THE WEST BLOCK
Episode 20, Season 11
Sunday, March 13, 2022
Host: David Akin
Anita Anand, Defence Minister
Jonathan Wilkinson, Natural Resources Minister
Stephen Poloz, Former Governor of the Bank of Canada
Location: Ottawa, ON
David Akin: This week on The West Block…
David Akin: Ukraine’s humanitarian crisis worsens as Russia steps up attacks on multiple cities and towns. More than 2.5 million people have fled into neighbouring countries. We’ll talk to Mercedes Stephenson, who is on the ground in Moldova.
Sanctions against Russian oil and gas are wreaking havoc in global energy markets, leading to soaring gas prices across Canada.
Unidentified Speaker: “It feels that I am pumping gold into my car. No longer gas.”
David Akin: We speak to Natural Resources Minister Jonathan Wilkinson about rising energy prices and what his government plans to do about it.
And, taking stock of the economy two years after the pandemic. We’ll talk to the former Bank of Canada governor Stephen Poloz about jobs, housing and record inflation.
It’s Sunday, March 13th, and this is The West Block.
Hello. Thank you for joining us. I’m David Akin.
The stream of refugees fleeing Ukraine has turned into a flood. Most of those have gone to Poland, but plenty are also landing in smaller countries such as Moldova on Ukraine’s southern border. And it is in Moldova where we find West Block host Mercedes Stephenson. She has been reporting from Moldova for the last few days.
Mercedes, it’s great to see you as always, even if it’s far away. Tell us what you’re seeing there.
Mercedes Stephenson: David, we were at the border and the situation is just heartbreaking. As you can see, it’s cold here in Moldova at this time of year and this is the most vulnerable Ukrainians who are coming across the border as refugees. Fighting age men are not allowed to leave the country, so this is women with small children. It is the elderly, people holding their pets, struggling at times, falling down, trying to make it across, very long walks, and it’s putting a real strain on Moldova because this is a small country and it’s not a wealthy country. But Moldovians have truly opened their hearts and quite literally their homes as well to allow people to come in, but it is putting a strain on the social system here. The numbers anywhere between 4 to 10 per cent of the population now made up of refugees with another 1 million potentially coming across the border if Odessa is struck by the Russian military again.
In terms of politics, it’s been fascinating. There’s so much concern that this country could be next on the list for Russia, that the opposition and the government give you the same answers on camera, but behind the scenes there’s absolutely concern that because Moldova is not a NATO country and because it does not have a large military, it could be next if Putin wants to make a point.
David Akin: Mercedes, Prime Minister Justin Trudeau was meeting with Western allies in Europe last week, and you had a chance to sit down with the Defence Minister Anita Anand. She was part of that visit with the prime minister in Latvia. What did she have to say?
Mercedes Stephenson: David, Canadians are looking at defence and security very differently with what’s happening in Ukraine right now. For years, we were talking about a conflict far away in Afghanistan. Now we are looking at a situation when we’re talking about a superpower. So questions about things like the F-35 jet, which is stealth, replacing our CF-18’s come up. That has been on the procurement table and being talked about for close to two decades now. There are questions about putting more money into the military after it has been exhausted by the pandemic and fighting climate change crisis, and now we’re talking about a possible conflict with the superpower. So there’s questions about whether the government is going to inject more money into defence and security, or accelerate certain projects to allow Canada to protect itself, particularly up in the North, in the Arctic, which is known as NATO’s Northern Flank.
Anita Anand, Defence Minister: Well I think, let’s take a step back and look at defence spending overall, because your question really goes to ensuring that we have a secure country, continent and NATO contribution. I will say that we know from our defence policy that we will be increasing defence spending by 70 per cent over the nine year period, beginning in 201. But in the context of the current threat environment, we must ask ourselves: is that enough? Should we be doing more? And my view is to come to the table with a robust package for NORAD modernization in the short-term, and to ensure that we are ensuring that we have our NATO commitment very well placed on our priority list. Those are priorities for me as minister, and I believe they are warranted in the current threat environment that we are living in and witnessing every single day.
