Carney Travels the World While Managing Complex Domestic Agenda

FRANK MCKENNA: The prospect of a referendum will end up freezing consumer and investor sentiment. It'll slow the economy down, by definition.
PETER HAYNES: Welcome to Episode 71 of Geopolitics with the Honorable Frank McKenna. My name is Peter Haynes. I'm the host of this podcast series, where we're going to discuss some important geopolitical issues that impact investors and traders, and for that matter, anyone that follows the geopolitical space around the world.
Speaking of around the world, Frank, you have been traveling a lot since you last spoke at our conference on November the 6th. Where have your travels taken you and what did you learn on your trip?
FRANK MCKENNA: Yeah, no, I've been on the road a lot. I just got in yesterday from Oman, but-- and over in the Middle East, we had our Brookfield offsite over there. And it was just absolutely amazing. And what I learned, I can summarize very quickly. The whole region is on fire, just absolutely on fire. Massive amounts of investment pouring in. They're using their petroleum money to do interesting things, including creating big, renewable industries, and investing in education, and so on. So it's a very attractive area of the world.
Not surprising the prime minister was there a few days after we were there, because he knows the people there and he knows the world well. In the new year, two ministers at least, maybe three, are going over on different trips. Francois-Phillipe Champagne, Minister of Finance, is going to go over, and I believe he'll have a number of Canadian companies with him, and as well, Anita Anand, our Minister of Global Affairs.
So it was wonderful. And we had a chance for some pretty exclusive access. We met with members of the royal family in Dubai and the crown prince in Abu Dhabi, and in Riyadh, in Saudi Arabia, we met with His Excellency Faisal Alibrahim, who's the Minister of Economy and Planning. So we had fabulous trips, met with the CEO of the First Abu Dhabi Bank. And all of these people just reinforced my view that it's a region Canada needs to get involved with, and very, very quickly. Yeah.
Brookfield already is. We've got over $15 billion deployed and tens of billions of dollars in money in our funds out of there. But the growth is going to be so explosive in the coming years that it's a huge opportunity for Canada. And quite frankly, I'm really excited about the fact that Canada is getting wired in as quickly as they are.
PETER HAYNES: Frank, is there any hangover in Saudi Arabia from the issues that Canada faced with the tweets that went back and forth between Chrystia Freeland and some leaders in Saudi Arabia? Is there any hangover from that, or is that in the past?
FRANK MCKENNA: It's in the past. None. In fact, I would say the opposite is true. I hadn't wanted to say this, but Carney more or less walks on water over there. We know him in Canada, I guess, for his role as governor of the Bank of Canada. But they know him there as the chairman of Brookfield, and they know him as former governor of the Bank of UK and former Goldman Sachs executive. He knows all of these people. They know him.
They're really tickled pink with what they see in Canada, the new leadership and the new direction of Canada. It's got them pretty excited.
PETER HAYNES: That's good to hear. It's been less than three weeks since we were together on stage at the conference. I can't believe how much material we have to cover just today, and some of the things we won't get to.
FRANK MCKENNA: Yeah.
PETER HAYNES: It seems like being a geopolitical expert has some career longevity to it, doesn't it, Frank?
FRANK MCKENNA: No doubt about that.
PETER HAYNES: We're going to do it a little differently today, because normally, we work our way from Canada out. Today, I'm going to work from outside of Canada in, at least that's at the outset here. Where we need to start is in Ukraine, as it appears we may be on the cusp of a peace agreement over there. Are we as close to a deal as we're reading about in the press, and if so, then why now?
FRANK MCKENNA: Well, I think we'll know in a day or two whether we are or not. The original draft was really originated-- and it's acknowledged as such-- it was originated out of Russia. And so it's very, very pro-Russian. And Ukraine and the European community, who are not involved in it, quite rightfully, pushed back on it. They now have put some new language together, and that's being shopped in Russia and the Ukraine. So we'll see. Russia may find it hard to accept some of the changes that have been made, but I think we're closer than we've been for some time.
And the question is, why now? Well, there's a couple of things going on. Every negotiation all depends on deal tension. There's a lot of deal tension right now. In the case of Ukraine, it's a war of attrition. They're losing that war of attrition. They're having trouble keeping young men and women who are draft age, and are going off to Europe to escape the conscription. So they've got a problem in terms of recruits.
The United States has proven to be a very unreliable ally, which makes their life more difficult. And they've got some corruption scandals swirling around that are reducing the credibility of the Zelenskyy government. So Ukraine is motivated.
Russia, you'd say, why Russia? Well, Russia's got problems, and we shouldn't gloss them over. They've had a 30% rise in gas prices recently. Their VAT, value-added tax, has now gone up to 22% from 20%, which is pretty heavy. And they still have double-digit inflation, which, of course, is corrosive. They've got 2/3 of their rainy day fund depleted. They've got foreign reserves of 300 billion that's exposed to expropriation. They've got-- a third of their refining capacity is either closed or partially closed in as a result of raids. And as a result, there's shortages of gas and diesel.
