What Can We Do to Build Up the Good Trade Story that is Energy?

VIEWS FROM OUR POLITICAL COMMENTATORS: NDP, CONSERVATIVE AND LIBERAL

BY TIM POWERS

BY TIM POWERS

It is hard not to believe that global trade as we have known it is under threat. That challenge is real and has the potential to impact all sectors including energy.

The English Brexit vote and the Donald Trump election in the United States shows there is political traction in protectionism as well as legitimate discontent in different quarters. Unlike past movements or political leaders who sounded the alarm about unfair trade deals then hit the snooze button, actions are now being taken to truly destabilize this multilateral system that has enriched Canada.

Take two significant actions launched by President Trump while the North American Free Trade Agreement (NAFTA) renewal negotiations have been taking place. Trump has vacillated back and forth on imposing tariffs on Canadian steel. While doing that he has declared a trade war with China. In the early days of these skirmishes the North American financial markets took dives during those pronouncements, people’s retirement savings took a short-term punch and everyone scratched their head wondering where things were going.

Our federal government has done a sound job in trying to navigate these forced NAFTA renewal negotiations with an erratic president who has run an administration which appears from the outside to be the definition of organized chaos. Canada’s approach to this whirling dervish of an American President might prove instructive for the energy sector.

The Canadian game plan appears to have multiple prongs. One key element is Canada looks to tell its story of the benefits of trade to multiple audiences that could influence the key decision maker. In this case, Canadian officials from multiple levels of government have been meeting with U.S. Governors, Senators, Congressmen and Congresswomen as well as key business-like groups. If you can get someone else to carry your water who has the ear of the President – why not!

“Our federal government has done a sound job in trying to navigate these forced NAFTA renewal negotiations.”

Tell your story in places where you know the audience you want to reach grazes. Again it is no coincidence during the dust up on would be steel tariffs that Prime Minister Trudeau showed up on MSNBC and CNN talking about all that was wrong with protectionism. He did this from communities like the ones in the U.S. that Trump would purport to save with his populism. It is well known how much Trump likes U.S. cable TV.

Cultivate other options. Don’t just look to walk through one door. Though our Prime Minister has not had any real deep success here, he inherited a European Trade agreement from the previous government, he has been to other places looking to cut deals for Canada. While his China and India trip captured headlines for other reasons, they were ostensibly about increasing Canada’s trade options with those massive economies.

Of course this is not the entire Canadian playbook nor would it be the only strategy a sector could employ. Nonetheless, it provides some guidelines on a diversified approach to selling in a contentious environment.

Tim Powers, is the Vice-Chairman of Summa Strategies Canada and the managing partner of Abacus Data, both headquarters are in Ottawa. Mr. Powers appears regularly on CBC’s Power and Politics program as well as on VOCM in his home province of Newfoundland and Labrador.


Gabriela Gonzalez

BY GABRIELA GONZALEZ

The North American energy sector is well aware of its success as a good trade story but it’s safe to assume that most people, even if they are paying more attention lately because of the NAFTA renegotiations, are not as informed. I propose that we take a moment to reflect on how the North American energy sector’s interconnectedness has made it a success story since the 1990s and why the region is well on its way towards energy independence.

We know that Canada, the United States and Mexico mutually benefit from each other’s energy production: while the U.S. imports Mexican oil and sells it gasoline and natural gas, the U.S. buys oil, gasoline and power from Canada, while selling it oil and natural gas. The Honourable Jim Carr, Canada’s Natural Resources Minister, said it well in early March 2018 at the energy sector’s primary conference, CERAWeek, “…the interests of Canada and the U.S. are aligned very well in the energy sector” and this has been the basis of a long and successful collaborative energy partnership in North America since the mid-1990s. At the same conference, a joint panel composed of Mexico’s Energy Minister, Canada’s Natural Resources Minister and U.S. Energy Secretary, strongly reinforced the interconnectedness of the energy industry across the three countries, tying the region together effortlessly.

It is precisely the sector’s interconnectedness that has made it a good trade story and thus far helped it stay out of President Trump’s protectionist agenda. This success is not by chance, it is likely because energy trade is double the rest of good and services, as Mexico’s Energy Minister reminded the sector at CERAWeek 2018, and there are continued growth opportunities for the three countries.

Now that we know the foundation for North America’s energy sector success, let’s look at ways to sustain this achievement, especially in the age of a Trump presidency.

It would be easy to say just do whatever you have been doing so far since it seems to have worked for the past 24 years, but that simplistic approach won’t cut it in the age of greater transparency, higher environmental standards and political uncertainty in the region’s biggest country.

The industry must remember that the general population doesn’t necessarily tune in to the CERAWeek proceedings or other industry conference. The sector must speak to the general population, not just to insiders and it must remember that all politics are local. Energy leaders must make the case that a healthy North American energy sector means well-paying jobs across the region, that the livelihoods of thousands of communities will be maintained, and that the sector will work hand in hand with regulators and indigenous communities to protect the environment.

