The Bush administration is refusing to play by the North American Free Trade Agreement rules, endangering an entire two-way trading relationship across a wide front and threatening to drag energy into the dispute, warn provincial premiers and federal cabinet ministers in Canada.
The situation is so grim, British Columbia Premier Gordon Campbell thinks it’s time to remind his neighbors to the south how much they rely on Canada for energy.
He told reporters Aug. 12 that exporters of natural resources from his province — which is second only to Alberta as a gas producer — may start shifting to friendlier markets in the Asia-Pacific region.
Campbell said the U.S. refusal to accept NAFTA softwood ruling means the only alternative is to “look beyond American markets. And make no mistake China and India want our energy resources.
“We are friends with the United States. We have a huge partnership we can build on. But if you can’t rely on the rule of law, what do you rely on?” Campbell asked.
Klein opposes using energy
As he has in the past on the prospect of turning energy into a bargaining chip, Alberta Premier Ralph Klein said he wants nothing to do with such “vindictive” measures, regardless of the outrage being expressed in Canada over Washington’s dismissal of a final ruling by a NAFTA panel on Aug. 10 that would have ended a prolonged softwood lumber dispute.
But even Klein showed frustration when he said the “Americans are not shy about expressing their need for oil and gas and are not shy about moving into Canada to take advantage of that secure and reliable supply.
“Yet, when it comes to something like softwood lumber, they are all too willing to violate the rules of NAFTA.”
However, as he has in the past, Klein said that using energy “to force the Americans to the table” could trigger a vindictive response from Washington, which will “start to escalate.”
U.S. dismisses NAFTA decision
In the idyllic surroundings of the Canadian Rockies resort town of Banff, the atmosphere turned ugly when Canada’s 10 provincial premiers and three territorial leaders realized that the U.S. government was dismissing as irrelevant the decision by a NAFTA “extraordinary challenge committee” to uphold Canada’s lumber practices.
It was the fourth time a NAFTA panel said the United States had failed to prove that Canadian softwood posed a material threat of injury to U.S. producers.
Instead, a spokeswoman for U.S. Trade Representative Rob Portman insisted that the only outcome acceptable to Washington would be a “permanent and negotiated resolution.”
In the meantime, Canada’s forestry sector has lost thousands of jobs and paid C$5 billion in punitive U.S. duties since 2002.
The latest panel declared that Canadian provinces do not subsidize their lumber producers, effectively opening the way for return of the C$5 billion.
Campbell said Aug. 11 that Canada’s Prime Minister Paul Martin promised he would speak directly to President George W. Bush about the latest lumber developments.
“It’s hard for us to see how you build a long-term relationship, whether it is any kind of trade if the Americans aren’t willing to live up to their legal obligations,” said Campbell.
“Hopefully, the (Bush) administration will act aggressively to solve this problem and move it forward. I’m looking forward to the prime minister’s report back on his call to the president.”
Energy threat blocked in past
In past years, both federal and provincial cabinet ministers have been swiftly rebuffed by colleagues for suggesting Canada’s most potent response would be to block oil and natural gas exports that are critical to U.S. energy needs, or to block approval of an Alaska gas pipeline through Canada.
One of those to pay the price was former federal Natural Resources Minister Herb Dhaliwal, who was back on the offensive Aug. 12, urging the Canadian government to impose a surtax on natural gas exports to the United States, a strategy he said would effectively force the Americans to refund the softwood duties.
“You have to play hardball with the Americans,” he told the Globe and Mail. “Otherwise we are just going to get bullied by them.”
The Canadian premiers and territorial leaders, who happened to be in Banff for their annual meeting, quickly adopted a resolution calling on Ottawa to take all necessary measures to recover the duties and force Washington to respect the ruling.
Canada’s International Trade Minister Jim Peterson and Industry Minister David Emerson warned Washington that it was compromising the integrity of NAFTA.
“We respect our NAFTA obligations and partners and expect nothing less from our fellow NAFTA members,” they said. “It is time for the United States to do the right thing.”
New U.S. ambassador adds to fury
David Wilkins, former speaker of the South Carolina House of Representatives and newly installed as U.S. ambassador, added to the fury by playing down the lumber problems, arguing that most of the C$1.8 billion in daily two-way trade is trouble-free and calling for a negotiated softwood settlement.
“Ninety-six percent of our trade is harmonious, only four percent is contested,” he told the premiers.
Campbell, whose lumber producers have paid C$2.75 billion of the duties, fired back that the U.S. refusal to comply with NAFTA rulings could undermine the principle of “hemispheric free trade” by Canada, the United States and Mexico.
“Why would we depend on a partner who doesn’t believe in the rule of law?” he said. “It’s time for the Americans to return the almost C$5 billion they have illegally taken …”
Dalton McGuinty, premier of Ontario, Canada’s most populous province, told Wilkins not to underestimate the “potency of the symbolism connected with (softwood),” while Quebec Premier Jean Charest said spurning the latest NAFTA ruling “contaminates other trade issues … it brings us to a tipping point.”