Russia is going through their arms at a great rate, and they're going through their men, as many as 1,000 a day. And I know they live by the old Stalin quote that quantity is a quality all of its own. But even by Russian standards, the cost in materials and manpower is humongous. So I think there's a lot of deal tension.
For the United States, well, I think the President would still like to win his Nobel Peace Prize, and I'd be the first in line to nominate him if he can resolve a couple of these thorny disputes, but also the affordability issue, having the ability to have more oil on the market would probably bring gas and oil prices down, which would help the President in his midterms.
Critical minerals. He's got to deal with Ukraine, but they can't get critical minerals out. So he'd like to do that. And quite frankly, the United States has got a vested interest in breaking up this bromance that's taking place with China and Iran, where all of these-- and North Korea. These countries are getting increasingly close together. So there's a vested interest on the part of all the major players to try to find a solution.
PETER HAYNES: Frank, is there any way-- I've been reading some of the military stuff on this-- that as part of the agreement, Russia wants to take land it has actually not claimed yet. Is there any way that ends up happening?
FRANK MCKENNA: Well, if Ukraine has any say, it won't. Russia wants the Donbas region, and they've occupied some of it. And almost every observer, after they pause and think about it a little bit, would say, the lines are probably going to be frozen and Russia will probably get to keep what it has. Ukraine doesn't want that, but that's probably realistic.
But on the other hand, for Ukraine to give up tens of thousands of square miles that Russia has not conquered, and to give it up without a shot being fired, I think that's a bridge too far. It's not just Zelenskyy who's having trouble with that, but the troops on the ground that are fighting and dying would have trouble giving up that ground as well. So no, I think it's more likely to be some version of frozen lines than actually giving new territory over to Russia.
As well, Russia wants the Ukraine effectively to disarm, to go down to, I think it's 600,000 soldiers rather than 900,000. And Ukraine is going to be very careful about weakening itself when they don't trust Russia or have ironclad security guarantees around the peace. So a lot of issues to be resolved. But I'd say we're a little closer today than we were two weeks ago.
PETER HAYNES: Let's hope we keep the momentum going forward. And kudos to President Trump and the US if they can, in fact, get a deal that works for both parties. And he is obviously a deal-maker in his own name. That is the President.
The past few weeks have represented a time in which global multilateralism is on display, just without the inclusion of the United States, which decided not to attend either COP30 in Brazil or the recent G20 summit in South Africa. We don't need to relitigate on this podcast the current administration's decision to pull back on global relations. So instead, Frank, I'd like to focus on what happened at these events without the United States.
Let's start with COP30. It feels like the annual climate meeting has lost some of its impact, and I'm sure that's partly because of the absence of the United States. And this has led some pundits to question the need to continue the organization.
In an article summarizing the accomplishments of COP30, which ended up with a watered-down statement about a roadmap on deforestation and fossil fuels that existed outside of COP, the BBC was quoted as saying the following.
Quote, "How barmy is it to fly thousands of people halfway around the world to sit in giant, air-conditioned tents to argue about commas and interpretations of convoluted words? How ridiculous that the key discussions here on the very future of the way that we will power our world occur at 3:00 AM in the morning amongst sleep-deprived delegates who haven't been home in weeks?" end quote. Frank, do you think the best before date of COP is behind us?
FRANK MCKENNA: No, I don't. I think that some of the conviction around COP has been sidelined a bit by affordability issues, which are high on everybody's agenda, the US ideological wars, et cetera, et cetera. I think that may have taken some of the steam out. But climate change hasn't gone away. And some of its visible manifestations are on full display as we speak in terms of storms and flooding and hurricanes, et cetera, et cetera. So it hasn't gone away.
I think that there's an inexorability about climate change that requires an inexorability in terms of the response. And just because the US is denying that climate change is happening doesn't mean the rest of the world is. And even in the United States, cities, and states and individuals are working on climate change initiatives. And in a lot of the world, great progress is being made.
I think you're well aware of what's going on in China, that through the mass manufacturing which they're capable of, they've knocked the price of solar down now to the point where coal can't compete with it, and even some of the fossil fuels. So if you're in the United States and you're the President, you might think you love coal, and I'm going to do everything to get coal back on the front burner. But in terms of economics, it doesn't make any sense.
So there are certain forces at play, technology forces, that I think are effectively undermining the administration's argument in the United States. We're seeing battery technology advance rapidly, carbon air capture being increasingly a potential remedy. We're seeing carbon sequestration, nuclear. All of those things are taking place.
So no, I think climate change is still going to be on the agenda, and it may be led by countries that might shock us now, such as China, India, Europe, et cetera, rather than the United States. But that doesn't mean it's gone away.
PETER HAYNES: I did notice, actually, an article on Bloomberg today about the New York State-- one of the funds in New York State who's recommending getting rid of some portfolio managers due to the fact that they're not paying attention to climate issues. So you're correct to say that even within the United States, there seems to be a divided view.