Mercedes Stephenson: With all due respect, minister, the war is—it’s right now, and Canada has had Russian bombers in the past, poke our airspace, come through. Not that they’re going to drop bombs on us. They were simply provoking, but that was also a different environment. There’s Russian interest in the Arctic. Is there not a reason to accelerate the ability to defend Canadian airspace right now?
Anita Anand, Defence Minister: There certainly is a need to move as quickly as possible with our future fighter procurements. And from a DND perspective, that is exactly what I am seeking to achieve. We need to make sure that all of our procurements, that whether it is air, land, or sea, are moving forward quickly, and that is something that I believe I can bring to the table, having been the minister at PSPC. I have my deputy minister who was there with me as well now at DND. We are working very hard on modernizing procurements and we will continue to ensure that we do so, whether it’s in the context of future fighters, or JSS, or any other procurements that serve the Canadian Armed Forces. You have to remember the very beginning of my mandate letter from the prime minister, is to ensure that the Canadian Armed Forces are well-equipped and well-resourced. I am a person that likes to deliver on the requests that are asked of me, and that’s exactly what I am working on.
Mercedes Stephenson: How quickly do you think that could happen? I mean, during the Afghanistan War, Stephen Harper sole sourced things because we were at war. We’re not at war right now, but obviously this looming spectre of what Russia’s capable of is weighing on your mind, certainly, and everyone’s.
Anita Anand, Defence Minister: It is weighing on my mind. I will say that the process is not run under my watch, it is run at Public Services and Procurement Canada. But the most important thing that I can say as minister of national defence is that we achieve the equipment that the Canadian Armed Forces need as quickly as possible and at the bets price possible.
Mercedes Stephenson: Are you concerned about the state of readiness of the Canadian Armed Forces, in particular, the Canadian army? I’ve had multiple sources tell me that they seem to have difficulty responding, that it’s slow. That it will be a struggle to even meet the one month deadline to get 120 people here. It’s been many years since we were at war in Afghanistan, and parts of the army have hollowed out, especially those non-commissioned officers in the middle who make up the bulk of the soldiers and that junior leadership. Is that something you’re seeing as the minister?
Anita Anand, Defence Minister: Well, I will assure you that reconstitution and recruitment of the Canadian Armed Forces, is a top priority for both the chief of defence staff and me. We need to ensure that we are continuing to rebuild the Canadian Armed Forces. Having said that, we are continually engaged in assuring that where deployments are needed, resources are able to flow, and so it is a process of examining the particular situation, the threat involved, the security issues at play, and making decisions about where to deploy resources. There is no doubt there are issues that we need to ensure are alleviated, including reconstituting the Canadian Armed Forces. But contributing to the rebuilding and the refurbishment of NATO’s eastern flank by upping our commitment to Operation Reassurance was one of my top priorities, and I’m very pleased that we were able to announce that a couple of weeks ago.
Mercedes Stephenson: Do you look back at how your government has managed defence since 2015 and feel like maybe you were a little bit blasé, a little bit asleep at the switch? There wasn’t the urgency to procure things. There wasn’t the urgency to recruit, and there wasn’t the urgency to spend on defence.
Anita Anand, Defence Minister: I look ahead. I’ve been the minister for three months and I need to keep working hard for the Canadian Armed Forces. They are my priority and I will do my very best. Whether it’s culture change in the military, whether it’s procuring ships and planes for the military, whether it is ensuring that we are living up to our NATO and NORAD commitments, I will keep working for the Canadian Armed Forces and therefore the Canadian population at-large.
Mercedes Stephenson: And I appreciate that, but you are a member of the government as well. Do you think that the government has performed well on the defence file?
Anita Anand, Defence Minister: I believe we have continued more work to do and that’s exactly what I’m going to do. Thank you so much.
