Carney’s next moves after EU meetings and the investment summit, according to our experts

On Sept. 21, institutional investing reporter James Bradshaw, financial reporter Tim Kiladze and deputy Ottawa bureau chief Bill Curry answered reader questions about Prime Minister Mark Carney’s recent efforts to bring more business to Canada in the midst of a trade war with the United States.

In a search for new partners, Mr. Carney has been pushing the notion of “a unique alliance” with the European Union, and received an invitation from the EU’s top official to become the bloc’s first associate member.

Meanwhile, at the first-ever Canada Investment Summit, Mr. Carney announced plans for the privatization of major airports, a nationwide internet network and a “productivity mega deduction.”

Readers asked what the summit was like from the inside, how a deeper EU partnership could affect Canada and how increased investment could affect Canadians. Here are some highlights from the Q&A.

Ripples from the summit

What was the summit like from the inside?

Tim Kiladze: One line has stuck with me: “The lobby is where it’s at.” That was said to me by a Canadian exec one morning last week at an event adjacent to the summit, and the point was, it’s the networking that matters, not necessarily the panels. The lobby areas outside summit events were often quite busy with lots of people talking and making their way through the crowd.

As for the feel, the big thing to me was that it actually didn’t feel all that different from a lot of conferences I’ve covered and attended over the years. The draw was the big names, for sure. But it was the same type of cocktail chatter and energy you may see in your own industry.

How deal making gets done at the Canada Investment Summit, a ‘massive catalyst’ for growth

Bill Curry: That’s a good summary, Tim. One of the unique aspects of the summit was that generally, the CEOs and investors did not have any support staff with them. So it was interesting to see these executives and cabinet ministers mingling one on one in the hallways of the Four Seasons hotel.

Some execs at the investment summit said they never set foot in Canada before then. Why wasn’t Canada seen as a place for foreign investment?

James Bradshaw: That question gets to the crux of the summit.

Canada tended to get lumped into a “North American” investment strategy at a lot of the world’s largest money managers. And because the U.S. is the world’s largest economy, with the deepest capital markets, lots of advanced industries, plenty of innovation, and all of it done in the world’s dominant currency – the U.S. dollar – most of that money just flowed to the U.S. A deal in Canada had to really stand out.

Canada also had a reputation – often one it deserved – of being a slow and cumbersome place to invest. We had a lot of regulations. Sometimes you needed more than one approval to start a project – from federal, provincial and municipal governments, plus regulators. You might have to hedge currency changes in the U.S. dollar so that didn’t eat into the returns on your investment. For investors, time is money – the longer the investment takes to start paying back, the weaker the return. So this really mattered.

The president and COO of Blackstone, the US$1.3-trillion asset manager, talked about a project they invested billions of dollars in to transmit electricity from Quebec to New York state. It took 16 years to complete. He then called Canada a “sleeping giant” economically. We’re trying to shed the sleepy part of that reputation now.

Will they track and report on the progress of these projects in raising financing?

Kiladze: It’s hard to track. But I’d argue that from the government’s perspective, a big goal of the summit was, well, vibes-based. Simply showing Canadians that major institutional investors like us and are interested in what we have to offer is a win. It helps to feel loved when your biggest trading partner and historical ally tries to knock you down.

What I think has been lost, however, is that these funds have long liked Canada. A subsidiary of Saudi Arabia’s Public Investment Fund, for instance, bought major grain handling assets in the Prairies, and Blackstone, the U.S. private equity giant, holds $50-billion worth Canadian assets, many of them in real estate. We ran into some issues with too much regulation and decision bottlenecks, but it’s not like we were a banana republic until now. Plus, Canada’s pension funds are some of the most sophisticated investors in the world.

Carney’s investment summit attracted ‘all the right people.’ Will it bear fruit?

Is Carney simply selling the country to the global 1%? What’s the benefit of foreign investors vs. trying to cultivate homegrown opportunities?

Bradshaw: Homegrown investment certainly has its advantages, but if Canada is really going to be ambitious about building infrastructure, scaling up businesses, building the technology behind AI, etc., it’s not likely there is enough money – enough capital – at home. On top of that, governments are reaching the limits of how much more debt they can take on. So access to bigger pools of money, so we can make more investments in Canada, is one benefit.

As for the first part of your question, there is an element of important parts of Canada being put up for sale here. And that means revenue from some of those pieces of infrastructure and companies could flow out of the country. But some of that money would likely come from huge foreign pension funds, for example, so the money isn’t going to a bunch of 1 per cent-ers in every case. It’s sometimes paying pensions. Even the really big asset managers out there – think Blackstone, or a private equity firm like TPG – have lots of clients who are pension funds. So will the richest investors make some money? Yes, that’s why they show up. But it’s a little more nuanced.

What does Carney’s plan to privatize airports actually look like in practice, and how would it affect regular Canadians?

Bradshaw: The line I keep hearing here is that the devil will be in the details.

The outline of the plan the government has proposed is that Ottawa would keep ownership of the underlying land and assets but sign long-term agreements with investors – basically leases – that would give those investors the proceeds from revenue streams like retail, food, parking and maybe some of the airport fees charged to travellers.

In return, Ottawa would raise money – Mr. Carney said “tens of billions” of dollars – that it could put to other uses.