FRANK MCKENNA: We're going to see a manifestation of it in some form or other, just in the trade dispute we have with the United States, I can tell you, because I just got off the phone, and the Minister of Industry is over in South Korea and Japan talking to auto manufacturers there who are demonstrating interest in coming into Canada with auto plants around EVs, or electric vehicles, hybrids, as the case might be.
And meanwhile, we are now buying more cars from Mexico than we are from the United States because they started a tariff war. We've got counter-tariffs up on their autos coming in. Increasingly, we may very well end up putting our money on hybrids and on an evolving world rather than on gas-guzzlers and traditional autos.
And I don't know what the final result will be, but the United States might see the rest of the world leapfrog right over it, and they're left with legacy assets and legacy plants at a time when the world has moved on. So Canada is going to be going through that debate as the US pushes us aggressively on auto manufacturing and says, we don't want your cars anymore. Well, we may start looking at a new friend group with a different product. In a way, that may be where the puck is headed, Peter. I think the jury is out yet, but that may be where the puck is headed.
PETER HAYNES: Yeah, you mentioned we'll talk about Carney looking for new friends around the world, which he's been up to lately. But just, I want to pick up on your comment about solar there. One of the key takeaways from COP was the clear difference in direction of travel on energy policy between China, which is looking forward to a world of clean energy, and as you say, as a leader in terms of solar, and the United States, which has gone backwards, in some people's minds, by reversing much of Biden's Inflation Reduction Act to focus on fossil fuels for energy.
In your opinion, Frank, do you think that this strategy will come to bite the Americans? And with Canada talking about another pipeline, how do you think our country will be able to thread the needle into a clean energy future?
FRANK MCKENNA: Well, it's a good question. First of all, I do think this will come back to bite the United States. They will basically be the Blockbuster store that's left, and everybody else has moved on to digital technologies. And they'll find that out in the fullness of time, in my view.
With respect to pipelines, I think that's a whole different issue. And I just want to use it as a bit of a teaching moment, because we're right in the middle of what will be a major debate around pipelines. So I think there's going to be a major announcement which will involve Alberta and the government of Canada.
If I were asked to summarize it, I would say we're at the beginning of the beginning of a grand bargain, and I'll tell you why. First of all, let's start with some facts. Climate change is real. That's my fact. Not everybody has to subscribe to it. But I believe climate change is real.
Energy production is also real. And if Canada takes a million barrels of oil off the market, that doesn't mean it goes away, Peter. It just means Venezuela, or Nigeria, or Saudi Arabia, or somebody else supply that million barrels of oil. So we have to attack it in a different way.
So the government's ambition for Canada, our current ambition is for Canada to be an energy superpower. And that's not to say that we'll be a superpower, on carbon alone. We'll also be a superpower on clean energy. And hopefully we'll use some of the enormous proceeds from traditional, conventional energy to help fuel clean energy.
We'll be a leader, I think, in carbon capture and sequestration. We'll be a leader in the electrification of LNG, a leader in methane emissions and hybrid vehicles, battery storage, et cetera. And I think those two things-- I've said this since we started doing this program-- can coexist and should coexist.
Now, the fact is, the United States has taken advantage of our good graces and taken our oil at a sharp discount, and we've gone along with it. Four million barrels of oil a day going to the United States. We end up getting deeply discounted. Over 10 years, that comes to $70 billion. That's how much we have subsidized the United States of America, which doesn't need any subsidy. I don't have to tell you that.
Not only that, but to make matters worse, they've turned around and said, OK, you've got an imbalance of trade with us and we want to punish you for that. We've only got an imbalance of trade because we're giving them our raw oil for them to process in the United States. So the problem is, we have to do something about that issue. So why would we double down on putting more oil to the United States of America when it will result in more of a discount and more of an imbalance in trade? That's a fact.
Another fact-- it's a disputable fact, but it may be a fact. And that is that the United States is reaching peak oil. Their fields are now older fields. Their depletion rates are more rapid. It costs more to put more product in the marketplace. And all of that means that Canadian oil may be much more valuable, in fact, critical, going forward. So I think we have leverage. I don't think we have to rush in doing anything, but we have leverage. And we have that leverage if we can get pipelines that give us alternative forms of egress.
So to cut to the chase, why do I think it's just the beginning? We need egress. We need to get oil out of the market. But we have other competitive alternatives to a new pipeline. And so we have to work through those. And just so that I'm not going to mislead you, I'm quoting Premier Smith on this. And she said, she's encouraged by what she sees.
I'm seeing Enbridge announce they're going to expand by 400,000 barrels. I'm seeing TMX announce they want to expand by another 400,000. I think that that's a bit of an exaggeration. South Bow say they want to build a 650,000 barrel-a-day line. I'm hearing the group that runs the St. Lawrence Seaway say they're wondering if they can load oil on tankers from Thunder Bay and get them out through East Coast ports.
