Making Canada Relevant Again- The Economic Super-Thread

[Edward Campbell]

There's bad news and good news, according to this column by Neil Reynolds which is reproduced under the Fair Dealing provisions of the Copyright Act from he Globe and Mail:

http://www.theglobeandmail.com/commentary/democracies-cant-live-in-perpetual-stimulus/article4299446/

Democracies can't live in perpetual stimulus

NEIL REYNOLDS
The Globe and Mail

Published Monday, Jun. 18 2012

The British government has run a budget surplus in only six of the 37 years since 1975. The American government has run a budget surplus in only five of the 52 years since 1960. The Canadian government has run a budget surplus in only 10 of the 46 years since 1966. As Hudson Institute scholar Christopher DeMuth asserts in a prescient paper, Debt and Democracy, Keynesian doctrine – surpluses in the good years, deficits in the bad – has morphed in the advanced democracies into perpetual stimulus. As a result, the exponential accumulation of debt means that the next generation, people still unborn, could theoretically be required to pay all of their lifetime incomes in taxes merely to make the interest payments on an enormous debt.

“Obviously,” Mr. DeMuth says, “this will never happen.” But, based upon past experience, democracies are not yet prepared – with few exceptions – to balance their books. In these circumstances, what gives? In Mr. DeMuth's assessment, democracy gives. A day of reckoning comes. The Western world must either return to balanced books or risk a turbulent end to the great age of the dynamic democracies.

“The routine redistribution of wealth from future generations to ourselves is profoundly undemocratic and corrupting,” Mr. DeMuth says. “The risks … are not only economic but political. [The use of] deficit financing of current consumption now undermines spending discipline and political accountability. The reinstitution of responsible management of public debt may be essential to the sustenance of democratic self-government.”

The Washington-based Hudson Institute, founded by the famous global strategist Herman Kahn in the 1960s, is an internationally respected think tank. Mr. DeMuth, a distinguished fellow at the institute, formerly taught at Harvard University's Kennedy School of Government. His paper analyses different kinds of debt and concludes that the great democracies now routinely justify all debt as “investments” of one kind or another. “This [is] catnip for practising politicians,” Mr. DeMuth argues, “because it offers [a way to provide] constituents with more government services than taxes to pay for them.”

Mr. DeMuth cites Sweden as an example of a democratic state – “where the welfare state is alive and well and government debt is low” – that properly balances spending and taxes. It is not the welfare state that's coming to an end, he says. It's the debt-financed welfare state. But this is tantamount to saying the same thing in different ways. Most electorates would not tolerate the taxation required to run a pay-as-you-go welfare state.

Canada might be regarded as a halfway house in the DeMuth analysis. Although successive federal governments ran deficits for more than 30 years in a row – from prime minister Lester Pearson through prime minister Brian Mulroney – we have since recorded 10 budget surpluses in the past 13 years. The lingering problem is that we ran larger deficits in three bad years (total: $200-billion) than we ran surpluses in the 10 good years (total: $90-billion).

By the DeMuth analysis, however, Prime Minister Stephen Harper is certainly right to refuse alms to bankrupt European states. We have been this way, Mr. DeMuth says, before – when the democracies heaped easy money, as humanitarian investments, on spendthrift African countries for three decades (beginning in the 1960s). By the 1980s, Mr. DeMuth notes, the recipient nations could not service their debts even at near-zero interest rates.

Easy money, though, always encourages debt, whether in poor countries or rich, whether by households, corporations or governments. As Time magazine noted in May, the developed democracies “have all accumulated unprecedented levels of debt.” Here is Time's Top 10 list of indebted democracies (counting all borrowed money).

Canada is No. 10 with debt equal to 276 per cent of GDP. Australia is No. 9 with debt equal to 277 per cent of GDP. Germany is No. 8 with debt equal to 278 per cent of GDP. The U.S. is No. 7 with debt equal to 279 per cent of GDP. Though details differ, these four democracies are essentially tied. South Korea is No. 6 with debt equal to 314 per cent of GDP. Italy is No. 5 with debt equal to 314 per cent of GDP. France is No. 4 with debt equal to 346 per cent of GDP. Spain is No. 3 with debt equal to 363 per cent of GDP. Britain is No. 2 with debt equal to 507 per cent of GDP. Japan, only slightly more indebted than Britain, is No. 1 with debt equal to 512 per cent of GDP.

And people thought that banks were too big to fail.

The bad news is that we (Canada) are amongst the 10 most indebted OECD countries (Reynolds doesn't say that (he quotes Time as saying "the developed democracies" but I'm about 99.9% certain that there are non-OECD members in worse straits than even Japan).  The good news is that we are only #10.

The key point, made by Mr. DeMuth is: “This [debt] [is] catnip for practising politicians because it offers [a way to provide] constituents with more government services than taxes to pay for them.” That's what Trudeau did in the 1970s, what Mulroney slowed in the '80s, what Chrétien continued to provide in the '90s (albeit by making the provinces pay) and what Chrétien, Martin and Harper continued until 2009. Only now is Prime MInister Harper moving us, I hope, in the right direction: smaller, less intrusive government that spends less.

 

[a_majoor]

This government is doing some sterling work in getting economic diversification under weigh. TPP, free trade with Europe, Free trade initiatives with a constellation of countires and even opening up choke points between the Canada/US border are all great initiatives. Collectively, they have the potential to open up many new avenues of approach for Canadian business and investment, and even if the global economy is going down, we have arranged to spread the blow among as many different places as possible (with the greater possibility of being hooked up to whoever rises first):

http://fullcomment.nationalpost.com/2012/06/19/kelly-mcparland-stephen-harper-has-good-reason-to-offer-lectures-to-europe/#Comments

Kelly McParland: Stephen Harper has good reason to offer lectures to Europe
Kelly McParland  Jun 19, 2012 – 10:20 AM ET | Last Updated: Jun 19, 2012 11:56 AM ET

European leaders are evidently growing testy at the lectures directed their way from Canada and the United States. Stephen Harper and Barack Obama are the only two G20 leaders who are refusing to kick in more cash to the International Monetary Fund as a safety valve for Europe, and Mr. Harper suggested Monday the “great majority” of leaders support Canada’s argument that Europe can solve its own problems.

Jose Manuel Barroso, the president of the European Commission, responded snappishly, telling reporters: “Frankly, we are not coming [to the G20 summit in Mexico] to receive lessons in terms of democracy and in terms of how to run an economy, because the European Union has a model that we may be very proud of.”

In diplomatic terms, that’s the equivalent of “up yours.” It is understandable that EU leaders might resent interference from abroad, but in this case Mr. Harper has a sound case to make. The EU economy is anything but a “model to be proud of.” The Mexican summit is just the latest in a seemingly never-ending round of high-level sessions called to seek a solution to a crisis that has brought one country after another to the brink of insolvency, and may yet end in the dismantling of all or part of the Eurozone. The latest threat of an EU-wide meltdown was only barely avoided on Sunday, when Greece voted by the slimmest of margins to accept a punitive austerity package rather than face eviction from the Euro club.