Mercedes Stephenson: So David, it sounds there like the minister is looking at accelerating procurement on major projects and potentially an injection of funding into defence. Of course, we won’t know if that’s actually going to happen until we see the budget. When the government releases that that will be our real determination of how serious the government is about potentially increasing defence spending.
David Akin: Mercedes, thank you. Stay safe. The West Block’s Mercedes Stephenson in Moldova.
Up next, sanctions against Russia have global energy prices soaring. We speak with Natural Resources Minister Jonathan Wilkinson about Canada’s role, after this.
David Akin: Perhaps as much as foreign ministers or defence ministers, the world’s energy ministers have been forced to react to Russia’s invasion of Ukraine. Oil and gas supply disruptions, caused in part by sanctions, have seen prices skyrocket. The push is on now to find ways to replace Russian oil and gas in the marketplace and that includes Canada.
Joining us now to talk about this, from his constituency in North Vancouver, is our Natural Resources Minister, our Energy Minister Jonathan Wilkinson. Minister, good to see you this morning. And I guess the first thing to ask is: Vancouver gas prices are $2 bucks a litre or more, that’s apparently the most expensive in North America, and I’ll bet your constituents are asking why and is there anything we can do about this?
Jonathan Wilkinson, Natural Resources Minister: Yeah. My constituents and I think Canadians and Americans and Europeans are all experiencing the elevated prices for both oil and gas, particularly for oil here in Canada. And I would say that that is a function of the uncertainty that has been generated by the terrible tragedy that we are seeing unfold in Ukraine. Uncertainty around whether Russian oil and gas will continue to flow but also, it’s driven by the desire on the part of virtually all of the Western European countries, to find ways to replace Russian oil and gas that they currently import with other sources. And so there are some things that we can do. First and foremost, the International Energy Agency ministers met about two weeks’ ago, to start the conversation about how we provide greater certainty to the market because some of this is just being driven by uncertainty.
David Akin: I want to talk a little bit more about what Canada can do, but before I do, just let me come back to the pocketbook issue for so many Canadians. Hundred dollar a barrel oil is, of course, great for a producing country. It’s lousy for consumers, great for producers like Canada. Alberta’s getting a lot more royalty revenue and Premier Kenney, you heard this week, decided to turn back some of that revenue in the form of rebates to Albertans to compensate for high gas prices. Would you be an advocate at the cabinet table as we start to talk federal budget? Is it possible for Canada to use some of its enhanced royalty revenue for an enhanced one-time only benefit to turn some money back to Canadians, recognizing the high energy prices they’re dealing with right now?
Jonathan Wilkinson, Natural Resources Minister: Well, I think we certainly have to be focused on the issue affordability, as this government has been in the context of all kinds of other conversations around housing and childcare and on child benefit and other things. Certainly, you know, I recognize that this is a big challenge for many Canadians, and we need to figure out what the best way to actually address that is. It certainly can be in terms of pushing forward with encouraging people to utilize zero emission vehicles and those kinds of things, which are not nearly as sensitive to the price. It certainly can involve a look at the windfall profits that the oil and gas sector is actually making during this period of time that is driven by this terrible tragedy in Ukraine, and it may involve other tools. Those are conversations that we are having on an ongoing basis and it’s an important conversation.
David Akin: In terms of things Canada can do, I heard Newfoundland Premier Andrew Furey last week, talk about frustration with the delay, the extra delay that the federal government announced on the Bay du Nord project, and for those who don’t know, that’s a new oil and gas production facility proposed, something like 500 kilometres off-shore of St. Johns. He says that could help put some more energy into European markets. Is there some other ways that Canadian producers could be moving energy to Europe?
Jonathan Wilkinson, Natural Resources Minister: There are. We are looking—of course, we are looking to respond to the needs of our European friends and allies. They have asked us to look at what we may be able to do, and just as the Americans led the process that allowed for the release of some of the strategic reserves, they’ve asked all of us that produce oil and gas as to whether there are things we can do to be of assistance. We are looking right now at whether we can actually flow more oil over the course of the short-term, through the existing pipeline network, to help them address some of the transitional issues that they’re facing right now. Certainly one of the things that the Europeans are saying, is not only do they need to replace Russian oil and gas, but they actually need to accelerate the transition that they’re going through to renewables and hydrogen, to ensure that they actually are producing more energy domestically, and to ensure that they’re sourcing the energy that they need—the clean energy that they need going forward, from stable, secure, democratic countries on which they can rely.
