The Trump Effect on Canadian Marketing: Commerce, Taxes and Privacy

How do the recent elections in the United States impact Canadian marketers? You may ask – ‘what do U.S. politics have to do with marketing … in Canada!?’ The implications could be significant if only because Canada’s economy is exceptionally tied to that of the U.S.

Marketing, an important driver of the Canadian economy, is a sector sensitive to domestic and international changes in government regulation, economic stability and consumer purchasing power. With so many companies operating and serving a large customer base in both Canada and the U.S., any policy and economic changes in either country can have a significant impact.

As we await Donald Trump’s inauguration on January 20, we still have limited information on how the new administration will proceed on several crucial domestic and international issues, and how those policies could affect Canada’s business environment. However, based on Trump’s recent cabinet appointments, tweets and press conference, we can anticipate certain policies and their potential effects (direct or indirect) on Canada. 

TRADE & COMMERCE

The North American Free Trade Agreement (NAFTA) signed in 1994 between U.S., Canada and Mexico could be scrapped entirely, or renegotiated. The Trump administration has already confirmed last week that NAFTA discussions will be opened immediately, pleasing voters in Rust Belt states like Michigan and Ohio, who have witnessed significant job losses over the last decades because of moving productions (i.e. automotive, manufacturing) abroad.

Prime Minister Trudeau, an ardent supporter of globalization and free trade, has already signaled his willingness to negotiate in an effort to save the agreement. In the extreme case that Trump cancels NAFTA, Canada does have a wild card under its sleeve. The preceding 1989 Canada-U.S. agreement which already removed most tariffs between Canada and U.S. would be resurrected, ensuring that trade in most sectors would not be affected.

The Trans-pacific partnership (TPP), a proposed agreement between Canada, U.S. and another 10 Asia-Pacific countries which would have created the largest free-trade zone in the world, will not survive. Trump has been a fierce opponent of the TPP and without American involvement the deal will not go forward. For Canada, three of its top five trading partners would have already been inside the TPP. What TPP's demise really means for Canada is a loss of access to the world's third-largest economy: Japan, though there is already talk of resurrecting earlier bilateral trade talks with that country.

CORPORATE TAXES & PROTECTIONISM

The Trump administration may bring more corporate tax breaks, fewer business regulations, and a “hands off” regulatory approach in emerging policy debates around e-commerce, the Internet of Things, data security enforcement, and other areas affecting marketers. While such policies could be positive for American companies, including those doing business in Canada, a proposed change in the tax rules of foreign profits may cause companies to repatriate cash. This may lead to U.S. companies closing down operations in Canada. A “brain drain” of skilled workers may also occur if some Canadians choose to follow the jobs across the border.

PRIVACY & CYBER (DE)REGULATION

In an increasingly complex privacy area, companies whose business models depend in part on data monetization will watch closely for Trump administration initiatives. With Trump strongly supporting the ability of the U.S. to access personal data in the name of national security, the EU-U.S. Privacy Shield could be jeopardized. Given that many Canadian companies have U.S. outreach or host customer data on U.S. servers, this could bring into closer scrutiny Canada’s adequacy with EU privacy laws. While previous experience with the invalidation of Safe Harbour indicates that may not be the case, what happens if there is no replacement for the Privacy Shield?

The Federal Communications Commission (FCC), the main telecom and broadband regulator, may experience significant changes. The broadband privacy rules adopted in October 2016 (echoing concerns expressed by Canada’s Privacy Commissioner in the Bell Relevant Ads Program) may not be enforced and thus be repealed. The likely reversal of the net neutrality decision - which would undermine the principle that Internet service providers should enable access to all content without favoring or blocking particular products or websites – is another indicator of how Trump looks at internet policy.

The Federal Trade Commission (FTC), tasked with protecting consumers against companies that misuse or do not protect personal data, may also witness some scaling back in enforcement activities.

Both the FTC and FCC will change leadership, as Commissioners Edith Ramirez and Tom Wheeler respectively, have announced their resignations. The incoming commissioners will both be Republican appointees, who are likely to adopt a 'light-touch' enforcement approach consistent with Trump's deregulatory philosophy.

WHERE WE GO FROM HERE

The effect of the new American political regime on Canada should not be underestimated. A spokesperson for Chrystia Freeland, now Canada's Minister of Foreign Affairs, said roughly 2.5 million Canadian jobs are dependent on trade with the U.S., while 23% (or $449.9 billion) of Canada’s GDP is derived from exports of goods and services to the U.S. alone.

In the new Trump era, the biggest threat to the Canadian economy is protectionism. Not only is Canada threatened by Trump’s “America First” rhetoric, but also by an increasingly protectionist Europe. Despite the recent ratification of the Canada-EU Trade Agreement (CETA), important trade partners including France, Germany, Italy and others have called for referendums on EU memberships, favouring instead trade barriers and limits to immigration.

Trump’s campaign promises to get rid of NAFTA and the TPP, increase taxes on foreign profits, and build a wall with Mexico are indicators that a more protectionist America will arise. It’s not all doom and gloom however. In his acceptance speech, Trump said that “…while we will always put America's interest first, we will deal fairly with everyone, all people and all other nations. We will seek common ground, not hostility, partnership, not conflict." Will this positive message reflect the Canada - U.S. relationship over the next few years? We’ll find out soon enough. In the meantime, we should keep in mind that Trump is a businessman, not a politician, who looks at the benefits and deals that his country gains from all partnerships.

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Cristina Onosé - Senior Manager, Public Affairs @ Canadian Marketing Association.

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Tags: trump, net neutrality, nafta, corporate taxes, privacy, economy, canada