Frank's Funk

FRANK MCKENNA: We're watching the posture of this new government. We're watching this big Projects Office. We're watching the appointment of Dawn Farrell. Watching the appointment of the Natural Resources minister. And, and we're starting to believe in Canada as an investment place.
PETER HAINES: Welcome to episode 68 of Geopolitics with the Honourable Frank McKenna, who I'm here with in studio for the first time in a long time. And he's decked out in his Blue Jays paraphernalia, all set to head down to the Rogers Centre to hopefully see the Jays get one game closer or even get close to that, securing the, the first place position for the Blue Jays in the American League East. And we'll get to the Blue Jays at the end here. But again, it's Peter Haines as always. I'm the host of this podcast series where we're going to discuss some important geopolitical issues that are impacting investors, traders and any other interested citizen around the world. And we're going to talk baseball. So, Frank, I hope you're doing well. And I'm going to start with a rather touching email that you forwarded to me from a Canadian listener who was very complimentary of this podcast. This listener, quote, finds your approach and tact extremely informative and comforting in challenging times. End quote. The listener goes on in the note he sent to say, you bring a sense of optimism in conversations, along with a pragmatic and realistic perspective that is refreshing. For the record, Frank, I agree with this listener wholeheartedly. Now, that said, you and I attended a client event last week or the week before where we were meeting with an overseas investor who was curious about Canada- US interplay, and I must admit that I have never heard you so sombre. What has got you feeling the blues? Or am I characterizing your mood incorrectly?
FRANK MCKENNA: You're probably characterizing my mood correctly. And by the way, I am very optimistic about Canada. I like the direction we're going in. I think that Trump has been a galvanizing event in our lives. Uh, and I think we've needed a burning platform, and I think we have a burning platform. So in terms of the medium and long term, I'm really optimistic about Canada, our ability to get stuff done, get resources to market, to extract full value economic rents and all, all of the rest of it. So I feel pretty good about that. I am concerned, I guess, would be the right word, in the short term, about the United States of America and its role in the world, and I speak as a genuine fan of the United States of America. I looked up to them as being the policemen of the world, the moral leader of the world for a long, long time. In fact, Pax Americana goes back some 70 years, and that umbrella has been a comforting umbrella to all of us. And it's helped assure that we had a generally peaceful world and a genuinely caring and sharing world where everybody was going to be doing a little better. And we'd all do a little better because our neighbours were doing a little better. I'm concerned in the short term about the sheer unpredictability of America as that beacon and that role model. I think the rest of the world is rapidly losing faith in the order and structure of America. Just in the last day or two alone, you could go two weeks and we wouldn't have time in this broadcast. But in the last day or two, we've had a third boat blown up in the Caribbean without trial, without accusation or anything, just arbitrarily blown up. That's unusual. We've got a prosecutor refused to prosecute several people that Trump didn't like, fired. That's unusual. Trump has, uh, cut all funding for bike paths and trails because he thinks that they're hard on cars. That's unusual. Wind has effectively been stopped as a renewable energy source in the United States. One project that was close to 90% completed, many billions of dollars, just a halt brought to it. All of that's unusual. Basically, handpicking your people for the, uh, for the central bank so you can get the decision that you want, which is lower interest rates. I think that's unusual. To try to force somebody out of the central bank, making a criminal accusation. I find that worrisome, quite frankly. And the effort to try to guide the bank, uh, in a certain direction, I find that worrisome. The speech to the United Nations of the president of the United States, basically saying that climate change is a con job to the world. Now, you're talking to responsible leaders from all over the world, all of whom are experiencing the effects of climate change and undertaking remedial action. And your role model, the, the, the really, uh, the moral force of the world telling you it's all a con job and you're wasting your money. Or on immigration, uh, that you're, you're crazy to be taking immigrants in. You know, without immigrants, a country like ours would have half the population. In Toronto alone, over half the population weren't even born in the city. And I think we've learned to live with two founding languages and cultures, First Nations community and millions of people from around the planet who have come to live in our country. There are countries like Italy or countries like Japan. There are countries all over the world that would be depopulating at a crazy rate if they didn't have newcomers coming in. Uh, it's true all over Europe. So all of these things are happening. The United Nations just got blamed for, uh, an escalator not working for his wife or a microphone not working for him. Ukraine, he’s gone from indifferent as to whether or not Russia should win, to saying today that Ukraine could push them back and, and recapture all of the territories that are out there. So you've just got this whiplash. 50% tariff on Brazil, because he didn't like the way his old friend Bolsonaro was treated. 50% tariffs on Modi in India. And you just sit there trying to make sense of it all and get guidance from it and feel a sense of comfort. And it's hard to do that. And, you know, Americans, obviously, they made their choice and they're comfortable with Trump as the president. But I'm speaking now for the rest of the world and saying that it's distinctly chilling and worrisome to watch the unpredictability of the, uh, the administration in the United States.
