Canada, Japan and Asia

Japan wants more business with Canada but senses our ambivalence

TOKYO — Globe and Mail Tuesday, Mar. 31 2015  Colin Robertson

It is the world’s most populous metropolis with 35 million residents (we Canadians are 33 million). With towers, temples and the Imperial Palace, Tokyo is a labyrinth, intersected by triple-decker roadways, canals and efficient subways.

For Canadians, Tokyo is a good place to do business, with reach into the rest of Asia, but our success requires sustained, focused discipline of which the Japanese are masters.

In the 70 years since the Second World War, Japan has embraced a lively democracy. But the kingdom of 6,852 islands has problems. Japan imports half of its food, and since the Fukushima disaster curtailed nuclear generation, almost all of its fuel.

More serious is its demographic challenge. The Japanese population – 127 million – is aging. It declined by 268,000 in 2014.

Is Japan fated to become just a bigger Singapore? It’s doubtful.

Through innovation and quality delivered by iconic firms like Sony, Mitsubishi and Toyota, Japan maintains its global standing as the third-largest economy. Its economic stimulus program is rebuilding its earthquake resistant bridges, tunnels and roads. Japanese students are top performers in the OECD’s PISA testing for reading, science and math.

Fiscal expansion, monetary easing and structural reform – the three main arrows in Prime Minister Shinzo Abe’s reform quiver – are into their third year. Even though the Japanese renewed Mr. Abe’s mandate last December, the jury is still out on his reforms. He now wants Japanese women to enter the traditionally male-dominated work force, a big cultural shift.

Japanese security policy and its post-war constitutional commitment to pacifism is evolving (Japan is the second-largest contributor to peacekeeping).

Japan still carries wartime baggage: Its abuse of “comfort women” still aggravates China and Korea. Then there is Mr. Abe’s curious historical revisionism. With the approaching 70th anniversary of the end of the Second World War, there is an expectation of renewed Japanese atonement.

The rapid rise of China and its creeping offshore territorial expansionism makes the Japanese, and their neighbours, anxious. Japan remains dependent, but less confident, in the reliability of the U.S. security umbrella, notwithstanding the Obama administration’s pivot to have 60 per cent of the U.S. fleet in Pacific waters.

Prime Minister Abe visits Washington next month to discuss the Trans-Pacific Partnership (TPP) negotiations and the scope of Japanese Defence Force reforms.

A successful TPP hinges on the Japanese-U.S. negotiations around agriculture and automobiles (to which Canada and Mexico should be party). Japanese concessions on agriculture (like Canada on supply management) will hinge on U.S. congressional passage of Trade Promotion Authority.

The recent controversy and division over the Chinese-inspired Asian Infrastructure Investment Bank points to the need for better Western consultation. The West tells China to participate in the rules-based international order but the West needs to demonstrate its willingness to work with China.

For Canada, Japan is a major market and investment source. A joint study in 2012 concluded that reducing barriers could increase Canadian exports to Japan by 67 per cent.

For Japan, we are a source of food and, potentially, energy. A Japanese Foreign Ministry official recounted that he “eats Canadian – your wheat in my pasta, pancakes and noodles and your malt in my beer.” Japan would like closer security and defence technology ties with Canada.

We pursue closer economic relations through two negotiating tracks: the twelve-nation TPP and, though it plays second fiddle to the TPP, a bilateral economic partnership agreement.

Japan wants more of our oil and natural gas. Japex has investments in Alberta’s oil sands and British Columbia’s gas fields. But new investments won’t come easily given the current abundant global supplies. Japanese officials also wonder about our ability to find the necessary social licence for new pipelines and terminals.

We have real assets: our resources; existing family ties (since 1980, half of our immigration has come from Asia); good schools and universities. Transit through our West Coast ports, now with improved pre-clearance, accesses the fastest shipping route between Asia and North America.

But we handicap ourselves: Through our inability to build the necessary infrastructure; our schizophrenia on foreign investment, especially state-owned enterprises; poor marketing of our educational services; and a peripatetic approach to the essential official visits.

Japan would like to do more business with Canada but, like the rest of Asia, it’s not waiting for us to get our act together. Meanwhile, Australia sets the pace on how to do business in Asia.

