Softwood Lumber and Canada US trade

 

Canada must be careful not to become the U.S.’s trade target

Colin Robertson The Globe and Mail   Wednesday, Sep. 28, 2016

There are bumpy times ahead for global trade and especially for trade with the United States, our biggest trading partner. Canadian governments will have to be nimble lest we get sideswiped or become a target, as is already the case on softwood lumber.

On Tuesday, the World Trade Organization announced that the pace of global trade has slowed to recession levels and it warned of creeping protectionism. Anti-trade rhetoric is a central feature of this presidential cycle, breaking an 80-year consensus within the U.S. that supported open trade and the liberal rules-based international order.

In Monday’s debate Donald Trump again bluntly declared that the U.S. has to renegotiate its trade deals “to stop” countries, specifically naming Mexico and China, from “stealing our companies and our jobs.” A more nuanced Hillary Clinton repeated that she could not endorse the current Trans Pacific Partnership (TPP). Ms. Clinton has promised to name a chief trade prosecutor but in the debate she acknowledged that the U.S. has “5 per cent of the world’s population. We have to trade with the other 95 per cent.”

The most potent threat to Canada would be Donald Trump’s promise to renegotiate the North American Free Trade Agreement. In a report last week the Washington-based Peterson Institute concluded that there is “ample precedent and scope” for a U.S. president to unilaterally raise tariffs and that blocking efforts through the courts or Congress would be “difficult and time-consuming.” Trade expert Gary Hufbauer warned that “enormous economic damage will ensue.”

Meanwhile the clock is ticking on softwood lumber, the Freddy Krueger of trade disputes. Settlement in 2006 depended on the personal intervention of President George W. Bush, tired of having it as a drag on his discussions with Prime Minister Paul Martin and then Prime Minister Stephen Harper.

The 2006 agreement ran out last year and the cooling-off period concludes on October 12. Despite discussions between President Barack Obama and Prime Minister Justin Trudeau and the ongoing efforts of Trade Minister Chrystia Freeland and the United States Trade Representative Michael Froman, the U.S. industry soon will be seeking countervail duties on our lumber exports.

A resolution anytime soon is doubtful. With less than four months left in office, President Obama will spend his remaining political capital trying pass the TPP during the congressional lame-duck session following the November 8 election.

A congressional deal on TPP would likely oblige reopening the agreement. In the ensuing scramble, Canada’s supply management system for dairy products could potentially come into play. The Trudeau government should look at this as an opportunity to reform an inefficient system that costs Canadian consumers.

For now, Canadian negotiators need to understand the political geography around lumber (or timber as it is called in the U.S.) and reconcile the differences within Canada. The Maritimes, where most of the harvested land is in private hands, want a continued exemption from any managed trade deal. Quebec and Ontario have a distinct position. So does Alberta.

There are the differences between coastal and interior British Columbia, our largest lumber exporter. British Columbia’s protectionist policy on the export of logs needs reform. It not only incites U.S. trade action but it is a handicap in efforts to negotiate an economic partnership agreement with Japan.

Despite some initial wobbling, the Trudeau government is demonstrating a similar enthusiasm for freer trade as previous governments.

Ms. Freeland is an effective trade minister, especially in working the political relationships. Ms. Freeland’s personal efforts with U.S. Senate agriculture chair Pat Roberts, a conservative Republican, helped resolve the nearly decade-long country-of-origin dispute.

Earlier this month Ms. Freeland travelled to Germany to help secure the support of the Social Democratic Party for the Canada-Europe trade agreement (CETA). She named former trade and foreign minister Pierre Pettigrew to be our political point person for CETA. The deal is on track for signature in late October, with implementation of much of the agreement in 2017.

Meanwhile, the government’s cross-Canada TPP consultations have become a public education exercise around the importance and value of trade.

In recent years, western governments have gotten out of the habit of reminding their citizens why freer trade matters to their personal livelihood and to national prosperity. Trade is now very much about the politics of inclusion. The current U.S. presidential campaign and the recent Brexit vote are reminders that governments forget this lesson at their peril.