PETER HAINES: Well, you covered a lot of ground there, Frank, some of which we actually have on the agenda here. But, uh, you gave, gave us all a lot to think about here. I'm going to start our conversation focusing on, and I'm going to try to put you in a better mood, actually. I hope I can do that. I'm going to start the conversation here on CUSMA, which probably is one of, in fact, it was the topic we were discussing with this international investor that I felt was, uh, was where some of your consternation was coming from. But we'll learn about that. So last week, the US began a 45-day consultation process ahead of public hearings on the CUSMA trade agreement that's expected in November. Uh, and the purpose of the consultation process is to help inform the US ahead of next July's formal review of the agreement. Frank, there's been a lot of confusion about exactly what the July 2026 renegotiation of CUSMA means and whether there is, in fact, a chance the entire trilateral trade agreement disappears, as is allowed under article 34.6 of CUSMA. Frank, separate fact from fiction for us.
FRANK MCKENNA: Well, there is a lot to unpack here. So, uh, Trump negotiated the last CUSMA because he said that NAFTA was the worst agreement ever done and that CUSMA was the best agreement ever done. And so we've all signed on to CUSMA. But he put certain, uh, poison pills into it, which are starting now to activate. One of them is this six-year review. So this six-year review takes place next July, but the, the consultation takes place right away starting in October, and it was intended to be a review, not a reopening, per se, but a review so the parties involved could all discuss and, and probably see if they could mutually agree on some type of relief if somebody was aggrieved. That's what was intended. If everybody was really happy, we could re-up, which basically takes the agreement out till 2036. And if people weren't happy and but couldn't find common ground, it would just kick over to the next year and then the year after that. So every year you'd have that review. The only problem is, there's another poison pill, which is a lot more ominous. And, and that's a death switch. Uh, and that death switch is the article that you've mentioned. With six months’ notice, you can end up walking away, getting out of CUSMA. The good news is that Canada is probably the envy of the world in terms of the situation we're in because most of our goods are covered under CUSMA and there are no duties or no tariffs on CUSMA products. 95% of our goods going in tariff free. The ones that we're paying a price on, we're paying a high price. Aluminum, steel, autos at 25%. Steel and aluminum at 50%. Copper. Coming at us, another round of softwood lumber, pharma, semiconductors and so on. So those ones get hit hard. But we are dramatically lower in terms of overall tariffs.
PETER HAINES: People always refer to it as a blended rate, somewhere in that 5% range, right?
FRANK MCKENNA: Correct. Everybody does an analysis. Some people say it's as low as three. Some people say it's as high as five or six. All the banks have opinions on it but it's probably in that 5% range. Blended. That doesn't help you if you're in the steel industry. You don't care. I often use the anecdote about the statistician who drowned in a river that, on average, was only four feet deep. You're going to drown if you're in steel. It's a very tough file. Okay, so everything is okay. Not wonderful, because we're fighting with our best friend on, on some files, but not bad. But there is some evidence that Trump, as part of his negotiating strategy, will pull the chute, will pull the death switch on CUSMA and give a six-month notice. Now that possibility is being taken quite seriously by parties to the agreement and by people, members of his own administration. So I can tell you, it's not just idle talk. If that were to happen, that's a bit of a doomsday scenario because in Canada, Mexico and the United States, there would be a freezing of confidence of investors and consumers not knowing what the future was going to bring, not knowing whether they were going to have tariff- free access to these other markets. I think it would be bad for Canada, no doubt about that. I think it would be very bad for the United States as well. And that would be the one reason why, Perhaps, it won't happen. Trump may not want to push his business community into even more antagonism toward his administration than they currently feel. But there is a possibility of that. And I'm just telling you, Peter, if that's the case, that would be very, very serious. And if that doomsday switch was pulled, the whole idea is to improve his negotiating posture so that he can say, I demand this and this and this and this. And if you don't give it, we're going to pull the chute on the agreement, and let's see how you like that. The one thing that we don't know, Peter, if there are any legal experts on this, I'd appreciate the advice, but the legal advice that I see is that there's not a built-in decision-making role for Congress. There was, when we do a treaty, that treaty had to be ratified by Congress. There is not a built-in mechanism that we can observe so far where Congress gets an opinion on this, because if they could, I think they would say, no, we don't, we agree that this is way too draconian. I don't think they would go that way because it's getting into midterms and because Congress, we think, would be more interested in maintaining the relationships. I hope and pray that they will demand that they have a say in the whole thing, because if not, it would be up to Trump himself, and we would be negotiating with a very difficult individual.
PETER HAINES: Okay, you're Carney and his inner cabinet, and your friend, the Honourable Dominic LeBlanc, who's in the middle of this negotiation, and you're in the room with them and you're providing them advice. There's two paths we're going to follow. We're going to follow down that this is just going to be a tough renegotiation of certain aspects of CUSMA or the draconian model, where he's pulled the lever. What advice do you have to Canada's trade negotiators in advance of a negotiation where he's pulled the lever?
