The 4 rd Quarterly C-Suite Survey: POTUS Election, Trade Agreements, Assessment of Federal Government, and Climate Change Policies June 1 th, 2016 Sponsored by: Published and broadcast by:
Introduction Methodology: telephone interviews with 158 C-Suite executives from ROB1000 companies between May 12 th and June 8 th, 2016. This quarter s survey asked the C-Suite about: The state of the Canadian economy The United States Presidential Election Trade Agreement Ratification and Expansion Climate Change Policies Assessments of the New Federal Government s Performance 2
Key Findings - Summary The C-Suite favours Hillary Clinton over Donald Trump for President of the United States by a margin of :1. While the presumptive US presidential candidates have been critical of trade agreements, the C-Suite wants lawmakers to move ahead with adoption of more free trade agreements. Most executives support increasing labour mobility, as well as removing tariffs and a customs union between NAFTA members. They also support negotiating free trade with China. Furthermore, they are concerned about the economic impact if the TPP and Canada s trade agreement with Europe collapse. Nearly all agree that both the government and the business community need to do more to inform he public about how NAFTA and other trade agreements have been beneficial to Canada. Executives are now twice as likely to expect the Canadian economy to grow in the next 12 months than to decline, an increase in confidence since last quarter. That said, few expect strong growth. While most believe our record trade deficit in March is a temporary issue tied to commodity prices, most also believe that the global and Canadian economies will remain in a low growth scenario over the next decade. The new Canadian government receives better scores for its international trade and foreign relations efforts as well as its commitment to infrastructure spending. It gets weaker assessments when it comes to its handling of energy and resources files and the government s finances.
United States Presidential Election C-Suite executives prefer Hillary Clinton over Donald Trump by a ratio of -1. Donald Trump s support disproportionately comes from Alberta-based and resources sector executives, as well as those that expect the Canadian economy to decline in the next year. Most think it is unlikely the eventual President will renegotiate NAFTA despite their rhetoric. They are less certain about the Trans-Pacific Partnership trade agreement. Most think it is at least somewhat likely the next President will try to renegotiate it but 42% also think the next President is at least somewhat likely to block the agreement. 4
US Presidential Election Thinking about the US Presidential election and the two major parties' presumptive nominees, which of the two would you prefer to become President of the US? Overall 65 12 2 Alberta 5 27 1 7 BC, SK, MB 65 14 Ontario 74 17 9 Expect Canada's economy to decline 49 40 6 4 Expect Canada's economy to grow 72 1 14 1 0 50 100 Clinton Trump Neither/Other Don't know 5
US President and NAFTA Would you say it's very likely, somewhat likely, not very likely or not at all likely that the next US President will... Attempt to modify the Trans- Pacific Partnership trade deal 47 8 Go back on their rhetoric and make no changes to NAFTA 1 5 1 Block the ratification of the Trans-Pacific Partnership 8 4 8 14 6 Attempt to renegotiate NAFTA 9 26 42 1 Very likely Somewhat likely Not very likely Not at all likely Don't know/ No response 6
Trade Agreement Ratification and Expansion Executives mostly believe Canada s recent record-setting trade deficit is a temporary issue until commodities rally. Only a minority says it is a structural long-term problem. Ontarian executives are most likely to say it is a structural long-term problem. Yet the vast majority expect no better than low GDP growth for Canada and the global economy in the next decade. These views about the global economic climate and Canada s competitiveness form an important context for their views on free trade. The vast majority agreed that if the Trans-Pacific Partnership (TPP) and Canada-Europe Free Trade deals were not ratified it would have a negative impact on Canada. 7
Impact on Canadian Economic Growth If both the Trans-Pacific Partnership and the proposed Canada-Europe Trade Agreement are not ratified and both deals collapse, how negative would the long-term impact be on growth prospects for Canada? Total 15 80 4 1 Alberta 11 84 4 Ontario 17 81 2 Expect Canada's economy to decline Grow 1 81 77 5 1 Resources 9 87 1 Services 16 79 4 Manufacturing 25 6 1 Very negative Somewhat negative Somewhat positive Very positive Prefer not to say 8
Long Term Trade Deficit Problem In March, Canada had a record trade deficit of $.4 billion. Based on what you know or think, would you say: That Canada has a structural and long-term trade deficit problem, OR This is likely to be a temporary issue until commodities prices rally Total 65 5 Ontario 55 45 Western Canada 69 1 This is likely to be a temporary issue until commodities prices rally That Canada has a structural and long-term trade deficit problem 9