So there's probably a million and a half barrels of oil that can be produced without a new pipeline. And so that doesn't mean we don't need a new pipeline, but it delays it substantially. If you're somebody like Enbridge-- and they've said this, so I'm not misquoting them-- they're saying, why would we spend $40 billion on a new pipeline that would turn around and cannibalize the profits we're making on our existing pipeline network, which we can expand through debottlenecking a lot cheaper than a new pipeline?
So we've got hurdles to go. I think that we'll have a grand bargain where the province of Alberta will agree with carbon capture and sequestration. Government of Canada will agree, theoretically, with a new pipeline. But it's got to go through a number of hoops, one, getting a market participant that agrees to it, financial agencies that fund it, and then social license.
Remember, the last time this same pipeline was proposed, it was under the Harper government, and the Harper government went back to the project proponent with 214 additional requirements which they had to meet. And then even after all of that, the federal court kicked it out and said that the Harper government hadn't done enough consultation with First Nations. So a lot of puts and takes before we get to the end of the road.
But theoretically, we're going to end up having another million and a half barrels from current egress points. We'll probably end up having a framework for a new pipeline, but we'll have to go through a lot of hoops before it's finalized.
PETER HAYNES: OK, so I'm going to pick up on a couple of the points you're making around this pipeline agreement. Through this entire process of discussing a grand bargain, as you call it, between the province and the feds in Ottawa, one party has been left out of the discussions, or at least they feel they've been left out of the discussions. And that's the premier of BC, because this proposed pipeline will run through to northern BC, where there's a lot of concerns about the environmental issues on the northern BC coast.
So I know you've just stated your position. You want debottlenecking. You want to increase that way. You don't want us to go and build Keystone again, even though there may be some politics in that. I know you stated that at the conference. And we're looking at this transaction. It's apparently going to be announced tomorrow. Does Premier Eby have a beef? And overall, what do you think the general feeling of the rest of Canada is going to be around this announcement?
FRANK MCKENNA: I look at the polling, and the polling across the country is strongly supportive of new pipelines, new access to markets, because of the threat from the United States of America, quite frankly. The Lord helps those who help themselves. And right now, we're going to have to help ourselves. So there is political support for doing it.
But I wouldn't-- I know Premier Eby well. He's been a reasonable guy. He's strongly supporting LNG terminals and getting gas from Alberta into BC to fuel those terminals. So I think we have to take our hat off to him that he has been a cooperative player. But I think we have to understand he's got a political constituency as well that he needs to deal with. And there's a hundred First Nations rights and title holders along the route of that pipeline.
We should take a deep breath and just let the whole thing marinate. First of all, we don't have a private sector proponent yet. We don't have enough production to fill a pipeline yet. Nobody has started the consultation process with First Nations yet. It's going to take years for this to work its way through. So I wouldn't storm the barricades on day one. I would say there's lots and lots and lots of time to let people air their problems and try to see if we can resolve them.
PETER HAYNES: Well, one of the groups that's going to air their grievances here, you can imagine, would be the sustainability community. I was at an event actually recently with some of the folks from that community, and there's actually a school of thought that this pipeline discussion is actually a false flag to lower the temperature in Alberta, given the fact that, as you just mentioned a second ago, Alberta is going to be happy about the cooperation, but it's going to take forever to get there. Do you put any salt in this potential perspective?
FRANK MCKENNA: We should be addressing concerns from Alberta. The problem I have with that community, they believe that if they can stop a pipeline from Canada or gas from being produced, that all of a sudden, the world has less carbon in the air. That is factually a lie. It's not true. It simply means that somebody else produces that carbon.
So what we have to do is to take advantage of the leverage that we have with an announcement like this to get the Pathways Project done, which will sequester carbon and allow us to have the lowest carbon barrels on the planet. Methane emissions, which is a much more deleterious emission than CO2-- let us be tough on that. And let us work on other remedies, hybrid vehicles, perhaps, electrification of LNG, and things like that, and mitigants.
So we cannot start with this binary choice that we have to make that it's either, we produce carbon or somebody else produces carbon. It's not like that at all. We have to take advantage and leverage our strength as a major, world-class energy producer to do good things with that, both in terms of conventional and clean technology.
The environmental community, unfortunately, get their funding from and their advocacy from one side of that equation. They will never cross over and join hands with the other side of that and try and have a constructive dialogue.
PETER HAYNES: It is obvious that Ottawa is trying to work hard to gain the trust of the West, and that's a relationship that's seem broken under the Trudeau government. And that had led to, as we've talked about on this podcast before, some talk about separation. While this pipeline arrangement is likely to quiet that talk for a while, separation talk has heated up in another province recently, with Quebec scheduled to go to the polls late in 2026 and the Parti Québécois leading in public opinion.