And while Canada is anything but immune to the painful impact a European collapse would entail, few G20 countries would likely hesitate to swap their economic record for Mr. Harper’s, given the chance. While Europe and the U.S. alike are struggling to stay afloat, Mr. Harper is juggling several initiatives that will pay ongoing rewards well into the future if he can pull them all off.

Chief among these would be membership in the TransPacific Partnership, a round of trade talks that would create a Pacific trade pact bigger and more up-to-date than the North American Free Trade Agreement. The National Post’s John Ivison reports that Mexico and Canada have been invited to join the the U.S. and the other eight TPP members. No deal has been finalized, and Ottawa is reportedly balking at some conditions, including demands for an end to trade management in eggs, chicken and dairy products. Loss of those protective measures would be deeply unpopular in Quebec, but it is a small price to pay for a much larger reward, and changes are long past due in any case.

At the same time Mr. Harper is angling for inclusion in the Pacific club, Ottawa is deeply engaged in talks towards a free trade deal with Europe itself, which may be concluded as early as this year. And the CBC reported Tuesday that the prime minister would use the Mexican summit to detail advances made in moves toward trade ties with China, which the Conservative government has been courting assiduously since long before an official visit to Beijing in February.

On yet another trade front, Ottawa was finally able to join Michigan’s state government last week in announcing a new bridge linking Windsor, Ont. and Detroit, a long-sought project that should end chronic traffic snarls at the busiest border crossing between the world’s two biggest trade partners. Ottawa views the bridge as so essential — the existing span is more than 80 years old and plagued by gridlock — that it devised a unique formula to bypass political wrangling in Michigan, and will pay Michigan’s share of the costs, recouping the money later through bridge tolls.

The project, which could cost up to $4 billion, is “an investment in the future — in the future of the North American economy, in North American trade and North American manufacturing,” Mr. Harper said.

Such high-flown words are to be expected from politicians, but in this instance Mr. Harper has cause to be proud of the record his government is building on the trade front. If Canada hopes to be more than a resource economy dependent on raw materials it can dig up and sell overseas, it must act on all fronts to produce a healthy and growing economy. Expanded trade is essential to that, and the Conservatives have worked diligently to expand access and open new markets. Mr. Barroso may not like being lectured, but Canada’s noteworthy success in a struggling world is something Europe could learn from.

 

[a_majoor]

The end of supply management and effectively increasing people's disposable income by @ $300 +/year will more than balance the losses to the farm industry when the barriers come down. Farther upthread there is an article from the FP which indicates how counterproductive this is; a yoghurt manufacturer would like to set up shop in Canada and buy lots of milk, but cannot due to quotas. At the same time, farmers are forced to sell their milk as animal feed at a lower price than the yoghurt maker is willing to pay. Consumers and farmers lose under this scheme:

http://fullcomment.nationalpost.com/2012/06/21/john-ivison-trans-pacific-partnership-and-low-political-costs-mean-supply-managements-days-are-numbered/

John Ivison: Kiss goodbye to supply management
John Ivison  Jun 21, 2012 – 2:36 PM ET | Last Updated: Jun 21, 2012 9:28 PM ET

Martha Hall Findlay's report is the first to examine the first to address the question of political will of eliminating supply management.

As Martha Hall Findlay reeled off the reasons why Canada’s supply management system should be dismantled, you could almost hear time’s winged chariot changing gears in the background. The former Liberal MP’s research paper, which landed in the week the Harper government joined the Trans-Pacific Partnership talks, has the potential to change everything.

Written for Jack Mintz’s School of Public Policy at the University of Calgary, it is the latest to lay out the irrefutable case for consigning the supply management of dairy, poultry and eggs to history.

Crucially though, it is the first to address the question of political will — or more accurately, political won’t. Her analysis suggests that there are only 13 ridings in Canada with more than 300 dairy farms — eight in Quebec and five in Ontario.

Eight of them are Conservative, most with 10,000 vote pluralities. Her conclusion is that even if Conservatives had made clear their intent to end supply management, and all those seats had been lost in 2011, the Tories would still have won a majority government.

She suggested even that scenario was unlikely, since it discounts the prospect of people actually voting in support of dismantling supply management.

Her analysis of Statistics Canada’s agricultural census division suggests that in every single riding in question, there are far more non-dairy farmers, who would benefit from ending supply management through gains in exports.

There are a mere 12,746 dairy farms in Canada (down from 145,000 in 1970 and 30,000 in 1996). This compares to 210,000 beef, pork and grain farms dependent on international trade.

The reason so many MPs are of the opinion that nothing can be done is that they are constantly bombarded with messages from the vocal dairy lobby, richly funded by the proceeds of the higher milk prices all Canadian consumers pay. No-one wants to be accused of killing the family farm, even though the numbers suggest there has already been a winnowing of small farmers.

Ms. Hall Findlay urged export-oriented farmers to mobilize themselves in support of reform. But the real silent majority is the millions of consumers who pay more than they should for dairy and poultry.

The study suggested a family that buys an average of three bags of milk a week (four litres) is paying up to $300 more than in the United States — and that doesn’t include higher prices for cheese, butter and eggs.

“The worst part is that it’s not just taxpayers, it’s regressive. Lower income families are paying a higher percentage of their income for basic nutrition.

“From a political perspective, that alone should be worth far more than the whole variety of family tax credits that have been offered in recent years to encourage voters,” she said.

The paper did not delve into the ticklish issue of how to compensate dairy farmers for their the loss of value of their production quota — currently, each cow is valued at $28,000. But Ms. Hall Findlay did point to the experience of Australia, which funded transition payments by putting a levy on retail milk sales for eight years. She noted that, while the levy kept dairy prices higher than international free market prices, they were lower than they had been under supply management.

The timing is impeccable. Canada has just been invited into the Trans-Pacific Partnership and top of the list of demands from existing members like the U.S., New Zealand and Australia is the opening of Canada’s supply managed sectors.

The Conservatives hope they can pacify other TPP members by opening up some more tariff free quota, as they are doing with the European Union in their free trade negotiations. But, as the Hall Findlay paper notes, Europe is the only major trading bloc with a higher producer subsidy equivalent than Canada (as a percentage of gross farm receipts, the EU’s PSE is 27%, Canada’s is 18%, the U.S. is 10%, China is 9%, Australia is 6% and NZ is 1%). The quota solution just won’t wash with the TPP members, so the Harper government is going to have go further. Why not make a virtue of a necessity by courting the people who would gain from the introduction of free trade in dairy and poultry?