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Hidden Wiring of Canada US Relations

 

How Canada can avoid falling victim to Trump’s protectionist rhetoric

MILWAUKEE, WIS. — The Globe and Mail Tuesday, Jul. 19, 2016

In the coming days both the Republicans and Democrats will adopt platforms that will underline American concerns around security and trade. Donald Trump pledges to “rip up” all existing trade deals “to make really good ones.” Even when we are not the direct target, Canadian interests, especially trade, are at risk of becoming collateral damage.

Assuaging U.S. security concerns and containing the protectionist instinct requires an all-Canada effort by our national and provincial governments.

At the Washington summit in March and then last month in Ottawa, Prime Minister Justin Trudeau and his ministers worked with the Obama administration to strengthen perimeter security with a joint entry-exit program that also should give greater confidence in easing border access.

The Ottawa meeting also endorsed a trilateral competitiveness work plan with a series of measures to reinforce supply chain efficiencies, innovation and stakeholder consultation and outreach. In practical terms, it will help business: further expediting travel with the NEXUS “fast pass” and, eventually, a single electronic portal that satisfies the information requirements of the governments’ multiple agencies.

This effort, led by our trade ministers, should also serve as basis for a continental Plan B so that we can realize the gains from the Trans-Pacific Partnership (TPP) agreement should it fail to secure the required congressional approval for implementation.

We need similar efforts at the state level. This is where protectionist fires start, usually through “ Buy America” policies that are then copied at the congressional level. But by the time these flames reach Congress, we are essentially firefighting so it is better to tamp them down at their source.

Our fire hose has three streams.

First, the hard data that demonstrates that 35 American states export more to Canada than anywhere else in the world. We are the second-largest export market for most of the rest. The data also shows how much the U.S. needs what we sell to them. A recent study for our Washington Embassy concluded that 78 per cent of what we sell to the U.S. is then used to make goods and services in the U.S. Trade with Canada generates an estimated nine million U.S. jobs. We need to define these by district and state.

The second stream is the web of existing reciprocal agreements that cover everything from trade to lending a helping hand in fighting fires, floods, pandemics and other disasters. Many are practical understandings negotiated by states and provinces. Reciprocity means equal treatment, a concept even Mr. Trump can understand, and the basis of cross-border agreements since before Confederation.

The third stream is public diplomacy. Prime Minister Trudeau has taken our envoys off the Harper government’s short leash and told them to be creative in pursuit of Canadian interests.

Our Consul General in Chicago, Roy Norton, entertained Midwest state legislators this past weekend in Milwaukee using a Jeopardy-styled game to inform them on Canada, helping by samplings of Ontario wine and Quebec beer.

After a decade of cuts, however, public diplomacy needs reinvestment in resources and budgets. Given that the U.S. accounts for three-quarters of our trade this would seem to be a “no-brainer.”

If “all politics is local,” then provincial premiers and legislators have a vital and continuing role in reaching out to their state counterparts and reminding them that doing and making things together generates mutual prosperity.

In Calgary this week, the Pacific Northwest Economic Region brings together over 80 legislators from Washington, Oregon, Idaho, Montana, Alaska, Yukon, Northwest Territories, Saskatchewan, Alberta and British Columbia. Meanwhile in Milwaukee, several hundred legislators from Alberta, Saskatchewan, Manitoba and Ontario are meeting with their Council of State Governments’ counterparts from 11 Midwest states.

Legislators build relationships that are important, today and tomorrow, especially given the ladder nature of U.S. political careers. Barack Obama was an Illinois state legislator in 2004. Five years later he was the U.S. president.

These get-togethers debate and pass resolutions on regional issues and in previous years they have encouraged border co-operation and opposed protectionism like country-of-origin labelling. In Milwaukee this weekend legislators endorsed a resolution for a “Protein Highway” to encourage research and entrepreneurship between the Prairie provinces and Great Plains states on high-protein crops.

