Justin Trudeau’s Pacific overture

Paul Wells adds context to Trudeau’s take on CNOOC

by Paul Wells

(Paul Chiasson/CP)

As a rule of thumb, any position that gets a politician called “brave,” “courageous” and full of “guts” in a single column is going to be awfully attractive to most politicians. Say hello to Justin Trudeau, who wants the CNOOC-Nexen deal approved and, as he heads back to Calgary this week, is eager to say so.

Readers are encouraged to debate the wisdom of the policy choice among themselves. I’m here to offer a little further information.

First, if we’re going to start whistling slowly and exclaiming that this Trudeau sure isn’t much like his father, it’ll be handy to get his father right from time to time. Pierre Trudeau was (a) the most China-friendly prime minister in history before Jean Chrétien and, well, Stephen Harper and (b) despite his carefully tended reputation as a haughty ascetic, highly prone to compromise in the interest of furthering long-term goals. Let’s take those in order.

Here’s the book Justin’s brother Alexandre edited, annotated and re-released a few years ago, reminding us that when Pierre Trudeau became the first Canadian prime minister to visit China in 1973, it was a return trip for him. “The point is not to judge other worlds by the standards of your own,” Sacha wrote. “It’s something to remember when dealing with the newly resurgent China.”

When Justin Trudeau writes today that “trade remains a paramount objective, but we can no longer rely on the United States alone to drive our growth” and “we cannot afford to miss vital opportunities elsewhere,” I hear strong echoes of Pierre Trudeau’s “Third Option,” which sought precisely to diversify Canadian trade away from the United States. (So: isolationism was the first, rejected, option; free trade with the US the second; trade with the world the third.)

The notion that Canada, sitting like a fedora on top of North America, can have any significant trade partners besides the obvious one is an idea Conservatives used to snicker at, or one of them anyway: in his first Commons speech as leader of the Opposition in 2002, Stephen Harper complained that Jean Chrétien “tried to revive the failed trade diversification of the 1970s, the Trudeau government’s so-called third option strategy, which did not work then and is not working now.”

The other reason I think Pierre Trudeau would have recognized a familiar style in Justin Trudeau’s announcement is that the older man was hardly immune to taking stances that might alienate the drowsiest elements of his electoral base. He didn’t win three majorities on debating-club points. Take his decision in 1983 to allow Ronald Reagan to test cruise missiles over Canada. (If you take this walk down memory lane, stick around long enough to hear NDP foreign-affairs critic Pauline Jewett’s magnificent rant in rebuttal. “Isn’t this typical? Parliament’s not in session, six o’clock on a Friday afternoon they make the announcement hoping you’re not around either.” Plus ça change.)

Nor indeed does one need to make connections to Pierre Trudeau to see that Justin Trudeau’s stance has roots in solid, if lately undernourished, Liberal traditions. Winning Liberals have often been natural-resource Liberals. Here’s Chrétien this year at the world’s biggest mining conference in Toronto; he subsidized the oil sands up the wazoo and made an Edmontonian his natural-resources minister.

Trudeau’s stance on CNOOC makes it harder for Martha Hall Findlay to pose as the spoiler who Gets The West; draws a clear distinction with the NDP, which doesn’t like the deal; and leaves Harper an unpalatable choice between rejecting the bid and falling into line behind a guy named Trudeau. Interesting.

 




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Justin Trudeau’s Pacific overture

  1. I wonder who writes Trudeau’s columns.

    Trudeau is for free trade with China but against it when it comes to Canada internally. Will Trudeau explain why he is for trade with China but supports supply management within Canada? Poor people would benefit significantly more if supply mgmt were ended within Canada than they will if CNOOC deal is approved but Trudeau only seems to care about middle classes.

    Where does Trudeau stand when it coms to TPP talks that threaten supply management in Quebec? Cheaper eggs and milk would be good for working class people but does Trudeau even think of their needs or is he all about the middle class?

    Japan Times Nov 20 2012:
    Prime Minister Yoshihiko Noda told U.S. President Barack Obama during a meeting Tuesday in Cambodia that he hopes Japan can participate in the Trans-Pacific Partnership free-trade talks despite opposition to the initiative at home.

    • “Will Trudeau explain why he is for trade with China but supports supply management within Canada? ”

      Will Harper?

      • I have never voted for Cons so that’s not as clever response as you think it is. Harper and his minions have defended supply mgmt a few times at least and I am unimpressed. I would be delighted if all leaders explained why poor and working classes have to overpay for basic food stuffs in order to benefit 12,000 millionaire farmers.