That is certainly Ms. Hall Findlay’s intention. She lost her Toronto seat at the last election but has expressed an interest in running for the Liberal leadership again (she ran in 2006). She said if she won, she would make the dismantling of supply management Liberal policy.

But that day will be a long time coming, as long as the Liberal Party is dominated by the Wayne Easters of the world. The Liberal trade critic didn’t miss a beat after the TPP announcement landed this week, demanding the government continue to protect dairy and poultry farmers.

Ms. Hall Findlay has made what Yes Minister’s Sir Humphrey Appleby would call a “brave decision” — namely, one that risks losing votes. Regardless, it will raise her candidacy in the estimation of those Liberals looking for some fresh thinking and political integrity.

It’s long been known that supply management is a racket — an indefensible, anti-competitive cartel. Politicians of all parties have known it, condemned it in private and then voted unanimously in support, as they did in November 2005.

But the tide just turned. The combination of entry to the TPP and evidence that change can come at minimal political cost suggests that supply management’s days are numbered.

Mr. Mintz, the renowned tax and fiscal specialist, said he sees the current situation as a “milestone” in Canadian history, similar to the signing of the Canada-U.S. free trade agreement.

“We are at a very important juncture. Do we want to be a major trading country in emerging markets, or, are we like a turtle pulling its head and feet back into its shell?” he asked. This government has already indicated it has ambitions to bolster Canada’s trade in Asia through new alliances.

Supply management is the price of admission.

National Post
jivison@nationalpost.com

 

[GAP]

Had a discussion with an egg producer a couple of weeks ago. He was horrified that he would not be entitled to his entitlements. Didn't want any part of supply and demand, just wanted his guarantee.....he's always had it, he should always have it.




There is no cure for stupid.

 

[Edward Campbell]

The end of supply management and effectively increasing people's disposable income by @ $300 +/year will more than balance the losses to the farm industry when the barriers come down. Farther upthread there is an article from the FP which indicates how counterproductive this is; a yoghurt manufacturer would like to set up shop in Canada and buy lots of milk, but cannot due to quotas. At the same time, farmers are forced to sell their milk as animal feed at a lower price than the yoghurt maker is willing to pay. Consumers and farmers lose under this scheme:

http://fullcomment.nationalpost.com/2012/06/21/john-ivison-trans-pacific-partnership-and-low-political-costs-mean-supply-managements-days-are-numbered/

Liberal star Martha Hall Findlay is, undoubtedly correct, and getting "forced" out of supply management by evil foreigners is, also undoubtedly, a timely opportunity. The only thing I find just a wee bit strange is that a Toronto-Liberal should see the obvious. The established Toronto-Liberal view, the received wisdom, is given by the Globe and Mail's Jeffrey Simpson in a column in which he says: "no chink exists in the political armour defending supply management, either in Ottawa or at the provincial level. In Quebec, especially, the support is ubiquitous, in part because the producers are in a union – l’Union des producteurs agricoles du Québec – that is arguably the most powerful lobby group in Canada, along with the Canadian Association of Petroleum Producers. Any assault on supply management would be seen as an assault on Quebec, and we know what emotional wallop that punch brings ... [and] As usual, Canada will use every tactic to delay, frustrate and block any changes in order to keep dairy and poultry farmers off the streets of Montreal and Ottawa."

He also notes that Prime Minister Harper is a committed free trader and that some suggest that he "actually wants to use the TPP to destroy supply management." He pooh-poohs that idea because he (Simpson) still believes that Stephen Harper "must also see the perils of arousing Quebec." At the risk of repeating myself: a Conservative government can, indeed must aim to "govern without Quebec" - not "against Quebec" just with only a very, very few Quebec seats. But Ms. Hall Findlay's paper, in my opinion, more accurately takes account of the real political calculus: the few ridings involved are not enough to stay Harper's hand. Ridding Canada of supply management is a long term winner for all of us.

 

[Kirkhill]

Liberal star Martha Hall Findlay is, undoubtedly correct, and getting "forced" out of supply management by evil foreigners is, also undoubtedly, a timely opportunity. The only thing I find just a wee bit strange is that a Toronto-Liberal should see the obvious.

Here's your answer Argyll:

The former Liberal MP’s research paper...Written for Jack Mintz’s School of Public Policy at the University of Calgary,

Proof positive that hydrocarbons in their natural state and sour gas are far less hazardous to cogent thought than all that exhausted CO2 generated by the madding crowds and their chattering preachers in Toronto.  >

If it wasn't for having to put up with them until they got their heads straight I might almost be inclined to invite Jeffrey Simpson and Peter Mansbridge to bring their buddies out here... Maybe we could put them up in a detention facility and call it a retreat.

 

[Edward Campbell]

More on Martha Hall Findlay's foray into honesty in this column, by Andrew Coyne, which is reproduced under the Fair Dealing provisions of the Copyright Act from the Ottawa Citizen:

http://www.ottawacitizen.com/quality+short+supply+honesty/6828770/story.html

A quality in short supply: honesty
Hall Findlay's take on supply management shows leadership

By Andrew Coyne, Postmedia News

June 23, 2012

There are issues that are more important than supply management. There are parties that have more support than the Liberal party, and there are people with a higher profile than Martha Hall Findlay. How is it, then, that an academic paper by a former Liberal MP on an issue that remains obscure to most Canadians has raised such a fuss? I can think of a few reasons.

One is the issue itself - the system of supply quotas that has governed dairy, poultry and egg production across Canada for the last four decades. It is timely, with the announcement that Canada will be joining negotiations on the Trans-Pacific Partnership, a nascent free-trade bloc the government is anxious Canada should be part of, admission to which was until now conditional on the elimination of supply management. It may still be: the government has not been forthcoming on what terms it has accepted, or would in future.

If the government were of a mind to get rid of supply management - it swears it is not - that is perhaps the only basis on which it could: our trading partners made us do it. Certainly it would not dream of doing so otherwise. Such is the power of the supply management lobby, especially dairy, that a suffocating consensus has settled over the issue, of a kind rarely seen in a democracy. Consensus is not even the word. Every party strives to outdo the others in the fulsomeness of its support. And not just every party: every member of every party, in every province and at every level of government. It's quite creepy.

Yet virtually every economist or policy analyst of note agrees that supply management is a disgrace. The primary effect of the quotas - the intended effect - is to drive up the price of these foods, staples of most Canadians' diets, to two and three times the market price. The burden of these extraordinary price differentials, of course, fall most heavily on the poor, a fact that ought to trouble self-styled "progressives" but evidently doesn't.

But it isn't only consumers who pay. Since the quotas are tradable, the premium over market prices gets capitalized into the value of the quota. The right to a cow's worth of milk production, for example, runs to about $28,000, meaning a farmer looking to get into the industry faces an initial outlay, for the typical 60-cow farm, in excess of $1.5 million - just for the quota, never mind the cows, the barn and the rest.