FRANK MCKENNA: You know, they obviously don't need my advice, because they're, they're pretty skilled negotiators. But I think that we, at some point, need to widen the envelope so it's not just trade issues. The problem that we have is when they do their consultation, every widget manufacturer is going to come in and say, I need protection for my widget factory. The whole reason to have a free trade deal is that not every widget factory gets protected, and that we're all better off as a result of having...
PETER HAINES: Collective good rather than individual good.
FRANK MCKENNA: Exactly. But if you start listening to people in consultations, the only thing they care about, quite appropriately, is their own individual good. That's why we need leaders who are bigger than that. If you had leaders who were above that, they wouldn't listen to the four CEOs of aluminum companies as to why they need bigger aluminum prices. They'd listen to the 100,000 business people who have operations that use aluminum, who'd say, this is insanity. You need to keep the price of aluminum down and not have tariffs. So the trouble is, Trump seems to listen to a lot of these CEO billionaire types who get into his ear, rather than a lot of other people that are affected. I would say that we need to be able to negotiate. First of all, we need to try to get possession of a common fact situation. He uses the term that there's a $300 billion subsidy, Canada the United States. That is not true. Uh, it's almost an equal trade, probably the most equal trade of any of the ten top trading partners. And when you consider that we have the biggest trading relationship, the fact that it's equal is a huge, huge plus for us. And the only reason why there is any deficit at all is because we ship raw materials in which they need, and they turn around and turn them into jobs. Not like Mexico, for example, or Vietnam, that ship manufactured goods in which, you could argue, affect American jobs. We ship raw material in that makes their jobs. Secondly, I would make sure that goods get put on the table as well. We've got a very large goods deficit with the United States of America. They always forget accounting services or all kinds of other goods, consulting services that we buy from them, as if they don't count, but they count for a lot. So I would put them in, and I would remind the United States that, uh, of all the millions of troops they have deployed around the world, there are none on the northern border. So we've got their back, and that's worth a lot as well. So I would, uh, have the negotiations around the goods, but also add in other issues. We did the original free trade deal in the 1980s around energy dependency and a North American energy security package. Well, I think we can change some of the names, but do the same thing this time. They will have access to our uranium, for example, which is really critical for their reactors. They'll have access to our potash. 85% of their potash comes from us, which is critical to their agriculture. They'll have access to our critical minerals, which is critical for their manufacturing sector. We can do all of those things. We can also shore up the military relationship by committing to the GDP number that's been agreed upon by NATO. That would be very beneficial in the relationship. We may even agree to the so-called Golden Dome, the protective dome over North America. That is a big thing that they're looking for. We can talk about border security, but we need to be assertive. In my view, Peter, on our own account, we need to say there's not a fentanyl problem in the northern border. Anybody who looks at it would say there's not fentanyl problem. So get those damn 35% tariffs off. But we do have a problem in crystal meth and other things coming across from your border to our border. Fix that problem. We now have tens of thousands of migrants coming out of the United States into Canada. You fix that problem. That's on your account. 70% of the guns used to kill people in Canada come from you. You can fix that. They will say that they want free trade and agriculture. We'll say you're not even using the quota we've given you. But if you want free trade in agriculture, will you open up sugar for free trade in sugar? Because right now 85% of your sugar market is protected. There are a lot of ways that I think that we can demonstrate to them that the relationship is fair, balanced, mutually beneficial, and that we can add some border and security items to that, uh, that make it even more beneficial for the United States of America.
PETER HAINES: So I think we all know that Trump needs to have a win here in this, uh, doomsday scenario. What do you think would be the most important thing that he would need to be able to say victory?
FRANK MCKENNA: Probably getting access to critical minerals, in if you make that a little larger definition and include uranium, potash, pure critical minerals. out of the 31 that are listed as available in Canada. I think that he could walk away and say, that's a big win. I've got a heck of a time negotiating with China because they control rare earths, and we don't want to be beholden to Russia or China or anybody else. But our friend Canada is prepared to give us a rover on critical minerals, and so we're going to have access to critical minerals from them. And also the items that we need for our own security, like aluminum and steel and copper and nickel, all strategic metals that Canada has in abundance that we need for our defence production, Canada is committing to, those to us through this free trade agreement.
PETER HAINES: Frank, just a tangential comment here. Just before I came to this meeting, the US government announced that they were renegotiating a, uh, loan agreement to Lithium Americas, which is the largest potential, has the largest lithium deposit that they're going to be mining for, and the US government in return is going to receive zero cost warrants that will ultimately give them up to a 10% stake in a public company. We know that the government also bought a stake in Intel. Uh, there's certainly pros and cons to the federal government, uh, socializing equity exposure across the balance sheet of the government. I'm curious what your thoughts are. Are you expecting this trend to continue with the US government, or, uh, do you believe these are one-offs?
