ISE, Japan – A group of powerful world leaders is about to hear a starkly new take on what Canada thinks must be done to revive the stagnant global economy.
Prime Minister Justin Trudeau will promote Canada’s growth-boosting plan to his Group of Seven counterparts this week in Japan.
Trudeau’s theme: government investment is better than belt-tightening.
This approach will sound different to G7 leaders than the message they likely heard from Trudeau’s predecessor, Stephen Harper.
The ex-Conservative leader, who lost power to Trudeau’s Liberals last fall, regularly called upon the global community to apply budgetary restraint.
Trudeau’s approach is expected to be well-received by most of his G7 peers at the two-day summit, which begins Thursday in Japan’s Ise-Shima region.
Most of the leaders have supported the use of fiscal tools to foster growth, but countries such as Germany and the United Kingdom are likely to stick to their cost-cutting approaches.
Peter Boehm, Trudeau’s personal representative at the G7, said it’s important to strike the right balance.
“Each country has a particular set of circumstances so fiscal stimulus is obviously important for the government of Canada as it is for other governments as well,” Boehm, the deputy minister of international development and Canada’s ambassador to Germany from 2008-2012, told reporters.
“There’s also a debate that continues on structural reform and austerity and the idea is to get the mix right. In some countries you need to look at different types of stimulus measures and what you can do to grow the economy. The signal that the leaders send in the collective is important for markets and it’s important for how the international financial institutions will react.”
One of Canada’s closest G7 allies in the anti-austerity camp is Japanese Prime Minister Shinzo Abe, who met with Trudeau and International Trade Minister Chrystia Freeland on Tuesday in Tokyo.
“Prime Minister Abe has been a real pioneer in emphasizing the need for governments to use fiscal tools,” Freeland, who participated in Trudeau’s bilateral meeting with Abe, told reporters Wednesday in Tokyo.
“And, as you know, our government very much is in agreement … So, we’ll be very pleased to engage in that discussion.”
Japan, however, has a huge amount of debt compared to Canada and has been forced to try a combination of approaches to lift growth, including asset purchases or “quantitative easing.”
The situation is better in Canada, where the Liberals say low interest rates combined with the country’s relatively low debt-to-GDP ratio have created good borrowing conditions.
As a result, they have committed to running years of budgetary deficits in order to double federal infrastructure spending over the next decade to $120 billion.
“Canada, at this meeting, will be speaking strongly on the side of investing in growth, rather than in favour of austerity,” Freeland said.
The government believes the G7, which also includes the United States, the United Kingdom, France, Italy and Germany, provides a good forum to share Canada’s approach.
Trudeau is scheduled to get one-on-one time Thursday with French President Francois Hollande and German Chancellor Angela Merkel on the sidelines of the summit.
However, he likely will have a tough time persuading Merkel to make a big shift away from her cost-reducing stance.
The G7 leaders will also discuss a range of other subjects, including security, refugees, health, climate change and the empowerment of women.
Canada is expected to try to encourage G7 partners to join Ottawa in refusing to pay ransoms to kidnappers.
The issue is of particular significance for Canada after militants in the Philippines beheaded Canadian hostage John Ridsdel last month. Ridsdel was kidnapped alongside fellow Canadian Robert Hall, who is still being held by the group.
“I think we’re seeing a summit where there won’t be a single, burning issue,” John Kirton, director of the G8 Research Group at University of Toronto, said in a recent interview.
Kirton believes U.S. President Barack Obama’s visit to Hiroshima is likely to attract the majority of the media attention away from the summit.
Obama will become the first sitting U.S. president to visit the city, which was levelled by an atomic bomb during the Second World War.
But Kenjiro Monji, Japan’s ambassador to Canada, said in a recent interview that the global economy will be the “main theme” of the summit. He added it’s very important the G7 strikes a strong message about growth.
One expert said while the G7’s anti-austerity camp holds the consensus, the challenge is finding a way for heavily indebted European countries to make that shift.
Either way, G7 countries will closely watch how Trudeau’s plan unfolds, said Matt Browne, a senior fellow at the Center for American Progress in Washington.
“It would not surprise me in the years to come that the example of Canada, should it prove to be successful, … would then indeed set an example for others to follow,” said Browne, whose organization is run by high-ranking figures in Democratic politics.
With the other leaders at the summit facing domestic hurdles, Browne said newcomer Trudeau and his relatively fresh slate are in a unique position.
“I think that allows him to be braver,” he said when asked about the four years of majority government Trudeau has in front of him.
Obama, meanwhile, is seen by many as a “lame-duck” president as his final term nears its end.
British Prime Minister David Cameron is swamped ahead of next month’s vote on whether the United Kingdom should leave the European Union — the so-called Brexit.
Browne said observers feel Hollande’s presidency has been a disaster.
In Germany, Merkel faces lower levels of growth than expected and the inability of the labour market to integrate refugees, he added.
Italian Prime Minister Matteo Renzi must cope with one of the highest government debt loads in the European Union. Renzi has opposed Germany’s austerity position, insisting that spending is the best way to boost growth.
Abe also has to deal with a massive amount of public debt and a parliamentary election later this year, which will force him to postpone a planned hike in the national sales tax.
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