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The Changing Dynamics of Canada-U.S. Relations

President Obama’s Inaugural Address and State of the Union speech have one thing in common.  The emphasis is on jobs and America is changing.  Its demographics clearly showed that the electoral map favors the party that is more attuned to minorities, women’s rights and the youth.  Its social fabric is being tested regarding gay marriage, gun control restrictions and the possible legalization of marijuana.  The economic picture is transforming itself as the U.S. sees energy self sufficiency on the horizon as it actively searches for expanded markets for exporting its goods.  Finally, the interminable debate around the debt and annual deficits will go a long way in defining the role of government for future generations.

Canadians observe the U.S. political landscape with interest, and sometimes, with bewilderment.  They see the Democrat and Republican parties stuck in political gridlock, and conclude that America still holds to a status quo that is out of tune with new realities.  Yet, this is far from accurate, suffice it to say that America has made great strides in many areas that affect our lives north of the border. We must take note.

Canada and the United States form the largest commercial partnership on the planet.  And while trade flows have generally stagnated in the decade since 9/11, Canada still sends more exports to the U.S. than any other country (over 70 percent).  My home province of Québec sent 68 percent of its exports to the U.S. in 2011; in the state of New York alone, we exported $7 billion of goods compared to $2.4 billion in China, $1.5 billion to Germany and $1.4 billion to France.

The interdependence and integration of both our economies, sustained by free-trade agreements (FTA, NAFTA) have contributed to our common prosperity.  It is obvious that despite regular initiatives by politicians on both sides of the border to develop new markets beyond North America, this commercial partnership will not drastically change in the near future.

This being said, Canada would be foolhardy to ignore the writing on the wall.  America is gradually heading to energy self sufficiency, as is likely all of North America.  This is bound to have huge repercussions on the economic status quo in the long run and on the political landscape.

The upcoming decisions dealing with the fiscal cliff talks regarding the debt ceiling and the sequestration deal will have an immediate effect on the economic recovery in the U.S., and its outcome could directly affect Canada’s own recovery.  We in Canada are too dependent on the U.S. to not be affected one way or the other.  Failure to reach an agreement on these matters could plunge the U.S. into another recession.  Canada will not remain unscathed.

The decision on the Keystone Pipeline is another area that could drastically affect the economic relations between the two countries.  With Obama’s desire to be a leader in climate change, and with the nomination of climate change advocate John Kerry as Secretary of State, there is cause for concern in Canada’s oil path.  Oil and gas revenues are not only important to the province of Alberta, but they are an integral part of Canada’s equalization program that helps spread our wealth across the country.

Whether it is energy, fiscal issues, or overall economic activity, Canada will have to develop a growth strategy of its own including investments in education and infrastructures, encourage innovation, and search more aggressively for new markets.  The long term relationship with America is bound to shift, and Canada cannot afford to be a spectator.

*John Parisella is the former Québec delegate general in New York and currently a visiting professor at the University of Montréal’s International Relations Center. He is also a Member of the Board of Directors of The Montreal Council on Foreign Relations.

Tags: Canada-U.S. relations, energy, State of the Union

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