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?

Will Ontario business stand up to Dwight Duncan and keep Ontario open for business?

It is not surprising, and only mildly disappointing, that the government of Ontario would be the first to encourage a negative public response to the proposed merger of the London and Toronto stock markets. It’s an election year, and the Liberal McGuinty government will scramble to make political capital of whatever crosses its desk.

Still, there’s something shameless as well as anachronistic about the statements of Ontario Finance Minister Dwight Duncan.

For several years, he’s effused about Toronto’s prospects as an emerging global financial hub. He’s lectured parochial western Canadian governments that worry about losing their ability to regulate securities in their provinces. His government runs advertisements in numerous smart American magazines, portraying Ontario as an ideal business location. He has at service a powerful Securities Commission, along with other professional agencies, that can deal with the complexity of foreign investment initiatives. He’s a free marketer with a reputation to protect, and he was free to stand aside and let professional regulators respond to this merger proposal first.

Instead, Mr. Duncan was the first to worry about unknown impacts on jobs and to inflate the role of Dubai as a minority investor, saying: “We do business with the Middle East. I am just not sure I want them owning our stock markets.”

He’s linked this merger proposal to the failed hostile take-over of Potash Corp. in Saskatchewan by using that sticky term “strategic.” It would also be a significant merger. But it’s about private soft-ware and private and highly mobile professional skills—not rocks in the ground owned by the Crown on behalf of the people.

He has risen to prominence in a government obsessed with being modern, but he can’t grasp the first principle of great global business destinations—their governments don’t turn every topical business issue into a plebiscite. Indeed, if Ontario is going to go big, it will need to elect quieter governments.

There will be public hearings in Ontario and Quebec about the London-TMX merger and a full-fledged foreign investment review by the Government of Canada. There will be plenty of opportunities to expose and explain what must be tangible net benefits to Ontario investors, industries, and financial professionals.

One thing we don’t yet know, however, is whether the Ontario business community will speak up.

Historically, they’ve left public politics to the politicians—even when their vital interests are at stake. For instance, they mostly stood on the sidelines during the Free Trade and GST debates, and were silent when the last Ontario government abandoned its initial plans to privatize its electricity assets. It is not easy to respond decisively to vague fears with faith in free enterprise. However, if they want to be great, as Mr. Duncan would like, they ought to start asserting themselves.

For starters, they might gently suggest that their elected governments do their homework before stirring people up.

Brad Wall and “strategic” conservatism

Nobody lost an election in Canada this week. But, as in the US, change is afoot.

Stephen Harper lost his most competent minister, Jim Prentice, and his most trustworthy political ally, British Columbia’s Liberal Premier Gordon Campbell. And most importantly, he was publicly out-talked, out-campaigned, and successfully cornered by a rising political star in his own political base and partisan home—Premier Brad Wall of Saskatchewan.

Looking at the bald facts of the issue—should the Government of Canada reject a $40 some billion hostile bid for Potash Corp of Saskatchewan—you’d imagine that everyone would carefully play their fated roles. (Most people in Saskatchewan didn’t like the idea; Premier Wall would have to oppose it, and Harper also needs Saskatchewan to stay solidly Conservative in his next election.) However, Premier Wall doesn’t seem to play “damage control.” Using all means available to him (provincial alliance-building, speech-making, media interviews, and public lobbying in Ottawa), he set out to redefine how we treat foreign investment. He cut off efforts to sweeten the bid and forced Harper to mutely do what his logic and his principles could not embrace.

The impact of Wall’s short, dazzling campaign brings to light important public policy and political issues.

Brad Wall isn’t bilingual but he uses the English language wonderfully. And seemingly, he has the ambition to take a national leadership role in setting national conservative economic policy. With or without silk ties, Thomas Friedman’s one-liners, or conscious intent, he’s pushing conservatism back to a more interventionist approach. This is well within the political traditions of western Canada. As events this week reveal, Harper’s more rigid laissez-faire approach is extremely vulnerable to populist challenge.

Of course, for now, Wall may have put more wind in the sails of Michael Ignatieff than his own brand in the Conservative Party. Nevertheless, what Canada’s cosmopolitan business leaders thought was a national consensus on foreign investment has turned out to be not much more than an agreement to talk about other things, for now.

It’s refreshing to see a politician enjoying a honeymoon with the national press. However, the attacks on BHP Billiton’s bid by Wall and his allies received precious little effective scrutiny. For instance, on October 26^th, Wall volunteered in a letter to the Financial Post that “if forced into this merger, we will use our resource-taxing authority to recoup losses that occur.”

Then, what power over the people’s resource was in jeopardy? Wouldn’t the new shareholders want to maximize the value of this resource?  What is “strategic” anyway about rocks that the people own and can’t physically be smuggled out of the province without being taxed? If rocks are “strategic,” then why not finite reserves of conventional natural gas and oil? Since people are our most precious and mobile resource, should we raise the bar on foreign takeovers across the high-tech sector?

It is ironic that Wall captured the support of the other western Canadian premiers, except Gordon Campbell. For forty years, western leaders argued that the West’s development and diversification demanded both clear provincial ownership of resources and free trade in capital, as well as people. They won both arguments and the West has led Canada’s development since.