Canada’s Atlantic Retreat

It’s conceivable that Canada’s second Calgary prime minister will end his career much like its first, R.B. Bennett: chasing dreams of wealth across the Atlantic.  

Stephen Harper isn’t a traditional anti-American Tory or a Depression prime minister desperate to find new markets in Europe. However, Ottawa’s public service still pines to get out from under America’s shadow and loves to negotiate offshore—and Washington insiders see no career or national advantage in trying to build a stronger partnership with Canadians.

Consequently, Canada’s government is gambling, first, that two have-not provinces—Quebec and New Brunswick—will facilitate additional Western oil exports via an Atlantic port, and, second, that demographically declining Europe will help Canada become “less dependent” on the growing US market. Both projects demonstrate that you don’t have to be a shallow right-winger to give the 19th century another try.

To be fair, for a moment, it’s quite possible that Harper isn’t terribly excited about either enterprise. Almost alone, he still refers to “North American” energy security. Nevertheless, both long shots have been dignified in Canada by the Obama administration’s flippant diplomacy toward Canada and its indifferent approach toward a sustainable North American recovery.

In a piece in the Financial Times on the stalled Canada-EU trade talks and pending US-EU trade talks, Joshua Chaffin repeats speculation that “Washington has been encouraging the Canadians to dig in their heels, knowing that any concessions they win will be a starting point for US negotiators.” Chaffin goes on to note that the EU and US negotiating dynamics will be different: “…they are more evenly matched, whereas the EU economy is almost 10 times larger than that of Canada.”

Chaffin doesn’t offer a clue about what Canadian negotiators think of this rumored American suggestion. It’s a bit rich, however, to imagine that US officials with no demonstrable interest in protecting (let alone expanding) free commercial relations with Canada would tell Canadians to try to act like big boys in Europe.

Instead of negotiating a grown-up customs union with the US to match Europe’s, Canada is now off negotiating on its own. This is a perilous position that wasn’t necessary.

Obama and Harper keep trudging along as conservative administrators in the least imaginative sense of the word.

Keystone XL Project: Canadian understatement should win the debate

It’s not easy for modest Canadian understatement to get attention when the other side claims that their President must side with the "survival of the planet" and nail those polluters up in Canada.

The leaders and campaign strategists of the American Climate Change movement have chosen Fort McMurray, Alberta, as their Selma, Alabama. Never has a protest movement employed as urgent language against the principle business of one boomtown. Never has American advocacy sounded so brave and asked so little of fellow Americans in their 50 states.

That said, in those undramatic moments when Obama was thinking about how he will explain himself to history, Obama would be well-served to read Derek Burney and Fen Osler Hampson’s quiet Canadian case for not blocking the Keystone XL project.

Ticket to North American energy independence was published this morning in the Globe and Mail. The following two sentences almost laughably understate the commercial and North American case for not interfering with a project that has passed US environmental scrutiny—nationally and in affected western states.

“Under NAFTA, Canada provided security of oil supply to the U.S., including supply on a pro rata basis in times of shortage, in exchange for security of demand. No other oil supplier has made a similar commitment to the U.S.”

That “security of demand” is at stake in your decision, Mr. President.

If Canadian governments and Canadians and Americans who invest in Canada can’t be reasonably sure that they have equal access to American consumers, Canada and the partnership will be the poorer; Canada will remain tied to your fate, but not as one who can trust you.

Canada, it’s true, didn’t get a free trade agreement that could've be compromised by future protectionist congresses. That’s probably unattainable so long as we remain entirely separate democracies.

Nevertheless, Canadian businesses have every right to expect that an intelligent second-term President will not hold Canadian energy business to a different, higher standard than American businesses—and make it relatively easier for Venezuela, Congo, and Saudi Arabia’s energy suppliers to do business in the United States.

A New Deal with Canada? “Not a snowball’s chance in hell”

Great political egos don’t rest when they retire. Without advisors and restraining consequences, they are simply freer to roar.

Former Progressive Conservative Prime Minister Brian Mulroney recently informed a hall of university students that Canada’s development on this continent effectively stopped when he stopped leading the country.

Here’s Maclean’s magazine John Geddes’s report:

“Which brings him to a broader point: any Canadian prime minister must not only nurture the U.S. president’s friendship, he must let the world know about it. ‘Look,’ he explains, ‘one of the main instruments of your strength is if you’re perceived as having influence in the Oval Office.’ He illustrates this with another story, one from the very last day of negotiations on the Canada-U.S. trade deal in 1987. James Baker, the U.S. treasury secretary who was heading the American bargaining team, called him to say talks had stalled. Mulroney replied that he would have to phone his friend Reagan at Camp David then. ‘You mention that,’ he says, grinning roguishly, ‘I want to tell you, the Americans, they’re transfixed.’ (So are the St. Thomas students.) Baker got the deal finalized, needless to say, within the hour.