Likelihood of Low GDP Growth How likely do you think it is that the [Global/Canadian] economy will experience no better than low GDP growth over the next decade? Would you say it's... Global Economy 41 4 14 1 Canadian Economy 42 41 1 1 Very likely Somewhat likely Somewhat unlikely Very unlikely Prefer not to say 10
Trade Agreement Ratification and Expansion Regardless of the fact that the presumptive US presidential candidates have come out against the TPP, almost none in the C-Suite think Congress and Canada s Parliament should abandon their work on the treaty. The vast majority want law makers to continue their review of the TPP and give serious consideration to voting in favour. The C-Suite is enthusiastic about the TPP (87% support, 78% net support) The intensity of support for TPP is more tepid (though still majority support) in Ontario, and among manufacturing executives. The vast majority supports a Canada-China free trade agreement (78% support, 58% net support). 11
Trade Agreement Ratification and Expansion Most executives support greater Canada-US labour mobility (87% support, 7% net support) Notably, support for greater labour mobility between Canada, Mexico and the US was weaker (6%, 1% net support). When it comes to labour mobility with the US the manufacturing sector has both the most enthusiasm (67% strongly support) as well as the most opposition (% oppose). However it is the services sector that is most opposed to increased labour mobility between ourselves, the US and Mexico. Most also support a common tariff or customs union between Canada and the US (90% support, 81% net support), and the same between Canada, Mexico and the US (76% support, 5% net support). The services sector was least supportive of negotiating a customs union and removal of barriers with the US and Mexico, with one third opposed. 12
The Future of the Trans Pacific Partnership Given public sentiment in the US and the fact that both Donald Trump and Hillary Clinton oppose the Trans Pacific Partnership, which of the following is closest to your view? The US Congress and Canada's Parliament should continue their review of the Trans- Pacific Partnership and seriously consider voting for the trade deal despite the Presidential nominees' statements 91 The US Congress and the Canadian Parliament should abandon the Trans- Pacific Partnership 4 Don't know 5 0 50 100 % saying each 1
The Trans Pacific Partnership Trade Agreement Last fall, the Trans Pacific Partnership trade agreement was concluded between Canada, the US, Mexico, Japan and others. Based on what you know or have heard would you say you strongly support, somewhat support, somewhat oppose, or strongly oppose Canada ratifying and implementing this trade agreement as negotiated? Total 4 44 8 2 4 West 50 8 8 1 Ontario 52 9 Expect Canada's economy to decline 8 45 11 2 4 Grow 45 4 6 2 4 Strongly support Somewhat support Somewhat oppose Strongly oppose Prefer not to say 14
Labour Mobility with the US Do you think Canada's government should try to negotiate a new visa policy that allows as much labour mobility between the US and Canada as possible within the next ten years? Total 5 4 11 0 Strongly support 20 40 Somewhat support 60 80 Somewhat oppose 100 Strongly oppose Prefer not to say 15
Labour Mobility with The US and Mexico On the same timeline, should Canada's government negotiate a similar visa policy that allows as much labour mobility between/with the United States and Mexico as possible. Total 41 24 8 6 Strongly support Somewhat support Somewhat oppose Strongly oppose Prefer not to say 16
Customs Union with the US Now, I'd like to ask you if you think Canada's government should try to negotiate a customs union with the United States to allow for the removal of all tariffs between the two countries and as many non-tariff barriers to trade as possible within the next ten years. Total 5 7 8 11 0 Strongly support 20 40 Somewhat support 60 80 Somewhat oppose 100 Strongly oppose Prefer not to say 17
Customs Union with the US and Mexico In the same timeline, should Canada's government try to negotiate a similar customs union with both the United States and Mexico, again with removal of all tariffs and as many nontariff barriers to trade as possible? Total 4 4 1 Resources 42 9 16 1 Services 24 45 25 6 Manufacturing 50 8 4 4 Strongly support Somewhat support Somewhat oppose Strongly oppose Prefer not to say 18
Trade Agreement Ratification and Expansion Executives want to see relations opened up with China. Just over half (51%) believe the Canada-China trade relationship is too restrictive rather than just right, or too open. Those that expect the Canadian economy to decline the next year are more likely to oppose this, relative to the majority who expect economic growth in the next year. A North American customs union is the trade agreement that executives are most likely to say would boost the economy. Western executives are more likely to choose TPP than executives from the rest of Canada. Nearly all agree that both the government and the business community need to do more to inform he public about how NAFTA and other trade agreements have been beneficial to Canada.
