canada has pledged to provide C$1.1 billion
in humanitarian and development assistance over three years to support those affected by the conflict.
During the campaign, Trudeau also vowed to scrap Canada's purchase of 65 F-35 Joint Strike Fighters, open a
competitive procurement process for "more affordable" fighters, and invest the savings in the Royal Canadian Navy.
Canada joined the F-35 consortium in 2002, pledging to invest $150 million in the development of the aircraft. Its
withdrawal from the program reportedly would increase the price of each F-35 purchased by the U.S. military by about
$1 million. While Trudeau has reopened the bidding process to replace Canada's aging fleet of CF-18s, the Pentagon
reportedly expects the F-35 to compete in the new process and the Canadian government reportedly intends to make the
annual payment required to remain in the Joint Strike Fighter program this year.
Trade
In 2015, Canada lost its long-held position as the United States' largest trading partner to China; however, Canada still
has a $575 billion merchandise trading relationship with the United States. Canada is a party to the proposed Trans-
Pacific Partnership (TPP) free trade agreement and signed the agreement with the United States and other parties on
February 4, 2016. The Liberal government officially has yet to endorse the TPP—which was negotiated primarily by
the prior Conservative government—and is engaged in "consultations with Canadians" over the pact. Under the accord,
Canada would provide certain additional protections for intellectual property rights but would provide only incremental
additions to its largely closed market for dairy, poultry, and eggs.
Other bilateral trade issues may arise, such as the perennial dispute over softwood lumber. The Softwood Lumber
Agreement, which had regulated bilateral lumber trade since 2006, expired in October 2015. Unless a new agreement is
approved, U.S. producers may begin filing antidumping and countervailing duty trade cases in October 2016.
Energy
The supply glut and price collapse in the world oil market has hit Canada especially hard. Oil, primarily from the
bituminous oil sands of Alberta and Saskatchewan, is the largest Canadian export to the United States. Canada remains

the largest source of imported oil to the United States, but the value of oil imports plunged 43% in 2015 from 2014,
although the quantity of oil imported increased by 8%.
The Obama Administration rejected the Keystone XL pipeline in November 2015. Since that decision, TransCanada, the
pipeline company, has launched an investor-state-dispute-settlement arbitration under the North American Free Trade
Agreement (NAFTA) seeking $15 billion in compensation over the decision. It also has challenged the constitutionality
of the decision in U.S. courts.