These regional get-togethers, operating with little fanfare or attention, most closely resemble extended family reunions. They constitute the hidden wiring of our continental relationship. They do practical work.

They contribute to a relationship best described by Harry Truman. This quintessential Midwestern U.S. president, speaking to the Canadian Parliament in 1947 said its working principle is “compounded of one part proximity and nine parts good will and commonsense.”

Relationships, whether prime minister to president or legislator to legislator, are what build good will and common sense.

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Trade, Canada and the US Election

Why trade is taking a beating in the U.S. presidential race

Liberalized trade was once American orthodoxy, but in this volatile and unpredictable U.S. presidential campaign things are different: trade is taking a beating.

Where trade was once welcomed by free-market Republicans and union-backing Democrats, economic nationalism has suddenly united both Republicans and Democrats. Why? The trade issue intersects at the four corners of anti-globalization, anti-immigration, anti-Wall Street and anti-Washington.

Both Republican candidate Donald Trump and Democrat candidate Bernie Sanders have made criticism of trade deals central to their campaigns, forcing their opponents to play defence or to shift their stand on trade.

That’s why it’s worth watching carefully what happens in today’s primaries, especially in Ohio and Missouri. The takeaway from last week’s Michigan primary was that both Republicans and Democrats believe trade agreements are costing Americans their jobs.

For Canada, the stakes couldn’t be higher. America is our biggest market – and it’s essential that we tell Americans that we are also their biggest customer.

There have been critics of free trade in past presidential elections – Democrat Dick Gephardt, Republican Pat Buchanan, and independents Ross Perot and Ralph Nader all spoke out against trade – but they were crucified as flat earth types by editorialists and economists and ultimately spurned by voters.

Today, editorialists have little influence and the economists are split. Robert Reich, who served as Bill Clinton’s labour secretary, calls the Trans-Pacific Partnership (TPP) the “worst deal you’ve never heard of” and Nobel laureate Paul Krugman says the “elite case for ever-freer trade is largely a scam.”

Why voters think trade favours the ‘elite’

Following a long fight, President Barack Obama got the Trade Promotion Authority (the necessary enabling legislation for an up or down vote on the TPP) through Congress last year with the votes of Republicans. But that support is now heading south. Ohio Senator Rob Portman, who served as George W. Bush’s U.S. trade representative is now against the deal. And any congressional vote on the TPP is unlikely until after the November elections.

Most Americans say they know very little about the TPP, an attitude that is shared by most Canadians. The difference is that in the U.S., the more Americans learn about the TPP, the more they oppose it. This is especially true for Republicans.

Concern about trade and the TPP has expanded, Democrat pollster Pat Caddell said last week in Washington, because voters think trade favours the elite, not them. In short, Americans think they are getting “screwed” by their leadership on trade and immigration, says Mr. Caddell. And this backlash against the elites explains, in part, why the GOP establishment candidates are flaming out.

The GOP race is beginning to narrow to a race between two insurgents – Mr. Trump, the populist outsider, and the ideological evangelist Texas Senator Ted Cruz – both of whom are pushing messages around economic anxieties and political alienation. Trade is also the major theme in Mr. Sanders’ campaign and key to his upset victory last week in Michigan over Hillary Clinton. As a result, Mrs. Clinton is now calling for a “trade prosecutor” to enforce other nations’ trade commitments.

Mr. Trump and Mr. Cruz, along with Mr. Sanders, are all tapping into this discontent. Mr. Trump says he will “Make America Great Again” while Mr. Sanders promises a “New American Revolution.” If these forces unify behind a presidential candidate, and find a voice in state and local candidates in the November election, Canada could get sideswiped in a wave of nativism and protectionism.

Why Canada needs to speak up

The Trudeau government needs to do two things: explain trade to Canadians – and then remind Americans why our trade serves their interests.

We should also take full advantage of the promise from Mr. Obama and Mr. Trudeau to try and get a softwood lumber agreement settled in 100 days. Its resolution will only get more difficult when Mr. Obama leaves office. And we need to think about a Plan B should the U.S. not ratify TPP.

