With softwood lumber, dairy and energy in the crosshairs, tensions and uncertainty over trade relations between Canada and the United States are on the rise. Dr. Laura Dawson is the director of the Canada Institute at the Woodrow Wilson Center, and an expert of Canada-U.S. relations. She discusses what Canada should be doing about its energy relationship with the U.S., NAFTA, and opportunities to diversify trade with other countries around the world.
My name is Laura Dawson. I’m the director of the Canada Institute at the Woodrow Wilson Center in Washington [D.C.]. I focus on a broad spectrum of Canada-U.S. issues, in particular economic issues and, lately, we’re doing a lot of energy work.
Do you think Canada should be concerned with its trade relationship with America?
On the one hand, Canada should be delighted that the U.S. has finally agreed to open up the NAFTA. A lot of folks have been asking to upgrade that geriatric agreement for two decades. So there is an opportunity to improve the terms of the Canada-U.S.-Mexico relationship, but it’s in a context of a lot of anti-trade rhetoric and a lot of uncertainty. I think Canadians are justifiably nervous about what some of the implications of these statements are.
Should Canadians be nervous because there is intent to change NAFTA or that it will actually get changed?
I think they should be nervous about the way that some of these opportunities are going to be operationalized. Canada really needs to remind the United States that it is an important trading partner. It’s responsible for something like five per cent of U.S. employment, and seven per cent of U.S. GDP. None of the things that the United States are doing or talking about are targets towards Canada, but they are kind of forgetting about Canada. They are taking punitive or targeted actions towards China, a certain amount towards Mexico, and I’m concerned that Canada might be caught in the crosshairs.
With the U.S. being our greatest trading partner, is there anything other than approving and building pipelines that Canada should be doing?
I think approving and building pipelines is a great start. Everybody recognizes the need to get Canadian oil out to tidewater, however that happens – east, west, south. But I think in the energy sector, it’s a little bit strange because there’s very little coverage of the energy sector directly in the NAFTA. The North American Free Trade Agreement has a very small chapter that basically ensures security of supply – that Canada will basically keep the taps on and export crude oil to the United States on a continuing basis. And that was reflecting a problem or priority in the early 90s. Now things are quite a bit different. The United States is both a customer and a competitor, and so I think it’s time to talk about that energy relationship, to maybe not add new things to the NAFTA, but to use the NAFTA negotiations as a springboard for a broader tri-lateral dialogue on competitiveness, on improving permitting process, on regulatory alignment, improving efficiencies, etc., and really making good on the campaign promise of not just making America great again but making North America greater and more competitive in the world.
What opportunity is there for Canada in global markets?
At the same time as Canada is talking to the United States and Mexico about the NAFTA, they’re about to embark on a potential free trade negotiation with China. Until Canada can export oil, there’s not a lot of opportunities there in terms of direct exports, but at the same time, an agreement with China would help energy services. It would help in the area of investment certainty. It would help in some intellectual property protection. At the same time, an agreement with China could be really risky. There are some real potential pitfalls and Canadian negotiators are going to have to be really on their game. The thing about energy is that because it hasn’t been included in trade agreements, there isn’t a real tradition of the energy industry weighing in on what should be in these agreements. So I think now is a really good time for organizations like CAPP to talk to its members about a new trade agenda, an energy trade agenda, and how the formal agreements and informal agreements that Canada is undertaking can play a role.
In a global context what kind of strengths does Canada have?
Canada brings tremendous strengths. It’s got, of course, the resource which is very, very strong, but it also brings its domestic security. It is a safe, sane, stable country that respects human rights and respects the rule of law so from an investment perspective, it’s very, very appealing. It’s a country that other countries want to do business with, and want to continue to do business with. I have to say since [Canadian Prime Minister] Justin Trudeau got elected, people in Washington love Canada. We just have to figure out how to operationalize that. Canada, because it is a relatively small country, is a bit more flexible, is a bit more nimble on its feet to do more innovative deals. Canada, because it has a high standard of living, has also relatively higher labour costs, so it has to rely on innovation and new technologies in order to have a comparative advantage in the world. And that innovation works equally well in the energy sector as it does in manufacturing and agriculture.
Do you think there’s anything that gives investors pause to invest in Canada?
I think there’s been a lot of volatility and there have been new markets emerging that certainly investors will be looking at. But in terms of a consistent, stable market, I wouldn’t bet against Canada.
About Laura Dawson
Laura Dawson is Director of the Canada Institute. Named one of Canada’s Top 100 foreign policy influencers by the Hill Times in 2014, Dawson is a speaker, writer, and thought leader on Canada-U.S., NAFTA, TPP, and international trade issues. Previously, she served as senior advisor on economic affairs at the United States Embassy in Ottawa and taught international trade and Canada-U.S. relations at the Norman Paterson School of International Affairs. Dawson continues to serve as Emeritus Advisor at Dawson Strategic, which provides advice to business on cross-border trade, market access and regulatory issues. She is a Fellow at the Canadian Defence & Foreign Affairs Institute and serves on the board of the Council of the Great Lakes Region. Dawson holds a PhD in political science.