FRANK MCKENNA: No, I think it'll continue because this is part of the ideology of, of the president. It's remarkable for a Republican to defend that. The blatant interference in the Nippon Steel takeover of US steel, getting in return a golden share, turning around, putting their finger on the scale. When US steel is trying to close a refinery in Pennsylvania this past week, and saying, no, you can't do that, our golden share, we're voting against that, requiring a pay-the-man tariff of 15%. NVIDIA, um, if they sell chips to China, it's not terrible that you're selling chips to China, we just want, want you to pay the, the house its share. Taking an equity stake in Intel. Taking a stake, like you've just talked about, in lithium production. All of these are unheard of things for a Republican administration to do. It is more socialist than the most socialist countries in the world, in many ways. It's managed capitalism. And so it's highly unusual. Tiktok. Basically putting your finger on the scale on TikTok, saying, we can't have it in the United States unless we own a majority interest, and there are certain protections and on and on and on. So no, I think because this is out of the Trump playbook, we'll see more of it. And the Republican Party have all stepped in line and said, yes, master, if you believe that we should end up becoming a state-directed capitalist society, then we'll go along with it.
PETER HAINES: I think it's contributing to the fact the market's trading at all-time highs. I don't think anyone thinks the market can go down. I do think that there's that invisible hand that exists to protect the downside of the market, or it's worrisome for people that are following risk assets. Frank, I want to just switch gears here to talking about Prime Minister Carney's meeting last week with Mexican President Claudia Sheinbaum in Mexico, and the two leaders had agreed to deepen ties. You know, typical discussion points coming out of a meeting like that, they're going to deepen ties while at the same time committing to maintain a shared partnership with the United States. This tone is different between Mexico and Canada from a few months back, when things were a little bit more frosty and it appeared as though there was momentum for strengthening bilateral trade relations with the United States. Is Canada's position with Mexico part of its trade diversification strategy away from the US, or is there more to these discussions?
FRANK MCKENNA: Yeah, both of those things are true. I think we see each other as natural partners. So whatever happens with CUSMA, we are going to end up having a trading relationship. So I think, uh, that just makes sense. Uh, Mexico's, what, about 140 million people. It's a big market and we're 40 million people but an affluent market. So that makes sense. But secondly, I think that what we're doing is basically level setting and saying, let's not let the United States separate us. Let's not let them pick us off one by one. Let's stay together, make sure we communicate a lot. If you're going to be doing something abruptly, let us know and see whether we'll match and that sort of thing. So I think it's just a smart strategy from two adult leaders, quite frankly.
PETER HAINES: Uh, I noted as well that Anita Anand today was speaking to both China and India on the side at the United Nations, talking about strengthening partnerships. I believe she's headed over to the, uh, the Far East to be meeting with leaders.
FRANK MCKENNA: Yes, I've been talking with her recently about exactly that. And my advice, not that she would need to take my advice, is in terms of the highest priorities, it would seem to me, strengthening our access to the biggest markets in the world. Uh, and we've got people on the US desk working assiduously on that. But we have relationships to repair with both India and China, and particularly India represents a very desirable market. So I think, I think that's good work that both Prime Minister Carney and she have been working at very, uh, responsibly now for some months, starting with the G7 and Kananaskis.
PETER HAINES: Okay. So also in the past month, Prime Minister Carney unveiled his choice for CEO of what is known as the Major Projects Office. The person who has that position now, Dawn Farrell, uh, is also now responsible for the initial release of five nation-building projects, including, number one, the phase two of the LNG Canada in Kitimat, uh, the Small Modular Reactors project at the Darlington Nuclear Plant, a copper mine project in Saskatchewan, a port expansion in Montreal, and the expansion of the Red Mine in northern B.C. I find this list of major projects that Carney unveiled a few weeks ago to be notable for what's not on it, and that's a pipeline. First of all, are you surprised by the omission of a pipeline? And second of all, your thoughts on Dawn Farrell?
