As the North American leaders Stephen Harper, Barack Obama and Enrique Peña Nieto meet in Mexico City this week, we can expect smiles and all the rhetoric about intensifying the relationship between the North American Free Trade Agreement (NAFTA) partners. While the trade numbers justify applauding and celebrating the NAFTA agreement 20 years after its inauguration (January 1994), there remains a lot of “behind the scenes” tension, conflict and unresolved issues.
For Canada, NAFTA has been a positive development. In 2010, trilateral trade represented $878 billion, which is a threefold expansion of trade since 1993. Mexico now represents Canada’s first Latin American partner in trade, and we are Mexico’s second most important trade partner in the world. Bilateral trade has expanded at a rate of 12.5% yearly to attain $30 billion in 2010. Canadian investment in Mexico is now estimated at over $10 billion. In short, both countries have benefitted from the deal.
This being said, it is generally acknowledged that both Canada and Mexico invest more time, energy, and resources in pursuing bilateral relations with the world’s number one economy, the United States. As a result, some outstanding issues such as Canada’s imposition of visas on Mexican tourists continue to be a major irritant for the Mexican government. The continuing disputes on respective beef import bans also continue to create tension between the two countries.
Just this past weekend, Canada’s highly respected Globe and Mail had the following headlines: “Mexico has stern messages for Harper” and “Canada-Mexico relations merit more than forced smiles”. Clearly, the relationship is strained.
Reforms to Mexico's energy sector were signed into law late last year. The legislation proceeded rapidly from President Enrique Peña Nieto's announcement of the reforms in August, to the negotiations among the major political parties during the fall, to voting in both houses of Congress, resulting in a majority of the 31 state legislatures changing the Constitution. For the first time in 75 years private participation will be permitted in Mexico's energy sector, not only in oil and gas, but also in electricity and power generation. The repercussions of this reform will be felt not only in Mexico but across the hemisphere, including Canada as increased development of Mexico's energy sector is a win-win for Mexico and the rest of North America.
The reform has led to large expectations and deservedly so. It goes further than what was originally envisioned when Peña Nieto announced the reforms in August 2013. The two conservative political parties, Peña Nieto’s Institutional Revolutionary Party (Partido Revolucionario Institucional, PRI) and the National Action Party (Partido Acción Nacional, PAN), molded the legislation to make it deeper and more robust. The opposing liberal party, the Party of the Democratic Revolution (Partido Revolucionario Democrático, PRD), demonstrated rampant opposition to the reforms as they viewed them as a “privatization” of Pemex, the state oil company. The PRD is still hoping to halt the reform through a popular referendum, but the success of this initiative is unlikely.
They say the devil is in the details, and proponents of turning around Mexico's declining oil and gas production appear pleased with the components of this legislation. The vehicles that allow foreign investment vary in the amount of risk involved. These include service contracts, profit-sharing agreements, production-sharing agreements, and licenses. The latter functions in the same way as a concession, and faces a potential legal hurdle as Mexican law prohibits concessions. Nevertheless, these contracts allow foreign companies to have more skin in the game, and catapult Mexico into the top 10 in the world in terms of investment regime offered.
On November 25, Canadians went to the polls in four by-elections—two in Manitoba, one in Québec and one in Ontario. The results were not dramatic, as they maintained the same distribution of seats in Canada’s House of Commons. The Conservative Party of Prime Minister Stephen Harper kept its two Manitoba seats—albeit with highly reduced margins. The Liberals, led by new leader Justin Trudeau, won both the Ontario and the Québec seats.
What made news was the fact that the Liberals captured second place in the Manitoba contests, leaving the New Democratic Party (NDP) to ponder whether they are losing their hold as the alternative to the governing Tories.
Harper’s party is still mired in the Senate scandal from last spring, which involved alleged spending infractions by former Conservative Senators Patrick Brazeau, Mike Duffy and Pamela Wallin—then part of the Conservative caucus.
To the opposition parties, it’s the scandal that keeps on giving, as daily revelations dominate the newswires. The prime minister is finding out the hard way the Watergate scandal lesson—the “cover-up” is usually more damaging than the “crime.” Evasive answers, contradictions and improvisation have amplified what should have been an isolated case of misbehaving senators (since expelled from the Tory caucus) into a full-blown scandal.
