Canada plays oil card in discussion on NAFTA

Obama’s spokesman said the candidate’s threat to NAFTA was ‘just campaign rhetoric.’

SCRIPPS HOWARD

OTTAWA — Americans’ privileged access to Canada’s massive oil and gas reserves could be disrupted if Washington cancels the North American Free Trade Agreement as Democratic presidential candidates threaten, Canadian Trade Minister David Emerson warned.

“There’s no doubt if NAFTA were to be reopened, we would want to have our list of priorities,” he said Wednesday.

“Knowledgeable observers would have to take note of the fact that we are the largest supplier of energy to the United States, and NAFTA has been kind of a foundation of integrating the North American energy market,” he said.

“When people get below the rhetoric and start picking away at the details, you are going to find that it’s not such a slam-dunk proposition to go from the rhetoric to a meaningful improvement.”

Canada and the United States have free trade in energy because the accord effectively prohibits discriminatory export controls on oil and gas. Emerson’s comments came after Democratic presidential candidates Barack Obama and Hillary Clinton promised Tuesday to withdraw the United States from the agreement after taking office, unless the deal was completely renegotiated.

The pact has become a target for criticism by U.S. unions, which blame it for the disappearance of thousands of jobs, but studies have repeatedly shown that trade has thrived and all three NAFTA signatories have benefited since the deal took effect in 1994.

But Obama’s rhetoric on the subject may be just that, CTV News reported Wednesday night. Citing Canadian sources, the network said that a senior member of Obama’s campaign team called Canada’s U.S. ambassador, Michael Wilson, within the past month, warning him that Obama would be taking some “heavy swings” at NAFTA in the campaign.

“Don’t worry, ... it’s just campaign rhetoric, ... it’s not serious,” CTV reported the campaign official as saying.

Late Wednesday night, a spokesman for the Obama campaign said the staff member’s warning to Wilson sounded implausible but did not deny that contact had been made. “Senator Obama does not make promises he doesn’t intend to keep,” the spokesman told CTV.

Emerson called the Democratic candidates’ NAFTA vow political posturing aimed at party voters, predicting it would fade from sight if either wins the presidency.

But he said he’s nevertheless worried about a rising tide of protectionism in the United States. “It’s been getting more strident; it’s permeating Congress ... and it’s not just the heat of the presidential campaign that is causing concern, it’s the whole congressional system.”

During the Democratic candidates’ final debate before next week’s Texas and Ohio primaries, Clinton said Tuesday she would demand new environmental and labor provisions in NAFTA as well as a new dispute-resolution mechanism. And she’d eliminate the right of foreign firms to sue Washington for enacting measures to protect its workers. Obama agreed.

But Emerson said reopening the deal would open a can of worms, with new demands for changes from all countries.

“If you reopen [NAFTA] for one or two issues, you cannot avoid reopening it across a range of issues,” he said.

He scoffed at Democratic suggestions that they want to toughen labor and environmental provisions, saying: “I don’t think the United States has got anything to teach Canada about labor and the environment.”

It’s far from certain that tearing up NAFTA would leave Canada without any trade deal with the United States. That’s because its predecessor, the Canada-U.S. free-trade agreement (FTA) of 1988, was suspended, not canceled, when NAFTA came into force and it was what delivered the benefits of free trade to the two nations.

“My understanding is that abrogation of the NAFTA would automatically trigger reversion to the FTA,” Michael Hart, a trade expert at Carleton University in Ottawa who helped negotiate the original Canada-U.S. free-trade deal, said.

“In U.S. law, there is both a NAFTA Implementation Act and an FTA Implementation Act. Congress would need to revoke the first, which would then reactivate the second,” Hart said.

Gordon Ritchie, an architect of the Canada-U.S. FTA, said Canada would be in a good position to weather things if the free-trade arrangements fell apart because the two economies have become much more integrated since 1992. Also, since then, multilateral trade rules have cut global tariffs and established a World Trade Organization system to arbitrate disputes that’s no worse than the NAFTA mechanism, he said.