        • I also oppose supply management. No one seems to be talking seriously about unwinding it, and instead are sticking to FUD about food quality.

          • It’s truly unfortunate that MHF and Garneau (assuming he runs) have a snowball’s chance in hell due to the Trudeau steamroller. “Ooh shiny” wins again.

          • Well I can only guess, but maybe Justin doesn’t want to appear as the flash candidate….whereas I’m fed up with stodge and would prefer some flash.

            But MHF and Garneau won’t likely outflash that name unless they come up with something really good

          • Oh shiny hasn’t won for some time. Try it; we might like it.

          • Thanks, but I prefer competence. Although there’s no guarantee of competence as a leader with MHF or Garneau, at least their CVs suggest it’s a lot more likely than Trudeau’s CV.

            If Trudeau’s name was Tremblay, for example, we wouldn’t even be having this discussion.

    • Why on earth wonder what professional writer toils to write the piece? I used to write the correspondence of a cabinet minister: I assure you the letters were not from me. I had a job to do and I did it — moreover I was not a member of any party at all during that job, but I was a skilled and educated writer. So that particular government was not as concerned about partisanship as it was about skills, a fact I still find interesting and I understand that is no longer true with the government today. I was just hands and head: it was my job to look into the problems of the person who wrote to the minister, and to help the minister research and respond to whatever was available that would help that person. The minister requested further investigation into the matter, or signed and sent the letters.

    • “Poor people would benefit significantly more if supply mgmt were ended”

      There is no guarantee that will be the case. New Zealand got rid of its supply management scheme but according to the CBC: “New Zealand consumers pay prices equal to or higher than average prices in Canada. The extra money is somewhere, but it’s not in the pockets of farmers or consumers.”

      No doubt the supply management scheme was poorly designed and did nothing to protect farmers (there are only 10% the numbers there were when the program was put in place.) But getting rid of it will be costly and consumers will see no benefit (because demand determines the price of dairy products.)

      ANALYSIS | 5 reasons to defend farm marketing boards
      http://www.cbc.ca/news/politics/story/2012/01/04/pol-supply-management-trade.html

  2. Trudeau was smart to get out with his position (the correct one) before Harper decides. This is not really a bold decision, but the main stream media thinks it is a bold decision, so he makes an easy decision, and gets credit for making a tough one. It allows Trudeau to hedge/postpose the tough decision…i.e. on Gateway. It is a good separator between him and Mulcair.

    Most of Nexen’s assets are outside of Canada. It has been a horribly managed company. The Americans wil force CNOOC to sell off the Gulf of Mexico assets, but Britain will welcome CNOOC to the Nexen’s North Sea assets, because with Britain has made the North Sea relatively uneconomic for private capital, and it requires state capital more interested in supply than profit to invest there.

    • He has already stated his personal position on gateway. No postponement needed.

  3. If Trudeau Liberals and CPC end up with similar trade/energy policies leaving them fighting it out about who can do more for the oilsands, that will probably suit Mulcair just fine.

    • Yes, I find Mulcair’s position on the oil sands to be balanced. It basically states it’s utter folly to put all our economic eggs in the dirty-energy basket in this century. We need a diversified innovation-based economy with a strong value-added sector to provide Canadians across the country with good job and business opportunities.

      It’s too bad Trudeau decided to become Harper-light instead of a centrist liberal.

  4. I dunno in the instant feedback age of twitter, blogs, political talking shows with assorted sized heads of various persuasion, pollsters and polls coming out your ying yang that I’d put him in the same league as Ivison does. But, maybe for today’s day and age.

    So, JT is taking a bold stand supporting CNOOC after what, two 30 day extensions by the CPC party beyond the original deadline? A little bit of Ralph Klein here, I’d say.

    Not that I disagree with his position, but let’s just say I suspect that this was much more of a committee undertaking that what his father was accustomed to on the examples noted.

  5. If a liberal did everything that Stephen Harper did you’d say he was awesome. That’s just how you partisan hacks work.

    • I like how you managed to both make a point, then drown yourself in a sea of irony, all in 20 words. Efficient.

  6. Falling into line behind Trudeau? Are you high on something Wells? If this deal goes through it will be because it is good for Canada and Harper will make that decision. And it certainly won’t be because Trudeau approves of it. My goodness, it’s been in the wind for months, now Trudeau approves of it and you try to attribute it to Trudeau? How desperate is the media to crown Trudeau? It’s pathetic!

