Observers divided over what Obama presidency means for Canadian economy

annieyang

http://ca.news.yahoo.com/indepth ... obama_cda_economy_2
6 X; |) V) B) B% f: i9 NWed Nov 5, 2:23 PM
By Kristine Owram, The Canadian Press
ADVERTISEMENT
. e: l. Y1 c9 X4 }' I3 K
0 c1 S7 ]5 q5 r" d0 I1 ?; N4 M3 LTORONTO - Barack Obama's victory in the U.S. presidential election is good news for the Canadian economy to the extent that it boosts consumer confidence, but his protectionist attitude could hurt Canada's struggling manufacturing industry, economists say.

Bank of Montreal chief economist Sherry Cooper said Wednesday the historic victory should help revive consumer confidence and return spending to more normal levels and this, combined with the likelihood of another U.S. fiscal stimulus package, will help Canadian manufacturers.
1 n: D! U" e% s0 D2 k9 w, d# O
"One of the important effects of the Obama win, as we saw as people poured into the streets (Tuesday) night, is that it improves the feelings of optimism and confidence, which had been at rock-bottom lows in the U.S.," Cooper said.
' P0 ]  L0 b8 [, g- e/ c- w+ b
1 s" Z! j, |' w! `"That in itself could help restore spending to more normal levels ... and a more buoyant U.S. economy means our export markets will improve."

But Paul Ferley, assistant chief economist at Royal Bank, said Obama has indicated he may take a protectionist stance as the U.S. economy struggles.

  G9 E+ B; q" f3 \" YFerley said this has "very negative implications for Canada, given the extent to which we export to that economy and the extent that the Canadian economy is much more open, much more trade-oriented."
& L; X* Z0 w3 V2 |1 o- e: M
Obama has even hinted he might renegotiate the North American Free Trade Agreement in an effort to protect jobs in hard-hit parts of the U.S. industrial heartland, but most analysts say this is unlikely.

Any NAFTA changes "are likely to impact only Mexico because they will deal with the assurance of environmental and labour practices already in force in Canada," BMO's Cooper noted.
1 l6 K4 t1 j+ {5 z, F/ }
/ U" S: g0 j6 A  l9 LThe Obama presidency could affect Canada's oil industry, as the president-elect has said he will fight America's "addiction" to dirty oil, which could include crude from Alberta's oilsands.

"The so-called dirty fuel has been a hot-button issue on the campaign trail and I think it bears watching if an Obama presidency discriminates against imports from the oilsands," said BMO Capital Markets economist Doug Porter.
  t8 n; O$ x- T. F/ ?% ~
But Ferley said Obama has also talked about reducing America's dependence on oil from the Middle East.

, z% }, [3 n0 t' Q/ [! ]"I'm inclined to be optimistic," he said. "Given the U.S. needs for oil, given the vast deposits that are available in the oilsands, I think that reality is hard to ignore."

+ K( u: A. F' R# y) sObama has also indicated he wants to implement a fiscal stimulus package, which could include a bailout for the U.S. auto industry.
0 k. |$ I- ?9 F2 w
"Certainly I think it's fair to say that an Obama administration would probably be a little bit more active than the Bush administration has been in terms of offering direct support to various industries," said Porter.
/ ^2 @, J" {' _6 Z
"It seems to me that the Bush administration has gone out of its way to not help the auto industry, and I think that's one area where we could see a very real change, which could benefit Canadian workers and possibly auto parts supply companies as well."
9 q4 _& ^" W7 c6 n+ o1 }! C
However, an auto industry bailout package could also encourage the merger of GM and Chrysler. Cerberus, the New York private equity firm that owns 80.1 per cent of Chrysler, is in talks with General Motors Corp., and GM is said to be seeking federal aid to make the deal happen.
% Z- {# [8 N1 e, C. O  B# z7 c
* [) ?" i" c! s- n7 aA merger would likely mean significant layoffs and plant shutdowns, including some in Canada, where GM and Chrysler employ about 30,000 people and operate assembly and parts plants in southern Ontario.

Ultimately, Cooper said, anything that boosts U.S. consumer confidence - which dropped to its lowest level on record in October - is good for the American, Canadian and global economies.
1 M0 U" G7 b. t  ~# H
6 ~9 q; V; a8 R! @"Anything that would help to shorten and mitigate the U.S. recession of course would be good for Canada, and actually more than offset whatever protectionist measures might be coming down the road."