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Playing hardball on softwood Canadian minister revives talk of linking energy to lumber deal with the U.S.; Emerson has previously accused U.S. of ‘predatory economic bullying’ Gary Park Petroleum News Calgary Correspondent
A rookie member of Canada’s new federal cabinet has suggested energy could be the club to resolve a protracted Canada-U.S. softwood trade war.
Industry Minister David Emerson, just one month after being elected to Parliament and named to a senior cabinet post, has called for the type of hard-line approach that infuriates the Alberta government and causes the petroleum industry to cringe.
He told the Vancouver Sun that the United States “has to make some fairly significant decisions about their relationship with Canada, just as we have to continually assess our relationship with the United States in a number of areas.
“And you can’t have all of the things that you want and value and are critical to you and not give something back on the other side. And that’s going to permeate a lot of thinking around natural resources generally.”
The implied message from his remarks is that Canada should link its demand for a lumber deal to the more than 50 percent of Canada’s oil and natural gas production that flows across the 49th parallel.
Currently Canada ships about 1.9 million barrels of oil and 10.4 billion cubic feet of gas a day to the United States. Emerson from lumber industry Before entering politics, Emerson was chief executive officer of forestry giant Canfor and a leading spokesman for British Columbia’s lumber industry that accounts for about half of Canada’s C$10 billion in annual lumber sales to the United States.
In those roles he has been in the thick of several years of challenging U.S. duties on Canadian softwood that currently total 27 percent and have been responsible for thousands of forestry sector layoffs that have crippled many British Columbia communities.
In 2002, Emerson attacked U.S. “predatory economic bullying” and on several occasions argued in favor of linking energy with a softwood resolution and an improved dispute settlement system under the North American Free Trade Agreement.
“If you look at softwood lumber, you want their market,” Emerson said. “What do they want from you? The only thing they want from us is to stop sending lumber to the United States. Well, that’s not free trade.
“So you’ve got to find a framework in which you’re holding back something they want, and I think that’s the way Americans negotiate trade deals. They just don’t give you anything for nothing.”
But he did not issue an outright call for cutting off U.S. access to Canadian energy supplies, suggesting only that Canada should consider using a variety of issues “to cause the Americans to pay attention.” Minister says industries vulnerable Emerson said Canadian industries are vulnerable to a highly politicized U.S. trade system and need stronger protection from NAFTA.
He suggested the United States often employs the “flakiest, flimsiest, emptiest case” to impose interim duties on Canadian exporters.
“It’s a disguised gun to hold to the head of foreign exporters to force you to come to heel and satisfy the protectionists in the United States,” he said.
The same frustrations spilled over three years ago when then-prime minister Jean Chrétien told President George W. Bush that if the United States wanted Canadian energy it would have to reconsider a preliminary tariff on softwood.
“You want gas, you want oil and you don’t want wood?” Chrétien said he told Bush. “It’s too bad, but if you have free trade, you have free trade.”
Herb Dhaliwal, then fisheries minister and later natural resources minister, had earlier fired the opening salvo by telling the United States it should not expect cooperation on routing a gas pipeline from Alaska through Canada to the Lower 48 if it continued to restrict imports of softwood.
But Chrétien quickly toned down the rhetoric after a meeting with Alberta Premier Ralph Klein, rejecting the notion of linking softwood and energy.
“There is no need for that,” he said. “It’s a war when you do that. We are free traders and they (the Americans) are free traders and they want to have oil and gas and we want to sell oil and gas to them.”
Klein told Chrétien at the time that blocking C$50 billion a year in energy exports, or pipeline construction could have a “disastrous” impact. Industry leaders oppose linkage Reaction from industry leaders to any thought of linkage ranged from “imprudent to dangerous to madness.”
Earlier this year, Pierre Alvarez, president of the Canadian Association of Petroleum Producers, said any “tit-for-tat” approach to resolving trade disputes “is simply not the right answer. “Without free and open access, projects would simply not proceed,” referring to the Hibernia and Sable projects off Canada’s Atlantic coast and development of Alberta’s oil sands and northern gas, which he described as “too big for what is a very small (domestic) market.”
A poll commissioned by the Canadian Institute of the Woodrow Wilson International Center for Scholars, based in Washington, D.C., found that a strong majority of Americans and Canadians agreed their two countries should create a common set of rules to standardize how energy resources are developed, transported and sold in North America.
Although 57 percent of Canadians thought that increasing energy exports would undermine national sovereignty, 70 percent endorsed the idea of unified rules. Agencies pledge to work more closely In May, leaders of the U.S. Federal Energy Regulatory Commission and Canada’s National Energy Board signed an agreement pledging to work together more closely as regulators on projects such as gas pipelines without sacrificing their sovereign interests.
Newly appointed Natural Resources Minister John Efford has also moved towards more harmonious Canada-U.S. relationships after his predecessor Dhaliwal threatened to withhold permits for a gas pipeline from Alaska through Canadian territory.
“The energy relationship and the export of energy resources to the U.S. is major ... improving those relationships is a must,” Efford said, noting that Canada is now the largest source of crude oil, natural gas and petroleum product imports to the United States.
Jack Mintz, chief executive officer of the C.D. Howe Institute, an Ottawa-based think tank, has called for Canada to renegotiate its trade agreements with the United States to include a continental energy pact, or risk “economic drift.”
He said Prime Minister Paul Martin must initiate work on a pact that would create a level playing field for investors in Canada, the United States and, ideally, Mexico to achieve the cheapest, most efficient way to exploit energy reserves on a continent that is increasingly worried about security of supply.
Mintz said it was up to Canada to find a way to open discussions on free trade matters. “The United States knows it’s a 900-pound gorilla. And they are not going to initiate those kinds of changes.”
U.S. Secretary of Energy Spencer Abraham has openly mused about working more closely with Canada to alleviate the U.S. reliance on Middle Eastern crude.
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