Pierre Trudeau once said that living next to the United States was like sleeping with an elephant: Even if the beast is friendly and even-tempered, his enormous bulk means that Canada is affected by every twitch and grunt.
His son now knows what dad was talking about. As a result of the U.S. election, much of Prime Minister Justin Trudeau’s agenda – on the economy, trade, energy and the environment – threatens to be thrown into disarray.
The elephant to the south may still be friendly, but post-November 8, he is definitely less even-tempered. And he’s twitching and grunting, violently. Canada has to figure out where the elephant is going, how we might direct his moves to our advantage, where we must shift with him, and when we need to get the heck out of the way.
Let’s start with the positive.
Keystone XL: Mr. Trump’s platform inadvertently gave Canada’s oil industry, and the Trudeau government, a giant gift. He promised to remove roadblocks to building energy infrastructure – and specifically mentioned the Keystone XL pipeline.
That’s a game-changer for the Canadian oil patch, and it even reshapes the landscape of Canadian politics. If Keystone is built, there may still be a need for domestic Canadian pipelines, such as Energy East to the Atlantic and Trans Mountain to the Pacific. But that need is less urgent – economically and politically. The Trudeau government, which was preparing to spend enormous political capital pushing through Canadian pipeline infrastructure, may now have to spend far less, thanks to Mr. Trump.
For Canada, that’s the upside of the U.S. election. The downsides are many, as are the question marks.
The environment: The Paris climate accords are now a dead letter in the U.S. Various states may continue to take steps to lower greenhouse-gas emissions, but a Trump-led Washington will be moving in the opposite direction.
That is disastrous for the planet. If the world’s largest economy doesn’t believe in climate change, the carbon-reduction measures undertaken by other countries, such as Canada, start to look pointless. That doesn’t necessarily mean the end of the Trudeau government’s plan to get all provinces taxing carbon. Canada and the U.S. have different tax rates and rules in many areas, and the sky does not fall. And much of the environmental action in America is at the state level. States such as California will continue to put a price on carbon.
But a big part of the premise behind the Canadian carbon-pricing exercise, as embraced by the Trudeau government and Premier Rachel Notley in Alberta, is that Canada’s oil industry can only earn American “social licence” for things like pipelines if it is garlanded with green credentials.
A week ago, that might have been true. Not any more.
Canada can still raise carbon taxes while the U.S. ditches them, and there are compelling arguments for doing so. But some industries are extremely sensitive to cross-border cost differentials – and if one jurisdiction offers noticeably lower energy costs, companies will pick up and move. There are ways to address this, but some of Canada’s carbon plans are now operating under a blinking amber light.
NAFTA: Mr. Trump’s “Contract with the American Voter” says that on his first day in office, he will “renegotiate NAFTA or withdraw from the deal.”
Given that Canada is the most trade-dependent economy in the G7, and the bulk of our trade flows north-south, much of it through supply chains crossing and recrossing the border, it would be an understatement to describe Mr. Trump’s pledge as problematic.
However, his target, and that of his voters, is not Canada. It’s Mexico. There aren’t many folks in the Rust Belt who think Canada stole their jobs. Demonizing Canada for America’s problems is such a comedically absurd idea that the guys behind South Park spun it into an Oscar-nominated movie.
Exactly what Mr. Trump and a Republican-controlled Congress want to do with NAFTA, and on trade in general, remains to be seen. Congress and the White House may not be entirely on the same page. Republicans, remember, have always been pro-free trade. President Obama could rely on Republicans in Congress to back trade agreements that much of his own Democratic party opposed.
Nevertheless, Canada risks being side-swiped by a ham-fisted dismantling of NAFTA. Which is why the Trudeau government was right to immediately signal to president-elect Trump that Ottawa is always open to talking about improving the deal. When the elephant complains, you listen. Intently.
The border: Mr. Trump’s rhetoric promises Fortress America: “extreme vetting” of immigrants, expelling illegal migrants, severe punishments for people who overstay visas or enter illegally, and of course that giant wall along the Mexican border.
What does it all add up to? Other than the Mexican border wall, it’s hard to say. And like the rage against NAFTA, none of this is aimed at Canada. But it could end up hitting this country just the same.
The situation is reminiscent of the years following 9/11, when the Bush administration sounded as if it was going to dig a moat and raise the drawbridge against the rest of the world. Ottawa’s goal today, as it was then, must be to ensure that the Canada-U.S. border, Canada-U.S. cargoes and Canada-U.S. travellers continue to be treated differently. The more the U.S. thickens its border with the rest of the world, the more the border with Canada must be relatively reduced. If American walls go up, Canada has to be inside those walls.Report Typo/Error
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