Quebec Provincial bonds have been weak of late and are now, in fact, at the widest spread they've been to Ontario's since 2018 as the PQ lead in the polls expands and because leader, Paul St-Pierre Plamondon, vowed to hold a referendum vote if elected. Are you raising your DEFCON level yet on Quebec?
FRANK MCKENNA: Yeah, definitely. It's a sleeper, and people haven't been paying much attention to it because Alberta's been getting more attention. And this would be a nightmare scenario. A prospect of a referendum will end up freezing consumer and investor sentiment. It'll slow the economy down, by definition. And right now, the Quebec Liberal Party is melting down because of some internal issues. So there really is no natural alternative to the separatist party, which is probably headed to a win in the next election.
Peter, I'm hoping I'm right on this. There's no guarantee. We say, those people who are in around the energy sector, that the best antidote to low oil prices is low oil prices. You get low oil prices long enough, it creates the conditions for increased demand and oil prices go up.
And I'm hoping that the best remedy for a referendum in the province of Quebec is the threat of a referendum in the province of Quebec, and that people will wake up and say, look, I don't like the uncertainty. I don't like the volatility. I don't like the way our provincial bonds are trading. I don't like the inability to get credit. I don't like families being torn apart. I don't like communities being torn apart. I don't any of those things. I'm hoping that that, in itself, will end up creating a bit of a backlash against the idea of having a referendum.
PETER HAYNES: Yeah, I agree with you. It's not the right time. It's never a right time. But given what Canada's gone through in the last year, I'd hope to think that this is something we can keep on the sidelines.
So looking back at the G20 summit-- I know we talked about COP, but I want to talk about the G20 now. Prime Minister Carney got a little bit testy with a short answer of quote, "Who cares?" when he was answering the question about when he had last spoke to President Trump about the trade negotiations. Carney clearly is preferring instead to work the room and the globe for other trade partners.
Now, I know he apologized in parliament today for that short answer, and it appears he may be heading next week to Washington. At this stage, are you hopeful Canada can get the ball rolling again on trade talks with the United States, or are you joining the camp that the current trade negotiations will simply roll into the 2026 renegotiation of CUSMA?
FRANK MCKENNA: Yeah, first of all, I'm thankful that Carney walked his remarks back. In the great scheme of life, we all say intemperate things from time to time that we'd like to take back. So I'm glad that he did, because, as we know, it's a period of acute sensitivity with the US President.
I think that time is somewhat on our side. There's a court case that will be coming before year end. I think it would be useful to have that court case decision. I think there's some deal pressure building on the US side. Certainly, on aluminum, they're hurting, and hurting badly. We're actually pushing some of our aluminum into European markets. And the aluminum that's going into the United States is going in at a very, very high price because the tariffs have to be accounted for.
And I think the auto sector is just in fits over trying to make this trade war work for them. 25% tariffs on those parts of a car that aren't American, and we're putting 25% tariffs on those parts of an American car that aren't Canadian. The end result of that is that for the first time in 30 years, Canada is now buying more cars from Mexico than it is from the United States. And we're the biggest buyer by far of US autos.
So this is a known net goal of the US. And I think the auto sector would really like to get it fixed up. So I think there is some deal pressure to try and get some stopgap measures fixed even before the major CUSMA debate takes place.
And by the way, if you've been reading the news, there's a substantial amount of pressure and support growing within the US business community for CUSMA, saying, we need that trade relationship to manage the trade between these three countries.
PETER HAYNES: Frank, I want to actually understand something I want you to help me out on here. When a country like Canada negotiates tariff rates with the US, which is part of the agreement, or when the UK negotiates a 15% tariff rate with the United States on certain goods, just to be 100% clear, these are one-way tariffs. So it's not like Canada will receive any offsetting tariff revenue from other US imports, because I think we dropped most of our reciprocal tariffs. Am I correct when they say we have to live with a tariff, it's a one-way tariff?
FRANK MCKENNA: Not completely. We actually do have tariffs. We dropped tariffs on anything that was CUSMA-compliant, because the United States actually doesn't have tariffs on CUSMA-compliant areas. But on steel and aluminum and autos, they've got 25% tariff on steel and aluminum, 25% on autos. We have put up counter-tariffs on steel, and aluminum's 25%, and we have a 25% tariff on the US portion of an auto. So the answer is, we don't have exactly matching tariffs with the US, but we have put tariffs up on several of their areas simply to protect ourselves.
PETER HAYNES: Yeah, I was driving through Kentucky with my wife the other day, and she wanted to put something over our license plate just to show it was an Ontario license plate, given the-- some of the concerns about taking Kentucky Bourbon off of our shelves here in Ontario.
OK, so in the vein of the discussion around tariffs, the ambassador to Canada, US ambassador to Canada, Pete Hoekstra, has been quite vocal about the importance that Canada follow through on its purchase of a fleet of F-35s from Lockheed Martin rather than choosing an alternative, such as the Swedish Gripen, even if it's just for a portion of the order, implying that a decision to change course might impact trade negotiations.
