Skip to content

Why does Canada want to worsen the climate crisis by expanding energy proportionality in NAFTA?

The Council of Canadians is opposed to the energy proportionality provision in the North American Free Trade Agreement (NAFTA).

The Financial Post explains, “[Article 605] means Canada and the U.S. cannot reduce access to each other’s oil, natural gas, coal, electricity or refined petroleum products without an equivalent reduction in domestic access to the same product. So if Canada wanted to cut oil exports to the U.S. by 20 per cent it would have to cut domestic supplies by 20 per cent as well, except in specific circumstances such as the need to protect national security.”

The scale of impact is hugely different though – Canada exports about 3.76 million barrels a day to the United States, while the U.S. exports about 486,000 a day to Canada.

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 has also noted, “Proportionality, the de facto, mandatory-exporting clause applies only to Canada, since Mexico refused it.”

But now it appears clearer that efforts are underway in the current renegotiation of NAFTA to bring Mexico under that provision – despite awareness now of the climate crisis.

At the House of Commons Standing Committee on International Trade this past Monday (December 4), Canada’s chief NAFTA negotiator Steve Verheul stated, “We are working on an energy chapter. Again, the U.S. is somewhat resistant to having an energy chapter, but we’re including provisions that we’re putting forward to try to modernize that chapter in particular. The proportionality clause is one that also will exist in the national treatment and market access for goods chapter, so the current energy chapter in NAFTA simply replicates something that’s already found in another chapter. We’re also looking at bringing Mexico into the energy chapter because they were not part of it in the original NAFTA when it was negotiated.”

This was not entirely unexpected.

In February, Reuters reported, “Asked whether the energy industry could get a more favorable role than other parts of the economy in NAFTA renegotiations, [Canada’s Natural Resources Minister Jim] Carr said, ‘I think that’s a real possibility’. …Carr told reporters that Canada will continue to make the case that the integration of the energy sector is in the best interest of all three governments.”

And in April the Globe and Mail reported, “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.”

In December 2013, Mexico ended 75 years of government control of its oil reserves when it passed an energy reform law that allows transnational corporations to explore and extract oil and gas. That reform is expected to attract as much as $15 billion of foreign investment annually and increase oil production to as much as 4 million barrels per day by 2025 and double natural gas production.

The Council of Canadians is calling for an end to the energy proportionality provision given it is the antithesis of what is needed to take action to address climate change.

In the coming weeks we will be releasing two reports by Laxer on energy proportionality and NAFTA.

To call on the Trudeau government to scrap the energy proportionality provision in NAFTA, please sign our online petition.

The penultimate round of NAFTA talks are scheduled to take place from January 23-27, 2018 in Montreal.