The government should use its promised cross-country TPP consultations to explain how Canadians benefit from trade. One in five jobs depends on trade and trade is equivalent to sixty per cent of Canada’s GDP. Training and adjustment for those whose jobs are affected must be part of the equation. Increasingly, trade deals are less about tariffs than regulations. These regulations should expedite trade while raising environmental and labour standards.

Prime Minister Justin Trudeau told the story in Washington last week of the benefits of the Canada-U.S. relationship. Canada is the largest or next largest export market for 45 states. Nine million American jobs depend on trade with Canada.

We need to parse this down to each district then take it to every state legislator and to those who do business with Canada. Our federal, provinical and municipal leaders need to spend more time getting this message out with their American counterparts. We should also make a common cause with Mexico, our North American partner.

Americans need to understand that trade with Canada serves their interests. If Canada fails to deliver that message, the political voices of protectionism and nativism that are now tempting many Americans are likely to win out – leaving Canada as roadkill in the process.

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Homeland Security scrutinizes Canadian Syrian Refugees

Canadian officials have assured U.S.counterparts that Syrian refugees face multiple layers of security screening before they are settled inside Canada.

Canadian officials have assured U.S.counterparts that Syrian refugees face multiple layers of security screening before they are settled inside Canada.
Photo Credit: CBC

U.S. scrutinizes Canada’s screening of refugees

The U.S. Senate Committee on Homeland Security and Governmental Affairs is hearing testimony on Canada’s process of quickly bringing in 25,000 Syrian refugees. Some prominent American leaders have expressed concern that Canada’s screening of refugees may not be adequate and that dangerous people could too easily cross the Canada-U.S. border. About 400,000 people cross every day.

Canada uses several layers of security screening

Canada’s Public Safety Minister Ralph Goodale has told his American counterparts that Canada employs several layers of security screening. Only refugees screened and approved by the United Nations High Commission for Refugees are chosen. They are then screened by Canadian officials abroad and biometrics are collected.

This is by no means the first time prominent Americans have suggested terrorists have easy access to the U.S. from Canada. Canadian officials have had to work hard to dispel the myth.

Terrorist myth persists

“Ever since (the terrorist attacks of) 9/11, there has been this sense amongst many well-placed Americans including people like the chair of the Armed Services Committee and former presidential candidate John McCain and current presidential candidate Hilary Clinton that some of the bad guys came in from Canada. It’s not true. It’s mythology. But it remains there out as a kind of suspicion,” says Colin Robertson, a former Canadian diplomat and vice-president of the Canadian Global Affairs Institute.

ListenNo ‘fast pass’ into the U.S.

Robertson points out that after multiple screenings, refugees are still not granted easy access to the U.S.  “They still come as stateless or Syrian citizens. They can’t travel to the United States without filling out all the forms that the Americans require…So it’s not as if they are getting a fast pass into the United States through the back door of Canada.”

Some Americans would like to step up border security measures by having Canada share its no-fly list and by having both countries share entry and exit information about people crossing the common border. Canada is reluctant to do so because there is more pressure to respect privacy concerns.

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Canada and the World 2016

Three things Trudeau can do to bolster Canada’s international reputation

Assessing geopolitical risk is a booming business for diplomats, spies and money managers.

Continuing instability in the Middle East and North Africa tops the Council on Foreign Relations’ annual Preventative Priorities Survey. At the top of the list is the conflict in Syria and Iraq that creates refugees and breeds terrorists. Current tensions between Saudi Arabia and Iran are a piece of the deep, historical divisions between Shiite and Sunni, Persian and Arab.

Other top-tier contingencies include a crisis with North Korea; disruptive cyberattacks; a terrorist attack on the U.S. or an ally; political violence in Turkey; political instability in Egypt or Afghanistan. Lower-tier contingencies include more Russian aggression in Ukraine; Russia-NATO tensions; European Union divisions caused by the refugee influx; South China Sea confrontations sparked by China.