FRANK MCKENNA: I'll start with Dawn Farrell. She's a terrific choice. I've served with her on boards. She's a very accomplished director. She did a great job on Trans Mountain and showed not only her operational skills, but her political skills. She's managing First Nations, managing Government of Canada, managing the, obviously, the toll payers and managing the construction. So I think, I think it's an inspired choice. I was not surprised that an oil pipeline was not on the agenda, for the simple reason that you, you need a private sector sponsor. Somebody's got to step up and say, I want to build a pipeline. Are you in? And clearly, in spite of a lot of effort by Premier Smith in Alberta, that wasn't forthcoming. Now, that doesn't mean that it's not lurking out there, that people are interested. I know they are sizing up the opportunity, but building the Northern Gateway, uh, which is the pipeline most often touted, is probably a $30 or $40 billion project. To do that, you've got to absorb that in the tolls on the pipeline. Are the toll payers prepared to pay that? So you've got competition as well, Peter. That's the other thing. A lot of the producers are, would be saying, what I want are more barrels and pipelines, but it doesn't have to be a new pipeline. So Trans Mountain has got room for another 250 300,000 with some dredging, uh, and with some solvent in the pipeline and probably some pressurization and so on. South Bow is looking at areas where they can debottleneck and add. Enbridge are as well. So there's probably a million, million and a half barrels of oil that can be produced without a new build. That would be lower cost, um, existing right-of-ways, uh, so far less challenging. So in a way, a new pipeline is competing with that. Uh, and that's not to say that both can't coexist, but it takes the urgency out of, uh, a de novo build when you've got other avenues. Right now, egress is pretty good. The differential is really narrowing in, uh, as a result of Trans Mountain. And right now I'd say what we need to do is to work on the, uh, capacity, which was designed for, for higher revenue by using it on a spot market. And I think there's some effort now to try to turn that into a capacity market. Uh, in which case, uh, there's more oil could flow through there quite quickly.
PETER HAINES: So, Frank, uh, on Dawn Farrell's mandate here, is this what's known as the one project, one review, one decision to your time frame. Is it realistic that these projects that are in the Major Projects Act, that Prime Minister Carney has come out with the Major Projects Office, is it realistic to assume that these projects can fit that time frame?
FRANK MCKENNA: Yes, I think it, I think it very much is. Just to remind you that during war time, the Alaskan pipeline was built at the rate of 13km, 13 miles at that time, 13 miles a day. So when you got to do something, you, uh, you've got a lot of pressure on you to do it. And before, we had a kind of a meandering attitude. If some, something gets proposed and everybody more or less takes their time, puts it through all the hurdles and passes it on to somebody else, putting it through more hurdles. In this case, everything's on a fast track. I don't think we expect to actually be producing minerals out of a mine in two years, but we want to get through the permitting and, and get to a decision to construct. And I think it's doable. Yes. Uh, the LNG project that you've referenced is well advanced. Uh, and these mines are, are well advanced, Port Montreal, etc. They're on the taxiway. And I think this will really accelerate, uh, them towards takeoff. So, yes, I think that all can be done. And by the way, Peter, I want to say something that I've observed in the last few days, and that is that the rest of the world is watching us. And I had a conversation today, for example, that really made me feel good. And that is the rest of the world watching, saying, we're watching the posture of this new government. We're watching this big Projects Office. We're watching the appointment of Dawn Farrell, watching the appointment of the natural resources minister and, and so on. And we're starting to believe in Canada as an investment place. Uh, it's got rule of law. It's got a pro-market government. And maybe this is just a good place to park some money. And so I'm starting to feel a, uh, change in investor sentiment towards Canada, just as a result of the process that's already been ignited, uh, without new projects not actually being under construction. So that's, that's a good part of the story too.
PETER HAINES: Yeah. You just said pro-business. I think that's what we all have to take away. It's a pro-business government currently. No, not, that's not to say the, the opposition government wouldn't have been a pro-business government had they been in power. But certainly, uh, Prime Minister Carney has, has definitely led the way, uh, and so far has, has put Canada in good stead globally. Speaking of global issues, this week at the United Nations meetings, Canada joined the UK and Australia in formally recognizing Palestine as a state. And while at the UN meeting on Monday, French President Emmanuel Macron said France will follow suit. Are these announcements symbolic, or is there more to it?
FRANK MCKENNA: I think it's interesting that this process was led by France and by Saudi Arabia. Uh, and clearly there's a lot of international angst about what's taking place in the Middle East. The view of Canada and the other Western countries, particularly, is that a recognition of Palestine will put additional pressure on Israel to try and, uh, and try and deal with the, uh, the Palestinians in some way that is going to be more acceptable to the international community. And this, this mainly is around the West Bank, of course, and the government in the West Bank, led by Abbas, has made it clear that Hamas would not be part of a government. They would like to form a government on the West Bank. He wasn't even allowed to go to the United Nations today. Uh, the United States wouldn't give him permission to enter the United States, uh, to speak to the United Nations. So. So the rest of the world, there's 130 countries in total that are recognizing Palestine's. We're just part of a big international community that, that's headed that way.
PETER HAINES: So in that regard, Israeli military leadership seems to be willing to go anywhere to root out enemies in regards, it regards as terrorists, regardless of the location. And this included strikes recently on the sovereign turf of neutral mediator Qatar, who Israeli Prime Minister Netanyahu accused of harbouring terrorists. Do you think there's a limit to Israel's efforts to root out its enemies that the United States will tolerate? I guess we'll call it sort of a red line, so to speak.
FRANK MCKENNA: I think the United States has, uh, already seen Israel cross over its red line. I think the United States was quite upset about what took place in Qatar, because the United States, under this administration or previous administration, Jared Kushner and others, were really the author of the Abraham Accords, which brought Israel and the Arab states closer together, a very cooperative relationship, a good piece of work, of diplomacy. And that's very much in peril now. And I don't think that's something the United States wants to see. So I think that they are privately probably quite critical of Israel, even though publicly they're quite supportive.