Like other Asians, the Japanese sense ambivalence about Canada’s commitment to the Pacific. For our own interests, we need to do better.

Colin Robertson is Senior Strategic Adviser, McKenna, Long and Aldridge LLP. He recently took part in a tour of Japan, sponsored by the Japanese government, for members of the Canadian Defence and Foreign Affairs Institute

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North American Energy

Co-operation on energy should be continental priority

VAIL, COLO. — The Globe and Mail

Colin Robertson  Wednesday, Mar. 18 2015

The North American energy revolution is underway. Fuelled by energy self-sufficiency, Canada, the United States and Mexico can create an economic powerhouse that will rival any other regional bloc and guarantee continental sustainable prosperity.

This past weekend, scientists, environmentalists, energy industry representatives and government officials from all three nations met in Beaver Creek, Colo., for the annual Vail Global Energy Forum. Inspired by the spring skiing, the stocktaking was lively, opinionated and optimistic.

The Mexican energy reforms enacted by President Enrique Pena Nieto – combined with those to education, labour and banking – signal a second Mexican revolution.

The reforms promise to curb the economic drivers behind illegal immigration by creating jobs and security within Mexico. This will benefit Canada. U.S. concerns about its southern border inevitably act as a damper on efforts to create a more open northern border.

The Mexican reforms have already opened opportunities for the Canadian energy sector. We are building pipelines and infrastructure for energy generation. Mexican regulators are looking to Alberta’s Energy Regulator for best practices.

We will gain more business when we reform our visa requirement that relegates Mexicans to second-class status within North America. The fix seems obvious: a secure North American traveller program modelled after NEXUS.

Innovation – fracking and continuous improvements in conventional and renewables – is driving the U.S. energy revolution. The United States is now the world’s biggest oil and gas producer (and top in wind production). This remarkable turnaround is already spurring a re-shoring of manufacturing.

Secure energy is also a geopolitical game-changer. Former secretary of state Condi Rice told Vail participants that it creates a better economic base for North America and “for anyone who is dependent on oil and gas.”

U.S. industry is pressuring Congress to reverse its ban on U.S. crude oil exports. They argue that U.S. product will break the grip of OPEC and Russia as the principal suppliers to Europe, Asia, the Caribbean and Latin America.

For Canada, these developments mean that a national energy policy based on exporting to the United States must change.

We have to diversify our markets if we are to take maximum advantage of our resources. This means pipelines to both coasts, new storage terminals and upgrading our existing refinery capacities.

This should be a national priority, a sesquicentennial project on the scale of building of our continental railways, the trans-Canada highway and the St. Lawrence Seaway.

It also means the kind of North American collaboration on energy policy that we achieved on trade and investment. The North American free-trade agreement integrated our markets based on supply chain dynamics. Today’s North American car is built from parts made in all of our three countries.

We need to start with a common understanding of the North American energy picture: What is our capacity? How do we maximize its efficiencies?

We need infrastructure that links our resources safely and efficiently to processing, transmission, transportation and to markets. We need to plan for the future including electricity grids that respond to the recharging of electric vehicles and refuelling infrastructure for natural gas and hydrogen vehicles.

Second, let’s look at the development of common standards on sustainable land and water use. We should be developing “best in class” North American regulations that set the global standard. Canada’s Oil Sands Innovation Alliance is a model for industry pooling of best environmental practices.

Third, we need a permit system for new infrastructure including pipelines and transmission grids that is transparent, reliable and, to the extent possible, above politics.

Fourth, we need energy literacy. Industry needs to work with civil society and environmentalists to explain, educate and demythologize. Hollywood tends to vilify the energy industry. Highly publicized, poorly handled accidents – Deepwater Horizon, Lac Mégantic – have left the public increasingly skeptical around energy development.

National governments must lead the North American energy dialogue. The recent continental energy ministers’ meeting should become an annual affair.

As with politics, all energy is local. State and municipal governments manage much of the regulatory authorities. Our emissions standards originated in California. States’ and provinces’ experimentation in carbon pricing and the practical application of renewable and alternate energies, become models for national and continental practice.

Colorado Governor John Hickenlooper hosts the first-ever continental summit of provincial premiers and states’ governors in Colorado Springs this October and he told the Vail Forum that the agenda includes energy co-operation.

The North American energy revolution is upon us. Let’s take advantage of natural synergies between our resources and markets in North America.

