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Time Has Come For Canada to Get Tough With the USA

In order to get anything resembling fair treatment in trade arrangements with the USA, Canada needs to start playing hard ball with the US government, starting with threats to pull out of NAFTA and sell its oil and gas to China instead of the USA.
U.S. Ambassador Celucci

1/15/2005

Way Too Meek on U.S. Trade

The Chinese want our oil. Maybe that will get Uncle Sam's attention.

Tue., Jan. 4, 2005

By Murray Dobbin


TheTyee.ca


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.

 http://www.thetyee.ca/Views/current/TooMeekUsTrade.htm

add a comment on this article

Murray Dobbin's doesn’t know shit. 15.Jan.2005 06:09

End Zone North

Murray Dobbin's might have learned how to conjugate verbs in college as most journalism majors do, but failed to take a class in economics.

For every barrel of oil that Canada sells to China its one less barrel of oil that China buys from its normal suppliers of oil, and thus those suppliers could sell that oil to the US.

The world supply of oil is always 100 percent of what is. If Canada decides to trade with China instead of the US, the world supply has not decreased at all. The price will remain relatively the same, the only cost will be in transportation.

We would love to buy Canadian beef, provided it's safe. Why isn't Canada selling its surplus beef to Japan right now? Because Japan doesn't want tainted beef, that's why and they won't accept it.

Canada can sell its lumber to anybody it wants, so stop complaining that the US should buy it.

re: Murray Dobbin's doesn’t know shit. 15.Jan.2005 09:20

anon

>> For every barrel of oil that Canada sells to China its one less barrel of oil that China buys from its normal suppliers of oil, and thus those suppliers could sell that oil to the US.

If China is trying to get oil from Canada, perhaps it means that China isn't getting enough oil (or wants more than it currently gets). China could buy Canadian oil and *continue* to buy oil from their "normal suppliers". That means the U.S. is short as much oil as China buys from Canada.

China wants much more oil 15.Jan.2005 13:04

Canada can sell her oil to China, and not the USA

China can use alot of oil for its rapidly growing and rapidly industrialising country. It is also starting to build up a national strategic oil reserve, in the tens of millions of barrels of oil, to enhance its energy security. If, as many experts assert, the manufactured mass media image of a large and sustainable, long term affordable supply of oil is an illusion, and Saudia Arabia, Kuwait, etc. are at or near peak production, which production levels will decrease progressively (and possibly substantially) over coming years, whilst world demand for oil increases, then China, India, Brasil and other large, rapidly industrialising nations will be competing fiercely for a declining supply of ever more expensive oil. This situation provides an opportunity for Canada to assert its rights in the trade sphere with the USA. If Canada diversifies its export markets for oil and gas, then the US will need to increase its imports from the Middle East, Nigeria, Mexico, Venezuela, Indonesia, etc, to compensate for reduced imports from Canada, which could be difficult as a result of America's poor and progressively declining political relationship with all these regions of the world. The US Government prefers to maintain a reliable, affordable flow of oil and gas from Canada than having to seek new sources elsewhere in the world. This should provide it with an inceptive to treat Canada more fairly in its trade relationship, for example not placing levies on softwood lumber imports from Canada. It would also be an indication of goodwill if the USA stopped unreasonably harrassing Canadian citizens travelling to and from the USA, and also stopped kidnapping Canadian citizens for rendition to barbaric countries for prolonged torture.

econ 101 15.Jan.2005 13:25

learn something.

There is plenty of oil in the world market.

China wants to buy Canadian oil because they are going to pay for it with Cheap Chinese junk like DVD players, TVs, plastic dogshit, and everything else you can find in a Wal-mart. Arab and OPEC countries don't want it, they want CA$H!!!

If the Chinese wanted to pay cold hard cash for oil they wouldn't give a shit where it came from, Oil is oil basically.

If the Canadians want to sell oil to china by all means go ahead, but I have an idea that the labor unions in the land of the Maple leaf won't go for it, so all of this bullshit about selling oil to China is just that, bullshit.

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