Canada and China Free Trade Agreement If it were to happen in the next five years, is the negotiation and ratification of a Canada and China free trade agreement something you would support or oppose? Total 2 55 16 4 2 Expect Canada's economy to decline 17 51 4 6 Grow 26 57 14 4 Strongly support Somewhat support Somewhat oppose Strongly oppose Prefer not to say 20
Canada-Chinese Relationship Which of the following best describes your assessment of the trading relationship between Canada and China? Is it too restrictive and some trade barriers need to be reduced 51 Is it not restrictive enough and trade barriers need to be put in place 9 The relationship is just right 29 Don't know 11 % saying each
NA Customs Union Preferred Overall as Most Impactful Trade Agreement Which of the following three things would do the most to improve the Canadian economy? 41 A North American customs union 6 48 Total The Trans-Pacific Partnership 24 1 8 West Rest of Canada A bilateral Canada-China free-trade agreement 20
NAFTA Would you strongly agree, somewhat agree, somewhat disagree or strongly disagree with each of the following statements? The Canadian government needs to do more to inform the public about the benefits of free trade deals such as NAFTA 70 28 1 NAFTA has been on balance a good thing for Canada 68 28 12 The Canadian business community needs to do more to inform the public about the benefits of free trade deals such as NAFTA 62 0 4 Strongly agree Somewhat agree Somewhat disagree Strongly disagree Don't know/ No response 2
Assessments of the Federal Government s Performance Executives approve of the direction the federal government has taken when it comes to: representing Canada on the world stage infrastructure and international trade. Executives were mixed in their assessments of the government on: climate change the economy generally and security and defense. Most of the C-Suite disapprove of the government s direction on: pipelines assessment and approvals the government s finances Western and resources executives are more disapproving of the government s handling of the climate change and pipelines files, than executives in the rest of Canada and non-resources sectors. Likewise those that believe the economy will decline in the next year are also more likely to disapprove. 24
Government Direction I'd like you to tell me whether you strongly approve, somewhat approve, somewhat disapprove or strongly disapprove of the direction the government has taken on the following files: Representing Canada on the world stage 28 51 1 6 1 Infrastructure 2 49 18 7 International trade 12 58 4 Climate change 14 42 26 16 Security and defense 5 44 28 17 5 The economy generally 8 8 0 Pipelines assessment and approvals 9 25 2 28 5 The government's finances 8 1 8 1 Strongly approve Somewhat approve Somewhat disapprove Strongly disappove Don't know/ No response 25
Government Direction: Climate Change I'd like you to tell me whether you strongly approve, somewhat approve, somewhat disapprove or strongly disapprove of the direction the government has taken on the following files: Climate change Overall 14 42 26 16 Western Canada Ontario Rest of Canada 11 14 44 40 47 1 44 17 16 11 1 Expect Canada's economy to decline Grow 6 17 2 46 2 2 26 12 4 2 Resources Services Manufacturing 4 7 48 8 25 4 10 1 17 Strongly approve Somewhat approve Somewhat disapprove Strongly disapprove Prefer not to say 26
Government Direction: Pipelines I'd like you to tell me whether you strongly approve, somewhat approve, somewhat disapprove or strongly disapprove of the direction the government has taken on the following files: Pipelines assessment and approvals Overall 9 25 2 28 5 Western Canada Ontario Rest of Canada 5 10 2 1 56 0 8 11 40 14 11 7 Expect Canada's economy to decline Grow 4 12 27 0 6 24 9 4 Resources Services Manufacturing 7 10 1 28 25 28 4 8 7 4 6 4 Strongly approve Somewhat approve Somewhat disapprove Strongly disapprove Prefer not to say 27
Climate Change Policies While executives tend to favour a regulatory approach to reducing GHG emissions over carbon pricing schemes, most support an emissions trading approach. Support for a carbon tax has fallen 1% since 2007, with support and opposition now effectively even. Opposition in the resources sector is less intense than in 2007, while opposition in the services and manufacturing sectors has grown since then. Trump supporting executives overwhelmingly oppose a carbon tax, while those that prefer Clinton are supportive. Support for Cap and Trade is stable overall, though Western and resources executives are warming to the idea, while manufacturing and Ontarian executives are less supportive than in 2007. 28
