Opinion: How Canada should respond to tariffs

Calgary Chamber of Commerce president and CEO Deborah Yedlin. (Courtesy Calgary Chamber of Commerce)

Deborah Yedlin is the President and CEO of the Calgary Chamber of Commerce. She has worked on Bay Street, Wall Street and has over two decades experience as a business columnist.

There was an audible exhale from the more than 1,000 guests present in the large room at the Canadian Embassy in Washington, D.C. after President Trump finished his first speech of his first day as the 47th American President.

Canada wasn’t mentioned. What a relief.

But as everyone knows by now, the relief was short-lived, with the President answering a question about tariffs posed by a reporter later that evening. It ruined many a Canadian appetite.

With the spectre of tariffs looming – and only the timing to be determined – there were several important, and constructive, themes that were constant in every conversation on Monday, regarding how Canada should respond.

The first was about diplomacy and the preference to find a diplomatic solution that avoids the imposition of tariffs. Neither side benefits. The very essence of trade is that it is mutually beneficial, which is very true in the context of our trading relationship with the U.S. To unwind contracts, re-locate manufacturing facilities, disrupt supply chains and increase the cost of oil or natural gas and other inputs will decrease economic activity on both sides of the border.

The second was to leverage relationships with state governors – and meet with the U.S. Ambassador to Canada Pete Hoekstra, as soon as possible. Ambassador Hoekstra is from Michigan - a border state with deep ties to Ontario through the auto manufacturing sector. He has strong ties in Washington as a former Republican Congressman from Michigan, was previously Ambassador to The Netherlands, and therefore understands the importance of trade between the two countries. Even more important, as a former congressman of a border state, he will be very aware of the difficulties associated with unwinding the mutually beneficial supply chains.

Unwinding unhelpful legislation

The third was to focus on what we can control – namely, unwinding unhelpful legislation such as Bill C59, the Clean Electricity Regulations, the Emissions Cap, the Impact Assessment Act and the Tanker Ban, and commit to dismantling interprovincial trade barriers.

The productivity crisis in Canada owes much to the regulatory challenges associated with obtaining project approvals that were either delayed or canceled, with investment dollars stuck on the sidelines or allocated elsewhere. The positive impact of the Trans Mountain Pipeline (TMX) on the Canadian economy is already evident and we need to pursue similar initiatives that contribute to long term economic growth and economic security.

The fourth was to put infrastructure projects that can diversify our markets – such as Northern Gateway and Energy East – back on the table – and look at opportunities to increase natural gas exports.

This will require regulatory certainty for both the pipeline proponents and the producers, enabling them to risk long-cycle capital. From a producer standpoint – it means certainty for oil and natural gas production and increasing egress off the west coast.

For natural gas, specifically, this means increasing our LNG export capacity as well as the pipeline infrastructure into the U.S. While the latter might be counter-intuitive, as the U.S moves to increase its own LNG export capacity, more Canadian natural gas will be needed to backfill domestic demand.

Similarly, the case for oil exports to new markets hasn’t changed. We simply can’t be beholden to one customer. It’s bad risk management and we are about to see this play out in real time.

Positive economic impact on Indigenous communities

The lessons learned from building TMX can be applied to Northern Gateway 2.0 – as well as the positive economic impact on Indigenous communities that have been able to participate in the development of resource-related projects, suggests there is a path forward. I still remember a conversation with one of the Chiefs from a community that had signed on to take an equity interest in Northern Gateway, and the devastation he voiced when the project was cancelled, because of the loss it represented for the future of his community.

Finally – we need to come together as a country.

It comes off as a bit rich when Alberta’s energy production is being offered as a sacrifice in a trade war – when there has been minimal support for the sector’s challenges by other provincial leaders – and Ottawa - over the last 10 years.

The federal legislation put forward along with the regulatory challenges and lengthy timelines have stymied investment. There has been nary a peep of protest from Ontario and other provinces – save for Saskatchewan and Newfoundland – until now.

If anything, the notion of cutting off oil and natural gas exports speaks to the ongoing lack of understanding of how energy systems function. You cannot actually turn off a tap; pipes are full, storage is limited, and once shut in, there is no certainty it could come back online. It simply doesn’t work.

Nothing focuses the mind like a hard deadline; in this case, the date appears to be February 1st. We’d better get focused. Together.