Canada downgraded, relations with the U.S. at lowest point in 25 years
Canada’s relationship with the United States is facing recent strains unseen since the signing of the Canada-U.S. free trade agreement 25 years ago. Unlike early episodes of Canadian angst over nationalism, this stress is due to the U.S. taking Canada, its most important and reliable ally, far too much for granted.
Even President Obama’s State of Union address mentioned a host of countries throughout the world with no reference to Canada, which he recently kicked in the teeth with his decision over the Keystone XL pipeline.
If anything, Canada needs to think hard about how to reboot its ties with the United States.
Historically, Canadians have understood that our most critical political and economic ties are with the world’s largest economy, with which we share a 8,891-kilometre border, the longest in the world. Trade is exceptional, with over $600-billion of bilateral trade. Family ties are strong, with many Canadians living in the United States and many Americans migrating here over the years. Security issues are shared since military and terrorist threats know no boundaries.
We have signed many important agreements with the U.S., such as the North American Free Trade Agreement, the Canada-U.S. tax treaty and recently, a promising start to removing unnecessary regulatory impediments to Canadian-U.S. trade. These and other treaties have helped minimize policy confrontations but stronger treaties could have been negotiated in some cases.
For example, the 2010 government procurement treaty lessens the effect of obnoxious Buy American rules under 2009 U.S. Recovery Act that would have hurt Canadian businesses bidding for construction infrastructure contracts. While NAFTA provides an exemption from such actions with respect to certain federal programs, it does not apply to sub-national governments. The procurement agreement exempts us from some discriminatory trade policies of state and local governments, although only temporary relief has been given for agriculture, energy, environment and housing projects, a logic that defies explanation. Why would a “friend” not jump to a permanent exemption?
In the case of the Canada-U.S. softwood lumber agreement, just renewed this week for two years, Canada has had to accept an export charge on its $8.5-billion of lumber exports to avoid a tariff imposed by the United States. While U.S. complaints about provincial logging regulations are fair enough (as if there are no subsidies and tax preferences that support the U.S. forest industry), this historic dispute remains intractably unresolved after so many years.
But it is the Keystone XL pipeline decision that illustrates best the Obama government’s downgrading of Canadian-U.S. relations. Even though the case for the pipeline is clear-cut in terms of energy security and jobs, President Obama’s decision to reject the project was officially based on the need to reroute the pipeline through Nebraska to avoid an aquifer, an issue that could be quickly resolved. But as everyone knows, the real reason for the rejection was to placate an environmental lobby that wants to trap Canadian oil sands production in Alberta. If the shoe were on the other foot, the U.S. would have applied considerable pressure on Canada to approve a Keystone XL pipeline. The whole mismanaged process was an insult to Canada, which is supposed to be a close ally.
This is further illustrated by Tuesday’s Wall Street Journal article co-written by John Podesta, former chief of staff for Bill Clinton and chairman of the Democrat-leaning think-tank Center for American Progress. He criticizes Republicans for supporting a “pipeline that imports more foreign oil,” thereby grouping Canada with Iraq, Saudi Arabia and Venezuela. Has Canada fallen that far down the totem pole?
So what should Canada seek now that U.S. is treating us so shabbily? As with squabbling members of a family, it does little for the small brother to retaliate with actions that only hurt him. In the past, some experts have raised the idea of a “grand bargain” with the Americans to deepen the relationship. But the current protectionist climate doesn’t lend itself to big ideas.