Things I'm Keeping An Eye On
Welcoming the New Year
Happy New Year! I hope you had a restful and refreshing break. To kick off the New Year, today’s post looks at some of the things I will be watching as the year goes on and how that fits into what I plan to write about here. Between a federal election, a likely Ontario election, Trump 2.0, and the ongoing collapse of the neoliberal and geopolitical order as we’ve known it for the past thirty years, it looks set to be an interesting and challenging year.
What is next for Industrial, Innovation, & AI policy?
If one thing seems inevitable for this year, it is that we are about to see a change of government federally. Whether or not we see Trudeau step down first and a replacement Liberal leader come in, I don’t know, but I would be shocked if either Trudeau or any other leader could close the monumental polling gap to the Conservatives. I think it is pretty baked into most people’s thinking that we will see Prime Minister Poilievre this year sooner or later, and I don’t see any reason to doubt that assumption.
That leaves a few significant policy files up in the air. The Conservatives haven’t released anything close to a detailed platform beyond their core slogans, so precisely what the direction of travel will be remains to be seen.
These include the Conversatives’s approach to industrial policy. The Liberal government made major investments in electric vehicle and battery manufacturing and wider investments into clean technology. While, in my view, their efforts fall short of a more coherent industrial strategy, they are nonetheless significant industrial policies. How is a Poilievre government likely to look at these investments and the possible need to make further ones to ensure they pay off? What is the broader approach to using industrial policy levers to shape the direction of the Canadian economy likely to be? While Conservatives have traditionally been more hands-off and market-oriented, populist leaders globally have often taken more interventionist approaches, and where a Poilievre government will land is unclear.
Also on the table are federal policies around innovation and AI. In the innovation space, the Canadian Innovation Corporation has already been kicked into the long grass past the next election and looks sure to be no more. Joining that now seems to be the proposed capstone organization for the federal research funding councils. The Fall Economic Statement included only that more information would be announced in the coming months. Given that the government is undoubtedly in its end game now, its ability to stand up a new organization seems very unlikely (not to mention unwise should they try and rush it through). I have no idea if the Conservatives and Poilievre agree with the need for a capstone organization or a CIC. Even if they do, they would likely want to return to the drawing board themselves rather than pick up the Liberal’s work on these fronts. There are some deep problems with Canada’s current approaches to research and innovation, so sooner or later, these topics will need to be returned to in one form or another.
On AI, it looks very likely that the government’s proposed legislation won’t make its way into law before the next election. Bill C-27, which includes the Artificial Intelligence and Data Act, the Consumer Privacy Protection Act and the Personal Information and Data Protection Tribunal Act, has remained stalled for months. Whether through an early prorogation of Parliament to allow for a Liberal leadership race or through a no-confidence motion passing forcing an early election, it looks like this legislation will die on the order paper. What won’t die is the need for Canada to get serious about regulating AI (and updating the desperately out-of-date privacy legislation), so this will also likely be on the agenda for a new government.
Cutting across all this is what a Conservative government will mean for Canada’s federal state capacity. If you are a regular reader of Deep Dives, you’ll know I write about this often. With Poilievre widely expected to make deep cuts to a public service that has grown by 40% since 2014-15 - how and where these cuts fall and whether enough attention is paid to the types of skills and functions we need in light of a changing economy and major global and local challenges are going to be significant questions in the future.
Fortress North America?
Zooming out, this year will bring some turbulence to Canada’s relationship with the USA. Trump’s return will challenge Canada’s cozy complacency on several fronts. The threat of tariffs looms large in this. How far they are being used to bully Canada into certain concessions or are something Trump is intent on regardless remains to be seen. However, they certainly serve to upend the established economic norms between the two countries.
What comes next is the big question. I think some scenarios are worth discussing. One is an acceleration towards a Fortress North America approach. We have already been moving in an increasingly protectionist and anti-China direction under pressure from the Biden administration—something I’ve written about previously. There is plenty of reason to expect similar from the Trump White House. Some Canadian politicians are anticipating this, such as Doug Ford pointing to Mexico as a backdoor to Chinese cars and arguing for a bilateral trade deal.
With CUSMA up for review in 2026, we could see it tightened up as a trilateral pact in an explicitly anti-China way, with the Trump administration likely to push for tightened rules of origin and restrictions against Chinese firms. It will be important for Canada to have a firm idea of its offensive and defensive interests going into any renegotiation. Trade with the US is incredibly important to Canada’s economy. Yet there are also plenty of reasons to think that the tight integration with the US has been detrimental to Canada, making Canada a branch plant economy rather than an innovative leader in our own right. We need to thread that needle, and it could be plausible that new approaches beyond the NAFTA/CUSMA model could be better for us. That will take vision and consensus building to achieve, though, and we will have to see whether the incoming government are up to the task.
A more specific area of interest in the US is the future of Biden’s industrial and place-based policies. Huge investments have been made in both, and some recent work indicates that the Inflation Reduction Act looks set to deliver a 4x return on investment. Whether that investment continues or is reversed is a big question.
Other areas & upcoming work
More generally, I’ll be keeping a close eye on innovation, missions, and place-based innovation. Over the next few months, I am writing two reports for the CSA Public Policy Centre: one on Building an Inclusive Innovation Economy and a follow-up on Unlocking the Potential of Place. These will build on my writing here, particularly fleshing out some areas of the Agenda for an Inclusive and Innovative Canada I laid out last year. I’m excited to work on them and look forward to sharing my thinking for them as it progresses.
I’m also going to be looking more at how we respond to the collapse of the neoliberal economic model. I believe there is a real need for more progressive economic thinking and work on what comes next for Canada on multiple policy fronts. We are in a real moment of change, which brings enormous challenges and risks and immense opportunities to build something fairer and more equitable. There will be more from me on this front soon with some awesome collaborators, and I hope to be able to do more substantial work on the topic as the year goes on.
I plan to continue writing about all of this in the newsletter and much more that I do not have the space to get into here. Thanks for reading and being with me and Orbit Policy’s Deep Dives for 2025!