Blindsided by NAFTA and Trans Mountain: What’s at stake for the Liberals

With the NAFTA deadline looming large, today’s announcement on the fate of the Trans Mountain expansion project is an unforeseen event the Liberal Government didn’t need 

“Events dear boy, events.”

That was the response in 1963 from retiring British Prime Minister‎ Harold MacMillan, when an interviewer asked which had been the most difficult things he had to deal with during his time leading the British Government between 1957 and 1963.

Today, the second last day of August 2018, Prime Minister Justin Trudeau must realize, more than ever before, what MacMillan was talking about.

Because today the Federal Court of Appeal ruled that indigenous tribes in British Columbia, opposed to the twinning of the Trans-Mountain pipeline, had not been adequately consulted by the Trudeau Government before it approved the National Energy Board permission for the pipeline to be built.

And it cancelled the federal cabinet approval for construction to proceed.

This happened on the same day that Foreign Affairs Minister Chrystia Freeland‎ is in Washington with the Canadian negotiating team trying desperately to save the semblance of a North American Free Trade Agreement, that has enough in it for Canada to sign on before an American imposed deadline of August 31st.

And all this is happening just fourteen months before the next federal election, in October 2019. And it is happening just two and a half weeks‎ before Parliament resumes, and the unofficial election campaign begins.

The pipeline ruling today is about more than just building a new pipeline alongside an existing one from Alberta to the Vancouver area ‎to carry oil sands bitumen to tankers that will ship it to Asian markets. Building the Trans Mountain extension is part of the Trudeau Government’s energy and environment strategy. A pipeline in exchange for a carbon tax that rises to $50 a tonne by 2022.

So important is the pipeline to that strategy that in May, the Trudeau Government decided to buy it from its owner, Kinder Morgan, after the American owned company said it would stop funding the project because of the uncertainty about it proceeding.

And perhaps with a real sense of irony, the Government’s purchase of Trans-Mountain was approved on the same day the Federal Appeals Court blocked the expansion from proceeding.

With Trans-Mountain again on hold, and with increasing opposition from Conservatives both federally and provincially,‎ the dual Energy – Environment plan could be close to imploding.

Meanwhile, at the same time, the Trudeau government is reacting to being blindsided by the United States and Mexico in the NAFTA negotiations. Ottawa knew those countries were negotiating without ‎Canada at the table, but believed it was just on issues dealing with automobiles that involved those two countries.

Instead, on Monday, they revealed an agreement that dealt with much more. But not with the issues that mainly affect Canadian – American trade.

Since last year, when the American revealed their negotiating objectives, the U.S. goals have ‎been clear. And they have been particularly detrimental to Canada. They include:

  • The elimination of the independent dispute settlement mechanism with representatives from all three countries to arbitrate ‎trade disputes under NAFTA, and instead revert to American law and U.S. Courts to decide claims against Washington.
  • A dramatic reduction in the amount of American government contracts that Canadian, or Mexican, companies can compete for. This is particularly critical for Canada.
  • And for Canada to abandon the supply management system that governs dairy and poultry production. The dairy regime is particularly contentious. Tariffs on some U.S. dairy imports are close to three hundred per cent‎, effectively closing Canada’s market to U.S. competition.

At least for NAFTA, there is the possibility of a way forward. A partial relaxation of supply management on dairy for greater access to U.S. government procurement and some form of independent dispute settlement mechanism for less protection for Canadian cultural industries and perhaps longer drug patents for American drug companies are compromises that can, and may have to be, made.

The pipeline issue seems more intransigent. Time is of the essence, and more consultations with indigenous groups that don’t want to negotiate on the pipeline but just want to stop it, means the potential pipeline construction schedule is impossible to predict.

Oil sands producers are in worldwide competition with firms ‎throughout the world to supply the Asian markets hungry for energy. Those producers from other countries will be supplying markets while we are still talking.

This is not a promising landscape for a Government just over a year away from an election. The only solace Mr. Trudeau and his colleagues can take is that, to date, the Conservatives are strong supporters of the pipeline that never gets build, and the New Democrats are opposed to it but have no idea how to make up any of the revenue it’s completion would have created.

As for NAFTA, both opposition parties have been supportive of the Trudeau government’s approach. That won’t continue if there is no deal, or a deal judged to be a bad one.  

However, criticism will have to be accompanied by a better plan that could actually work. So far that has been absent.

The pipeline issue will take longer to play out. NAFTA could become clear this weekend.

There are different time frames for each. But the MacMillan’s thesis is playing out. Unforeseen events are certainly the most difficult to deal with.

Don Newman is Senior Counsel at Ensight and Navigator Limited, a Member of the Order of Canada, Chairman of Canada 2020 and a lifetime member of the Canadian Parliamentary Press Gallery.