    • I’m pretty sure Paul is referring to the communications side of things. Trudeau has clearly stated his position. Harper, for good reasons I’m sure, has not. If Harper approves the deal he will be endorsing a position that Trudeau – with the luxury of not having to actually make the decision – has already taken. He will be “behind” in the “someone already said it first” sense.

    • If Harper turns it down will you come back and admit you were wrong?

      • It has nothing to do with right or wrong. It has to do with trying to take credit when you don’t deserve it. Harper has to weigh a great many things before he makes the decision. I doubt Trudeau has done that, but he thinks that he can garner votes by looking as if he’s ahead of the game and Harper is indecisive. That’s crass.

        • Surely you jest sir. Being PM must be a tough job, but we are talking about the PM who practically invented crass. This is politics, not a debating class. SH has made that clear these last 7 years, even if he added nothing else of real value to our democracy.

          • What makes you think I’m a “he”? Assumption? Which is probably how you make most of your decisions.

          • Pretty lame, madam/Ms.

  7. This suggests to me that when JT does contemplate hard policy choices, he will become a corporate business Liberal of the John Manley.sort. That’s likely good news for Mulcaire, if he can find his way to being a social democrat rather than liberal leader.

    • I think there are a lot of things a centrist liberal leader can do for Canadians. The problem is if a party is too far left and manages to win this will only allow the cons to foment a counter-revolution that undoes all the progress and worse (like Mike Harris did replacing Bob Rae.)

      Harper has brought in $44.4B/yr in useless tax cuts that have done nothing for the economy. A lot could be done with half of that money and we could still balance the books.

      So I think a progressive party that builds up a just society brick-by-brick is best. The Liberals have become a regressive party that helps tear down a just society brick-by-brick. (Canada now ranks #23 in social spending among 31 High Income OECD countries; #9 in taxes; all thanks to the right-of-center Liberals and right-wing Conservatives.)

      BTW, Sweden has one of the (actual) strongest economies and ranks #2 in social spending. It has 37% debt (Canada has 85%.)

  8. Not sure why this helps the LPoC out West. I thought the deal was not particularly popular out there.

    • Demonstrates that he is pro oilsands development – the reason why some justify the need for Chinese direct investment – to keep feeding the exponential growth.

      Chinese century eggs, salted duck eggs – the one basket cares not what type.

      • “Demonstrates that he is pro oilsands development”…

        Yes, though perhaps Bigcitylib is making the now more frequently occurring “Let’s not forget that British Columbia is West of Alberta” argument wrt the phrase “the West”. After all, I’m not convinced that being “pro oilsands development” helps a politician much West of the Alberta/B.C. border. I’m not even sure it helps in Saskatchewan or Manitoba, frankly.

        It does seem to me that the notion of “the West” in Canada is becoming less and less meaningful politically, as there are a number of files on which what Alberta wants (generally) is different from what the citizens of every other province west of Ontario want.

        I don’t want to speak for “the West”, but as an “easterner” it increasingly seems to me as though “the West” finally “got in”, but that on an awful lot of files, once all the Albertans were through the door they slammed it in the faces of everyone else west of Ontario.

        • ” A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be”

        • There’s a lot of potential oilsands in SK as well, but even politicians in Fort Mac sometimes call for slowing oilsands productions to a rate that local infrastructure can keep up to. The voters there still have to live there, find doctors & send their kids to school.

          What the West has that it didn’t decades ago is almost half of Canada’s production of GDP, a diversified non-resource economy, and an independent banking system which isn’t hobbled by the chartered bank’s Victorian opinions on regional development.

          • Got a link for the “almost half of Canada’s GDP” bit? That seemed immediately impossible to me, and this wikipedia page anyway has B.C., Alberta, Saskatchewan and Manitoba at a combined 36% of Canada’s GDP. Not only is that not “almost half” of Canada’s GDP, it’s less than Ontario’s share.

  9. “Trudeau’s stance on CNOOC makes it harder for Martha Hall Findlay to pose as the spoiler who Gets The West;…”

    Grrrrr…another bloody easterner equating AB with the “west.”

    It is an interesting move on JT’s part, but not without risks. It looks like BC will go cuckoo…er NDP next time round.[ i'd vote for them. Clark's a walking disaster zone] There is considerable animus there directed toward the oil/tar sands, and in particular the NGP – which i see JT has wisely come down against; wrong pipeline, wrong place, something like that. The inference[ to me anyway] being that oil could be either moved by train or pipeline to either PR or Vancouver. The rub now is that the combination of ham handedness , arrogance and breathtaking stupidity on the part of Enbridge and the Harper oil lobby has likely shut down all those routes – at least for the short to medium term.[ If i was on Trudeau's team i would be making that point everywhere i went out "west" of Ottawa]

    Does history truly repeat itself after all? Like father like son? I don’t believe it does. But sometimes it feels like deja vu all over again, doesn’t it? Lots of the left of centre crowd made the same error of Trudeau senior – until October 1970. And i see JT is apparently positioning himself fairly close to Harper on Israel. How the liberal membership will take this is debatable – it is certainly controversial. What would his papa have thought about that i wonder?

