Winning against the US in trade

by Brian Lee Crowley

One of the disadvantages of taking the summer off when you’re a columnist is that events happen that would provide great fodder for columns, but the soapbox has been put away.

I bit my tongue over many things, like Hurricane Katrina, disaster relief efforts in New Orleans, the spike in gasoline prices, and now it is too late. But there is one perennial issue that emerged once again over the summer. And since it will come up again many times, I cannot stay the urge to speak my piece.

That issue is retaliation against the Americans. Softwood lumber exercises us today, but we’ve had many such disputes (wheat, mad cow disease, water diversion projects, agricultural subsidies) and will have many more. The issue therefore is not what we should do about this spat or that, but rather what are the principles that should guide us in dealing with the Americans when we disagree.

Regular readers of this column will know that I am no America-basher; on the contrary I greatly like and admire our neighbours to the south. But I am also a proud Canadian who is not blind to the vices and the foibles of Americans. In fact, like almost everyone else, they have the vices of their virtues.

For example, the Americans are a courageous people. But their corresponding vice is that they can be hectoring bullies. They are admirable risk takers. But then they can sometimes underestimate the value of what they are willing to risk, such as their friendship with us. They think big and are determined. But in their desire to win, they can forget that winning isn’t everything.

On softwood lumber the less admirable side of America’s character has predominated. That makes most Canadians angry, including me. That’s why the usual suspects were so gleefully exploiting an honest and justified emotional reaction by urging Canada to retaliate. Tax energy exports said some, since those nasty Americans are big consumers of our energy. Hit them with big tariffs on their exports back to us, said others. And yet others urged us to tear up the free trade agreement.

But an emotion is not a command to act. Letting our emotions rather than our reason rule us in our relations with the US would be an error of monumental proportions. All these retaliatory strategies are simply daft. And the people proposing them made me think of the troublemaker in the pub who is always egging his buddies on to take a poke at the 280 pound guy at the end of the bar. Amusing entertainment for the audience, but extremely unwise for those throwing the first punch.

Clever people don’t pick a fight with people 10 times bigger than they are. Not only do you end up with a bloody nose, but you give your own seal of approval to the notion that disputes can and should be settled by superior force. Which is exactly the principle on which the bigger guy will always prefer to settle any argument.

That’s why we worked so hard to get the Americans to sign the free trade agreement in the first place. While the rules it puts in place governing our trade relationship may be imperfect, they are accepted and respected by the Americans in the vast majority of cases. In fact, the value of our softwood lumber trade represents a few days’ worth of our annual trade with the US. It is one of the few exceptions that proves the rule that our trade is largely rule-governed thanks to NAFTA, and that we succeeded in making the Americans, most of the time, deal with us on the basis of rules rather than raw strength. Anyone who seriously suggests we should give that up is handing more power over Canada to the Americans, not less.

And the idea that we should tax our energy exports to the US is the game plan of someone who understands nothing of the complexity of our relationship. Yes, Alberta exports lots of energy to the US, but the feedstock for Montreal’s many oil refineries flows through a pipeline from Portland, Maine. Many Ontarians are consumers of US electricity.

We cannot hurt the Americans without hurting ourselves more so the notion that we can bend them to our will is too laughable for words. But that just means we must always look for ways to make the Americans want what we want. I suggest a highly publicized prime ministerial invitation to the president of energy-hungry China to come and inspect our undeveloped northern gas resources. There’s nothing that would please the Americans more than beating out the Chinese to buy these resources. And they’d be asking us what it would take to close this deal. A better dispute settlement mechanism anyone?

Brian Lee Crowley is president of the Atlantic Institute for Market Studies, a public policy think tank in Halifax. E-mail: BrianLeeCrowley@aims.ca