David Akin: You mentioned pipeline infrastructure and I want to see if I can get an update on Line 5. And of course, you know what this is. This is the line that brings Western Canadian crude to refineries in Eastern Canada, but it’s a line that goes across Michigan. The Michigan Governor Witmer wants to close this line. You had the chance in Houston last week. You were down for the big oil industry conference, to talk to the Energy Secretary Jennifer Granholm, a former Michigan governor. Did Line 5 come up? Was there some discussion about how we can secure North American energy, and specifically Line 5?
Jonathan Wilkinson, Natural Resources Minister: Yeah, we did talk about that. That was certainly one of the issues amongst, as you will appreciate, many others that we are talking about right now. Certainly, secretary Granholm understands the issue. She is a former governor of Michigan, and I expressed the continuing strong support on the part of the Government of Canada, to find pathways to resolve this, such that Line 5 continues to operate. It is a critical piece of infrastructure not just for Canada, but also for parts of the United States. And shutting it down, to be honest, just makes no sense at all. In the context of Canada then needing to import oil from the United States in order to replace supplies that actually flow through Line 5. So, I expressed my view very strongly. This issue is before the courts. The Government of Canada is supporting the proponent very strongly in the court cases, and we expect that the proponent will be ultimately victorious, but obviously we need to await the determination of the American court system.
David Akin: Minister Jonathan Wilkinson, our natural resources minister. Thank you so much for joining us today.
We’ll be right back. Please stay with us.
David Akin: Spiking gas prices, soaring home prices, generational highs in inflation, volatility, risk, what’s a consumer to do? What’s a government to do? And to get at some of that, we’re very pleased to be joined by Stephen Poloz, the former governor of the Bank of Canada, also the author of the just published book. Here it is, The Next Age of Uncertainty: How the World Can Adapt to a Riskier Future. Great to see you again. Really good book. Really enjoying it so far.
Stephen Poloz, Former Governor of the Bank of Canada: Thanks, David.
David Akin: And talk about risky. You finished this pretty much last summer when we had a global pandemic. We’re on the way out of that. Now we’re still unwinding the pandemic and now we have a war on?
Stephen Poloz, Former Governor of the Bank of Canada: Yes.
David Akin: One of the issues from this war: gas at $2 a litre. Great for the oil producers in Western Canada, not so great for the consumers.
Let’s talk a little bit about energy markets because they’re so important for Canada. Is there—can you see a way where we’re going to calm the markets down and it’ll back to a $1.50 a litre at the pump?
Stephen Poloz, Former Governor of the Bank of Canada: Well that’s quite possible. High oil prices usually are their own cure, right? Because they destroy demand and that causes people to drive less, etc., and also would normally prompt a supply response. And so usually high oil prices don’t last that long. In this case…
David Akin: There are more people getting in on the market thinking they get hundred dollars a barrel.
Stephen Poloz, Former Governor of the Bank of Canada: Well that’s right.
David Akin: Right.
Stephen Poloz, Former Governor of the Bank of Canada: But in these days, investment is being slowed down by lots of restrictions and of course, concerns about the longer term future of the business. So the response isn’t quite like it used to be. And on the demand side, that takes a little bit of time. But either way, they would be—I would be very surprised if we didn’t see oil prices getting back down to the 100 or below $100 range before too long.
David Akin: As the Central Bank governor, you get asked about housing prices probably about every press conference you gave.
Stephen Poloz, Former Governor of the Bank of Canada: Yes.
David Akin: And you had some—lots of housing swings when you were the governor, but your successor, Tiff Macklem, is looking at housing markets right now that I don’t know if you saw that kind of volatility, and it’s not just Toronto and Vancouver. It’s a lot of medium-sized cities. What do you make of these extraordinary prices we’re seeing?