    Hey PW. How about a column on how JT is trying to position himself to steal votes from both Tom and now Steve? What’s the cad going to do with Lizzie May? Will she ever return his tweets again?

    • BC does have a history of going cuckoo regardless of what party is in power. Jus’ saying.

      • Very true. But it’s rarely boring in my experience.

  10. Macleans? Isnt that the magazine that made unsubstanciated comments on Quebec which earned it a blame from the House of Commons and had to settle for an out of court settlement massively using copyrighted material from the Quebec Carnival. to me this rag has zero credibility on any issues

    http://www.torontosun.com/news/canada/2010/11/05/15989456.html

    Why bother read it

    • The claims made about Quebec bear a striking resemblance to the massive corruption scandal currently unfolding in… Quebec. And the copyrighted material was an image, not copy – that’s a design and layout screw up which hardly supports a claim of “zero credibility on any issues.” But the real kicker is that you provided a Toronto Sun link. Love it.

      • I was hoping it would be Ezra at least.

  11. Beware of Trudeaus bearing gifts or sucking up to the west. Remember the NEP.

    • Remember the NEP.

      Remember it??? How could we forget!?!?! It was a government program that lasted a grand total of five years, and died 27 years ago, yet no one in Alberta will shut up about it.

      That said, I guess I’d be interested in hearing Trudeau’s take on it, given that it was enacted when he was 9, and died when he was 14.

      • No one in AB has been ALLOWED to shut up about it. It has been a heaven sent club to beat the libs with ever since – and boy did those Alberta Conservatives make good use of it. I’m surprised it isn’t a mandatory subject for study from k – 12 ,complete with a picture of Pet proudly giving the finger on the front cover.[ that would be BC, but why let facts get in the way of a great story eh?]

        Far as i know JT has said just that – it was unwise to pit east against west, intended or not, and by the way i was still playing with my train set, so jog on! Finger raised! [ made the last bit up. Although i could imagine his pappa saying the equivalent en francais at the same age]

  12. JustinT will out-conservative the Conservatives and out-socialist the Dippers… and the Liberals will be the political out-house for Canadians.

    • That was deep. You must have a crystal ball under your tin foil hat.

  13. Pierre Trudeau also thought that Canada should be self sufficient. I wonder where Justin Trudeau comes in on that line of thinking?

  14. I see Andrew Coyne’s grand princeling (Coyne begat Gordon who begat Moffatt) is giving Trudeau’s position on CNOOC an A+ on G&M’s Economy Lab.

    I give MM a grade of C for ethics for continuing to comment on JT’s policies after offering to consult with his campaign http://twitter.com/JvfM1/status/258779759767609344

    and a B for blinkered consistency (along with Coyne and Gordon).

    Yes, all three, as well as JT support foreign direct investment to improve productivity. But when it comes to State Owned Enterprises (SOE) a normally like minded Jack Mintz raises concerns that they may not behave as efficiently as private sector companies ( eg Nexen that it is replacing). And such things as AB royalty payments may suffer as a result.

    So, how have Coyne and Gordon responded to this concern (and Moffatt through omission in his G&M piece)? They dismiss/downplay it, suggesting “well , if they are inefficient it affects the owner China – not Canada (like with Crown Corp Petro Canada). Inefficiency in fact is good for Canadians if the Chinese overpay” – (I am paraphrasing).

    Yeah, well, maybe in the short term. How nimble.

    Let’s see if the CPC addresses this in the terms and conditions of any CNOOC/Nexen sale.

    • The oil sands are the most expensive oil in the world. State-influenced actors are likely to be more stable and committed investors than purely private players because they are more interested in long term secure supply than in profits, and thus, continue to invest in projects through oil and commodity price volatility.

      i.e. State actors might be better oil sands investors than purely private actors.

      i.e. Nexen was a horribly managed company. It is hard to imagine anyone doing worse.

      Royalty payments are based on price, not on profitability. Any oil sands company can basically be a “non-profit” by investing in further development…i.e. incurring expenses to reduce “profit” to zero, or in leveraging its balance sheet to show interest expense.