PETER HAINES: Well, obviously a place that we're keeping a close eye on here globally. Uh, before we move to global affairs, though, Frank, I do want to give you an opportunity to say a few words about the decision by current Liberal cabinet minister and former Minister of Finance Chrystia Freeland, her decision to depart politics to become an envoy to Ukraine. I know you spent a lot of time with Minister Freeland during her time in politics. What can you say about this decision, and how will her legacy be framed by the historians?
FRANK MCKENNA: Really interesting question, because it's a complex legacy. I had a note from her today, by the way, basically saying, I learned from you how to gracefully dismount. I'm not sure that the graceful is part of it, but…
PETER HAINES: You mean your ten-years-to-the-day policy?
FRANK MCKENNA: Yeah. Having an exit, exiting on your own terms, is another way that she could have said that. So I think there's a lot of merit in that. I think that gives her a certain amount of credibility. I uh, I think that she'll have a strong track record she can talk about. And that would include national child care, which a lot of people think is not just a social program, but an economic program. It would include income subsidies for low income people. A lot of people would look at that with considerable respect. And mainly negotiating, CUSMA, the first time around. And the fact that she's reviled by Trump is actually a selling feature for her in Canada. If Trump hates her, it must be because she fought the good fight for Canada. And I think any objective observer would say that she did perform heroic service for her country during those negotiations. So that's all on the plus side, and probably the fact that she actually confronted Trudeau and left cabinet on a matter of principle would probably be seen by Canadians as being a plus. I don't think Canadians will be, will be complimentary about deficit financing, some of the tax measures she introduced, and so on. I wouldn't be, and I don't think others would be. But in the full sweep of history, usually the good comes to the top and people are more likely to forget things like deficits and more apt to dwell on big footprints in the sand, like NAFTA and so on. I'm a person who has a lot of respect for her. She came to public life, and I think she made public life better for her presence. She speaks five languages. Degrees from Harvard, Oxford. Written several books. Uh, can tell you from having worked my way through one that they're weighty, they're substantive, whatever you might call it. Prairie girl. Comes from a farm in Alberta.
PETER HAINES: Ukrainian heritage, right?
FRANK MCKENNA: Ukrainian heritage. And, uh, and is going to take on a role which is one of the more difficult roles of trying to deal with the situation in Ukraine. So I admire her for taking that really deep well of accomplishment, using it in public service and then continuing on in public service. So for all of those reasons, I'm very admiring of her.
PETER HAINES: Well, we'll, uh, we'll definitely watch for the history books to write her commentary over the next several years. So let's turn to the United States, Frank. On the weekend, supporters of Republican political activist and podcaster Charlie Kirk turned out in droves to mourn his loss at a funeral ceremony in California. In listening to comments from some of the attendees at the funeral, one gets the sense that the US has very much become an us versus them mentality when describing the left versus the right. While commentators from all sides of the political spectrum condemned the senseless murder of Kirk, President Obama did remind Americans that political violence has been a part of the US democracy in the past. My question for you is whether today, in your opinion, the US is more polarized than previous periods of political division in history.
FRANK MCKENNA: History is a long time. It probably includes the Civil War and so on. I would say in modern history, yeah, I'd say it's the most polarized I've ever seen it. It's really at the boiling point now. And, uh, so I think it is, I think it's really unfortunate. It's very polarized and the rhetoric is, is very inflammatory. It was a tragic event, the loss of Charlie Kirk. I feel very badly about that. Uh, it was only a few months ago that we lost, uh, a congresswoman in Minnesota and her husband, uh, both assassinated as well. These are terrible things to happen in civilized Societies. I feel, I feel horrible about it. And, um, I would have to say, on the positive side, if there's such a positive you can take out of such a horrible event, was the speech of, of, of Charlie Kirk's widow, who is extraordinarily gracious.
PETER HAINES: And forgiving.
FRANK MCKENNA: And forgiving, and under extremely difficult circumstances. And I listened to that. And I say, no, that's the lesson that we need to take out of this and try to make the world a better place. And I think that would be the best way that you could honour a formidable, uh, political campaigner like, like Kirk, uh, would, would be to, to live that message.
PETER HAINES: So, Frank, a delicate topic here, but I remember you quoting former Supreme Court Justice Oliver Wendell Holmes on this podcast, who once said about respecting limits on the First Amendment, quote, you can't yell fire in a crowded theatre. And with that in mind, I was curious what you thought of ABC's decision to, first, suspend Jimmy Kimmel for some of his Charlie Kirk commentary and, then, to quickly reinstate his show, which actually comes back on tonight on most ABC affiliates.