Conservatives have suffered the blowback in recent national polls, and the by-elections results confirmed that the government is in troubled waters. What may be encouraging to the government strategists, however, is that the Tory fall in the polls cannot really be attributed to the government’s major agenda item: the economy. Rather, it is the scandal and how the government conducts its business in the light of the scandal that are the source of the current rejection. With two years to go until the next election, there is plenty of time to adjust and recover—or so the Tories think.
Fifty years ago, I was entering university when a tragic event with worldwide repercussions occurred: the assassination of President John F. Kennedy on November 22, 1963. Many who lived through that day and the following three days can recall where they were, what they were doing and how they felt.
Besides the United States, Canadians probably felt the pain most vividly. JFK had visited us earlier in his presidency and described us as neighbors, allies, partners, and friends. No relationship was closer and more interdependent. He had effectively seduced us on that visit.
Since his death, numerous historical accounts have focused on the theories about his assassination, the myths about the Kennedy years in the White House—the so-called “Camelot” era—and the successes and failures of his presidency. Even after all these years, the JFK mystique still captivates our imagination.
JFK was, above all, a modern man. Elected president in 1960 at age 43, he was the first U.S. president to be born in the 20th century. Young, handsome and charismatic, he was the first president to do regular televised press conferences. With his natural charm, he was able to display vision, firmness and humor. By all accounts, he was a natural for the television age.
Above all, JFK knew how to use the power of words to inspire and to give direction. His words still resonate after all these years: “Ask not what your country can do for you; ask what you can do for your country”; “Never fear to negotiate, but never negotiate out of fear”; “Wherever we may be, all free men are citizens of Berlin—Ich bin ein Berliner”; We choose to go to the moon in this decade not because it is easy, but because it is hard.”
Barrick Gold Corporation, a Canadian mining company and the world’s largest gold producer, announced Thursday that it has temporarily halted operations at its Pascua-Lama gold mine in the Andean border region between Argentina and Chile. Production was scheduled to begin by early 2014, but environmental regulations, depreciating gold prices and declining company profits led to a decision to indefinitely suspend construction at the mine. Barrick said it has already spent over $5 billion of the total estimated project cost of $8.5 billion. The company told investors in a quarterly earnings statement that the postponement would provide capital savings of up to $1 billion in 2014.
Barrick’s stock prices fell 8.65 percent in April when a Chilean appeals court announced that it would block operations at Pascua-Lama due to “environmental irregularities.” The announcement came after members of Diaguita Indigenous communities filed a complaint that the mine had polluted glacial deposits and contaminated scarce water resources in the Atacama Desert. Chilean Interior Minister Andrés Chadwick welcomed the April announcement and said he hoped the company would be able to address the court’s concerns and conduct environmentally sound operations. The Chilean government has not announced plans to revise or lift the restrictions.
Officials voiced greater concern in Argentina, where operations were not discontinued until the company’s recent announcement. On the Argentine side of the mine, Barrick operations provide thousands of jobs and accounts for a third of San Juan province’s economy. Officials there have advocated repeatedly for the project, and it remains unclear how the closure will affect the region’s economy. Nevertheless, Guillermo Calo, Barrick’s top official in Argentina, said the company still plans to invest $400 million there next year.
While thousands of federal workers in the U.S. went back to work today after grappling with the government shutdown and debt ceiling crisis, Canada’s Parliament has just now reopened for business, with Prime Minister Stephen Harper’s second Throne Speech since his party won a majority government mandate in May 2011.
Coming at mid-term, the speech has been properly described as a new beginning for the Harper government. He outlined consumer-friendly measures such as reducing the gap between cross-border prices on items purchased in the U.S. and greater subscriber freedom in purchasing cable TV packages. In addition, he announced more law and order policies to reinforce his conservative base. All this was presented in the usual pomp of a Speech from the Throne.
The past year has seen the Harper administration facing its most serious crises since it first took office in 2006. Election irregularities in the 2011 campaign have led to departures within the ranks, and a Senate scandal involving three Conservative senators dominated the spring session. Current polls place the Harper Conservatives behind the third party in the House of Commons—the Liberals, under new leader Justin Trudeau. While there is plenty of time for a resurgence before the 2015 general election, the Speech from the Throne delivered on October 16 does represent a potential second wind.