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Keystone XL : Time to move on

Keystone XL has sucked up too much energy; let’s move on

Colin Robertson Globe and Mail Tuesday, Mar. 03 2015

It’s time to put the controversy over the Keystone XL permit behind us.

For six years – half the life of the Harper government – Keystone XL has dominated Canada-U.S. relations. It has sucked up energies better devoted to advancing our regulatory and border co-operation initiatives, including those to ease pre-clearance and to set common standards.

XL cast a shadow over collaboration in the Arctic where we might have followed the example of the Nordic nations and shared with the Americans a four year co-chair of the Arctic Council.

Ironically, Canadian oil is flowing into the United States as never before at volumes almost 50 per cent greater than all OPEC countries combined. Most of it goes by pipeline – by far the safest mode of transport – by tanker, barge, road and, increasingly, by rail.

The “Go With Canada” arguments in favour of the pipeline remain sound. The geopolitical argument bears repeating: Why would you treat a reliable ally, sourcing your essential strategic commodity, worse than despotic regimes that fund and furnish Islamist terrorism? Alberta, Premier Jim Prentice observed, is also the only major foreign supplier of oil with a carbon-pricing scheme. And the vast majority of the refined product stays in the United States.

As President, Barack Obama stands singular in his failure to appreciate the strategic importance of Canada to the United States. The XL veto will solidify his position with environmentalists. Those with big wallets likely will open them to his presidential library. As another Chicago South Sider, the great (and fictional) Mr. Dooley, long ago observed “politics ain’t bean bag.”

If the Obama administration has been small in its treatment of Canada, too often the Harper government has behaved stupidly in its dealings with the United States.

It starts, as Brian Mulroney well understood, with the development of a strong personal relationship with the president. Unfortunately, both Stephen Harper and Barack Obama are “cat” persons – their relationship is not the camaraderie that characterized Reagan-Mulroney or Clinton-Chrétien.

Mr. Harper should have recognized that on the environment, President Obama has religion. Apparently oblivious to the signals around potential compromises on climate from U.S. Ambassadors David Jacobson and Bruce Heyman, the Harper government forgot that ours is an asymmetrical relationship: the United States matters more to Canada, than we do to them.

The U.S. pays us little attention not because they don’t like us – they do (more than we like them) – but because they bear global responsibilities. Our contentious issues – energy and environment, trade and economics – don’t have the same weight as war and peace.

With 9/11, we both invested in a North American security perimeter based on the principle of “inspected once, cleared twice.” Faster sea and land lanes mean that our West Coast ports – Vancouver and Prince Rupert, B.C. – benefit from in-transit trade.

But despite U.S. protests, we recently passed legislation specifically preventing in-transit inspection for counterfeit goods. Particularly galling to the Americans was Industry Minister James Moore’s declaration that “it’s a bit of stretch” to ask Canadians to act as a “border filter for all goods destined for the U.S. market.” Yet that is precisely what perimeter security and “inspected once, cleared twice” is all about.

The takeaway from these incidents is that when small meets stupid we both lose.

Accommodation on all of these issues is doable – something our ambassadors, premiers and governors understand and what business expects of government.

On climate, Gary Doer, Canadian Ambassador to the U.S., has argued for establishing shared standards for emissions, fracking, hydro and the development of a North American energy portrait for strategic infrastructure investments.

To increase trade and investment, Ambassador Heyman has invited U.S. governors to visit and, in two weeks, he co-hosts a D.C. summit to increase joint investment.

Our premiers meet their American and Mexican counterparts this October in their first-ever summit. They will focus on the practical: infrastructure and supply-chain management, education and energy technology. The states and provinces are the best level to address procurement protectionism and to recognize professional accreditation, thus meeting North American labour-market needs.

The tensions afflicting our two national governments are but one level in the multidimensional chessboards of Canada-U.S. relations. We are allied on the increasingly big issues of peace and security. The only damper on the annual migration south of Canadian snowbirds is the plunging Canadian dollar.

Former U.S. secretary of state George Shultz often compares managing Canada-U.S. relations to carefully tending the garden. Mr. Harper and Mr. Obama both need lessons in gardening. Now let’s leave XL behind us and focus on making North America a sustainable, economic powerhouse.

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