Critics will argue that the F-35 supply chain includes a significant Canadian presence and economic footprint here in Canada, and that a second model in the air fleet would reduce the defense interoperability for NORAD, not to mention the amount of time needed to train the limited number of pilots in Canada that understand this new technology. Can Canada afford two fighter jet fleets, and how do you think this will play out?
FRANK MCKENNA: I think we can. There'll be a lot of experts weigh in on this, as well they should. But I think that I really like the fact that minister Joly has been pushing back on Lockheed Martin, saying, you're not putting enough benefits in the window, and going to the Swedes and meeting with Saab and saying, what can you do for us if we buy the Gripens? And the end result, I think, is that she's bringing a lot of jobs to Canada from either one or both.
In my view, the answer is, we can do both. Now, the military people will always want a purist solution where we have one plane, et cetera, et cetera. When I looked at all the literature on this, each of them have capabilities that are unique. The Gripens have substantial capabilities, as well as the F-35s. They're going to be allowing us to partner up with our Scandinavian friends, which probably is a closer theater for us, perhaps, than the United States in terms of some of the challenges that we will face.
So I think that we can do both. And the cost is so different. We end up-- if we buy the F-35s, we could buy 40 F-35s and probably 70 of the Gripens, which would dramatically increase the size of our fleet, whereas if we just go with the F-35s, we'd end up topping out at 75 or 80. So there's that. And the Swedes have put in the window manufacturing the Gripens exclusively in Canada, creating about 8,000 jobs, and also manufacturing an eye in the sky, AWACS type of plane in Canada, which is another couple of thousand jobs. We can't ignore that at all.
And there's some other issues as well. The United States right now is-- not demonstrated itself to be our friend. We spend 85% of our dollar at-- defense dollars in the United States of America, and we're not getting a lot of goodwill for that money. And so maybe we have to play a little tougher. And we're not sure whether there's a kill switch involved in the software in the F-35s that basically gives the United States ultimate command and control over those planes. And at a time when our countries are in such a hostile relationship, we have to think about that.
There was an article today in the newspaper, basically from a retired general, appropriately saying, look, I think you should buy all F-35s and then switch to the Gripens and end up doing another order for the Gripens. In other words, buy the 75 or 80 F-35s and then end up buying another order of Gripens.
I don't do this often. I don't have time to do it, but I read the comments. There are 275, maybe 300 comments. Every single comment afterwards is, to hell with that. The United States has proven to be a fair-weather friend. We don't owe them anything. The F-35s haven't proven to be reliable. The Swedes are putting more benefits in the window. Why should we double down on a relationship that is toxic?
I was shocked, Peter, at the vehemence of the comments. If you want to, anybody should look at it. You can look at the comments after an article. And I was shocked. But Canadians are really upset about the way we're being treated, and I think popular sentiment now would say that we should end up fulfilling our responsibilities with the F-35s, the order book, but as well, going with the Gripens as a second fleet of aircraft.
I think the other thing that people would say is that Ambassador Hoekstra should not be interfering in this decision, which is a decision for a sovereign country to make.
PETER HAYNES: Yeah, Frank, on that note, there's been back and forth allegations of meddling. And I just want to understand what your thoughts are, and especially given the fact that you've sat in that ambassador chair. The Trump administration accused Canada of meddling in US politics with the World Series Tariff advertisement, and this just ended up becoming a justification for halting trade talks at the time.
Hoekstra, as you mentioned, had warned about the 35's. And more recently, Vice President Vance weighed in on Canada's open immigration policy in a whole bunch of social media posts, arguing that it was that policy that was contributing to Canada's standard of living falling behind. Where is the line on meddling? Or is all of this just politics?
FRANK MCKENNA: It's politics, and poor politics at that. And I have to say, with respect-- Ambassador Hoekstra did the same thing when he was ambassador to the Netherlands. He got royally chewed out in that country for meddling in the affairs of that country, which is highly ambassador-like. And then he's turned around and in Canada, he's meddling in our decision in terms of the aircraft of choice.
But look, it's more than that, Peter. We've got to call out this hypocrisy. Trump meddled in our election, talked about the 51st state and all of these things, which really ended up costing Poilievre, probably, the prime ministership. I meddled when I was in Washington. We had engaged in Afghanistan, not in Iraq. We ended up putting posters in the subways around New York, reminding people that Canada was doing heavy fighting in Afghanistan as part of demonstrating to Americans that we had their back.
Trump has recently engaged in meddling in Argentina, actually putting up balance sheet in order to try to shore up Milei's government down there in a by-election. In Brazil, he openly meddled and put 50% tariffs on because he didn't like the way his friend Bolsonaro was being treated by the country. He recently went to Israel and gave a speech to the Knesset in Israel calling for the pardoning of Netanyahu, the prime minister. You couldn't meddle more in the affairs of a country than that.