All this we do to ourselves, quite apart from the annoyance it causes our prospective trade partners, and the risk this represents to our export-oriented sectors. Indeed, the system isn't even serving the interests of dairy farmers, rightly considered. While they remain confined to the domestic market, Australia, New Zealand and other dairy exporters are catering to the expanding middle class in fast-growing emerging markets.

So for Hall Findlay to come out against it is noteworthy in itself. Though not currently an MP - she's an executive fellow at the University of Calgary's School of Policy - she's a well-regarded figure in the Liberal party who is widely expected to run for party leader. Quite on her own, she has made it thinkable for an elected politician to get on the wrong side of the dairy lobby. Her paper makes a particular contribution in this regard, pointing out how few dairy farms there really are: fewer than 13,000 across the country, a force (more than 300 farms) in just 13 ridings.

That Hall Findlay may be a candidate for leader is the second reason her intervention has had such impact. This is not, conventionally, how one kicks off a leadership bid - by taking firm hold of what is considered one of the deadliest "third rails" in Canadian politics. Nor can it be dismissed as a mere tactic: the paper is deeply researched, and obviously sincerely held. One suspects this will not be the last such controversial stand she will take, but rather signals her intent to set out a sharply different vision for her party.

That's good for her, and better for the party. It is exactly the kind of bold break with the status quo the Liberal party needs to make. Certainly it is the kind of debate it needs to have. For that matter, it is the kind of debate, the kind of politics, we all need, which is perhaps the greatest import of Hall Findlay's initiative.

We have grown used to a politics in which no one ever says or does anything the least bit risky, and no one ever tells the truth unless by accident. Our politics has become, quite literally, a fantasy world, and nowhere more so than with regard to supply management. The unwillingness until now of anyone, literally anyone, to speak out against such a clearly indefensible policy speaks of a deeply entrenched culture of falseness and opportunism.

While far from the most pressing issue before the nation, the divide between experts and evidence, on the one hand, and the political class, on the other, gives it unusual symbolic weight. Indeed, it can serve as a kind of litmus test, a benchmark of political seriousness. If you cannot bring yourself to say it is wrong to make poor families pay three times the market price of milk to prop up a handful of wealthy farmers, you are not in the business of serious politics.

I've no idea whether Hall Findlay has any chance of being elected Liberal leader. I have no opinion on whether she should. But on this file, at this moment, she has shown a quality I'll venture to suggest might be desirable in a leader: leadership.

© Copyright (c) The Ottawa Citizen

I agree with Coyne, especially with:

1. "While far from the most pressing issue before the nation, the divide between experts and evidence, on the one hand, and the political class, on the other, gives it unusual symbolic weight. Indeed, it can serve as a kind of litmus test, a benchmark of political seriousness. If you cannot bring yourself to say it is wrong to make poor families pay three times the market price of milk to prop up a handful of wealthy farmers, you are not in the business of serious politics." and

2. Hall Findlay is showing leadership.

I suspect Hall Findlay's leadership, real though it is, is also just about as welcome as screen-doors in a submarine. I expect that Rae, Trudeau, Garneau, Coderre et al, not to mention Mulciar's minions, will dump on her from great heights.

 

[GAP]

What’s Behind Canada’s Entry to the Trans-Pacific Partnership Talks?
Published On Sun Jun 24 2012
Article Link

Last week, U.S. President Barack Obama formally extended an invitation to Canada to join the Trans Pacific Partnership negotiations, a proposed trade deal that includes the U.S., Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam (Mexico was also added last week). Supporters have lauded the TPP as potentially the world’s most important trade pact and the Canadian government spent months crossing the globe to lobby for an invitation.

Yet dig beneath the heady promises and the benefits for Canada are hard to identify. The price of admission was very steep – Canada appears to have agreed to conditions that grant it second-tier status – and the economic benefits from improved access to TPP economies are likely to be relatively minor since we already have free-trade agreements with four of the ten participants.

Given those conditions, why aggressively pursue entry into the negotiations? The reason stems less from gaining barrier-free access to a handful of relatively small economies and far more about using the TPP as a backdoor mechanism to promote regulatory changes in Canada.

Given Canada’s late entry into the TPP process, the U.S. was able to extract two onerous conditions that Prime Minister Stephen Harper downplayed as the “accession process.” First, Canada will not be able to reopen any chapters where agreement has already been reached among the current nine TPP partners. This means Canada has already agreed to be bound by TPP terms without having had any input. Since the TPP remains secret, the government can’t even tell us what has been agreed upon.

Second, Canada has second-tier status in the negotiations as the U.S. has stipulated that Canada will not have “veto authority” over any chapter. This means that should the other nine countries agree on terms, Canada would be required to accept them.

This condition could be used to stop Canada from joining forces with another country on a tough issue during the late stages of the negotiation. For example, Canada and New Zealand both have copyright terms that last for the life of the author plus an additional 50 years. The U.S. has proposed that the TPP mandate a term of life plus 70 years. While Canada and New Zealand might be able to jointly block the extension, the U.S. could pressure New Zealand to cave on the issue and effectively force Canada to accept the change.

These tough entry conditions might be worth it if Canada stood to benefit significantly from new market access. However, Canada already has free trade agreements with the U.S., Mexico, Chile, and Peru. That leaves just six countries, which currently represent less than one per cent of Canadian exports, as the net gain. In fact, there has been recent speculation that Chile is prepared to drop out of the negotiations precisely because it already has a free trade agreement with the U.S. and sees little upside in making major concessions in order to gain better access to the remaining TPP markets.

With Canada already surrendering negotiation leverage and few important markets at stake, our participation is less about other TPP countries and much more about us. Business groups such as the U.S. Chamber of Commerce applauded Canada’s entry into the TPP, expressing the hope that it would force further changes to Canadian intellectual property laws less than 24 hours after Bill C-11 passed in the House of Commons.

For the Canadian government, the TPP offers cover for major reforms to supply management, the combination of tariffs, quotas and price supports that increase costs for dairy, eggs, chicken, turkey and broiler hatching eggs. The system has been politically untouchable for decades, but using a backdoor approach of mandating change through trade agreement might provide the mechanism to garner the necessary popular support.

While backers maintain that the TPP will open up new markets to Canadian companies, the reality is that the agreement’s biggest impact is likely to come from major domestic legislative reforms that would otherwise face considerable opposition and serious political risk.
end

 

[Edward Campbell]

What’s Behind Canada’s Entry to the Trans-Pacific Partnership Talks?
Published On Sun Jun 24 2012
Article Link

Last week, U.S. President Barack Obama formally extended an invitation to Canada to join the Trans Pacific Partnership negotiations, a proposed trade deal that includes the U.S., Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam (Mexico was also added last week). Supporters have lauded the TPP as potentially the world’s most important trade pact and the Canadian government spent months crossing the globe to lobby for an invitation.

