Way Too Meek on U.S. Trade

The "promise " by the U.S. to end the ban on live cattle exports serves to remind us just how perverse U.S. trade law is and how corrupted is their democratic process. Canadian cattle ranchers are not holding their breath. They’ve understood that anything could happen in the two months between now and the March 7 date for lifting of the ban – and with the announcement of another mad cow find in Alberta, albeit well beyond the beef supply stream, the U.S. may have its pretext for stalling all the more.

In the lumber dispute, the U.S. continues to show contempt for the WTO and NAFTA, institutions it was largely responsible for creating. When you are an empire, it is very difficult to see why laws that apply to others should apply to you. Those who run the U.S., of course, have always maintained their nation doesn't have friends, just interests. But that is even more true now and if the Martin government really wants to deal with this reality it has to fight to win.

Even Paul Celucci , the American ambassador to Canada, seems to think Ottawa needs advice. He has actually suggested openly that only Canadian trade sanctions will get the attention of Congress on trade matters. Celucci was referring to the Byrd amendment, legislation which allows Washington to hand over to American corporations any cash that is gleaned from U.S. countervailing duties levied against foreign business competitors.

But dealing with the U.S. goes beyond this obnoxious law (the WTO has now authorized sanctions against the U.S. by eight countries affected). Canada has to play the cards it has to deal with trade harassment that occurs even after it wins rulings. And Canadians have to begin telling their government to develop a little courage to do so.

‘Bay Street scare tactic’

The counter-argument, of course, is that we depend on the U.S. for 85 percent of our export market and the Americans might close the border if we don't knuckle under. This is just a Bay Street scare tactic. It isn't just exports that have skyrocketed since we signed the free trade agreement  - imports have risen even faster. Thousands of U.S. companies and many U.S. states depend on Canada for huge percentages of their exports. They would be screaming at their Congressional members five minutes after any border action was threatened. The auto industry is so integrated that closing the border would shut down all U.S. production within weeks.

But the biggy is energy. It is the most important item on the trade list, because to the US it means security. The U.S. is desperate to establish energy security and is involved in a world-wide effort to do so, including massive political interference in the Balkans and other areas where oil or oil pipelines are critical to future U.S. supplies. And the biggest threat isn't Middle East instability - it is competition from China. The apparently permanent spike in oil prices is driven in large part by exponential increases in demand from China.

If Canada really wants to get the attention of the U.S. the two-by-four they need to hit them with is made of oil and gas. Assuming for the moment that the US actually threatened to 'close the border' one of the first affects would be to effectively abrogate NAFTA.  How can you have a trade agreement with a country that closes, or even restricts the border to trade?

Let’s rethink NAFTA

The main benefit of NAFTA to the U.S, the reason they signed in the first place, are the energy provisions which include a proportionality clause. That clause says that we can never decrease the proportion of our oil and gas production we send south of the border. But if NAFTA was unilaterally abrogated by the U.S. that clause would no longer apply. Canada could unilaterally threaten to decrease its exports, reminding the U.S. that they need us as much as we need them.

The "closed border scenario" is never going to happen. But as it turns out, there is no better time than the present to shake the U.S. out of its bad habit of taking Canadian energy for granted. The U.S. has had no competitor for our oil and gas - until now. While the U.S. is trying to tie up global energy supplies and keep them from China, China is now aggressively pursuing energy resources in America's own back yard, including Venezuela and Canada.

In the past few weeks delegations from large Chinese oil companies have been in Calgary talking about developing oil sands plants. According to press reports a half dozen projects are under consideration, valued at $2 billion - and that's just the beginning. The oil sands are one of the biggest oil reserves in the world. Talks on expanding an existing pipeline to the West Coast, and building a new one have already taken place.

Claudia Cattaneo, a Calgary energy columnist for The National Post, recently stated: "Watch the Americans have a hissy fit if a Chinese incursion materializes."  At about that time, Canada should demand negotiations on permanently eliminating trade harassment by the U.S. Department of Commerce. Given that the U.S. will never give up its trade sanctions weapon, the next logical step is a national debate in Canada about abrogating NAFTA.

Murray Dobbin's 'State of the Nation' column appears twice monthly on The Tyee.