UP FRONT

THE ENERGY PAYOFF

Martin may parlay Bush’s desire for oil security into freer trade across the border

Mary Janigan February 14 2005
UP FRONT

THE ENERGY PAYOFF

Martin may parlay Bush’s desire for oil security into freer trade across the border

Mary Janigan February 14 2005

THE ENERGY PAYOFF

Martin may parlay Bush’s desire for oil security into freer trade across the border

UP FRONT

ON THE ISSUES

Mary Janigan

IT SAYS a lot about the governing Liberals’ diplomatic inertia that the hottest buzzwords in chilly Ottawa are now “aggressive incrementality.” The Americans, you see, like big ideas. Chatter about common regulatory regimes for goods such as cosmetics puts them to sleep. Canadians, however, are far happier with small ideas. We don’t want a complicated customs union with the U.S.; we just want a hassle-free border. So when outgoing U.S. ambassador Paul Cellucci referred last month to “energy security” and “continued integration of the North American energy market,” official Ottawa had nothing but platitudes to mutter.

What’s up? This U.S. idea sounds vaguely threatening. But there’s not a lot more we can offer the Americans in terms of energy security—if only because we have already provided it. Anyway, we would prefer to talk about resource security, which would include unhampered U.S. access to our softwood lumber exports. But the energy notion has captured the Americans’ fancy—if only because of their dangerous reliance on Middle East oil and their concern about China’s growing competitiveness. So it is part of a far bigger package: U.S. and Canadian officials have been chatting quiedy for months about

everything from regulatory harmonization to energy supply.

So far, so quiet. Then the Bush administration publicly called for deeper economic ties with Canada and Mexico last month. That put Paul Martin in a very public spot. Martin’s challenge is to offer energy security to the Americans as one small part of a package that would

"We could dangle incentives to increase oil production; we could reduce the sector’s tax and regulatory burden

resolve resource and border disputes. The PM must also reassure Canadians that this is mere tinkering: that it is so minor it can be done without formally re-opening the North American Free Trade Agreement. “Energy security is a huge concern for the Americans,” says an insider. “It is not a big deal for us—because there isn’t a heck of a lot more we can do. But if the appeal of this idea gets them to the table ...”

The two countries are thoroughly intertwined: we supply 17 per cent of America’s natural gas imports—and nine per cent of its oil and refined petroleum intake. Both are part of the 26-nation International Energy Agency; its industrialized members are pledged to pool supplies in emergencies. As well, under NAFTA, the U.S. has even more security: Ottawa can only slap taxes on energy exports if it also applies them to domestic sales, and it can only cut exports if it cuts domestic sales by the same proportion.

What more can we do? Insiders say we could dangle incentives to increase domestic oil production which would then be available for export: that is, reduce the tax and regulatory burden in that sector. But nothing any government does could bring big projects like heavy oil extraction into production much sooner. And no one wants to move so quickly that environmental considerations such as the safety of proposed liquefied natural gas terminals are trounced. “I don’t know what an energy security pact could do: we want to sell them everything we can now anyway,” says Bill Dymond, senior fellow at the Ottawa-based Centre for Trade Policy and Law. “Development of energy is in private hands in both countries. This may be a big idea to the U.S., but it requires no change in Canadian policy.”

So: relax. Energy really is a small idea decked out in big-notion dress.

Mary Janigan is a political and policy writer. mary.janigan@macleans.rogers.com