Alberta’s recovery from one of its deepest economic slumps could be hindered if businesses looking to invest in the province sit on the sidelines and wait to see if U.S. President Donald Trump limits imports of energy and agricultural products.
After two years of recession and steep job losses, Alberta Premier Rachel Notley’s government is banking on a rebound in 2017. But that could be delayed if Mr. Trump’s protectionist rhetoric is aimed northward, according to Trevor Tombe, an economics professor at the University of Calgary.
“If you’re a firm trying to decide where to locate a certain proportion of your supply chain, you’re probably going to take into account policy uncertainty that now exists between Canada and the United States,” he said. “At the very least, you’re much more likely to wait to see how things play out over the next few months.”
As Mr. Trump was inaugurated on Friday, the White House said renegotiating trade deals such as the North American free-trade agreement is a priority. The President’s nominee for commerce secretary, Wilbur Ross, said this week that discussions will be aimed at improving the lot of U.S. manufacturers.
Though much of the tough talk has been focused on Mexico, it has raised major concerns at the national level in Canada. Indeed, Bank of Canada Governor Stephen Poloz warned on Wednesday that uncertainty over increased U.S. protectionism could mean a “material” potential hit to the Canadian economy.
Alberta is a major player in the trade relationship as an exporter of energy, petrochemicals and agricultural commodities, and forecasters had projected that the provincial economy had been on the road to recovery this year as conditions improve.
Ms. Notley said on Thursday that her officials in Washington were working on a plan to prepare for the new U.S. administration but it wasn’t ready. Instead, she credited her trade minister, Deron Bilous, for helping diversify markets for exports. The recent approval of the expansion of the Trans Mountain pipeline linking Edmonton with Vancouver has been trumpeted as a big step, but neither the pipeline nor Mr. Bilous’s diversification efforts are expected to boost growth in the short term. The trade minister’s office declined requests for an interview.
“Albertans need a government that will do everything they can to build trade opportunities and protect trade opportunities for Albertans,” Ms. Notley said. “We’re pleased that we already had Minister Bilous in place, doing that work, building relationships with our biggest trading partner, the United States.”
Energy, which is crucial to Alberta’s economic health, is one area where trade irritants could be few, however. In its “America First Energy Plan,” the new administration said it is “committed to achieving energy independence from the OPEC cartel and any nations hostile to our interests.” It did not mention Canada, its largest foreign oil and gas supplier.
Under NAFTA, oil and gas have flowed over the border with little complication, leading to a vast expansion of energy production in Canada and the development of extensive infrastructure.
Indeed, Mr. Trump and his Republican colleagues have pledged to approve TransCanada Corp.’s Keystone XL pipeline, which would ship up to 800,000 barrels of Canadian oil to U.S. refineries each day.
The shale-oil revolution has triggered a surge in domestic production in the United States but has not made the country self-sufficient, Jack Mintz, director of the University of Calgary’s School of Public Policy, said in a recent interview. Canadian supplies are still essential.
“If you break up NAFTA and Canada says, ‘Okay, we won’t export as much to the United States. We’ll put more emphasis on and allocate more to the world market.’ …They always were concerned about pipelines going to the West Coast,” Mr. Mintz said.
Meanwhile, increasing volumes of natural gas flow into Canadian markets from the United States, as output from the Marcellus formation in the Northeastern states climbs, showing how the industry is a two-way street.
Mr. Mintz is a director for Imperial Oil Ltd, which is majority owned by Exxon Mobil Corp. Rex Tillerson, Exxon’s outgoing CEO, is Mr. Trump’s nominee for secretary of state. The company has benefited from the unfettered cross-border trade and it is seen as unlikely Mr. Tillerson would counsel the President to force major changes to that relationship.
There could be trade clashes in agriculture. John Masswohl, director of government and international relations for the Canadian Cattlemen’s Association, said he is less worried about changes to NAFTA than potential U.S. efforts to gain preferential treatment in other export markets. For instance, the Trans-Pacific Partnership, which Mr. Trump opposes, would have meant equal import duties for supplies within the pact, he said.
“I think what he wants, is America first – basically America gets a better deal than anyone else, where you have kind of a hub and spoke. He still wants to do bilateral deals, it seems. Like in Japan – maybe America would do better in a bilateral deal than Canada might,” Mr. Masswohl said.
Canada exported $2.2-billion of beef in 2015 and 71 per cent of that went to the United States.Report Typo/Error
Follow us on Twitter:,