It Will Take Two: The Trudeau Government Makes a Bold Debut, but Cannot Improve Canada-U.S. Relations Alone

During the 2015 general election campaign, Liberal Party leader Justin Trudeau gave a speech on the bilateral relationship with the United States that laid the blame for problems squarely on Stephen Harper. “In the end, it’s not really about Keystone. It’s about judgment. It’s about the narrowness that allowed one project in one industry — however large and important the project and industry — to define one of the most positive and prosperous bilateral relationships the world has ever known. All of us, Canadians and Americans alike, are the poorer for it.”

Canadians chose to give Trudeau the chance to change the tone of the relationship with the United States. But on energy matters, as in other areas, there are a complicated set of issues and personalities on the U.S. side that will challenge Canadian diplomats and the new prime minister.

“Canadians chose to give Trudeau the chance to change the tone of the relationship with the United States.”

To begin with, the Keystone XL pipeline was caught up in U.S. presidential politics, with the leading contender for the Democratic Party’s presidential nomination, Hilary Clinton declaring herself opposed to granting a presidential permit to allow TransCanada to complete the project, and every Republican candidate – even Donald Trump – squarely in favor. Moves by TransCanada to take a step back from the controversy surrounding the project, by first withdrawing from a case before the Nebraska state Supreme Court that might permit construction to begin (in that state) without a presidential permit in October, and then by asking to pause the presidential permit process at the State Department, was not enough to take the issue out of the partisan political limelight in the United States.

Beyond oil, many Canadian natural gas exporters were pleased to see the U.S. Environmental Protection Agency issue the final rule implementing its Clean Power Plan that would advance the shift away from coal for electricity generation in the United States. Yet already 24 states have filed lawsuits to block the implementation of this rule putting the Clean Power Plan in limbo for at least the rest of President Barack Obama’s term in office.

The Clean Power Plan is a major element of Obama’s effort to reduce U.S. carbon emissions, and was crucial to his strategy for the United Nations climate talks in Paris. Prime Minister Trudeau arrived at Paris with provincial representatives in tow, and made a Canadian commitment to serious carbon emissions reductions that he will subsequently work with the provinces to deliver. President Obama welcomed Canadian commitments in Paris, but it will be his bilateral agreement with China that he really hopes will cement his legacy, and that will not yield Chinese carbon reductions if the U.S. does not meet its targets – and with the Clean Power Plan before the courts, that may not happen.

“President Obama welcomed Canadian commitments at the United Nations climate talks in Paris.”

Similarly, the North American auto industry is posing a challenge for both Washington and Ottawa. In a coordinated effort, the United States and Canada set a common goal for the auto industry to meet a fuel economy target of 54.5 miles per gallon by 2025 on the basis of the sold (not offered) fleet. Light-weighting (a Canadian specialty) will help firms to meet this target, but lower retail gasoline prices have boosted sales of larger, less fuel efficient light trucks and SUVs this year. In 2017, the U.S. Department of Transportation’s National Highway Transportation Safety Administration will see its statutory authority to support the new fuel efficiency targets come up for congressional reauthorization – and light weighting, which some charge lowers passenger safety, will be hotly debated. If Congress revokes this authority, not only the Obama environmental legacy but the Ontario auto sector will be damaged.

The North American auto industry is already bracing for changes due to the Trans Pacific Partnership (TPP), the most tangible part of Obama’s “pivot to Asia” foreign policy. Under the existing NAFTA rule of origin, vehicles must have 62.5 per cent North American content to qualify for tariff-free treatment; the TPP would lower the threshold to 40 per cent TPP content, forcing Canadian producers to compete for a smaller guaranteed percentage of each vehicle against automotive suppliers from Japan, Vietnam and also Australia, which has lost many of its assembly plants but still has a significant and hungry supplier base.

“The North American auto industry is bracing for changes due to the Trans Pacific Partnership.”

The Trudeau government is unlikely to agree to ratify the TPP agreement until the United States has done so, and the U.S. Congress may delay ratification – in part to avoid a politically sensitive trade vote in an election year, and in part because some would prefer to wait until Obama’s successor is in office to press for possible changes or simply to give the new president credit for ratifying the deal. Still, this too will generate uncertainty in the bilateral relationship that Canada’s new government cannot fix alone.

“Doer was well-liked and widely-respected in Washington as someone who understood energy and environmental issues in detail.”

This is why the National Governors Association meeting in Colorado in late October was a lost opportunity. All of the Canadian provincial and territorial premiers were invited, along with the Mexican state governors by NGA Chair John Hickenlooper, Colorado’s governor, who sought to bring together sub national leaders from across North America. Mexico’s governors arrived in force, but only Yukon Premier Darrel Pasloski bothered to show up. States and provinces are key leaders when it comes to energy and environment. Trudeau would have had some new allies in improving Canada-U.S. relations over energy and environmental issues had the premiers taken up the invitation to Colorado Springs.

“That could foster greater energy integration among all three countries.”

Still, Trudeau can improve his relationship with Obama with two upcoming decisions. The first is his selection of a new ambassador to the United States to replace Gary Doer, who has announced his plans to depart as soon as a replacement can be found Doer was well-liked and widely-respected in Washington as someone who understood energy and environmental issues in detail, and was equally astute when it came to U.S. politics related to both. Whoever Trudeau chooses to send will have big shoes to fill, but also an opportunity to put a new face on Canadian diplomacy.

The other decision Trudeau can make is to host, as soon as possible, the next North American Leaders Summit. These meetings were launched after the tenth anniversary of the North American Free Trade Agreement (NAFTA) and were intended to be annual. The United States hosted the first summit in Waco, Texas in 2005, and later hosted summits in New Orleans (2008), Honolulu (2011) and Washington (2013). Mexico hosted summits in Cancun (2006), Guadalajara (2009), and Toluca (2014). Canada hosted one summit in 2007 in Montebello, but Stephen Harper failed to host meetings in 2010 and 2015 as relations with Mexico and the United States soured.

Trudeau could use his North American Leaders Summit to argue for a North American climate change strategy as Ontario Premier Kathleen Wynne has proposed With a coordinated effort, Canada, Mexico and the United States could advance not just environmental goals, but also give clear signals to energy markets that could foster greater energy integration among all three countries.

“The 2016 election will be preoccupying U.S. counterparts, foreclosing the policy window for major change until another new government takes office.”

Prime Minister Trudeau can do a lot to improve the Canada-United States relationship, and with it, bilateral cooperation on energy and environmental issues. His new National Resources Minister Jim Carr, a Manitoba MP with limited experience with the energy or resource sectors, and his Environment and Climate Change Minister Catherine McKenna, a rookie M.P. with a background on social issues and human rights but new to global environmental talks, will have to work quickly to come up to speed on complex files and develop working relationships with U.S. counterparts chosen by President Obama for their decades of experience in these areas.

In the end, though, it takes two teams to play shinny. With so many issues on the global and bilateral agenda to address, the Trudeau government must manage expectations carefully. New energy in Ottawa may be able to come up to speed quickly, but the 2016 election will be just as quickly preoccupying U.S. counterparts, foreclosing the policy window for major change until another new government takes office with the requisite energy to be a better partner for Canada.

Christopher Sands is Senior Research Professor and Director of the Center for Canadian Studies at the Johns Hopkins University School of Advanced International Studies and a Senior Fellow of the Hudson Institute in Washington, D.C. He also holds the G. Robert Ross Chair in the College of Business and Economics at Western Washington University.