“And that, kids, is why you gotta cultivate your connections. But one last point. Without mentioning Harper by name, Mulroney caps his reminiscing on U.S. relations by observing that Canada, in his opinion, these days lacks the inside-Washington credibility that ultimately secured his trade deal. ‘You try to get that agreement down there now,’ he says, ‘you wouldn’t have a snowball’s chance in hell of getting that done!’”

Brutal. The Mulroney legacy grows as history stands still? Students, don’t give up!

For one thing, don’t worry too much about the telephonic skills of your Prime Minister. Canada’s place in Washington is limited, but not by a Prime Minister’s personal rapport with the President of the day.

It’s cringingly vain for Mulroney to suggest that he could get between President Ronald Reagan and James Baker—his first Chief of Staff, his National Campaign Manager, and his brilliant Treasury Secretary—on any issue of importance to the United States. Reagan and the US Senate made a deal with Canada because it served America’s interests. Period.

And please don’t be intimidated by the idea that what a "legend" did nearly a generation ago can’t be repeated—even improved on—now. 

There wasn’t a snowball’s logic to Brian Mulroney’s entire record of economic accomplishment.

The man was considered a political junky and ruthless cynic when he was elected in 1985. His economic pronouncements appeared ghosted; he talked mostly about business-like government and never endorsed free trade with the US. Smart public servants in Ottawa never imagined that he had the discipline or courage to reform Canada’s sales tax regime, let alone negotiate a comprehensive free trade deal with the US government. 

Furthermore, the times didn’t favor such an adventure. Ontario’s government wasn’t supportive of free trade. The cheap Canadian dollar was giving Canada’s manufacturers a competitive assist. But, generally, they didn’t relish competing on an open and level playing field with the US. In addition, their Republican President wasn’t popular with Canadian voters, and their Congress was full of protectionists.

Still, into hell Mulroney went—and came out with an historic deal.

The odds that Steven Harper will try something big appear slight. Yet prospects for success could be better today than they were in 1987.

Obama is very popular and trusted in Canada. The US economy is growing again. Free traders dominate Ottawa and Washington policy circles, and they have 30 years of success to bolster their arguments. 9/11 thickened the border, but experience argues strongly that further reducing barriers and integrating economic forces is in both country’s interests. Raising middle class incomes is pre-occupying politics on both sides of the border, but it isn’t driving either side to favor protection or reliance on economic nationalism.

Tradition has it that Canada makes the first move. What does Canada need to get the ball rolling? A Canadian agenda and a Canadian Prime Minister who won’t tolerate being patronized by Brian Mulroney.

A North American idea for a presidential election?

Modern campaigns defy the logic of economic development: the more money that’s on hand to spend and the more campaign planners know about market conditions today, the less they think about the future or tolerate new ideas.

Case in point: the 2012 US presidential election.

Some $2 trillion will be spent talking to voters about their economic concerns. A clear majority of those voters can be persuaded that one of the candidates can make a positive difference. In any event, only one set of policy makers will win and be assigned to play dice with America’s future. So, the stakes are high—whether the candidates are gamblers or not.

Under these bracing circumstances, America seems to be stuck in a rerun of France’s recent presidential election: Who can get us back to “normal”?

Romney would stick with the policies of George Bush; Obama wants to return to the 1990s, with Bill Clinton’s wife.

Democrats believe government can help business do more; Republicans believe everyone can get more out of government by giving it less. The only new economic idea of campaign year 2012 that is not already in circulation in China was Newt Gingrich’s public-private partnerships to colonize Mars.

It seems big money politics gags ideas, as well as talks.

When the day comes, however, when the campaigners can’t imagine how they’ll carry on without something new to say, here’s one to work up: rather than speculating about how to persuade or bully the world, why not consider how to complete the integration of North America’s two industrial, energy-rich, high-tech, high-income, highly skilled, free-enterprise, liberal federations—Canada and the United States?

Of course, there’s no focus group research on the subject and whoever first broaches the idea runs the risk of being called unrealistic or (ouch) off message.

However, neither Obama nor Romney will fire the American imagination by asking for A Mandate To Negotiate With John Boehner.

A grand bargain with Canada—a deal that would require sixty votes in the Senate and a majority government in Canada—could put real substance behind the promise of both liberals and conservatives to preserve America’s global leadership and enhance the benefits for middle class Americans from a growing global economy.

