December 10, 2019 | Local, Aerospace, Naval, Land, C4ISR, Security

Canada is rich - and cheap

EUGENE LANG

Eugene Lang is an adjunct professor at the School of Policy Studies, Queen's University, and a fellow at the Canadian Global Affairs Institute.

“It's Canada, they have money,” Donald Trump said at last week's NATO summit.

Most of what the U.S. President says is either exaggerated or false, but occasionally he sums up in a sentence what everyone knows to be true.

After admonishing Prime Minister Justin Trudeau at the summit for Canada's failure to meet, or strive toward, the North Atlantic Treaty Organization's defence-spending target of 2 per cent of Gross Domestic Product (GDP), Mr. Trump pointed out an inconvenient truth. The President was saying Canada is rich and cheap.

But just how rich is Canada?

Among the Group of Seven -- a group of the richest countries in the world -- Canada enjoys the third-highest per-capita income and, since 2016, has led the G7 in economic growth. Canada also has the lowest net-debt-to-GDP ratio among those same seven countries, and the second-lowest national-government-deficit-to-GDP ratio. Which means, in essence, that Canada is the third-richest country in the G7 and the best in class with government finances.

Successive governments in Ottawa have spent 20 years boasting about this strong national balance sheet to Canadians at every turn, and telling anyone abroad who would listen. This is why Mr. Trump knows that Canada does indeed have money. We are rich, at least compared with most other countries.

But are we cheap?

Canada spends about 1.3 per cent of GDP on national defence, tying us for fourth with Italy within the G7. Yet, Ottawa has never fully accepted the validity of the defence-spending-to-GDP measure. Both the Harper government – which signed the Wales Declaration, enshrining the 2-per-cent NATO target – and the Trudeau government have claimed input measures such as the GDP ratio don't tell the full story, and that output indicators are more meaningful. The defence output measure that is best understood is the extent to which a country's military is engaged in operations internationally. On that score, Canada looks terrible. We have fewer troops deployed abroad today on NATO, United Nations and other multilateral missions than in decades.

To be sure, having influence internationally and carrying your fair share of global responsibility entails much more than the size or engagement of your military. Official Development Assistance (ODA), or foreign aid, is another important measure in this connection.

Canada also ranks fourth among G7 countries in ODA as a percentage of gross national income (GNI). However, Ottawa is spending only 0.28 per cent, up slightly from 0.26 per cent last year, the lowest level this century. Fifty years ago, a World Bank Commission report, titled Partners in Development, recommended developed countries spend 0.7 per cent of GNI on aid. That Commission was chaired by Lester Pearson, former prime minister of Canada, recipient of the Nobel Peace Prize and a Canadian icon. Over the years, various Canadian governments have paid homage to Mr. Pearson's vision. Yet in the five decades since his report was published, Canada has rarely reached half of the Pearson target in any given year.

Whether Ottawa likes or doesn't like input or output measures, or GDP or GNI ratios, doesn't really matter in the world of international politics. For better or worse, these are the indicators that are used to compare and assess the degree to which countries are living up to their obligations and responsibilities internationally. Imperfect as they are, these are measures of burden sharing. They are the statistics countries look at when considering whether Canada or any other country is pulling its weight globally.

And on these measures, Canada looks middling at best, and bad at worst, by both international comparative standards. At the same time, we are among the world leaders in economic growth among developed countries, and we have held the gold medal in public finances for years. Rich and cheap, as it were.

That was the essence of Mr. Trump's criticism of Canada this week at the NATO Summit. And foreign governments the world over know it to be true.

https://www.theglobeandmail.com/opinion/article-canada-is-rich-and-cheap/

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