The Conservative victory in May 2011 was so impressive that some seasoned political observers saw the emergence of a new coalition made up of law and order types and Canadians with conservatives values— one which could transform the Conservatives into “the natural governing party” of the nation, as the Liberals were through most of the 20th century. Harper’s Conservative party is also seen as the most ideological party of its nature since Confederation.
Some pundits have postulated that the 2011 shift to the Right may develop into a permanent phenomenon. After all, in that year, the Liberals dropped to third place (Conservatives occupied 161 seats in the House of Commons while Liberals occupied 34) and seemed decimated in key strongholds across the country, including Québec and the greater Toronto area. The progressive view seemed in search of a principal voice. Enter the new official opposition party—the New Democrats (NDP), who are hoping to replace the Liberals as the alternative to the Conservatives.
As the U.S. government shutdown continues in its second week and there remains a looming possibility of a Congressional gridlock over the debt ceiling on October 17, much attention has been directed to the first-term Republican Senator from Texas, Ted Cruz. The Calgary-born Cruz has been dominating the headlines for the past three weeks with his 21-hour faux-filibuster against the Affordable Care Act (popularly deemed “Obamacare”), and his adamant stand against the president’s health care reform as a “job killer.” In so doing, the “Senator from Canada” (Cruz was born to an American mother and a Cuban father in Alberta, Canada. He currently holds both U.S. and Canadian citizenship.) has become the de facto leader of Tea Party Republicans in the House of Representations and the face of the GOP.
Republican House Speaker John Boehner seems unable to break Cruz’s hold on the Tea Party caucus. As a result, defunding Obamacare has become the leitmotiv for Republican support to end the shutdown. Speaker Boehner keeps asking for a conversation with President Obama to break the stalemate, but it seems his most intransigent opponent is within his own ranks. Cruz, however, may be calling the tune on this Republican shutdown position, but he is not without his detractors.
Republican heavyweights such as anti-tax zealot Grover Norquist and Bush operative Karl Rove have openly questioned the Cruz-led strategy to tie a budget vote to replacing the 2012 election result on Obamacare or making it inoperative. Some have openly speculated that a fratricidal war within Republican ranks could cost the GOP dearly at the polls in the 2014 midterm elections. Polls, while spreading the blame to both parties, indicate greater disapproval with the Republicans’ performance on this issue. It is undoubtedly a risky strategy.
Clearly, Cruz has ambitions beyond the shutdown and the debt ceiling fight—possibly even the next presidential cycle in 2016. While many Republicans are increasingly uncomfortable with his bravado, his leadership on this issue and his media presence are making Speaker Boehner look weak and vulnerable. This is a unique situation where the Speaker of the House is being held hostage by a first-term Senator of the same party from another arm of the legislature. Meanwhile, the Tea Party is keeping Boehner’s feet to the fire, despite his obvious inclination to find a compromise with Obama.
On Monday, Brazilian President Dilma Rousseff demanded an explanation from the Canadian government over a media report that claims the North American country spied on Brazil's Mines and Energy Ministry—the institution that manages the country's mineral and oil resources. This comes only a few weeks after a similar report claimed the United States was also spying on the South American country. "That is unacceptable between nations that are supposed to be partners," Rousseff said via Twitter. "We repudiate this cyber warfare.”
The report broadcast on Sunday by TV Globo claims that Canada's intelligence agency, the Communication Security Establishment (CSEC), used software called Olympia to map the ministry's communications, including Internet traffic, emails and telephone calls. Rousseff noted that there are reasons to believe the espionage had economic and strategic motives as many Canadian mining companies are operating in Brazil.
In response to these claims, Brazil's Minister of Foreign Relations Luiz Alberto Figueiredo summoned Canada's ambassador Jamal Khokhar to demand an explanation for what it called a "serious and unacceptable violation" of Brazilian sovereignty and the right to privacy of its citizens and companies. On the Canadian side, the spokeswoman for Prime Minister Stephen Harper said that "CSEC does not comment on its specific foreign intelligence activities or capabilities." The Canadian Defense Department declined to comment.
