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Issue 12 Vol I, March 31, 2006 comment U.S Canada Relations: Canada’s New Man in Washington may help
Canada's newly minted ambassador to the United States, Michael Wilson, has been out of politics since the 1993 federal election. Achieving a just and fair resolution to the softwood lumber dispute is his top priority. "The fact that we don't have a resolution there is impacting the whole relationship, and certainly in the eyes of Canadians, it signifies a lack of our ability to get agreement, an understanding with them on an issue which is very, very important to us", says Wilson. Experts believe that U.S. President George W. Bush is ready to negotiate a deal. "I think there will be a negotiated settlement within the next few months on lumber that will not be perfect but it will solve the problem," James Blanchard, former U.S. ambassador to Canada said recently, on CTV Newsnet's Mike Duffy Live, a popular Canadian news program. "And that's obviously going to be one of the first orders of business Prime Minister Harper and Michael Wilson. On the health of the Canada-U.S. relationship, Wilson said: "I don't know how rocky it is today, but clearly, it can be improved." He noted that Prime Minister Stephen Harper “wants to see a change in the tone from the top,” He added that P.M. Harper has already talked to U.S. President George Bush about this. Harper said, in a recent statement, that strong Canada-U.S. relations are a priority for his government. "If the tone from the top and the relationship between the two leaders is good, is open, is respectful, it's an ongoing dialogue, then it makes it an awful lot easier for the other people who are going to be dealing with others from the other side," Wilson said, on CTV Newsnet's Mike Duffy Live. On March 13, Wilson replaced Frank McKenna, who drafted a letter of resignation immediately after the Liberal Party of Canada lost the Jan. 23 federal election. McKenna had served less than a year in the key diplomatic posting to which then-prime minister Paul Martin had appointed him. Harper thanked McKenna for "helping maintain strong bilateral relations" with the United States. McKenna was seen as a potential star candidate to replace Paul Martin, but "in my heart of hearts, I will have no regrets" not running for the leadership, he said. Former New Brunswick premier Frank McKenna rejected a run for the Liberal leadership on Monday, saying he doesn't want his life to be consumed by politics. Until January 30, McKenna had been seen by many as a Liberal leadership contender. On that date, he announced that he would not run for the leadership. During 15 years as a politician in New Brunswick, including 10 as premier, "I became addicted to my responsibilities," McKenna said during a recent press conference. He said his life became unbalanced, and after leaving the premier's job in 1997, he vowed, "having escaped the trap, I wouldn't go back for the cheese." Canada's former ambassador to the U.S. expressed more muted optimism about resolving the long-standing issue. McKenna confirmed that, prior to the federal election in January, Canada and the U.S. had come close to reaching a softwood lumber deal. Prior to being replaced by former finance minister Michael Wilson, McKenna hinted that reaching an agreement now will not be a simple task. Prime Minister Stephen Harper said recently that Canada is eager to reach an agreement, but won't do so at any price. Canadians remember that it was Wilson, 68, who brokered Canada's first free-trade agreement with the United States in the 1980s, and introduced the unpopular 7% Goods-and-Services tax (GST), as finance minister in Mulroney's government. Born in Toronto, Wilson was a Bay Street investment executive when he entered politics in 1979. He attempted to ascend to the helm of the Progressive Conservative Party at the 1983 leadership convention. However, he dropped out after the first ballot and encouraged his support base to choose Brian Mulroney, the eventual winner. Mulroney served as Canada's Prime Minister from 1984 until 1993. | ||||||||||||||||||
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Toxic Budget Budget is a continuum of government accounts in the sense that, apart from looking at the income and expenditure accounts, and the accompanying issues of fiscal and current account deficit, and other facets, it is supposed to focus on what has gone by in the preceding year(s) and what it is going to be in the succeeding year(s). It is a continuum from the earlier years to later years. Although this year’s budget is the third budget of the ruling UPA Government, it has partially recapitulated the outcome of the last year’s budget, but has not gone back any further. One serious flaw of the budget is it has completely failed to have a vision of what will be the realization of the budget in the next fiscal year and how would be formulated. The budget is also not transparent in many ways. The most serious drawback is in terms of the requirements of the Fiscal Responsibility & Budget Management (FR & BM) Act, 2003 and also in terms of the Report of the Task Force on its implementation. The report highlighted attaining a fiscal correction of 1.66% of GDP by 2008-09. It also wanted a strategy for tax reform in terms of (1) widening the tax base (2) low rates; few rates to empower the households (3) enhancing the equity of tax system (4) shift to non-distortionary consumption taxes to increase efficiency in production and enhance international competitiveness of Indian goods and services (5) enhancing the neutrality between present consumption and future consumption (6) enhancing the neutrality of the tax system to form of the organization (7) enhancing the neutrality of the tax system to sources of finance, (8) establishing an efficient and effective compliance system (9) focus on buoyancy rather than