Ottawa Must Speak for All Sectors in All Regions

Commentary, Economy, Joseph Quesnel

If only Ottawa would put its full force and support behind the energy sector as it does other critical sectors in the economy. 

In early October, the prime minister announced that he would not back down from the latest American round of attacks on our softwood lumber industry. Then, the federal government announced it would pursue legal redress through the World Trade Organization (WTO). 

The United States has imposed countervailing duties on Canadian softwood lumber exports. American politicians from both parties have long concluded that the system regulating Canada’s forest industry amounts to an “unfair” subsidy for Canadian lumber producers. 

However, in late August, the WTO ruled that the duties imposed by the U.S. Department of Commerce had violated global trading rules and they decided that the U.S. had failed to make its case. 

American politicians and lumber producers have long contended that the Canadian system of forest tenure involving public ownership constitutes an unfair advantage to Canadian producers.  To be fair to the American side, NAFTA-established panels have ruled in their favour in the past, although WTO rulings tend to favour the Canadian position. This is likely why Canadian politicians are eager to challenge the duties through this avenue. 

Now, there is nothing wrong with Canada pursuing this course. While respecting principles of free trade and open commerce, Canada should advance its economic interests in the international arena with its neighbours. 

However, energy producers in Canada wonder why the federal government will not champion their interests as aggressively as it does the forestry industry’s interests. Many communities across Canada are heavily dependent on the energy industry and are often victim to these international economic factors and political posturing. They certainly deserve federal championing, especially in the pandemic environment. Canada’s energy sector was actually the hardest hit by the pandemic, according to many observers. 

Statistics Canada found that the second quarter of 2020 saw the largest drop in natural resources employment. In fact, employment in the entire sector saw a 7.3 percent drop. In the energy subsector, there was a 10.1 percent drop in real GDP. This is quite a sizable chunk. 

Demand for crude oil, fuelled by global travel restrictions and education options from home, has bottomed out. With continued restrictions, this is likely to persist into the future. 

Talk of a post-pandemic economic recovery might be premature given talk of renewed restrictions and growing COVID-19 infection rates in some parts of the country, but Canadian policy-makers and producers should look towards a new American political environment in the new year. 

The Trump White House was extraordinarily successful in crafting policies that encouraged domestic energy production and ensured American energy independence. This was largely driven by the so-called shale revolution in the United States. However, this might change under a new Biden administration. The presidential election campaign highlighted the growing faults within the Democratic Party between its urban working-class roots and its environmental wing that sought to limit energy development.

During the second presidential debate, Joe Biden made waves when he admitted under questioning by President Donald Trump that he intended to “transition” the American economy off of oil and gas. Trump highlighted how these intentions may damage specific regions in the countrylikely for maximum political effectbut this “transition” will affect the entire U.S. economy, just as a transition would affect Canada’s here. 

It is quite unlikely that a Biden administration will give carte blanche to Democratic forces supporting a so-called Green New Deal, but Biden will have to make concessions to a strong environmentalist constituency in his party. At a minimum, this will translate into policies that will roll back energy production in some parts of that country. 

As an effective coronavirus vaccine rolls out across both Canada and the United States and this limits lockdowns, Canadian policy-makers must anticipate and seize opportunities that the Biden administration presents. While exploring all legal options in the ongoing softwood lumber battle, they must also advance Canada’s hugely important energy sector. In 2021 and beyond, the federal government must finally reconsider, adjust, and where necessary. repeal existing legislation and policies that hamper domestic oil and gas production. This will advance the national economy as a whole and will also help Indigenous and non-Indigenous communities that rely on this industry for their very survival. Even if there are setbacks in the pandemic recovery, Canada must still anticipate and respond to problems experienced by the energy sector. 

Ottawa must speak for all sectors in all regions and 2021 will be a perfect opportunity for it to demonstrate its commitment to the critical natural resources sector. 

 

Joseph Quesnel is a senior research associate with the Frontier Centre for Public Policy.

Photo by Tj Holowaychuk on Unsplash.