Yet dig beneath the heady promises and the benefits for Canada are hard to identify. The price of admission was very steep – Canada appears to have agreed to conditions that grant it second-tier status – and the economic benefits from improved access to TPP economies are likely to be relatively minor since we already have free-trade agreements with four of the ten participants.

Given those conditions, why aggressively pursue entry into the negotiations? The reason stems less from gaining barrier-free access to a handful of relatively small economies and far more about using the TPP as a backdoor mechanism to promote regulatory changes in Canada.

Given Canada’s late entry into the TPP process, the U.S. was able to extract two onerous conditions that Prime Minister Stephen Harper downplayed as the “accession process.” First, Canada will not be able to reopen any chapters where agreement has already been reached among the current nine TPP partners. This means Canada has already agreed to be bound by TPP terms without having had any input. Since the TPP remains secret, the government can’t even tell us what has been agreed upon.

Second, Canada has second-tier status in the negotiations as the U.S. has stipulated that Canada will not have “veto authority” over any chapter. This means that should the other nine countries agree on terms, Canada would be required to accept them.

This condition could be used to stop Canada from joining forces with another country on a tough issue during the late stages of the negotiation. For example, Canada and New Zealand both have copyright terms that last for the life of the author plus an additional 50 years. The U.S. has proposed that the TPP mandate a term of life plus 70 years. While Canada and New Zealand might be able to jointly block the extension, the U.S. could pressure New Zealand to cave on the issue and effectively force Canada to accept the change.

These tough entry conditions might be worth it if Canada stood to benefit significantly from new market access. However, Canada already has free trade agreements with the U.S., Mexico, Chile, and Peru. That leaves just six countries, which currently represent less than one per cent of Canadian exports, as the net gain. In fact, there has been recent speculation that Chile is prepared to drop out of the negotiations precisely because it already has a free trade agreement with the U.S. and sees little upside in making major concessions in order to gain better access to the remaining TPP markets.

With Canada already surrendering negotiation leverage and few important markets at stake, our participation is less about other TPP countries and much more about us. Business groups such as the U.S. Chamber of Commerce applauded Canada’s entry into the TPP, expressing the hope that it would force further changes to Canadian intellectual property laws less than 24 hours after Bill C-11 passed in the House of Commons.

For the Canadian government, the TPP offers cover for major reforms to supply management, the combination of tariffs, quotas and price supports that increase costs for dairy, eggs, chicken, turkey and broiler hatching eggs. The system has been politically untouchable for decades, but using a backdoor approach of mandating change through trade agreement might provide the mechanism to garner the necessary popular support.

While backers maintain that the TPP will open up new markets to Canadian companies, the reality is that the agreement’s biggest impact is likely to come from major domestic legislative reforms that would otherwise face considerable opposition and serious political risk.
end

While I agree, broadly, with Prof Geist's conclusions (the biggest immediate "gain" will come from forcing us to change ourselves) we must consider two things:

1. Michael Geist has an axe to grind - he is a specialist in IT law and changes to Copyright are matters of great concern to him; and

2. The TPP is Free Trade 2.0 - it, and its provisions, will be the new "gold standard" which will, eventually bind China and India. We need to be on the inside looking out, not on the outside, with our nose pressed against the window, looking in.

 

[GAP]

One of the issues I heard was the issue over who's  laws apply in the event of a dispute....(As It Happens - CBC).

According to the interviewee if a foreign company in Canada loses money because of a change in Canadian Law, they can sue under the TPP......I need to find that clip in the archives, but the whole scenerio, if true, put a real chill on the TPP for me....

 

[GAP]

Here's the clip from 2:00 to 8:30 min

http://www.cbc.ca/asithappens/popupaudio.html?clipIds=2249383938,2249384873,2249385432

Here's the original topic webpage
More Power to Corporations to Attack Nations
http://www.citizen.org/Page.aspx?pid=5411&frcrld=1

Here's the whole TPP page
http://www.citizen.org/Page.aspx?pid=3129

I don't know much about "Global Trade Watch" and what the agenda is, but some of the arguments are interesting....

 

[Edward Campbell]

I don't know enough, yet, about the TPP to comment. But: remember the (still ongoing) hysteria about the NAFTA and the provisions which, if you believe Maude Barlow et al, oblige us to sell the US as much oil as they demand. Of course, no such provision exists; the provision which does exist states that we may not discriminate against the USA relative to other export markets; it is, essentially, a copy of established international trade law. My suspicion is that this will end up being similar.

 

[foresterab]

http://gold.globeinvestor.com/servlet/ArticleNews/story/GI/20120624/escenic_4366870/stocks/news/&back_url=yes

Bitter battle rages over Canada’s sugar industry
SEAN SILCOFF
19:01 EST Sunday, Jun 24, 2012
 

OTTAWA — Greaves Jams & Marmalades in Niagara-on-the-Lake, Ont., buys about 120 tonnes of sugar a year – enough to make 1 million jars of preserves.

Suffice to say, production manager Rudy Doerwald keeps close tabs on the price of the sweetener, but with just two suppliers to choose from, he has no choice but to take what’s offered.

“The price they dictate is unfortunately the price I have to pay,” he said. “I am just held hostage and there’s not much I can do.”

Mr. Doerwald’s gripe is simple, but finding a solution for Canadian sugar users like Greaves has proven next to impossible due to the peculiar way the world’s two most powerful economies protect their sugar industries.

For 15 years, Rogers Sugar and Redpath Sugar had the Canadian refined sugar business to themselves, protected by trade barriers that kept out subsidized sugar from the United States and Europe. For bakers, drink makers and confectioners such as Greaves, that has meant having to pay about 10 per cent to 15 per cent more than the world price.

After years of complaining to Canadian trade authorities, businesses that rely on refined sugar thought they had scored sweet relief in 2010 when the Canadian International Trade Tribunal broke from past rulings by allowing sugar from Europe to enter Canada duty-free.

But that victory was short-lived: Last month, the Federal Court of Appeal ruled the tribunal failed to show how it reached its decision to drop a 78-per-cent duty on the price of sugar from the U.K., Germany, Denmark and the Netherlands and another 22-cent-per-kilogram duty on all European sugar. It set aside the 2010 decision, asking the tribunal to reopen the case.

It’s the first time in the tribunal’s 23-year history such a decision has been overturned, and it came as good news for Rogers and Redpath, who argue they need protection from European producers who dump their product – selling it abroad for far less than at home.

“Everyone agrees the Europeans dump sugar,” Redpath president Jonathan Bamberger said. “The issue is whether there is a likelihood of material injury to the Canadian industry as a result of dumped sugar coming in. We believe there is.”

