What was behind Trump’s comment on NAFTA and energy?
April 22, 2017 – 10:07am
There is wide-ranging speculation on the implications of US President Donald Trump’s recent comments about Canadian energy exports and the upcoming renegotiation of the North American Free Trade Agreement (NAFTA).
On Thursday (April 20), Trump said, “I was in Wisconsin the other day, and I want to end, and add, by saying that Canada, what they’ve done to our dairy farm workers is a disgrace. It’s a disgrace. We can’t let Canada or anybody else take advantage and do what they did to our workers and to our farmers. And again I want to also just mention: included in there is lumber, timber and energy.”
The Globe and Mail now reports, “Neither Canada’s government nor oil industry have any idea what U.S. President Donald Trump was talking about when he warned that the U.S. will target Canada’s energy sector in renegotiations of the North American free-trade agreement. Finance Minister Bill Morneau, in Washington at the International Monetary Fund and World Bank spring meetings, said he could not think of any energy-related trade disputes between the two countries.”
A border adjustment tax?
That article adds, “Mr. Trump did not specify what he was aiming to do. He has previously presented himself as a friend to Canada’s oil and gas sector, restarting the Keystone XL pipeline project blocked by Barack Obama. The President is planning to unveil his tax plan next week [on April 26], which some economists have speculated could include a tax on foreign oil imports.”
According to the US Energy Information Administration, the US imported 3.76 million barrels of oil a day from Canada in 2015. Last month, the US Department of Energy said the United States posted a $39 billion energy-trade deficit with Canada due to imports of oil, natural gas and electricity.
An American border adjustment tax on energy exports from Canada would be a clear violation of NAFTA.
Proportional sharing clause for Mexico?
The article further speculates, “The United States is heavily dependent on Canada for oil and gas because it does not produce enough to meet demand. A more likely target for NAFTA negotiations is Mexico’s energy sector, which has historically been the subject of government monopolies but has been opened up to private investment since 2013. One Canadian official, speaking on condition of anonymity, said bringing Mexican oil and gas under NAFTA would be an attractive prospect in trade talks.”
This could suggest that Trump may seek to have NAFTA’s proportional sharing provision apply to Mexico as well. That provision basically says that Canada must maintain at least the same level of oil and gas exports to the United States as it had supplied for the past thirty-six months. Author-activist Gordon Laxer has commented, “Proportionality, the de facto, mandatory-exporting clause applies only to Canada, since Mexico refused it.”
In December 2013, Mexico ended 75 years of government control of its oil reserves when it passed an energy reform law that allows transnational corporations to explore and extract oil and gas. That reform is expected to attract as much as $15 billion of foreign investment annually and increase oil production to as much as 4 million barrels per day by 2025 and double natural gas production.
Speculation has suggested that NAFTA negotiations could begin this summer or fall.
Former diplomat Colin Robertson has stated, “At the earliest I think the renegotiation – with or without Mexico – will take at least a year, probably 19 months. After that we have to go for ratification, which adds on another year plus. My guess is that NAFTA, or whatever we call it, doesn’t get wrapped up until spring or summer 2019, meaning it will be front and centre in our October 2019 election.”
Mexico’s economy minister Ildefonso Guajardo sees a shorter time frame. He believes talks could start in late July and be concluded in April 2018. That may be because a general election will take place in Mexico in July 2018 and the early front-runner to be the next president of Mexico is Andres Manuel Lopez Obrador, a vocal opponent of Trump. He has stated, “[NAFTA] didn’t hurt, but it wasn’t the panacea”, suggesting he would be willing to walk away from the deal during the negotiation process.
To demand public consultations on NAFTA — and the removal of the proportional sharing clause from NAFTA — please click here.
North American Free Trade Agreement (NAFTA)
The clock is ticking on the North America Free Trade Agreement (NAFTA). Both the U.S. and Canada have opened up public consultations on the tri-country deal between Canada, the U.S. and Mexico. NAFTA renegotiations could start as early as August.
President Trump has made it clear he wants
NAFTA renegotiation to put “America first.”
Prime Minister Justin Trudeau has unsuccessfully tried to placate Trump. Prime Minister Trudeau has also tried to defend the deal, despite the evidence. For years we have seen the ravages of NAFTA – the Chapter 11 corporate lawsuits that have cost Canada millions of dollars and eroded our environmental and public policy, hollowed out manufacturing towns and hundreds of thousands of people put out of work, and greater inequality in Canada, the U.S. and Mexico.
We must stand up for an alternate vision – NAFTA renegotiations present an opportunity for a better, fairer NAFTA that will improve things for people and the planet.
Give the Canadian government a strong negotiating mandate by calling on it to:
► Eliminate Chapter 11, the investor-state dispute settlement (ISDS) process, from NAFTA. ISDS provisions allow corporations to sue governments for policies or regulations that restrict corporate profits. Corporations have used these provisions to challenge laws that protect people’s health and the environment.
► Remove all references from NAFTA to water as a good, service or investment. Canada is vulnerable to bulk water exports and increased privatization under the deal. President Trump could see Canadian water as a way to hydrate drought-ridden U.S. states.
► Eliminate NAFTA’s energy proportionality rule. This rule requires Canada to export a locked-in percentage of our energy production to the U.S. This forces continued production in the tar sands, which will stop Canada from meeting its climate commitments.
We must stand up to Trump’s dangerous agenda on trade. We can make NAFTA fairer by protecting and expanding Canadians jobs, safeguarding water and the environment, and strengthening our economy.