Once it has been established that a public narrative is important, then the sector must follow Minister Carr’s advice from his CERAWeek 2018 remarks: governments and businesses must talk to each other. This means that Canadian, American and Mexican mayors, premiers, governors, ministers and all legislators must continue talking to one another about the mutually beneficial trade relationship in the energy sector. Those conversations will help to further strengthen the woven energy fabric and show President Trump that the U.S. is not a victim, but that the energy sector equally benefits all partners in the region.

Lastly, the industry must speak up. Companies, CEOs, the big and small players must speak to each other and speak up through Op-Eds, thought-leadership pieces and media appearances to remind decision makers of the interconnectedness of the North American energy sector and why sometimes staying the course is the best approach.

Gabriela Gonzalez is Consultant at Crestview Strategy. Prior to this, Gabriela worked at Queen’s Park and is a long-time Liberal organizer. Most recently, she worked as a Senior Communications and Operations Advisor to Ontario’s Minister of Economic Development and Growth. Gabriela holds an Honours Bachelor’s degree in Political Science and Psychology from York University and Master’s degree from the Glendon School of Public and International Affairs.


BY KATHLEEN MONK

BY KATHLEEN MONK

This isn’t your parents’ NAFTA negotiations.

I’m sure U.S. and Canadian negotiators who crafted the original 1992 NAFTA deal, would barely recognize the circus-like atmosphere of today’s talks—led by the unpredictable utterances of Trump’s Twitter presidency.

NAFTA was, of course, quite controversial from the start. In 1992, Trump-like independent presidential candidate Ross Perot garnered almost 20 per cent of the vote running on an anti-NAFTA platform, and his famous quip about the “giant sucking sound” of jobs leaving the U.S. under the deal.

In Canada — the John Turner Liberals had run their 1988 campaign on tearing up the U.S.-Canada Free Trade Agreement, though Election Day saw Brian Mulroney easily return to 24 Sussex Drive.

As for the energy sector, the “proportionality clause” of NAFTA has long been the prime target for critics of the deal.

Jean Chrétien’s Liberals took a more modest stance in 1993, with their famous “Red Book” only calling for new negotiations to try and get better terms for Canadian exporters.

As for the energy sector, the “proportionality clause” of NAFTA, has long been the prime target for critics of the deal.

These provisions guarantee American access to Canadian energy, in proportion to the domestic supply. So Canada can only reduce energy exports to the U.S. if they correspondingly reduce domestic consumption.

Recently, this clause has received strong criticisms from left and right alike in Canada, with both the Council of Canadians and the Conference Board of Canada calling for it to be cast aside.

For the left, these provisions could stop Canada from reducing energy exports to the U.S., even in the face of domestic shortages, reduce domestic energy output to meet climate targets and/or decide to ramp up domestic value-added energy production.

For the right, it’s an outdated requirement that dates back to the global energy supply crisis of the 1970’s.

It is also possible that changes to NAFTA’s Chapter 11’s investor-state dispute settlement (ISDS) provisions could affect the energy sector.

For progressives, who have long criticized ISDS provisions allowing companies to sue governments over policies that affect their bottom line, fresh concerns are being raised about the ability of Canada’s government to enact policies in our national interest, for example actions to fight climate change.

Additionally, if a new NAFTA agreement harmonizes industry standards for things like power lines crossing into the U.S., it could become much easier to get Canada-U.S. pipelines approved.

As all three countries are so highly integrated—even mutually dependent as we are each other’s buyers, sellers and investors—it is most likely that a new NAFTA won’t actually change things radically for the energy sector.

But of course that’s assuming America’s wildcard president doesn’t do something unpredictable along the way.

“All three countries are so highly integrated — even mutually dependent as we are each other’s buyers, sellers and investors.”

It’s somewhat ironic that after all these years—and despite the large growth in Canadian energy exports to the U.S., and more recent drops in Mexican exports—American reliance on energy from its North American neighbours is actually back to just about the same levels they were the year the deal was signed. One thing that has changed is the Mexican energy market. Energy reforms introduced in 2014 by Mexican President Peña Nieto opened up the country’s oil and gas sector to private investment. Updating NAFTA to address the new energy dynamic in North America is critical.

The stakes—both political and economic—remain exceedingly high for Canada’s energy industry, and for all Canadians.

Kathleen Monk is a Principal at Earnscliffe, where she is trusted by Canadian leaders to navigate complex public strategy issues, design strategy and bring together diverse stakeholders to tell authentic stories that deliver results. She appears regularly on CBC The National’s preeminent political panel, The Insiders, and provides analysis for CBC News Network’s Power and Politics.