The case underscores the tricky business of balancing the interests of users and producers in one of world’s most warped industries. U.S. and European governments protect their cane and beet growers and refiners with import quotas, restrictions and price supports, leaving captive, closed markets paying well above world prices. “Sugar is probably the most protected, coddled and subsidized agricultural crop of any” in the U.S., said Chris Edwards, director of tax policy studies with the Cato Institute, a U.S. libertarian think-tank.

The policies compel U.S. and EU producers to refine millions of tonnes more per year than needed – enough to supply Canada many times over. That spectre convinced the CITT in 1995 that low-priced sugar would be dumped in Canada without trade protections, after foreigners captured a 15 per cent share. That decision was extended in 2000 and again in 2005.

With the trade barriers, Canadians typically pay more than the world price, Mr. Bamberger acknowledged. He added, though, that the availability of non-subsidized sugar from Latin America keeps prices here in check: “The discipline of the world market severely limits the possibility of [Rogers or Redpath] charging an economic rent because of a duopoly. It’s not zero, but it’s a very narrow amount.”

While the U.S. system has changed little – the U.S. Senate last week voted down a proposal to reduce the scope of protections, and exports remain subject to a 78 per cent Canadian duty – the EU in 2006 cut production quotas and lowered support prices for raw sugar. Production, exports and prices fell – at first.

The CITT felt the reforms would moderate EU exports, and ruled producers would likely send spare sugar to closer markets in the Middle East and Asia, not Canada.

But Rogers and Redpath appealed, saying the evidence instead suggested the EU would crank up exports, particularly to Canada, and harm the domestic refiners, which only operate at about 75 per cent of capacity. That could mean closing one of Canada’s four refineries and losing jobs, said Sandra Marsden, president of the Canadian Sugar Institute, the refiners’ lobby group.

The refiners’ fears appear to have been borne out. In the past two years, European prices have soared to the point where refined sugar recently cost 60 per cent more than the world price. Production has surged, leaving the EU with 5 million tonnes of surplus sugar. Producers have exceeded by hundreds of thousands of tonnes the EU’s trade commitment to limit subsidized exports, a move sanctioned by Brussels. “It’s better than it has been, but sugar is still heavily subsidized and production is being dumped on world markets,” said Fredrik Erixon, director of the European Centre for International Economic Policy, a free-market think tank in Brussels.

That’s hardly encouraging to Mr. Doerwald. “Everything I do, I always try to double or triple-source,” he said. “I really can’t go anywhere else [for sugar]. This is the only way I know.” If the CITT reverses its earlier decision and restores the duty on European sugar that will remain the case for years to come.

----------------------------------

SWEET TALK

Refineries:

Rogers Sugar Inc. (Brands: Rogers Sugar, Lantic)

Vancouver: Cane sugar refinery

Montreal: Cane sugar refinery

Taber, Alta.: Sugar beet processing plant

Redpath Sugar Ltd.

Toronto: Cane sugar refinery and blending facility

Niagara Falls, Ont.: Blending facility

------------------

BY THE NUMBERS

85%: Approximate share of Canadian-produced sugar used for food manufacturing and food service

70%: Increase in price of raw sugar, 2007-2011

1,000: Approximate number of workers involved in sugar production, including about 240 involved in sugar beet farming in Alberta

$3.26: Average retail price of a 2 kg bag of sugar in April, 2012, a 37-per-cent increase over April, 2008

Sources: Canadian Sugar Institute, Statistics Canada, U.S. Department of Agriculture, Agriculture Canada


We've already had verdicts on the Canadian Wheat Board...current discussions on dairy products and next sugar???  Of course the amount of subsidized product on the market dwarfs Canadian producer costs so not sure what the balence would be .

 

[GAP]

Breaking down the Trans-Pacific Partnership trade deal
BARRIE McKENNA The Globe and Mail Tuesday, Jun. 19 2012
Article Link

Where did the TPP come from?

The Trans-Pacific Partnership is unique among free-trade deals because it was created, not primarily to break down trade walls, but as a gold standard to which countries could aspire. The agreement was born in 2005 out of the achingly slow progress towards freer trade within the cumbersome 21-country collective known as the Asia-Pacific Economic Co-operation forum, or APEC. Progress was so plodding that insiders disdainfully called APEC “four adjectives in search of a noun.”

That all changed when the deal’s founding four members – New Zealand, Brunei, Chile and Singapore – completed a deal, then known as the Trans-Pacific Strategic Economic Partnership Agreement. What the so-called P4 have in common is that they are all small, trade-oriented economies with relatively few barriers between them. In 2008, the United States, Australia, Peru, Malaysia and Vietnam joined. The agreement was later renamed the TPP, soon becoming a top priority for the Obama administration. The nine partners want a deal by year end, but that timetable is almost certain to slip, especially now that Canada and Mexico have joined the party.

Why Canada wants a seat

The TPP is the state of the art of free-trade deals. Think of it as NAFTA 2.0 for the fast-growing Asia-Pacific region, with strong provisions on intellectual property (copyright, patent protection and the like) and harmonizing regulations. It’s also specially designed to be open to an ever-expanding number of new members.

It’s also seen as a major way to boost trade with Asia. The initial prize isn’t China, which isn’t a member and likely won’t be any time soon. But the TPP does include some of the most dynamic Asian economies, including Vietnam, Malaysia and Singapore. And by this time next year Japan may join the talks, creating a monster trading bloc.

For Mr. Harper, the TPP is as much about keeping pace with U.S. exports in this increasingly vital part of the world as it is about diversifying trade beyond the United States. Canada has already slipped behind the United States, which recently completed a free-trade deal with South Korea. Canada doesn’t have a single free-trade deal in Asia. The backdrop to TPP hoopla is that global free-trade talks – known as the Doha round – have stalled. Trading countries such as Canada, Australia and the United States see the agreement as a way to keep the free-trade momentum going, while preventing a backslide to protectionism.

The catch

An invitation to the table isn't the same as negotiations. And Canada hasn't yet conceded anything to the other TPP members, and vice-versa. Nor has it taken anything off the table.

To secure a TPP invitation, Ottawa has signalled that it's willing to put some important cards on the table. Those cards include lifting the protective-tariff wall that shields the roughly 15,000 dairy and chicken farmers - something sought by the United States, Australia and New Zealand.
More on link

 

[Edward Campbell]

This article, reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail, is related to an number of threads but, in my estimation,  most connected here:

http://www.theglobeandmail.com/news/politics/former-australian-pm-sees-role-for-canada-in-world-tilting-toward-china/article4441644/

Former Australian PM sees role for Canada in world tilting toward China

JOHN IBBITSON
OTTAWA — The Globe and Mail

Published Thursday, Jul. 26 2012

Kevin Rudd, the former prime minister of Australia, dreams of what he calls the Pax Pacifica, a 21st century in which the world peacefully accommodates both a rising China and a declining America within the embrace of once-Western but now universal values of collective security, globalization and rule of law.