We need to show some diplomacy, and we need to try to be constructive. It takes a carpenter to build a barn. Any jackass can kick one down. And I think we're better off, as ambassadors, being carpenters, working constructively. For 50 years, I've known the ambassadors from the US to Canada. All of them have worked extremely hard at building bridges. We had ambassadors helping us when we went through the sovereignty debate in Quebec. We had ambassadors helping us when storms took place, we needed their help.
Conversely, we did the same thing south of the border. We worked on issues not only with the government that we're sworn to serve, but also the other-- in the other country. We build bridges. We work together.
I used to talk to Ambassador Wilkins almost every day when I was ambassador in the United States, and he'd warn me about an issue that's coming my way and I'd warn him about an issue that was coming his way. I'd used to say, pucker up, and grenade coming in, and he'd turn around and he'd say, we just pulled the pin on it and it's going back. But we were working at it, trying to make things better. So I would say all of that.
And I would say one other thing, and it's more emotional than anything else. And that is, it's around Ambassador Hoekstra, who I don't know and is probably a very fine person. But every person I've ever met who comes from the Netherlands starts off the conversation by thanking Canada for the blood and treasure which they expended in liberating Holland.
I had the privilege of getting to know Queen Beatrix, and every time I met her, she would thank me again for Canada's contribution to saving Holland. And she would remember fondly the days that she spent in Ottawa during the war as a guest of the government of Canada. And I would simply say to Ambassador Hoekstra, as somebody born and raised in the Netherlands, that from time to time, it would be in his best interest to show some appreciation to Canadians who have paid such a price for the liberation of his country.
PETER HAYNES: Well said. At our recent conference, you were on a panel with Rona Ambrose, and she said she was watching the back and forth very closely that was going on between President Trump and Marjorie Taylor Greene, who she referred to as the Mother of MAGA. And she was looking at signs of fissures within that far right of the Republican Party which were maybe showing themselves.
Since then, I would argue, if anything, a hole broke open with MTG's eventual resignation from the House and some very strong parting shots from President Trump towards Marjorie Taylor Greene on the way out. As you look back on the final days of MTG's time in the House, are you surprised with this outcome? And is this event a canary for the Trump administration?
FRANK MCKENNA: I think the answer is probably yes to both of those. She really was the poster child for the MAGA movement. And so the rupture, high-profile rupture, was unseemly. And I think that it does have some implications going forward. We do have to remember, all politics is local. And there's a particular problem in Georgia with the extension of the Obamacare mandates. And this was going to hit her constituents very, very hard. So I think she felt the pain. But clearly, this represented a major breach in the MAGA armament. I don't think it's the end of the game, but it certainly was a breach.
PETER HAYNES: So Frank, as we look at what's going on in Washington more broadly, and we're actually now-- as you always say, they're constantly in a political campaign. We're a year out from midterms. What are you watching closely for in Washington for the rest of 2025?
FRANK MCKENNA: Well, every day, of course, if those people who pay attention to Truth Social, you'll see something come over the transom that will shock you. So prepare to be shocked.
But at the macro level, I would say court cases. The IEEPA case is major, so that'll be interesting. And there's some other court cases that are consequential. And the midterms. The United States is in perpetual election cycle. I'd say right now, there's a lot of consternation in Republican ranks about the midterms and the prospect of losing the House. So the politics of the midterms will-- after January the 1st, will swamp everything else.
PETER HAYNES: Frank, what is the latest on a topic that you raised briefly? And that was the potential redistricting around the southern of the United States, again, relating to a case that was coming to the Supreme Court. Is there an update on that?
FRANK MCKENNA: Well, again, Canadians won't really appreciate what's going on, but it represents just the highest form of larceny that's taking place, where Trump directed that Texas redistrict so that it would give him another five or six seats. And of course, Texas did that. And now it's been struck down by an appeal court in very, very strong language. So it may get reversed by Trump getting it up to the Supreme Court of the United States and having to use up more favors with his friends on that court. But as it stands now, it looks like he may lose that redistricting.
In the meantime, California reacted to Texas by having a referendum, in which it was agreed that they could redistrict as well. So they'll be putting five seats on the board for the Democratic side. And we're going through it in Indiana, Missouri, and the Carolinas. So it's just a wholesale battle of who's the most larcenist of the states. And it's unseemly to watch. But the end result may be a wash, where everybody has been able to find some seats by redistricting.
And the shame of it all is that what's being lost is the importance of having a system with integrity, something that's done so that everybody trusts the results. Unfortunately, that's not what we're seeing. We're seeing the very opposite of that.
PETER HAYNES: Frank, there was another issue in the southern of the United States relating to-- was it the Election Reform Act. It was something to do with voter rights In southern states.
FRANK MCKENNA: There's a case going up from Louisiana around the Voters Rights Act. If the Supreme Court decides, as it looks like it might, strip that Act of its effectiveness, which protected a number of African-American districts, that would result in a substantial bounty to the Republican Party. It could be as many as a dozen seats at play as a result of that.