Stephen Poloz, Former Governor of the Bank of Canada: Well, you know, David, prices go up for many reasons. Not all of them are speculation, and that’s always been our concern. How much of it is speculation so that it feeds on itself and becomes unsustainable? We have really strong housing fundamentals in Canada. As you saw in the Ontario Task Force, there’s a shortage of supply relative to immigration. That’s got to bump up prices. And as we enlarge our cities, prices of existing homes always go up because they’re closer to the middle than the new ones. That’s always going to be true. And low interest rates played a roll, so all those things together. But as interest rates gravitate to a more normal level, you might expect some flattening or some volatility in those prices, hard to predict at this stage because there’s other fundamentals that remain strong.
David Akin: One of the things I’ve always thought—and I might have asked you this question when you were governor—is that a policy maker, banks, or governments tend to respond to demand. We’re going to give you a rebate on this or that, tend to respond to price, and that fuels demand when in fact, the problem really is supply. And I don’t know there’s a lot—is there a lot of federal government or Ontario government can do to increase supply?
Stephen Poloz, Former Governor of the Bank of Canada: Supply primarily, I think, is mostly at the provincial or municipal level.
David Akin: Right.
Stephen Poloz, Former Governor of the Bank of Canada: Higher densification in existing neighbourhoods, that kind of thing, I think. And there’s a lot of red tape and rules around that. So I think the task force did have the right idea that some of that relaxation of some of those rules could make quite a difference. But that’s a really hard thing to get it done politically, isn’t it?
David Akin: Yeah. No, absolutely. I do want to recommend the book because I was saying just before we came on camera, it’s got some—it’s obviously about economics, lots of the themes you we were talking about. But, they’ll get to know you, your sense of humour. There’s good banker jokes in here, if you believe it or not, if you call it. But you do—one serious thing that you sort of close with is a bit of concern that policy makers, governments, bankers, businesses, will have trouble or may not have the capacity to manage in this era of rapid volatility when the amplitudes of swings are so extreme. Can you talk a bit about that?
Stephen Poloz, Former Governor of the Bank of Canada: Sure. The core premise of the book is that there are forces acting beneath the surface, like population aging or technological change, rising income and equality. These things are giving rise to interactions between one another and giving us higher bouts of volatility. And those things are a rising trend. So volatility should continue to grow through time. Governments usually save us from volatility, like they did a great job during the pandemic. Let’s face it. But will they have the capacity to do even bigger events in the future and maybe soon? And I think the answer is not really. I think it’s going to be very hard for traditional policy tools to do that. So I think companies and their employees will need to prepare themselves. Be more conservative. Be ready for more volatility, like we see today, such as oil prices or house prices or employment up and down. Those are the kinds of things, the everyday volatility, that’s going to hit people.
David Akin: I’ve got about 30 seconds, and as the grandson of a Ukrainian immigrant, I wonder what you make of the international coordination you saw in the wake of this invasion. You know international coordination for any kind of crisis is so important.
Stephen Poloz, Former Governor of the Bank of Canada: Yes. I mean, I lived in those as governor and I was always thinking: well, these are good meetings, but we’re not getting a lot done. But there wasn’t really much in that way to do.
David Akin: Yeah.
Stephen Poloz, Former Governor of the Bank of Canada: A crisis really brings out the very best in those forums, and I have been very, very impressed with that collegiality, the ability to move things that previously wouldn’t have expected. So at least we’ve got what we can on the table, to see if we can somehow counteract this atrocity.
David Akin: Yeah. No, it’s incredible. Stephen Poloz, former Bank of Canada governor. Thanks so much. Good luck with the book: The Next Age of Uncertainty. Not the John Kenneth Galbraith’s book: The Age of Uncertainty.
That is our show for today. Thank you so much for watching. We’ll see you back here next Sunday for The West Block. I’m David Akin.