FRANK MCKENNA: Yeah, but not all. There are some who've decided not to. I learned in my public life, really in, uh, very painful ways, that you should not give up defending free speech easily, that sometimes you have to take a real punch in the nose to defend somebody's right, especially on a university campus, to say sometimes outrageous things. And, uh, there's got, there has to be a limit. Everybody's trying to find that limit, now. It's very difficult to draw the line in the sand, but I'm on the side of saying that I would rather let people speak their mind, uh, but then turn around and say, yeah, with respect, I think that's just wrong. And this is why it's just wrong. And that's actually the way Charlie Kirk lived his life. He would take people on in open debates. So, uh, so I think that's a better model. But I worry, uh, about a bit of a larger issue in the US, and that is around broadcasting. This is not the first time that a broadcaster was intimidated. And recently one of the networks, I think it was ABC, paid a significant amount of money to Trump in a lawsuit to settle it because they were in the middle of merger negotiations. And, uh, you've just got a situation now where the owner of Oracle, I think, is in the middle of a major conversation about merging, uh, other assets and, and becoming another major conservative voice to, uh, parallel Fox News. I really think it's dangerous when, uh, when we don't have an independent press. And, uh, I would not like to see, uh, the ownership end up directing the message. I think that diminishes our democracy and would not be healthy for the American democracy. I've got so much faith in America, their ability to be a brawling democracy, a controversial democracy. But in order to do that, they've got to have unbiased ownership of media assets and allow, allow voices to be heard. I remember the famous words of Mao Tse Tung. I think it was, let a thousand flowers blossom, let a thousand thoughts contend. Our democracies are at their best when we allow, allow that collision of ideas to take place.
PETER HAINES: And Frank, I always kind of go back to my kids that are in their mid-20s and how they consume information now. And it's just so different than how I consumed it when I was in my mid-20s. And I'm sure you were the same way. It's just they have access to so much information, and even recently the debate over Tylenol. It's very difficult. People are confused on vaccines. They're confused because they're getting information coming at them from so many different sources. And it's such a, a soundbite world.
FRANK MCKENNA: Peter, I, I just want to say that because people have to, uh, I don't think everybody listening to us understands just how pervasive now alternative media has become. And there are some extraordinarily opinionated voices out there that have very large megaphones and are saying a lot of extraordinarily controversial things, in many cases, erroneous things. I thought that the president personally becoming involved in the Tylenol debate and making declarations that exceeded the evidence that was available was an unfortunate situation. I would much rather let the medical community dispense medical advice, and I would much rather see more respect for science overall, which has guided us in extraordinarily important ways for a long, long time. But now we seem to be going almost into a dark age where books could be burned and where people are summarily dismissed just for their views. And, uh, until you get the right person, and I'm talking about the CDC here, where some of the extraordinarily respected leadership have, have been fired, I don't think that that's in our interest, and, uh, we forget too easily, Peter. A pandemic was only several years ago and we were watching refrig trucks taking bodies out of hospitals because there wasn't enough room for them all. And now we have Florida, which is basically banning vaccine in the school system. We're setting out on a dangerous journey here if we don't get back to science-based evidence.
PETER HAINES: Yeah, well, um, we're all hopeful that that is the case going forward. I'm going to finish up with talking about Ukraine, Frank. Uh, there's a school of thought that President Putin is stringing along the United States and the Western world, for that matter, about a possible peace plan, uh, during a period where his troops are gaining territory in Ukraine. Although we did hear from President Trump, there may have been some pushback here from Ukrainian troops over the last, uh, few days. Meanwhile, some believe that Putin has grown so addicted to war as the driver of the Russian economy that he has really no pivot to keep growth positive, having been shunned by most of the rest of the world in terms of trade. How can one ever think the war will end if Putin is relying on the war to fuel his economy?
FRANK MCKENNA: I still think that there's a lot of deal tension here. Inflation is rampant in Russia. That's becoming a real problem. Fuel shortages. The Ukrainians have taken out a lot of the refining capacity, and Russia's, Russians are lining up for fuel. If you look at public opinion, sentiment in Russia, it's now become much more negative towards the war. I think people are starting to feel the price, but in lives lost as well. As many as 1,000 young men and women a day are losing their life in that battle. Surely, to goodness, people back in the villages, in the communities, who are attending these burial ceremonies must say, enough is enough.
PETER HAINES: I was going to say, I got to figure everyone in Russia knows someone that's lost a life in the war.