Climate Change Policies I'd like to ask about your support for different approaches to climate change policy and whether you support or oppose the following measures to reduce greenhouse gas emissions. % Change in support since 2007 Using federal regulations to limit greenhouse gas emissions 24 47 1 16-7 Participating in a carbon or emissions trading market with other companies 7 20-1 Putting a tax on carbon usage 1 20 27-1 Strongly support Somewhat support Somewhat oppose Strongly oppose Don't know/ No response 29
Taxing Carbon Usage: Tracking Sectors I'd like to ask about your support for different approaches to climate change policy and whether you support or oppose the following measures to reduce greenhouse gas emissions: Putting a tax on carbon usage Total 2016 1 20 27 2007 42 14 20 2 Resources 2016 15 24 25 2007 15 25 10 50 Services 2016 24 1 2007 25 48 16 10 2 Manufacturing 2016 17 46 8 25 4 2007 52 8 Strongly support Somewhat support Somewhat oppose Strongly oppose Don't know/ No response 0
Taxing Carbon Usage I'd like to ask about your support for different approaches to climate change policy and whether you support or oppose the following measures to reduce greenhouse gas emissions: Putting a tax on carbon usage Total 2016 1 20 27 Clinton 28 6 14 20 2 Trump 27 48 Approve of gov't approach on pipelines Disapprove of gov't approach on pipeline 15 27 26 8 27 7 28 25 2 Approve government finances Disapprove government finance 16 28 24 45 26 Strongly support Somewhat support Somewhat oppose Strongly oppose Don't know/ No response 9 2 17 2 1
Carbon and Emissions Trading Market: Tracking Regions I'd like to ask about your support for different approaches to climate change policy and whether you support or oppose the following measures to reduce greenhouse gas emissions: Participating in a carbon or emissions trading market with other companies Total 2016 7 20 2007 8 Western Canada 2016 14 4 20 20 2 2007 12 2 Ontario 2016 29 5 2007 24 49 18 8 2 Strongly support Somewhat support Somewhat oppose Strongly oppose Don't know/ No response 2
Carbon and Emissions Trading Market: Tracking Sectors I'd like to ask about your support for different approaches to climate change policy and whether you support or oppose the following measures to reduce greenhouse gas emissions: Participating in a carbon or emissions trading market with other companies Total 2016 7 20 2007 8 Resources 2016 18 4 1 0 4 2007 10 27 42 2 Services 2016 40 24 12 1 2007 4 1 2 Manufacturing 2016 2007 1 8 25 4 41 14 5 Strongly support Somewhat support Somewhat oppose Strongly oppose Don't know/ No response
Assessments of the Economy Executives are now more than twice as likely to expect the Canadian economy to grow (70%) in the next 12 months than to decline (0%), an increase in confidence since last quarter. While the outlook is far from strongly positive there has been a significant drop in expectations that the Canadian economy will contract over the next 12 months. Confidence in US growth remains strong. The resources sector is no longer significantly more likely than other sectors to predict a decline for their company in the next year, suggesting that perhaps the worst is behind them. 4
Expectations of the Canadian and US Economies What are your expectations for the U.S. /Canadian economy over the next 12 months, strong growth, moderate growth, moderate decline, strong decline? (% saying each) US economy 9 80 11 Canadian economy 70 28 2 Strong growth Moderate growth Moderate decline Strong decline DK/NR 5
Projections For The Canadian Economy 120 What are your expectations for the Canadian economy over the next 12 months, strong growth, moderate growth, moderate decline, strong decline? (% saying each) 100 80 60 89 72 58 85 55 91 92 92 95 69 82 75 87 91 91 97 89 77 60 66 5 5 56 70 40 20 10 28 40 15 45 8 7 8 5 29 16 20 12 9 9 10 24 9 47 45 4 0 0 Growth Decline 6
Projections for The US Economy 120 What are your expectations for the U.S. economy over the next 12 months, strong growth, moderate growth, moderate decline, strong decline? (% saying each) 100 96 86 89 91 92 95 94 90 89 9 90 9 89 86 89 80 60 40 20 0 76 4 68 70 71 66 67 61 55 50 45 8 0 2 1 28 51 47 72 68 67 27 29 1 1 10 8 9 8 4 6 10 7 10 7 11 14 11 Growth Decline 7
Slight Improvement in Outlook for Business What are your expectations for your company over the next 12 months, strong growth, moderate growth, moderate decline, strong decline? (% saying each) Q2 2016 27 58 1 1 Q1 2016 58 20 12 Q4 2015 58 1 Q 2015 24 51 1 Q1 2016 Oil/gas, energy, resources 18 41 5 Q2 2016 Oil/gas, energy, resources 24 55 18 Strong Growth Moderate growth Moderate decline Strong decline Don't Know 8