Harper’s Christmas Special: The Myth of How Fortress North America will boost Canadian Exports to the U.S.

Over the past quarter century, it has been a commonplace for right-wing continentalists to insist that without binding agreements between Canada and the United States, Canadian exports will be shut out of the American market.

In the mid 1980s, members of the Conservative government of Brian Mulroney and business lobbyists, who supported free trade with the U.S., insisted that day by day, week by week, rising protectionism in the United States was shutting Canadian goods out of American markets. In truth, only about five per cent of Canadian exports were the subject of trade disputes. More than half of Canadian exports to the U.S. took the form of internal transfers within American owned firms.

With a short list of exceptions, the U.S. government and regional American political heavy weights were not interested in retarding shipments of raw materials, including oil and natural gas, and semi-fabricated products to the United States, mostly by U.S. firms. And Washington did not want to block exports of assembled automobiles and auto parts (overwhelmingly by U.S. companies) to the U.S. Besides, this trade was conducted under the terms of the Canada-U.S. Auto Pact.

The outcome of that critical debate---which big business and the Tories lost----54 per cent of voters opted for the anti-free trade Liberals and New Democrats in the 1988 federal election, while 43 per cent voted for the pro-free trade Conservatives, was the signing of the Canada-U.S. Free Trade Agreement. With fewer voters but a majority of seats in the House of Commons, the Conservatives carried the day.

The treaty to which the Conservatives appended their imprimatur was a puzzler. It stipulated that U.S. firms would be accorded equal treatment in Canada with Canadian firms when it came to subsidies or tax incentives. It further stipulated that Canada was barred from reducing its petroleum exports to the U.S. below the level of a rolling average of exports over the previous three years. And it also barred Canada from establishing a two price system for Canadian petroleum---with a lower price for the Canadian domestic market while Americans were charged the world price.

With the above provisions which made it very difficult for Canada to establish an industrial policy and which gave Washington considerable authority over Canadian energy policy, how did the Mulroney government do on the matter of guaranteeing access for Canadian exports to the U.S. market?

Not well, at all. While the relatively low tariffs between the two countries were quickly removed, both the U.S. and Canada kept their own trade laws. No set of common rules, or code, was agreed on to govern allowable subsidies or tax incentives for companies involved in trans-border trade. While bi-national panels were to be set up to adjudicate trade disputes when they arose, the panels were only empowered to rule on whether each country had correctly applied its own trade laws. Each country was permitted to mount countervailing duties on goods imported from its partner when its authorities concluded that the other party was seeking an undue advantage for itself in a particular sector.

Thus there has been a string of cases in which the U.S. has mounted duties on Canadian exports since the FTA, and its successor NAFTA, went into effect. The most noteworthy of the disputes has involved softwood lumber, but the U.S. has also charged Canadian exporters of baby food, steel, copper pipe and other products with dumping their products into the American market.

Absurdly trade disputes between Canada and the U.S. have continued under so-called free trade. While most trade between the two countries flows freely, it did so before the FTA and NAFTA were implemented. One thing that the “free trade” regime does not guarantee is free trade.

There is a simple, and critically important, reason why despite the huge concessions made by the Mulroney government in negotiating the trade treaties, Canada did not obtain secure access to the U.S. market. The United States is unwilling to pool sovereignty with Canada or Mexico even in the narrowest of ways. The U.S. government, therefore, has never been prepared to replace U.S. trade law with a common North American trade law whose highest court of appeal would be a common North American court, with members drawn from the U.S., Canada and Mexico. Pooling sovereignty is the essence of the trade arrangements in the European Union. The Americans were totally unwilling to pool sovereignty with other countries when the FTA and NAFTA were being negotiated. And they remain as implacably unwilling to do so today.

And that takes us to today’s bid by the Harper government to deepen the Canada-U.S. relationship in a so-called Fortress North America deal. Just as Conservatives were prepared to give away the farm in return for nothing a generation ago, they want to do more of the same today. We can call this the Harper government’s Christmas Special. The plan is to negotiate a deal with Washington and to lock it in place over the holidays and in January before the House of Commons resumes sitting.

The Harperites are making the case that the Canada-U.S. border needs to be “thinned” so that the recent dramatic decline in Canadian exports to the U.S. can be reversed.

It is true that Canadian exports dropped dramatically following the economic crash in 2008. Indeed, Canadian exports to the United States plunged by $50 billion in a single year. Why? The Harperites would have us believe that this dramatic and worrying development can be addressed by negotiating a Fortress North America deal with Washington.