The glass half full view of how it could affect Canadians is that private investors would have an incentive to invest more in airports – upgrading security screening, food options or other services – to boost revenue and make the airports worth more. That could improve the experience for travellers.

The concern is that this kind of semi-privatization can also sometimes lead to fees or prices being increased – these are investors who expect a return on their investment.

It depends a lot on how the leases are structured, and whether the private investors are, for example, Canadian pension funds or U.S. private equity firms.

My colleagues Mariya Postelnyak and Eric Atkins have written on this topic recently if you want to learn more.

Deeper relationship with the EU

What is Carney trying to accomplish with closer ties to the EU?

Curry: Much of this is still being negotiated ahead of the late October Canada-EU summit in Montreal.

Former Liberal cabinet minister Jonathan Wilkinson is now Canada’s Ambassador to the European Union. He provided some insight into those negotiations during an interview that aired Sunday on CBC News. He said examples of topics under discussion include increased cooperation related to artificial intelligence, financial services and critical minerals.

When asked what may be under discussion related to immigration, Mr. Wilkinson said there could be changes that would make it easier for young people to study, travel and work abroad.

He also said there could be deals to mutually recognize professional credentials, listing architects as an example.

“But we’re not talking about large-scale immigration flows,” he said.

What will the proposed new arrangement allow Canada and the EU to do that they can’t already do now?

Kiladze: The details on this aren’t quite clear, which is why there is a lot of confusion about what being an “associate member” actually means. One example of collaboration that I’ve heard: Right now, so much of our technology runs through U.S. companies. Think about Microsoft Outlook at work, or servers relying on Amazon’s cloud services. If Canada could work with European companies to store data on EU servers, that could help our sovereignty, relative to the U.S.

But do we actually need to be an “associate member” to do this? We could just sign business agreements.

Mark Carney marks the return of the consequential political speech

My gut tells me some of this has to do with the EU side of things, in that they want to be tied to Mr. Carney in some way, because he’s well-respected there. (Partly stemming from his time as Bank of England governor.) Europeans largely rolled over to Mr. Trump on trade and simply accepted his tariffs, so Europeans may like being connected to a respected leader. And more importantly, Canada has all the natural resources that Europe desperately wants.

Again, though, a lot of these issues could probably be settled with business agreements.

How much do you anticipate public sentiment will shape the government’s plans regarding any plans with the EU?

Curry: It’s a safe bet that the federal government, through its public opinion research budget at the Privy Council Office, will be closely watching the public’s response to the push for closer ties with the European Union. The flip side is also worth keeping an eye on. As our colleague Konrad Yakabuski recently wrote here, several EU states will have elections next year and could elect leaders from far-right parties who are highly critical of the EU itself, including in France.

Essentially, some of Mr. Carney’s closest European allies, French President Emmanuel Macron among them, won’t be on the scene in a few months. That could make it challenging for Mr. Carney to maintain momentum on any agreements that are reached with the EU this fall.

Is there even such a thing as replacing the United States’ impact on Canada in the aggregate, by diving deeper into ties with the EU and international money?

Kiladze: Earlier this year at a conference hosted by The Globe, Jason Kenney, the former federal cabinet minister (and later Alberta premier) made a good point: When the Harper Conservatives were in power, they signed a number of new trade deals, and after that the Liberals pursued one with the EU. Yet after all this work, the importance of our trade with the U.S. remains the same. The point being: Geography is often destiny.

My read with the EU push is that we have to at least try. Being so reliant on one partner is clearly a strategic issue. And the same goes with courting international capital. It’s like personal investing – you want to diversify your portfolio. But untethering ourselves to the U.S. is very complicated.

One thing I think has been missing from the debate so far is that our ties to the U.S. have helped us economically for a long time. If you look at G7 economic growth, Canada has actually held up pretty well. Many larger European countries have not. Germany right now is in a lot of trouble because its industrial base is eroding. So, it’s a very, very nuanced issue.

Investing in Canada

Can you explain how average Canadians benefit when major infrastructure and energy projects are funded by private investors rather than by the government?

Curry: In theory, the profit motive should encourage the private operators to offer better services, such as food options etc., that consumers will want. One key variable is whether the private operator is Canadian. If it’s one of Canada’s large pension funds, then Canadians would benefit in that way. The government has been highlighting that as an option, but hasn’t ruled out the possibility that the private operators will not be Canadian. Ontario’s 1999 privatization of the tolled Highway 407 to a private consortium for 99 years, at a cost of just $3.1-billion, is the cautionary tale, as it is widely viewed in retrospect as a bad deal for consumers.

Bradshaw: One of the answers here is it just gives us much larger pools of investment we can tap into. Canadian investors only have so much money and to manage their risks – to avoid having all of their eggs in one basket – they need to spread some of that investment around the world (what they would call “diversification”). Foreign investors need to diversify too, which makes us more attractive.

But the other answer is that if we get infrastructure projects built, and we scale up and invest in Canadian companies, Canada benefits in other ways – faster economic growth and more job creation, which leads to more consumer spending. It’s a virtuous cycle.

CIBC’s chief economist Avery Shenfeld also had a good answer to this in a research report he wrote for clients. In many cases, “a foreign owner has roughly the same incentives as a domestic investor, which is to maximize the economic value of the assets they have in Canada. If it’s a mine or a pipeline, for example, it’s not something you can move out of the country,” he wrote.

This Q&A has been edited and condensed.