This follows a previous disclosure that the U.S. National Security Agency (NSA) had spied on Rousseff's telephone calls and emails as well as on state-run energy company Petrobras. In response to this report that came to light in mid-September, the Brazilian president canceled a state visit to the United States scheduled for October 23 and denounced this operation as a violation of human rights and international law during her address at the United Nations General Assembly.
Both reports are based on documents leaked by former NSA contractor Edward Snowden who, according to the documents, attended the conference of the "Five Eyes" intelligence-sharing network between the United States, Britain, Canada, Australia and New Zealand. Snowden is wanted by the U.S. after revealing details of the NSA's massive intelligence activities, and is currently living in temporary asylum in Russia.
With the U.S. administration now engaged in trade talks regarding the Trans-Pacific Partnership, and President Obama’s intention, expressed in his last State of Union address, to embark on a free trade arrangement with the European Union, it is clear that trade policy in the U.S. is in for a major shift. The Canada–U.S. commercial relationship, as we know it, will surely be in for a change. When you trade $1.5 billion of goods daily, neither country can remain indifferent if new commercial arrangements modify the status quo.
If we add to this the emerging energy revolution—related to shale gas and shale oil—that is bound to influence the U.S. economy, we can conclude that the U.S.’ major trading partners will soon face new challenges. It is becoming more apparent that the U.S. is heading toward energy self-sufficiency. By 2017, according to the International Energy Agency (IEA), the U.S. is expected to be the largest oil producer in the world. By 2020, it could be a net exporter of natural gas, and in 2030, the U.S. could be a net exporter of petroleum. This will have a direct impact on prices of those commodities, the cost of doing business and the potential growth of the U.S. manufacturing sector.
No one doubts the ingenuity and the innovative character of the U.S. economy. With a competitive advantage sparked by this new energy picture, one can conclude that the American economy may be in for important, positive and significant growth. Despite the uncertainty often associated with its domestic politics regarding deficit and debt issues, the U.S. economy is certain to be gradually transformed. The current Canada–U.S. commercial relationship, which is the largest in the world, will also be directly affected. Canada cannot afford to ignore what this new American challenge represents for its own future.
For Canada, this will require an even greater effort to diversify and pursue more aggressively new or alternative markets. It will also have to engage in more research and development, aim for greater productivity, attract more immigrants, and invest in greater manpower training. With our energy, our multiple natural resources , and our competitive high-tech sectors, Canada has already engaged with moderate success in diversifying its markets.
Last week’s address to the nation by U.S. President Barack Obama showed the complexity of the debate regarding Syria and the chemical attack of August 21. Military strikes were still on the table during Obama’s address, but at the end of week Russia and the United States had come to an agreement regarding chemical weapons in Syria and the renewed role of the United Nations in eventually eliminating them. While still open to doubt and debate about its impact and its results, it is easier to deal with diplomacy, even if it fails, than a potential war with no clear objectives or exit strategy.
Less than a month after the atrocious use of such weapons against a civilian population, Bashar al-Assad’s government now acknowledges the possession of such weapons when he spent years denying he had them. This is no small feat, since Russia—the prime supplier of such armaments—began the process with the U.S. after days of attributing the attack to the rebels.
U.S. domestic politics, being what they are, are once again the subject of renewed partisanship (the GOP still has no coherent policy on Syria), division on means and objectives, and a general lack of public support for any military enterprise against Syria. Obama’s decision to ask Congress may have been in line with his campaign rhetoric of 2008, but it had a lot to do with the British government losing a vote for the first time in 150 years on military action. Since then, Obama’s detractors in Congress have given Russian President Vladimir Putin the credit for getting Obama “off the hook.” They go a step further by calling Obama weak.
The fact is that the U.S. population is war-weary and skeptical about its leaders in both parties, as well as claims about the national interest. When we go back to Lyndon Baines Johnson and the Vietnam War, Reagan and the Iran-Contra saga, or Bush’s claims of weapons of mass destruction to bring about regime change in Iraq, it is not surprising that Obama was facing an uphill battle with the general public to get an endorsement for military strikes.