Economic illiteracy, on both sides of the Canada-U.S. negotiating table, is the biggest threat to continental security.
Let’s start with the Canadian side. His doctorate in economics notwithstanding, nothing so plainly illustrates Prime Minister Mark Carney’s economic deficiencies as Ottawa’s apparent treatment of the successor to the long-abandoned Keystone XL pipeline in recent trade negotiations.
Sources familiar with the file told the New York Times that Carney offered to allow the pipeline project to resume. While offering a pipeline is not a particularly odd move, it’s strange that Ottawa appears to have treated it as a concession to Washington.
Gaining additional access to our largest and richest customer is not primarily an American benefit. But under Carney, building a pipeline that allows our most valuable trade commodity to get to market is seen as a great sacrifice. We know the U.S. wants and needs our oil, but Carney would have us believe that we would be doing the Americans a favour by giving them the privilege of buying our commodities.
In reality, the Keystone XL project was cancelled years ago. TC Energy, which proposed the project, proceeded to spin off its crude pipeline business into South Bow, which is now advancing the Prairie Connector pipeline. That project proposes using roughly 150 kilometres of preserved Keystone XL-related pipe and two existing pump stations in Canada, connecting to a new American route.
South Bow has already secured 20-year binding commitments from nine customers to buy 465,000 barrels of oil per day. This is not, in other words, a case of economic charity — actual customers want to pay actual money to move actual Canadian oil.
We should also prioritize additional pipelines to the West Coast. Canada currently sends almost all of its exported oil to one customer , the United States. A barrel that can reach either Chicago or Shanghai is worth more strategically than one that can reach only Chicago.
Beyond the immediate economics, the federal government is trying to convince disaffected Albertans that Ottawa takes their economic interests seriously. To be credible, it can’t dismiss them as a tradable asset for the benefit of Central Canadian political priorities.
Keeping details of the negotiations secret is to be expected. However, there is a difference between negotiating discreetly and keeping Canadians in the dark about major decisions that affect their economic future. So far we have a combination of anonymous American and Canadian sources talking to the media, and a vibrant online rumour mill filling in the blanks. Carney’s statements since the deal collapsed have been concerningly vague and light on details.
Canadians deserve better. We shouldn’t accept without scrutiny the idea that pipelines are trade concessions, rather than a safe, necessary, common and obvious form of critical infrastructure for an energy-producing nation.
On the other side, U.S. President Donald Trump is a known productionist. He measures U.S. economic performance by what the United States manufactures. Conceptually, this makes some sense. The strength of the U.S. economy was historically based on its manufacturing might. The prosperity that it generated created the capital and consumer base upon which America built its modern services economy.
Trump is right that countries need to make things. A state that cannot make weapons, machinery, energy infrastructure and other strategic goods concedes real power. That said, strategic productive capacity alone shouldn’t be used as an all-purpose theory of economics.
Sometimes trade deficits are merely a reflection of regional geography or capital specialization. Yet Trump routinely conflates them with losses. Likewise, he views the decline in U.S. manufacturing jobs as a symptom of foreign exploitation, not a consequence of innovation and efficiency gains.
The U.S. largely produces light crude , while many of its refineries are built specifically to process heavy oils , the majority of which are imported from Canada. Canadian oil is thus a productive input into American refining.
Yet our leverage, if we can call it that, is not immutable. Worryingly, Carney is treating America’s dependence on Canadian crude as a bargaining asset at a time when that asset may be depreciating. Since former Venezuelan president Nicolas Maduro’s ouster, Venezuelan oil exports to the United States have climbed from roughly 284,000 barrels a day in January to 786,000 in July.
And on Friday, Trump announced a major deal to give the U.S. a stake in Venezuela’s oil reserves. While not much is known about the terms of the deal, and it will take some time before additional supplies come online, it is clear that change is afoot. Even so, the fact that South Bow was able to secure 20-year commitments for its proposed pipeline shows that Gulf Coast demand remains resilient.
Canadian products need as much market access as we can get. It shouldn’t have taken a trade war to realize that we need westward and southward capacity for our most valuable commodity — energy. The United States, meanwhile, needs secure industrial inputs, making pipelines a win-win situation for both countries.
Economic illiteracy is bad for Canadians and Americans. Our shared security suffers if either side thinks that commerce is capitulation, whether on the altars of climate or autarkic fantasies.
National Post
