CANADA

A revolt over energy

MICHAEL ROSE November 23 1987
CANADA

A revolt over energy

MICHAEL ROSE November 23 1987

A revolt over energy

Controversy da-U.S. free over trade the pact historic continued Canaunabated last week—but with an important new twist. Increasingly, the conflict took place behind closed doors, with officials of the two countries continuing the arduous task of translating last month’s agreement in principle into a precise legal text. But as lobby groups in both countries pressed for changes to the agreement, there was another challenge from an unexpected quarter. Maclean's has learned that senior energy department officials in Ottawa argued vehemently that the government had conceded too much to the Americans.

The dispute over energy began soon after the initial deal was signed on Oct. 4 in Washington. A group of veteran bureaucrats—including the powerful deputy minister, Arthur Kroeger—grew so concerned about certain provisions of the trade deal that they openly questioned the agreement and came into serious conflict with Energy Minister Marcel Masse. They

were also angry, sources said, at the minor role that the trade negotiating team gave to energy department experts. A highly placed Conservative government adviser said that members of that group—who have travelled frequently to Washington to advise Canadian lawyers working on the legal text—pressed hard to reopen key parts of the energy section and caused potentially damaging delays by squabbling with departmental colleagues. Said the adviser: “It’s obvious they would like to kill the whole damn thing, but that’s not going to happen. We’ve signed a deal and what you see is what you get.”

The officials, sources said, are veterans of the 1980 National Energy Program, which gave the federal government a strong hand in managing Canadian resources and sought to ensure that control of the country’s energy supply did not rest in foreign hands. A senior department official who opposes the free trade deal told Maclean's last week that its energy

provisions were “negotiated in a great crush at the end, and the package is far more binding than any existing agreement.” But he denied that there was any attempt to sabotage the text-drafting process or scuttle the accord.

Critics in the department were most concerned about the deal’s socalled “proportional access” clause, which states that if Canada decides to restrict energy exports to the United States in the event of an energy shortage, it must provide American customers “proportional access to the diminished supply.” That would mean that if the Americans were receiving one out of five barrels of oil produced in Canada, they would continue to get one out of five even if Canada’s output dropped by half. In that event, say some industry analysts, Canada might have to provide Americans with scarce energy at the expense of Canadian needs. Other experts insist that the clause is not a threat to Canada’s long-term supply of energy for domestic use. Indeed, industry and departmental officials said last week that despite the battle among Canadian civil servants, the legal text of the energy clauses of the agreement was all but complete.

But other obstacles remained on the American side as the legal teams raced to complete the draft, expected by early December. The U.S. auto parts industry lobbied for changes to help ensure that automakers will rely on manufacturers in North America for at least 60 per cent of their parts. And the American maritime industry wanted shipping to be excluded from the pact. Said one American trade official: “No question—there are clawbacks being attempted by both sides.”

In Canada, meanwhile, sharp differences of opinion remained over the effects of free trade on Canada’s economy. An Ontario government study published last week said that about 400,000 manufacturing jobs in the province could be affected by the deal. Other analysts immediately dismissed the study as misleading because it did not address the potential benefits to Ontario industry of gaining access to the vast U.S. market. Another study being prepared for the Alberta government said that the province stands to gain 40,000 new jobs. In fact, the blizzard of Canadian claims and counterclaims about the trade deal has raised questions in the United States about whether Canada will approve the accord. That doubt will remain until officials hammer out a final draft of the agreement—and the true debate begins.

MICHAEL ROSE

HILARY MACKENZIE

IAN AUSTEN