The battle fought over colonial Canada two centuries ago as part of the broader war of 1812 pitted a Republican administration in the United States, with its vision of small government, low taxes and democracy, against a British government that emphatically did not believe in any of the above. Yet in 2012 Canada will move closer to that older Republican vision, which has formed part of the American psyche ever since, while the United States drifts towards big government.
Part of this is happenstance. Canada was in good fiscal shape before the economic crisis of 2008 and managed to avoid the heavier blows that toppled banks and crippled the American economy. This allowed the Conservative government of Stephen Harper to end its emergency stimulus in 2011 and put in place measures to eliminate the budget deficit by 2014-15, mostly through spending cuts. The federal budget in the spring of 2012 will spell out where spending will be trimmed.
So the government has not needed tax increases to get its finances back on track, nor to cancel scheduled cuts in the federal corporate tax rate, which will fall to 15% in 2012. Even with provincial corporate taxes, it adds up to the lowest rate in the G7.
Strong demand from emerging economies for the commodities that Canada produces will soften the effect on Canada of slower growth in the United States. So too will the conclusion of two sets of negotiations meant to increase trade: a Canada-EU trade agreement, and a perimeter-security deal with the United States that will lessen delays at the border. At present when goods cross the border 45 authorities in the two countries require data. The Republicans of 1812 mounted an unsuccessful invasion of what were then the British colonies of Upper and Lower Canada in order to join them to the United States. The aim of the perimeter-security deal is to make it seem that way for the companies moving goods worth C$1.4 billion ($1.4 billion) across the border daily. The deal should harmonise regulations and cut the amount of duplicate demands for the same data.
src – economist