Nor can we count on prosperous times to assuage tensions. Economists predict another anemic year for China and Europe. Global trade, the engine of growth since 1945, has slowed.

Another challenge that should worry policy-makers: Global democratization is in retreat.

In its annual assessment of social, political and economic freedoms, Freedom House reports that the state of freedom worsened significantly in nearly every part of the world.” The bright spots last year were few: fair elections in Argentina and Tunisia, Aung San Suu Kyi’s victory in Myanmar.

With more governments censoring information and expanding surveillance, Internet freedom declined for a fifth-consecutive year. Not since the Cold War have nation states’ commitment to an international system built on democratic norms been less durable.

Other human rights watchdogs drew similar conclusions, warning that women are particular targets of Islamic terrorists, such as Islamic State and Boko Haram.

Amnesty International wants a “dramatic shift” in how the international community handles the 19.5 million refugees. Resettlement placement remains disappointingly low. Canada, it noted, provided inspiration in pledging to welcome 25,000.

To demonstrate that “Canada is back,” we can do more to support international order.

First, actively recommit to internationalism.

Prime Minister Justin Trudeau has rededicated Canada to multilateralism, and he actively engaged at the quartet of recent international summits (G20, Commonwealth, APEC, Climate). On climate change, Canada put up money and worked constructively to help close the Paris deal.

More effective than creating new democracy institutes is bringing vigour and accountability to existing multilateral programs. This should include our own Parliamentary Centre and our international youth leadership programs.

Second, identify those niches where we can make a difference.

Our expertise in international refugee matters should be reactivated, drawing on our successful experiment in pluralism. We can also demonstrate to the Trumpsters and scaremongers that a generous resettlement policy is good international citizenship and builds a stronger nation.

Containing nuclear proliferation is another niche where we can help. We have both experience and expertise that can also serve our commercial interests in a world that wants to wean itself off carbon.

The “Canadian vaccine” that helped contain the Ebola epidemic makes the case for continuing investment in collaborative scientific research.

Water will likely replace oil as the vital commodity of the 21st century. It’s already the source of regional conflicts. With a century trans-boundary water-management experience, we can help. Significant advances in effective water usage by our oil, gas and hydro industries have wider potential.

And third, let’s invest in the Canadian Forces, especially our navy.

In an era of recurrent humanitarian disasters, there will be frequent calls at 3 a.m. for first responders. The Canadian Forces have demonstrated proficiency, but they need both trained personnel and new kit.

The promised defence review must re-examine our procurement policies. What continuing premium are we prepared to pay, not just in dollars but in fleet readiness, to “Buy Canada”?

Earning our way back to a level of international engagement commensurate with our aspirations means activist diplomacy and Canadian Forces with muscle. This requires long-term investments in money and resources.

The post-Second World War institutions that guided international relations through decades of bipolarity and years of unipolarity are under intense stress.

Coping with the new multipolarity requires every nation, including Canada, to step up their commitment to multilateralism. Queen Elizabeth II got it right in her Christmas broadcast, saying: “It is better to light a candle than curse the darkness.”

The international scene will test Mr. Trudeau’s “sunny ways.” By finding our niches, we can demonstrate that “Canada is back.”

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Keystone and Clean Energy

Why Canada wants to feel more love from the U.S.

Globe and Mail Tuesday, Jun. 24 2014 and in RealClearWorld June 25

Living beside the United States, remarked Pierre Trudeau, is like sleeping with an elephant: “No matter how friendly or temperate the beast, one is affected by every twitch and grunt.” The twitching is getting to the Harper government and it has responded with a series of pokes.

A trio of senior ministers – John Baird, Joe Oliver, Greg Rickford – travelled to New York this month to voice what Stephen Harper calls our “profound disappointment” over the delayed Keystone XL (KXL) pipeline. Said Mr. Oliver: “This isn’t right, this isn’t fair.”

