Derek Burney. Photo by CBC.
Former Canadian ambassador Derek Burney, who is currently advising Prime Minister Justin Trudeau on how to proceed with the renegotiation of the North American Free Trade Agreement (NAFTA), says that Canada’s energy exports are a “trump card” in the upcoming talks expected to start this August.
The Financial Post reports, “Burney … told shareholders of TransCanada Corp., of which he is member of the board of directors, that ‘there will be no surrender’ by Canada to the administration of Donald Trump despite his insistence the U.S. will get a better deal, or will tear up the pact altogether. ‘Energy is a trump card and we will play it’, Burney said in response to a question from a shareholder about whether Canadian oil and gas could become a bargaining chip in the negotiations.”
That article adds, “Speaking to reporters after the meeting, Burney said U.S. refiners would rather import heavy oil from Canada than from unstable suppliers like Venezuela, even as American production of oil and gas from shale formations is growing. That makes Canadian energy a ‘strength’ that bolsters its negotiating position.”
The United States imports about 3.76 million barrels of oil from Canada a day.
Burney was involved in the negotiations for the original Canada-US Free Trade Agreement in the mid-1980s and then for NAFTA in the early-1990s.
Council of Canadians chairperson Maude Barlow reminds us, “One of the most egregious aspects of the Canada-US Free Trade Agreement was that it wiped out the long-standing Canadian policy that sufficient supplies to serve Canadian needs had to be guaranteed before exports were granted. Most important, the FTA, and NAFTA after it, placed strict limits on the ability of our government to curtail energy exports in times of Canadian need or for environmental purposes.”
She explains, “The deals say that Canada must maintain at least the same level of oil and gas exports to the United States as it had supplied for the past thirty-six months. Only if Canadian consumption is cut proportionately, and then only in times of crisis, could the Canadian government claim jurisdiction over its own energy resources.”
Author-activist Gordon Laxer has commented, “The clause was crafted to allow petro-corporations, most of them foreign, to export as much Canadian oil and natural gas to the U.S. as possible. It was written before the end of the age of cheap oil and before we recognized the looming catastrophe of climate change.”
He adds, “Proportionality, the de facto, mandatory-exporting clause applies only to Canada, since Mexico refused it.”
While U.S. President Trump has mentioned energy in reference to Canada and the NAFTA talks, it is not clear what he precisely meant by it.
The Globe and Mail has speculated, “The United States is heavily dependent on Canada for oil and gas because it does not produce enough to meet demand. A more likely target for NAFTA negotiations is Mexico’s energy sector, which has historically been the subject of government monopolies but has been opened up to private investment since 2013. One Canadian official, speaking on condition of anonymity, said bringing Mexican oil and gas under NAFTA would be an attractive prospect in trade talks.”
Laxer has also written the federal government should seek a “Mexican exemption” to NAFTA’s energy proportionality rule. And he has quoted California energy expert Richard Heinberg who says, “Canada has every reason to repudiate the proportionality clause, and to do so unilaterally and immediately.”
To send a message to Prime Minister Justin Trudeau calling on him to remove the energy proportionality clause from NAFTA, please click here.
News reports suggest that the NAFTA renegotiation could begin in August and conclude by April 2018, just months prior to the July 1 general election in Mexico.