But today, the threat of Buy American is much greater than in earlier times. The Great Recession has given rise to a new era of big government in the United States and to the largest stimulus bill in history. About $300-billion is being directed toward states and municipalities, which, in turn, have adopted or proposed hundreds of Buy American provisions. Thanks to the Democratic hold on Congress, which could continue for decades (the previous era of Democratic control lasted 40 years), and the powerful influence of protectionist unions on the Obama White House and Congress, we are at the threshold of an extended period of surging protectionist moves, such as the recent country-of-origin labelling of imported meats that Congress has imposed.
The third force in the new triad is environmentalism. Powerful environmental lobbyists and legislators are targeting "dirty oil" from Canada. Congressional initiatives in the name of the environment with a potential impact on trade are already part of U.S. law. The Energy and Security Act of 2007, initiated by Representative Henry Waxman of California, would forbid contracts by U.S. federal agencies to procure unconventional oil with higher life-cycle carbon emissions than conventional oil. The implications for imports from our oil sands are of great concern.
Whether or not the cap-and-trade bill of Mr. Waxman and Representative Ed Markey is adopted in its current form, it is likely that the U.S. will put a price on carbon and that this will give rise to the imposition of tariffs, or other restrictions, on imports from jurisdictions whose laws are not deemed "commensurate" with those of the United States. Given that all or most goods have a carbon imprint, the opportunities for protectionist mischief are immense. Canada, as America's largest source of energy imports, could, in the absence of a highly integrated regime, see our energy exports entangled in a giant web of legal restrictions that could amount to "green protectionism."
If the Energy and Security Act, in which Canada had no input, is taken as the norm, then the Canada-U.S. Clean Energy Dialogue, announced by the President and our Prime Minister, is likely to take place among American staffers in the corridors of Congress in the middle of the night, assisted by the lobbyists who make the Hill their home.
In the face of this triad of forces, what should be Canada's response? The challenge for our government is to think strategically and long term in its relations with the United States. For the Obama administration, national security (including energy supply) is paramount, and Canada must recognize this in our strategies. As for Congress, there must be a broad negotiating field to play off opposing interests and make sure that winners outnumber losers. "Incrementalism" is an illusion.
THE ROAD NOT TAKEN
If we are to seek to preserve our comparative advantage, we should now be aiming to deepen NAFTA, at least between Canada and the United States. Our aim should be to achieve a single economic space and a common security perimeter. Given today's realities, we are unlikely to achieve one without the other. The challenge of achieving such an accord at this time is enormous and would require vision, leadership and deep conviction on the part of the leaders of both governments. In other words, Canada needs to go down the road not taken, even though the chances of reaching our destination are not high.
This is why Canada's strategic thinking must go beyond the bounds of North America. The decision of the Harper government to negotiate a free-trade agreement with the European Union is a welcome one. But as the economic centre of gravity moves inexorably toward the Far East, particularly China and India, Canada should be laying the groundwork for deepening our trade with these countries, where demand for our resources, unlike in the sclerotic economies of Europe, is likely to grow exponentially.
In stimulating our economy, what better time to lay down pipelines to the West Coast and build the port facilities that will enable Canada to be a major partner of the giant economies of the Far East? Failure to diversify can only weaken our bargaining strength and make us more vulnerable to protectionist and other restrictive measures from the south.
Difficult as it might be to pursue such strategies, the Canadian government, if it does nothing, may be left with an even tougher task. "The greatest challenge in public policy," economist Lester Thurow wrote, "is dealing with incremental decline." Let us hope that, through making the right strategic choices, we will not have to face that challenge.
Allan Gotlieb was Canada's ambassador to the U.S. from 1981 to 1989 and is a senior adviser to the law firm Bennett Jones LLP.
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