immediate sources of tax revenue. Beyond that three statements have to submit every year before the budget is presented. These relate to (a) macro economic framework (b) medium term fiscal policy, and (c) fiscal policy strategy The budget is explicitly quiet on these issues. Another serious drawback is that, on the one hand, it has failed to take into account the various built-in assumptions (including constraints) of our economic, social, and political system, and, on the other, it has not been able to strike an optimal trade-off amongst the various (short period and long period) parameters that are directly or indirectly linked with the whole package. It is rather unfortunate that, apart from some political trade-offs amongst the “ideals” of the various ruling parties in the coalition government, the budget has miserably failed to strike a number of crucial trade-offs. 1. Rates of Interest, Inflation, and Economic Growth: There are strong linkages between the rates of interest, inflation, and economic growth. There seems to be a perfect mismatch between the existing interest rate regime and inflation in the country. Even 4 to 5 % rate of inflation is quite serious in terms of economic growth. The budget has completely ignored this perspective, and does not appear to be bothered about the given rate of inflation in the country and its adverse effects on the rate of economic growth. 2. Poor Ignored: The budget has not seriously looked at this aspect. It is on record that majority of farmers (essentially marginal and small) have remained poor. There is another issue, which is linked with the agricultural sector. The data show that about 65% of the labour force is absorbed in this sector, but it contributes less than 30% to the GDP. This is a serious paradox. The budget is quiet on this issue. 3. Tax-GDP Ratio and the Common Man: Tax Reforms are very crucial to the reforms process. One of the most serious problems of central finances has been the declining GTR (Gross Tax Revenues)-GDP (Gross Domestic Product) ratio. The budget has taken a few initiatives to mobilize higher tax revenues, but has ignored: (a) Imposing a highly progressive consumption tax on the so called ‘undeserving’ rich/super rich, who amass a lot of wealth because of an economic system of subsidies, protectionism, privileges, and ‘undesirable’ government support and laxity. Such rich people believe in status and highly conspicuous consumption. (b) Extending the tax net to the agricultural sector, where some of the urban income gets invested to avoid taxes. The budget has not struck a trade-off between the tax reforms and their short-run fall-outs on the common man, by assuring that the benefits of growth, no matter what the rate of growth is, would reach the masses through percolation (trickle down process) in terms of say, low prices of things of daily use, low taxes for the common man, and reasonably attractive interest rates (within the present day policy of low interest-rates-regime), and also in non-monetary terms like, basic social provisions, day-to-day security, effective law and order situation, public discipline and responsibility, and elimination of ‘rent-seeking’ nefarious activities. 4. Globalization and Indigenous Industries: Employment generation has been a policy priority in India ever since the time of independence and the focus has been mainly on the small-scale and cottage industries that engage majority of the employed people. The budget, unfortunately, has no concrete proposals for pushing and pulling the indigenous industries, knowing very well that the on-going reforms process, especially globalization will surely retard the progress of our micro and small units, and this would severely hamper the employment generation potential of the country. 5. Micro and Macro Measures: A combination of macro and micro measures of economic growth and development are crucial for any developing economy. The budget, therefore, has to strike a perfect trade off between the two measures, but this fact has not been seriously accounted for in the present budget. Lastly, the budget has made co comments, whatsoever, on the role of state in respect of (a) governance, which has five basic components: political accountability, the rule of law, social justice, quality education, and free market; and (b) disinvestment within the framework of the structural reforms, which is highly crucial in the present scenario of the reforms process. In fact the budget does not distinguish amongst the public sector, the government sector, and the political sector. It regards all the three as substitutes of each other, whereas in reality the three are entirely different from each other. In the context of disinvestment and other packages of the reforms process, it is the public sector that is important, and its role is akin to that of a venture capitalist, that starts a project, takes it to optimal heights, gets out of it, hands it over, and moves to other projects. This role of the public sector in this sense has not been emphasized in the budget. The budget has not been Pareto-Optimal in the sense that it has already distorted household budgets of the majority of Indians. In fact, it is a “toxic” budget. It is also not fully transparent, and there are many things in between the lines. It is “no vision-no mission” budget. |
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immediate neighbours Canada and the United States are always not at
best of terms. Their worldviews differ, as do domestic policies.
Canadians cherish their country for being more tolerant, multi
cultural and the one that follows state operated welfare programmes
about health and education. America is into neo conservative mode
these days, rushing for privatisation of everything and cutting down
on welfare services. Their economic interests too clash at times.
Our Ottawa Correspondent Bernard Nunan details one such area.