A common regulatory framework for energy security and environmental stewardship, a custom and currency union, the elimination of all present border constraints on Canadians and Americans, reciprocal employment rights for skilled workers, graduates and professionals, and joint Canada-US public works to modernize the infrastructure of the Mid-West and the North-West would go a great distance to modernize the “supply side” of the North American economy.

Extreme protectionists and chauvinists on both sides of the border would take offense, only adding a little drama to time-tested ideas.

Sure, there are ready objections to these ideas.

Romney might feel he has nothing to prove as a free enterpriser and stick to attacking Obama on the Canada-US Keystone pipeline delay. Obama may fear objections from Mexican-Americans and industrial union protectionists. 

However, the Republican Party can’t sell free enterprise by just attacking the federal government. And Obama’s credibility with voting Mexican-Americans is sturdy enough to be able to stand for equality for lawful immigrants and a different economic relationship with Canada today than with Mexico.

After working with the governments of Canada and Ontario to subsidize GM and Chrysler, could Obama attack Romney if he proposed an economic union with Canada? Conversely, would Romney dare ridicule Obama—the most popular politician in Canada—for over-reaching?

Five months to go, just wondering.

The China card and Canada’s frayed affair with America

Stephen Harper must have kicked something when he learned that Barack Obama had decided to delay the Keystone XL pipeline project. It’s been some time since he won anything significant for his political base in Alberta, and this $7 billion project would have greatly enhanced Alberta’s long-term economic credibility.

Yes. Harper too has made politically expedient decisions to secure his own majority—for instance, arbitrarily blocking the foreign sale of Potash Corporation of Saskatchewan. Nevertheless, as prime minister, Harper has taken, without reservation, numerous real political risks to bolster Obama’s foreign policy—on Afghanistan, border management and security, Israel, Libya, and, most recently, Iran.

Harper, however, left it to others to vent in public.

The Minister of Natural Resources, Joe Oliver, characterized the Keystone delay as a “wake up call” and then started dreaming about China.

“. . . Diversifying away from the US, particularly in energy, is right at the centre of our thinking. . . .It is a major fundamental strategic objective for Canada.”

Click on: www.theglobeandmail.com/news/politics/canadas-trade-vision-shifts-beyond-the-united-states/article2235094/

As a rhetorical gesture, the statement works.

It sounds big and elevates the strategic importance of the Enbridge Northern Gateway Project, an even more environmentally controversial system of pipelines across British Columbia and oil tankers down its exquisite west coast. Indeed, one retired Canadian strategist warned that Canadians not get too excited. “You can’t change geography,” Colin Robertson acknowledged. The US “is still the biggest market in the world.”

As a true description of what holds the strategic attention of the Harper Cabinet, however, Oliver’s statement is distressing.

Trade diversification is a natural outcome of globalization—the Americans, the Europeans, and the Asians are widening their markets even faster than Canada. But it doesn’t measure up as a comprehensive economic, ethical, or geopolitical strategy for Canada. Trade expansion builds on a strong economic base; it doesn’t substitute for one.

Canada’s geographic location isn’t regrettable; it’s a blessing.

Making Canada richer by being less North American is a lazy, vain idea. As a whole, Canada will only continue to prosper globally by improving its performance in North America and, yes, by helping the US remain a successful great power.

Two hundred oil tankers a year sailing off to China will not create for Canada a better trading partner than it has now or a more respectful American neighbor. The US is not on its knees to secure vast additional supplies of unconventional Canadian oil. A slice of China’s energy market will not make China any less ruthless as a superpower or the loss of North American markets less painful.

The 100 largest US cities alone are economically bigger than China; they are growing as markets and they already practice business, commercial law, and politics like Canadians. At the same time, Canada’s share of their imports is shrinking drastically.

“The numbers are devastating. Between 2001 and 2010, Canada’s share of U.S. imports has fallen to 9.1 per cent from 25.1 per cent in furniture, to 5.4 per cent from 10.1 per cent in electrical equipment, to 4.8 per cent from 10.3 per cent in beverages and tobacco products, to 2.2 per cent from 6.8 per cent in textiles, to 17 per cent from 30.3 per cent in printing, to 10.3 per cent to 18.1 per cent in fabricated metal, and to 19.9 per cent from 31.1 per cent in plastics and rubber.”

Click on: www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/stunning-loss-of-canadian-market-share-in-us-report/article1842144/

Canada isn’t failing as a communicator, it’s failing as an innovator—a competitive producer of goods and services that can create high paying jobs in its own wonderfully liveable cities.

Canada’s Maclean’s Magazine well represented a new confident Canadian nationalism with the headline “I thought we were friends. Obama’s backpedalling on the Keystone pipeline is just the latest slap in the face of Canadians. We do have other friends, you know.”

Is lovable Canada looking elsewhere for love?