Over the past week or so, Mr. Rudd has discussed his vision for a globally integrated China with UN Secretary-General Ban Ki-moon, U.S. Vice-President Joe Biden, former secretary of state Henry Kissinger and, on Wednesday, Foreign Affairs Minister John Baird.

Mr. Rudd arrived at a time when Ottawa could use some friendly advice from a politician who has been studying China for more than 30 years. The Conservative government is grappling with the proposed acquisition of Nexen, a Canadian petroleum firm, by CNOOC, a Chinese state-owned oil company.

And on an international scale, tensions are running alarmingly high between China, which claims virtually all of the South China Sea, and its neighbours, who claim parts of it.

Mr. Rudd pointed out in an address at the University of Toronto earlier this week that for the first time since George III was king, “a non-Western, non-democratic state will be the largest economy in the world.” And this will happen in a matter of years.

Yet for centuries the Middle Kingdom has sought to dominate its own sphere while completely ignoring everything outside it. How is China to be brought into the centre of the world?

“China is a strong country,” Mr. Rudd replied in an interview, but “China also respects strength.” Western nations must accept, he said, that, “there are times when we will have a principle-based disagreement, and we should never walk away from that. That’s just being realistic.”

China, in other words, must neither be kowtowed to nor needlessly aggravated by former colonial powers who have little moral capital within the region.

Mr. Rudd believes Canada and Australia should become partners in exploiting the potential of a world whose geopolitics are shifting more quickly than anyone expected or few imagined.

With “the centre of gravity now increasingly moving into the East-Asian hemisphere, together with the overall dynamics of globalization … this is going to bring Canada and Australia much closer together than in the past,” he predicted. “This is a good thing.”

As in Australia, Canada is grappling with Chinese offers of much-needed foreign investment, while worrying over what strings might eventually be revealed. On the proposed CNOOC-Nexen deal, while Mr. Rudd has “never been in the business of providing any foreign government with gratuitous advice,” he added that Australia is a major recipient of Chinese investment. “So we have some experience in these matters.”

“CNOOC is a company I know very well. They’re a good company,” he said, adding that in Australia, as in Canada, each proposal must be considered on its merits.

This is not a view universally shared in Australia, where Opposition Leader Tony Abbott of the Liberal Party is well ahead in the polls over the Labour government of Mr. Rudd’s successor, Julia Gillard. Mr. Abbott declared earlier this week that “it would rarely be in Australia’s national interest to allow a foreign government or its agencies to control an Australian business.” Chinese acquisitions are particularly “complicated,” he said, because so many of its large firms are state-owned.

One way to manage China might be to embrace its neighbours, which is an unstated purpose of the Trans-Pacific Partnership talks, an ambitious set of trade negotiations involving the United States, Australia and a range of Latin American, Asian and Pacific nations. Canada recently won American approval to join the talks, but the agreement could force this country to abandon protection for its politically powerful dairy and poultry industries.

“A free-trade agreement must be compatible across all sectors and in-depth within sectors. Otherwise, you’re kind of dancing around the edges,” Mr. Rudd observed. “This always involves difficult choices for countries.”

But “from Canada’s perspective, [a TPP agreement] would open a whole bunch of new doors.”

Including with Australia. The two countries’ economies are so nearly identical that Australia is often seen as a competitor by Canadian companies selling natural resources overseas.

“I think this is total BS and should be consigned to the rubbish bin of history,” Mr. Rudd argued, firmly. He believes Australian and Canadian companies and governments should exploit joint opportunities for selling into emerging markets.

Mr. Rudd, who is 54, grew up in the high noon of the American century. He hopes that the 21st century will be known, not as the Chinese century, but as his Pax Pacifica – “an international rules-based system, anchored in the universal values which we hold to be dear, but with different voices around the table. And we should be comfortable about that.”

Does that mean China will one day evolve into something resembling a democracy? Mr. Rudd shrugs slightly.

“It is one of the great unpredictabilities of the age.”

Two key points:

First: The Trans Pacific Partnership is, indeed, as the article suggests, "one way to manage China" by embracing its neighbours, "which is an unstated purpose of the Trans-Pacific Partnership talks, an ambitious set of trade negotiations involving the United States, Australia and a range of Latin American, Asian and Pacific nations. Canada recently won American approval to join the talks, but the agreement could force this country to abandon protection for its politically powerful dairy and poultry industries." There is a parallel between classical containment, as proposed by George Kennan in 1946/47, and our (the American led West's) current views on China. But, in my opinion it is the wrong way to manage China. The TPP is a good idea, on its trade merits alone - it will be better when, eventually, China joins, too. The best way to "manage" China is to engage, openly and honestly, on all fronts.

Second: The proposed CNOOC/Nexen deal is a new frontier - and not just for Canada.

There is a two article debate in the Globe and Mail about the CNOOC/Nexen deal. On one side, former Conservative cabinet minister (and still possible future leader and potential prime minister) Jim Prentice argues for "following the rules" and letting the chips fall where they may in an article entitled Nexen deal: Canada must remain open for business. On the other Roger Martin, Dean of the Rotman School of Management at the University of Toronto, argues for "reciprocity" in his article which is headlined as Nexen deal: The only standard is reciprocity.

Jim Prentice is about 90% right and Roger Martin is about 90% wrong. Free trade or just freer trade, even unilateral free trade, is always - so history shows - better than tariffs and "managed" trade, better for all partners, even the one that "gives" the most. The major net effect of free trade is to give the individual more money which (s)he will spend, which creates jobs, and, more importantly, save and invest, which creates even more jobs. Professor Martin is arguing a totally failed economic, political and strategic case - he is harking back to the Trudeau era, which was a political and economic disaster for Canada. Martin is parroting the very worst of American protectionist thinking - it, protectionism, is an incredibly stupid and dangerous idea which never serves the common good and often unleashes great evil on then world. At the risk of being dogmatic: protectionism, all protectionism, including Sir John A's national policy, always does more harm than good; it (protectionism) has no redeeming values for anyone, ever.

 

[Kirkhill]

There is still the issue, when discussing China as the World's Largest Economy, that that title is earned by dint of their very large population.  The national pool of wealth is literally a mile wide and a millimeter thick.  A penny still matters in China.  Many folks over there don't have that much to give.  They feel it every time the Government spends their money overseas buying Canadian oil companies.

How long will they put up with those expenditures, sold on a combination of necessity and national pride, when their coal mines, schools and dams are collapsing; the rural economies are neglected and corruption still favours the production of Mandarins?

 

[Edward Campbell]

In her new book, Winner Take All: China's Race For Resources And What It Means For The World]http://www.amazon.ca/Winner-Take-All-Chinas-Resources/dp/1443407402/ref=sr_1_1?s=books&ie=UTF8&qid=1343311177&sr=1-1]Winner Take All: China's Race For Resources And What It Means For The World, Dambisa Moyo, who is pretty respectable economist, posits that China has a long term resource strategy and that the very sort term opportunity costs are well covered by it.

