Canada pledges auto aid, cap-and-trade system

Wed Nov 19, 2008 5:09pm EST
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By Randall Palmer and David Ljunggren

OTTAWA (Reuters) - Canada pledged new aid to its ailing auto sector on Wednesday and, in an apparent shift, it also said it would work toward a North America-wide cap-and-trade system to limit greenhouse gas emissions.

The minority Conservative government, re-elected on October 14, made the promises in a policy speech marking the start of Parliament and quickly passed its first confidence hurdle when it won the support of the main opposition Liberal Party.

The government also said it would be a mistake to run a budget surplus "at any cost", signaling that next year Ottawa may run its first deficit since 1996-97, but it said any stimulus package would not be delivered in the next couple of weeks.

The agenda for the new session of Parliament, outlined in the Speech from the Throne, marked the government's first explicit pledge of new aid to the battered auto sector since the election.

"The Canadian manufacturing sector, particularly the automotive and aerospace industries, has been under increasing strain. Our government will provide further support for these industries," the government said in the speech.

It said that while Canada "must never return" to ongoing budget deficits, it would be "misguided to commit to a balanced budget in the short term at any cost" due to the global financial crisis.

Finance Minister Jim Flaherty will deliver an update on his fiscal and economic projections next week. Canada agreed on Saturday at a summit in Washington to do its part to stimulate the global economy but Flaherty said he would look at stimulus closer to the annual budget -- to be delivered next February or March -- rather than including stimulus in the fall update.

The government is trying to co-ordinate with the United States both its response to requests for auto aid and its approach to climate change, particularly in the wake of Barack Obama's victory in the U.S. presidential election.   Continued...