In truth, the border became “thicker” in the aftermath of the terror attacks of September 11, 2001. As a part of its response to the attacks, Washington deployed additional manpower to its Mexican and Canadian frontiers. While crossing times at the Canada-U.S. border grew longer after September 11, Canadian exports climbed steadily in the years prior to 2008.

The steep decline in Canadian exports to the U.S. after the crash had nothing to do with border controls. What the members of the Harper government refuse to face is that the crisis that burst to the surface in 2008 has unleashed a basic shift in the nature of the global economy. The U.S. will not carry the economic weight it has carried in the past. The American share of global economic output is in decline from about 20 per cent of the total to about 15 per cent. While that still makes the United States a considerable player, the centre of gravity of the global economy is shifting to Asia. That’s why Australia’s economy, with its Asian focus, is doing so well while Canada’s is sputtering.

That’s what makes the determination of Stephen Harper and the business lobbyists to tie ourselves even more tightly to the U.S. so maddeningly shortsighted. They are living in the past and are turning their backs resolutely against the future. Indeed, an adamant refusal to face the future is the hallmark of Conservative policies more generally than with respect to Fortress North America.

The Harperites refuse to acknowledge the two crucial realities of our time, peak oil and climate change. Experts across a range of fields, from geology to geo-economics and the U.S. military, say that world petroleum production will peak in the next few years and then will began an inexorable decline. The rise of China, India, Brazil and other countries coincides with peak oil. Their soaring demand for petroleum means that oil prices, with fluctuations along the way, are headed higher. Get ready for gasoline prices of $3.00, then $3.50 and $4.00 a litre. They’re coming.

Along with the destructive fury of climate change, peak oil will compel the reconstruction of the world’s cities. Greater urban density will be the order of the day with suburbs in decline. Public transit will be ascendant with multiple tram lines, also known as LRTs, crisscrossing metropolitan areas. Regional and national transportation systems will be rebuilt with the emphasis on rail---high speed rail in populous regions. Along with the opening of a Rob Ford exhibit in the Royal Ontario’s Museum’s dinosaur collection, there will be a fierce debate about whether to expand or shrink the role of nuclear energy.

Prior to the mid 1920s, Canada did more trade with Europe (principally Britain) than with the United States. There is no “natural” reason why the U.S. should remain Canada’s overwhelmingly dominant trading partner. Great commercial shifts have occurred in the past; they will occur in the future.

The Harper Government’s determination to enclose Canada in an even tighter embrace with the U.S. is as misplaced as was the appetite of Canadian high Tories a century ago to cocoon this country in an Imperial Federation with declining Britain.

And Fortress North America, while useless for Canada, would nonetheless come with a steep price for this country.

To “thin” the border and to “thicken” the common Canada-U.S. border with the rest of the world, Canada will have to harmonize its refugee and immigration policies with those of the United States. While some face saving device on these issues can be found to satisfy Liberal leader Michael Ignatieff who has said he would not countenance harmonization, that will be the essential result. Canada will be required to share vital information with the CIA, the FBI, U.S. Homeland Security, and other U.S. intelligence agencies about Canadian citizens and other residents. There is already much information sharing about Canadians with U.S. agencies. Fortress North America will invite American agencies right into the lives of Canadians. The Canada Border Services Agency, and Citizenship and Immigration Canada, will be harmonized into the broader framework of equivalent American agencies. The inter-operability of these agencies will be further extended to draw the Canadian Armed Forces even more fully into an American command structure.

And after all this has been done, how much more rapid will the crossing of the border from Canada to the U.S. become? Not much.

That’s because the Americans are very skittish about security on their borders. It wasn’t long ago that Homeland Security Secretary Janet Napolitano repeated the old and untrue yarn about some of the hijackers involved in the September 11 attacks crossing into the U.S. from Canada. And Secretary of State Hillary Clinton has always been a stern critic of Canadian security and the dangers to the U.S. on its northern border.

There’s another reason why the Obama administration won’t really give much on the matter of border “thinning.” Such thinning would be seen in Mexico, as well as by Latinos in the United States, as undue favouritism on behalf of Canada. As they prepare for the 2012 presidential election, the Democrats will be unwilling to do anything to hurt themselves with Latino voters. It’s a non-starter.

That doesn’t mean that the U.S. won’t be willing to sign onto an arrangement with the Harper government though, proclaiming the achievement of a Fortress North America. It’s just that the deal will be an empty shell as far as Canada and Canadians are concerned.

Like Brian Mulroney before him, Stephen Harper is all too anxious to give away Canadian sovereignty in return for nothing. A photo op and a few pretentious words is all these Conservatives have ever required.

Fortress North America is coming at us much faster than free trade did. The only way we can avert it is to make the political cost too high for Harper.