WITH FREE TRADE IN PERIL, PROVINCE TURNS TO TRUST
Prime Minister Justin Trudeau isn’t the only Canadian politician travelling to Washington, D.C. Premier Rachel Notley will head that way at the end of the month.
It’s yet to be decided who Notley will meet with and which government and business officials will join her, but her message will follow what Trudeau is expected to emphasize during his visit with U.S. President Donald Trump on Monday.
Notley, who’s meeting with Alberta business leaders to hear their concerns regarding protectionist trade rhetoric south of the border, is intent on ensuring U.S. officials understand the impact a border adjustment tax could have on the province.
While forestry, agriculture and agri-food companies could be affected, the energy sector would be hardest hit. A tax on oil and natural gas exports would represent a tangible threat to our economy. Simply put, it would render Alberta’s energy production more expensive, and therefore less competitive.
What’s largely been absent from the conversation is how a border adjustment tax would impact U.S. gasoline prices. Recent estimates put the cost at an additional 30 to 40 cents a gallon. That bites consumer spending, and when the American consumer accounts for twothirds of the U.S. economy, that’s not something anyone should want to risk.
North America’s energy sector is very integrated, which does not seem to be well understood within the Trump administration. That integration is key — for reasons of energy security and continental competitiveness.
In addition to exporting almost 75 per cent of the oil produced in Alberta into the United States, Canadian oil and gas companies have made significant investments in the American energy complex. A border tax could negatively impact the valuations of those investments.
The U.S. remains the top destination for Canadian oilpatch investment. Cenovus, Husky Energy and Suncor have interests, if not outright ownership, of refineries south of the border.
Then there are the Canadian subsidiaries of American companies — Imperial Oil, ConocoPhillips, Chevron and Devon Canada, to name a few — that could see the value of those investments impaired. There are also many pipeline companies, such as Enbridge, TransCanada and Pembina, and service outfits, including Precision Drilling, Calfrac and Step Energy Services, exposed to the U.S. market.
Notley and members of her NDP cabinet met Friday with a who’s who of the oilpatch to hear their concerns and better understand what companies and executives — through their own connections — are doing to deter measures that would impact their businesses and the economy.
Imperial Oil chief executive Rich Kruger and Encana CEO Doug Suttles were among those at Friday’s meeting. Kruger has worked with Trump’s new secretary of state, Rex Tillerson, a former ExxonMobil chief executive. Suttles has deep ties to the U.S. energy complex.
The threat of Trump’s proposed border tax and his desire for trade renegotiations has renewed the importance of face-to-face meetings, a practice increasingly replaced by electronic communications over the past decade.
Once again, it’s about relationships, whether at the gubernatorial level or in the House or Senate. By explaining how these measures could affect their respective constituents, upward pressure can be brought to bear on the White House.
One assumes Trump does not want to be handed a drubbing in the mid-term elections two years from now, but that could very well happen if jobs are lost because of his misguided economic policies.
The 10 states most dependent on Canada-U.S. trade, led by California, account for about 4.5 million jobs. Another 25 states also depend on trade with Canada. That’s more jobs, and real votes.
Many people on both sides of the border may not appreciate the efforts made by former prime minister Brian Mulroney to develop a strong relationship with president Ronald Reagan. Without the trust built between Ottawa and Washington, the original Canada-U.S. Free Trade Agreement might not have happened.
Trudeau has given his cabinet similar orders to connect with their American counterparts. Natural Resources Minister Jim Carr, on behalf of the energy sector, has a bounty of individuals to help him build relationships, including Kruger and Suttles.
As the corporate world grapples with the moves being contemplated by the Trump administration, a new form of negotiation — call it CEO diplomacy — has emerged.
It’s manifesting itself not only with someone like Tillerson at the cabinet table, but by company executives setting up meetings with government officials in countries where they have business interests that could be affected by U.S. protectionist policies.
On Friday, Premier Notley talked of unintended consequences, which is precisely what both corporations and governments around the world fear.
Notley alone won’t shift the tenor of trade discussions in Washington, but every journey begins with a small step. It’s important she is making the effort to establish relationships on the ground that could benefit Alberta when trade negotiations begin.
The 10 states most dependent on Canada-U.S. trade … account for about
4.5 million jobs. Another 25 states also depend on trade with Canada.