 

[Brad Sallows]

>Free trade or just freer trade, even unilateral free trade, is always - so history shows - better than tariffs and "managed" trade, better for all partners, even the one that "gives" the most.

As a matter of economics, that is a valid statement.  As a matter of national interests, technology, property, and security, it is not.  That is irrespective of whether the trading partner is China.

China, like the US, is a large country which has a lot of weight to throw around.  China, unlike the US, is not a relatively open country.  China has entirely too many problems enforcing intellectual property laws.

 

[Edward Campbell]

Brad, I'm happy to agree that free or even freer trade, especially with China, can cause some vexing intellectual property problems. But I still think the "national interest," including "security" interests are better served by free trade than by protectionism in any of its guises. Our "national interest" was and still is well served by free trade with the USA. Now, Max Baucus is still in the US Senate, trying, sometimes managing to convince the US Government to act against international law and its own best interests and he pursues his own protectionist agenda; and, recently, two pissant US state representatives convinced the US Federal Maritime Commission to release a report that accused Prince Rupert of enjoy unfair natural advantages over US West Coast ports - the report should embarrass every American with an IQ above six; but those horrid examples of American stupidity do not alter the fact that we, and the Americans, are better off, in (almost?) every respect because we have a pretty comprehensive free trade deal. An even more comprehensive free trade deal, that includes e.g. better labour mobility and more common product standards would provide more benefits.

The way to change China, to make it a more desirable trading partner, is to engage it and to lead by example. Hiding behind protectionist trade barriers is bad economics and bad public policy - but freer trade is a political project and good public policy requires courage, so ...  :-\

 

[Edward Campbell]

More, on vaguely related issues, in this column by Andrew Coyne, reproduced under the Fair Dealing provisions of the Copyright Act from the Ottawa Citizen:

http://www.ottawacitizen.com/news/Coyne+Christy+Clark+Northern+Gateway+benefit+extortion/6989837/story.html

Christy Clark, Northern Gateway and the old 'net benefit' extortion racket


By Andrew Coyne, Postmedia News

July 25, 2012

As the Nexen sale is to Stephen Harper, so the Northern Gateway pipeline is to Christy Clark. Both proposals come with substantial economic benefits, but also political dangers. Each leader will thus be tempted to attach a pricey list of conditions to their approval, in order to limit their exposure. So far, at least one of them has succumbed to that temptation.

Legally speaking, Gateway does not need the premier of British Columbia's approval to proceed. Pipelines are federal jurisdiction: the National Energy Board, after it has completed its hearings, will be the one to say yea or nay, albeit subject to cabinet override. It may be that the government of B.C. can prevent it from going ahead in other ways, though whether these could withstand a really determined federal government is another question.

Clark's real weapon is political: the opposition of much of the B.C. public to the project, and the price the federal Tories likely would pay at the polls were they seen to be overriding the government of B.C. on the matter — her own, or that of her likely NDP successor. The list of demands she has suddenly produced, far behind in the polls with less than a year to go before the provincial election, is an obvious attempt to inoculate herself on the Gateway issue, without actually coming out against it.

That, at any rate, is the charitable interpretation. The demand, in particular, that the government of B.C. be paid an unspecified sum as its "fair share" of the fiscal and economic benefits flowing from the project is so outrageous that it is difficult to believe it was not done for show. Fairness suggests entitlement. But it's not immediately evident why the B.C. government should be entitled to any of the Gateway largesse. It doesn't own the oil, and is not laying the pipe. The $6.7 billion in additional tax revenues it is currently projected to receive from it is more or less a windfall.

The government's answer, that it is entitled to its "fair share" on account of the environmental "risk" it is taking on by allowing Alberta's heavy oil to be piped across its territory and shipped out of its ports, is hardly enlightening. The principle sounds fine. But just as it does not specify how much it is due, so it does not explain precisely what risk it is assuming. If it is the cost of preventing and/or cleaning up from a spill, that is belied by the rest of its position paper, in which it is made quite clear it has no intention of paying for any of this.

For example, it proposes a long list of measures to improve the capacity to respond to spills off BC's coastline, all of them to be implemented by the federal government, at federal expense. It calls for raising the limit on liability for damages in the event of a spill, to ensure industry sets aside sufficient funds "to fully cover a major response without requiring public money." (Emphasis added.) Land-based spill management is likewise to be "industry-funded," on the principle that "those sectors (i.e. the oil and gas industry) that pose the risk must be responsible for all related mitigation and response costs." (Emphasis added, again.)

So whatever risks the pipeline poses, they would not appear to be risks to the financial position of the government of B.C. It is demanding its "fair share" — from whom is likewise something of a mystery — not because it is incurring any additional risk, but because it can: because (it believes) the pipeline cannot proceed without it.

Perhaps there are other costs, not covered by "all related mitigation and response costs." If so, there are better ways of seeking compensation than issuing vague public ransom notes to neighbouring provinces. For example, it could apply to the NEB to add a surcharge to the toll collected by the pipeline's owners, Enbridge, some portion of which would then be passed back to the oil industry. Better that an impartial third party should assess these things than leave provinces to unilaterally impose tariffs on each other.

In the final paragraph of my last column, I rashly suggested this was a matter that could be left to the two provinces to work out — better that than a "national energy strategy." But this isn't about energy. This is about interprovincial trade. What B.C. is attempting here is a provincial version of the "net benefit" test, that mysterious process invoked whenever the owners of a Canadian firm wish to sell their shares to foreigner. It comes with the same pretence of principle, to dress up what is little more than raw opportunism.

If the Harper government would like to deter B.C. from playing silly games over Gateway, it would do well not to indulge in its own. To be sure, Nexen's proposed $15 billion sale to the China National Offshore Oil Company raises some legitimate issues — not so much to do with state ownership (I don't think we'd be too upset if the Norwegian sovereign wealth fund, for example, were the purchaser) as with the nature of the state in question.

Whether Nexen would be managed on a sound commercial basis under its new owners, that is, need not concern us greatly (if not, that's China's loss, not ours), but transparency should: for example, with regard to transfer pricing. If we're to tax and regulate such firms successfully, we need to know who and what we're dealing with. What we don't need are arbitrary demands to maintain head offices here or preserve jobs there or the other riders governments typically impose, the cost of which is usually borne by the sellers, not the buyers.

So fine, let us have a prudent examination of the relevant issues. But let's leave out the extortion attempts, shall we?

© Copyright (c) Postmedia News

I agree with Coyne that:

1. Premier Clark is trying to commit extortion and she is playing a very weak hand; and

2. We need to treat the Chinese potential buyers in a firm but fair manner - in the same way we want to treat all owners, Canadian or foreign. And that does mean that we want transparent transactions.