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Columnists claim Keystone XL veto would be a NAFTA violation

Photo: (clockwise) McKenna, Corcoran, Burney, Hampson and Herman.

It is now being argued that a rejection of the 830,000 barrels per day Keystone XL tar sands pipeline would be a violation of the North American Free Trade Agreement’s energy chapter.

Globe and Mail columnist Barrie McKenna writes, “The essential bargain at the heart of the [first Canada-US Free Trade] agreement is that oil should flow freely, except in times of scarcity and national emergency. Very soon, probably early next year, we’ll find out if freedom has its limits. The FTA’s energy chapter, later grafted on to the North American free-trade agreement, was among the most contentious parts of the whole deal. It was reached after intense bargaining and considerable nationalist angst, particularly in Canada.”

McKenna continues, “The Americans didn’t want a repeat of Pierre Trudeau’s national energy program and other policies that might discriminate against U.S. interests in times of scarcity. So they negotiated strict limits on Ottawa’s ability to interfere in the market and limit exports, making another NEP impossible. Canadians, in turn, worried the U.S. might block crude imports on national security grounds to protect domestic energy production and refining capacity – as it had done in the 1950s and 1960s. Ottawa secured strict limits on when national security could be used as a pretext to block energy trade.”

Derek Burney, was Brian Mulroney’s chief of staff in 1987 and helped finalize the Canada-US FTA. Now a director at TransCanada, the company that wants to build both the Keystone XL and 1.1 million barrels per day Energy East export pipeline, he says, “The whole point of open trade on the border for energy was, ‘you can’t restrict our imports and we can’t discriminate against your exports’. That’s the equation. You can’t put a tax at the border, you can’t have a separate price for domestic consumers – all that stuff that would be contrary to an open border.”

With the Republicans soon to have the majority of seats in both the House of Representatives and the Senate following the recent midterm elections, a vote on the Keystone XL pipeline is expected early in the new year. It is possible that after that vote, US President Barack Obama could veto the legislation supporting the construction of the pipeline. The president has already stated, “Understand what this project is. It is providing the ability of Canada to pump their oil, send it through our land down to the Gulf where it will be sold everywhere else.”

McKenna concludes, “If Mr. Obama rejects Keystone, Ottawa should dust off NAFTA, file a formal trade challenge and demand the free trade in energy that the deal was supposed to deliver.” And it’s not just McKenna who argues this, so does Terence Corcoran in a recent commentary in the Financial Post (backed by trade lawyer Lawrence Herman) and Carleton University professor Fen Osler Hampson (in a Globe and Mail op-ed co-authored with Derek Burney).

If a NAFTA challenge were to happen, and who knows what Harper’s ministers and Canadian embassy staff in Washington, DC are saying as they intensively lobby for Keystone XL, we would encourage President Obama to remember his campaign promise of almost seven years ago. In February 2008, then-Senator Obama commented, “I will make sure that we renegotiate [NAFTA]… I think we should use the hammer of a potential opt-out as leverage to ensure that we actually get labor and environmental standards that are enforced.”

While he backed away from that promise as president in April 2009, the reality is that even in May 2012 an Angus Reid poll found that NAFTA “is not regarded in a positive light by people in the United States and Canada,” and that “46% Canadians and 40% of Americans say they would like their respective countries to do whatever is necessary to renegotiate the terms of NAFTA.”

The Council of Canadians has called for both the abrogation of NAFTA and for the removal of the energy chapter from the deal. In their place, Council of Canadians chairperson Maude Barlow has stated, “We are demanding a Canadian Energy Strategy which features meaningful regulatory limits on greenhouse gas emissions, a just transition to conservation, energy efficiency and the rapid expansion of public and community-owned renewable energy. Intimately linked to these efforts is our trade campaign, which challenges agreements, especially NAFTA [and the Canada-EU CETA], which stand in the way of progressive change.”

Further reading
The price of free trade is unchecked climate change (op-ed by Naomi Klein)