PETER HAYNES: And the timing of that case at the Supreme Court, is it possible that rolls through here and is in play for the midterms?
FRANK MCKENNA: I had thought it would be. I read an article moments ago indicating it probably couldn't all take place in time for the midterms. So jury's out on that.
PETER HAYNES: Literally. OK, final question here before we talk about the Blue Jays. Do you have a view on what's going to happen here in Venezuela? It's obviously a build-up of Naval operations by the United States, troops in the Caribbean, all pointing to some sort of an action with Venezuela. What is your expectation on how this plays out?
FRANK MCKENNA: We've gone through a lot of drama over the last 10 or 15 years on Venezuela, and they still end up having governments led by despots like Chavez and Maduro. It's only guesswork. But if I had to guess, I think they'll still be standing a year or two from now. The United States is certainly doing a lot of huffing and puffing, but I don't think they'll put ground forces into Venezuela, and I don't think the Venezuelans will overthrow their government. The military seem to be too strongly embedded with the government.
And the other thing, I'll just say it because it's probably true, Venezuela has oil. And that means they're not just an ordinary Banana Republic. They're a rich in resource Banana Republic that's got the second- or third-largest reserves of oil in the entire world, and a company that is exploiting that reserve, selling oil. Even while the United States is virtually declared their war on Venezuela, they're allowing Chevron to exploit oil there and sell it internationally. And Chevron is very, very wired, both into the government of Venezuela and into the government of the United States of America.
So if I had to guess, I would guess that oil money will talk and Maduro will still be there.
PETER HAYNES: All right. That's going to be one to keep an eye on. Just before we get to the Jays. Frank, there's some breaking news here in the last while. I know you pay very close attention to everything that happens on the East Coast. One of the East Coast's most famous athletes passed away in the last couple of days, just as the Canadian trials for the Olympics were happening in curling, and that was Colleen Jones. I know you've crossed paths with her in the past. What can you say to our audience about your time with Colleen Jones?
FRANK MCKENNA: Yeah, it's a very sad day for us, and it's a sad day for the country. I knew her because she was a journalist. She was on-- well, she was on TV every night. That's how we really know her, giving the weather. And I knew her and liked her there. And then, of course, as a curler, she was unparalleled. She skipped Canadian teams to world championships time after time after time. And she was well-loved by all of us who knew her. And she left us far too young.
PETER HAYNES: Yeah, it's very sad. Our hearts go out to the curling community and to the Jones family. Just in the last-- it's been 25 days, Frank, since the Jays lost game seven of the World Series in arguably heartbreaking fashion.
And my heart broke a little bit more when I read a recent story involving our bench coach, Don Mattingly, who was saying that the coaching staff was, in hindsight, probably responsible for not having IKF with a slightly larger lead at third base because the batter at the plate was not going to be hitting a line drive to the third baseman and getting doubled off, which was the argument why he was so close. And we all know he was out by a cleat at home plate. Have you started to heal yet?
FRANK MCKENNA: [LAUGHS] I've gone through the seven stages of dying on this, Peter. I've never been so emotionally wracked about this that I just, I feel embarrassed almost that I've found this so upsetting because, in many ways, I found the Blue Jays were a proxy for the whole country, Canada fighting against forces beyond our control and the David versus Goliath battle. And it was just so exciting. The whole country was transfixed. It became Canada's team. It became the world's team, the underdog story of the decade, I think. And so I was brokenhearted.
But I'm not brokenhearted now. And what I would tell you is that I'm not going to go through a bat-by-bat dissection of what happened in the seventh game or even some of the other games, the overtime game that we lost before anything else.
What I'm going to say right now is, thanks for the memories. Everything you gave us in the last two months was bonus. It was not what we expected, not what I expected. I apologize for that. And it was all bonus. And winning games and keeping us in the playoffs, that was bonus. But also, watching this group of young men come together as a team-- they loved each other. You could tell it. They played as a team and they lost as a team and they supported each other as a team. And I just felt a huge sense of pride. So all I would say is, thanks for the memories.
PETER HAYNES: I just think, Frank, if we superimposed what you were saying about the Blue Jays in April of this year with what you just said there, oh, my gosh. That's two ends of the spectrum. But I'm with you 100%. It was a great ride. And there's going to be lots of fun. Everyone wants to be a Blue Jay now. And so I think we'll have lots to talk about in the offseason.
Frank, that was-- appreciated all your thoughts here. I know we'll be together in another few weeks. We're going to-- I think on December 15 is our next taping date before you probably head east. Is that correct? Are you heading east for the holidays?
FRANK MCKENNA: I'm headed out. Yep.
PETER HAYNES: Great. All right. Well, we'll talk to you then. Thanks for your time.
FRANK MCKENNA: OK, thank you.
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PETER HAYNES: 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 views of TD Bank or its subsidiaries, and these views should not be relied upon as investment, tax, or other advice.