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Canada after the Brexit

mil | 10.07.2016 08:43 | Globalisation

The United Kingdom’s referendum vote to leave the European Union (EU) has provoked widespread apprehension and alarm in Canada’s ruling elite, and for a host of reasons.

These include: the adverse impact of the pro-Brexit vote and Britain’s impending exit from the EU on the world economy and on Canadian big business’s substantial European interests, the threat the unravelling of the EU poses to NATO and the system of multilateral alliances through which the Canadian bourgeoisie has traditionally asserted its global interests, and the potential boost Brexit could give to the forces pushing for Quebec’s secession from the Canadian federal state.

Although most of the political establishment and media have deplored the outcome of the Brexit referendum, there are elements—most notably the pro-Quebec independence Parti Quebecois (PQ), several prominent Conservative Party politicians, and the neo-conservative National Post and rightwing populist Toronto Sun—that have welcomed the anti-EU vote as an assertion of “national sovereignty.”

In the run-up to the June 23 Brexit referendum, Prime Minister Justin Trudeau and Finance Minister Bill Morneau spoke out forcefully in favour of Britain remaining part of the 28-state bloc.

On June 24, as stock markets plunged and the Canadian dollar was hit by a global surge in demand for US dollars, Trudeau announced his government was “monitoring the situation closely” and would be “working with our partners around the world in order to maintain stability and create economic growth.”

As elsewhere, Canadian stock markets have staged a comeback since the massive sell-off triggered by the Brexit vote. But economic analysts remain concerned about the impact of Brexit on a Canadian economy that has already been battered by the plummet in oil and other commodity prices and which faces major domestic threats from a housing bubble fuelled by record-low interest rates and high-levels of consumer debt. Canada’s household debt to income ratio is the highest in the G-7 and among the highest in the OECD.

Canada’s exports to Britain are valued at more than $10 billion annually, trailing only those to the US and China. Canadian businesses and investors have some $70 billion worth of direct investments in Britain, making it the third largest destination for Canadian FDI, behind only the US and the principal Canadian tax haven, Barbados.

Earlier this week, Toronto-based Canada Life announced it was joining at least a half dozen other firms in suspending redemption of funds that specialize in British commercial real estate due to plunging property values and surging redemption requests. A subsidiary of the Desmarais family-controlled Power Corporation, Canada Life has, or at least had, half a billion pounds invested in British real estate.

As is the case in the US, Canada’s political and military-security establishments are concerned about the impact the UK’s leaving the EU will have on the NATO alliance and its war drive against Russia. Less than a week after the referendum vote and in a bid to demonstrate NATO’s resolve in pursuing confrontation with Moscow, the Liberal government confirmed that Canada will assume leadership of one of the four battalions that will comprise NATO’s new “high-readiness” force on Russia’s borders.