FRANK MCKENNA: Uggh, it's going to exceed a million, the number of lives lost on both sides. So I think there is still tension on Russia. If I could use that commercial term to describe a war situation, the problem has been, in part, the stop-and-start, stop-and-start opinion of the United States of America. The United States is the biggest military force in the world, bar none. The biggest economic force in the world, bar none. I thought Biden had his heart in the right place, but he was often a pound late and a day late in terms of authorizing artillery shells that would go 50 miles and then a hundred, or authorizing tanks to go in, which he didn't for a long time, or some of the planes that were surplus. Uh, it just took forever. And it gave Russia some ability to withstand the, the pressure. And then under Trump, he withdrew their communications support and put it back, pulled money back and armament back and all of those things I think have given succour to the enemy, quite frankly. And it's kept, uh, Russia's Putin's hopes alive. And I think that he doesn't want to be humiliated on the battlefield. And, and right now, a small country like Ukraine is holding the line, generally speaking, against Russia. So I think that the deal pressure would increase dramatically if the United States and Europe and Canada, and so on, continue to fund the war and continue to, uh, introduce tougher and tougher sanctions, perhaps including even secondary sanctions.
PETER HAINES: I read somewhere, Frank, and I may have my number slightly wrong, that Russia gained 17% of Ukraine's territory immediately, and they've only gained 1% in the subsequent three years of the war. It feels like they've just been mired in this, these small battles, that going back and forth in small territories. And yet they can't make that major breakthrough.
FRANK MCKENNA: No, they've been frozen lines in large measure in spite of three years of intense warfare. This is a terrible, terrible slight to humanity to witness this. And the economic cost is horrendous as well. Uh, major producers of wheat and nickel and every other commodity. This would, it does incite inflation around the world and, and would improve cost of living if we could get it settled. But again Trump has been, on this one, really hard to read. Sometimes he...
PETER HAINES: He was very kind to Zelensky today.
FRANK MCKENNA: Exactly. And it almost seems to be the last person he meets. He goes to the summit and he's really going to slap Putin all over the place and comes away from the summit. And, you know, it's peace and love. So I, I hope the United States, I hope Congress starts weighing in and says, we've got to take this seriously, put the resources in this to allow Ukraine to end up negotiating an honourable peace.
PETER HAINES: All right, Frank, I know I mentioned earlier you were a bit down in the dumps about Canada-U.S. relations. But on the flip side, I suspect you're pretty happy with your Blue Jays, who you're going to watch play Boston tonight, given that they finally clinched a playoff berth. Although they made us wait a few days over the weekend. Let's talk about what the prospects are for the Blue Jays to take a deep run in the MLB playoffs.
FRANK MCKENNA: Well, the wish is father of the thought. I wish and hope that they have a deep run. So, you know, I'm going to express that optimism. I think they have the potential to have a deep run. Everybody listening will know the issues. Uh, pitching has become increasingly thin. Uh, long relief is a real problem. And whether Lauer there and Berrios will help, it still doesn't solve the ninth inning problem. So that's a problem for us. And now our starters are starting to…
PETER HAINES: Scherzer.
FRANK MCKENNA: Yeah.
PETER HAINES: Concerning
FRANK MCKENNA: Yeah, I think just running down. Yeah. And so that's a problem. You know, can we, can we use Yesavage and these critical game situations. I like his stuff. But you know it's, it's the big leagues. And he hasn't had much experience. And then on the offensive side we need the best version of Vladimir Guerrero. He could lift this team and carry them on the shoulder. We need Bo back. He can lift this team. And we need the best of Varsho and Kirk and, uh, and Barger and all of these guys, they, they've, they've got a lot of raw material, a lot of raw talent. I'm a big fan of the way the team has handled itself all year, but we're going to need everybody at their best in order to have a deep run.
PETER HAINES: It's so interesting what momentum means.
FRANK MCKENNA: Hmmm.
PETER HAINES: You look at the Cleveland Guardians right now. If they sneak into the playoffs, would you want to go near them with how hot they've been over the last couple of months? Or even the Yankees, dare I say it, have been very good lately and they've got an easy run to the end of the playoffs here. They're going to have a lot of momentum going into the playoffs, which I'm sure they're going to make. I just got to make sure the Blue Jays hang on to first place.
FRANK MCKENNA: Yeah, I agree. We've got a much tougher run, uh, than they do. We're up against serious teams that have stake, something at stake, and, uh, they do have an easy run. No doubt about that. And they’re the New York Yankees, you know. They basically are the best team money can buy.
PETER HAINES: Yeah. Well, uh, we lost, uh, All Star, I should say All Star, we lost a future Hall of Famer who retired here a couple of weeks ago. A shout out to Clayton Kershaw, one of the greatest pitchers, uh, in our recent memory. Frank, uh, this was a lot of fun. I just want to make sure everybody who listens knows that Frank, uh, and the Honourable Rona Ambrose will be both speaking together on the keynote luncheon address at our Market Structure and Portfolio Management conference on November 6th in Toronto. Uh, we’ll have a podcast before then in October. Frank, thanks very much for coming in studio today.
FRANK MCKENNA: My pleasure.
PETER HAINES: Thank you for listening to geopolitics. This TD securities podcast is for informational purposes. The views described in today’s podcast are of the individuals, and may or may not represent the view of TD Bank or its subsidiaries, and these views should not be relied upon as investment, tax or other advice.