In Winnipeg, Agriculture Minister Gary Ritz accused the United States of behaving like a “schoolyard bully” over country-of-origin labelling.

Last week in Washington, Ambassador Gary Doer and MP Rob Merrifield delivered an invitation from House of Commons Speaker Andrew Scheer to Republican House Speaker John Boehner to visit Canada for discussions on KXL and other issues.

If the Obama administration wants further evidence that Canada deserves some attention it should watch the recent exchange between former ambassador Frank McKenna and U.S. Ambassador Bruce Heyman. “It’s like a marriage. It might be really good for you but I’ve got some problems,” said Mr. McKenna of Canadian frustration over KXL and financing the Windsor-Detroit customs plaza.

Canada-U.S. relations operate on three levels: international, intermestic and people-to-people.

Ours is a complex relationship that goes beyond the traditional diplomatic conventions. Supported by the hidden wiring of connections between provinces and states, business and civil society, it is usually a model for neighbourly relations.

In international summitry, President Barack Obama and Prime Minister Harper are aligned on the big-ticket issues of peace and security, banking and finance, even if they differ on approaches to climate change.

The people-to-people relationship is solid. Americans like us more than we like them. We share much in common, at work and at play, although beating Team USA at hockey is now our main Olympic goal.

It’s on the transactional level of trade and commerce that we have problems, with KXL top of the list. For Canada, KXL is the problem with the partner. For the United States, KXL is a problem with a partner.

Hillary Clinton is right when in Toronto last week she told Mr. McKenna that KXL shouldn’t be a “proxy” for the relationship.

But KXL raises the question: Does the Obama administration have a strategic sense of Canada? We now supply more oil to the U.S. than OPEC. Increasingly, it travels by rail although, as the State Department acknowledged again this month, pipe is safer.

Ms. Clinton calls Canada an “indispensable partner,” but we aren’t feeling the love. Any serious White House study should result in renewed appreciation of Canada’s strategic importance. Pushing forward the border and regulatory initiatives would be welcomed.

Franklin Roosevelt set the framework through a series of trade and security agreements. This approach – Canada as a reliable ally; the U.S. as a trusted trade partner – has been followed by most subsequent administrations.

Its logic holds. The emerging international order is looking more like that of Roosevelt’s era – a multipolar system of sovereign states pursuing national interests. It will put a premium on reliable allies and trade partners.

Last month in Montreal, Ambassador Doer outlined a North American clean energy strategy, one that includes water. Water, says Mr. Doer, will make the debate about going from 85 to 86 pipelines “look silly.”

First: energy efficiency – sharing best practices on oil and gas, wind, solar and other alternatives. We’ve already adopted harmonized standards on tailpipe emissions for cars and trucks. Oil patch collaboration is improving environmental performance, especially on water.

We’ve three carbon-pricing experiments under way: British Columbia’s carbon tax; Alberta’s emissions reduction fund; Quebec’s cap-and-trade. Saskatchewan is experimenting with carbon capture and storage.

Second: energy reliability and renewability. Complete the hardening of our pipelines and electrical transmission grid systems and recognize hydropower within renewable energy standards.

Third: oil and gas development. Together, Canada and the U.S. produce more oil than any nation. Add natural gas and we’re positioning for a North American manufacturing renaissance.

Having led the world in shale development, North American energy ministers should develop continental fracking standards for next year’s leaders’ summit in Canada and then present them at the Paris climate talks.

Mr. Doer’s constructive approach underlines another lesson in managing Uncle Sam: We do best when, through initiatives advancing our shared interests, we make their agenda “our” agenda.

On becoming prime minister, Mr. Harper promised a “new tone” in the U.S. relationship, banishing the drama of the later years under Paul Martin.

Twitches and grunts notwithstanding, Mr. Harper’s initial instinct for a constructive approach to the United States is still sensible.

A former diplomat, Colin Robertson is vice president of the Canadian Defence and Foreign Affairs Institute and a senior advisor to McKenna, Long and Aldridge LLP.

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