      BHP wanted to use Potash Corp profits to build the Jansen mine…i.e. essentially eliminate any corporate taxes Potash would pay to the Saskatchewan and federal governments. It is why one has to be careful when foreign companies by primarily already developed assets, and not investing new capital.

      CNOOC-Nexen will involve a lot of new capital investment in Nexen’s oilsands and natural gas properties in Canada.

      Ditto for Petronas.

      The Potash deal would have been a disaster for Canada of collossal proportions…because BHP would not be bringing much, if any new capital to Canada, just using Potash’s cashflow to game the Canadian and international tax system.

      The oil sands requires massive amounts of new capital that foreigners would be bringing to Canada.

      • Royalty payments are based on price, not on profitability.

        Operating expenses for oilsands dev’nt are deducted before paying royalties (this is different than gas royalties, or conventional oil).

        In addition, you don’t move up to the higher tier of royalties (from 5%, used to be 1%) until you have recovered all of your capital investment. If you spend money inefficiently, you delay higher royalty payments.

        I will agree with you, however, that China/CNOOC is placing a premium on security of supply and longterm investment. But, if a west coast p/line is built, they could conceivably take the oil off the market.

        Not an issue if EFFECTIVE control of transfer pricing (the value of the bitumen produced in AB) is maintained – as this affects royalty $$ as well. More of an accounting and transparency issue, tho – needs to be firmly addressed. Note how China is anomalous on this wiki entry on transfer pricing: http://en.wikipedia.org/wiki/Transfer_pricing#China_specific_tax_rules

        • But the inefficient capital is being spent in Canada on salaries and/or capital equipment and/or or suppliers. So if they are inefficiently allocating capital, most of it is being spent in Canada. So what you lose in delayed royalties, you get in immediate “stimulus” spending.

          State enterprise oilsands inefficiency is reverse-Dutch-disease.

          From the Chinese perspective, I think they would rather get a higher positive return on capital, and pay royalties, rather than waste capital in Canada.

          • That is called having your cake and eating it too (a la Coyne).

            Either you are for FDI because it increases productivity industry-wide (the ripple effect), or, in the opposite case (Mintz argument), it contributes to industry wide inflation and lowers productivity (the toilet bowl flushing effect).

            You can’t have it both ways.

          • There’s no guarantee capital would be spent on Canadian suppliers. Canadian suppliers that are making money off Nexen now may be replaced with Chinese suppliers at a loss to the economy. They’ve done this in most other places they operate. Chinese SOEs operating in foreign countries have a nasty habit of directing supply orders to Chinese companies at the expense of their hosts. It may be inefficient but it still hurts us, this is what happens when you engage with corporations that don’t follow free market principles.

          • In 10 or 20 years maybe.

            Where exactly have they learned the engineering or upgrading or in situ technology experience.

            Did you see the trouble Exxon/Imperial had getting prefabricated stuff from Korea for Kearl to Alberta?

            One assumes the Canadian government is asking CNOOC to headquarter their oilsands and North American operations in Calgary.

            The majority of the spending is going to be local. The oil is in the ground here.

            It is more likely that the Chinese will begin buying up a Canadian supply chain.

          • Very good point (in top level post) that international resource companies have a very long history of using accounting manipulation to avoid paying taxes — I’m thinking of Weyerhauser in SK as an example. Mind you, it’s often with the collusion of both levels of applicable government.

            Having lived in China, I agree it is very likely they will want to control the entire supply chain. Also keep in mind that these companies are controlled by people who have no qualms killing people to avoid transparency — Chinese capitalists are the main reason the country had a communist revolution.

          • You should read George Friedman in STRATFOR, if you haven’t had the pleasure. The Chinese are doing all sorts of things that aren’t sustainable economically. That’s not necessarily going to hurt us. If they direct supply orders to another Chinese entity that’s not paying a fair price, the Chinese are only hurting themselves, not us.

          • If they load up their input costs by putting a good number of party apparatchiks on payroll, for example, and expense them in Canada – this can reduce Canadian taxes and royalties.

      • So essentially you are saying that you want the Chinese to be socialist for us? Spell it out, what is this missing capital we need? Money? Machinery? Labour? Expertise?

        The Tories could conjure up a Crown Corporation tomorrow and ask Carney to credit it whatever it needs to finance whatever production seems fit. Or it could finance itself. Why is it that the Chinese need to be a factor in your equation at all if state-run development is so fine and stable?

  15. CNOOC is basically the Chinese government.
    So the question is why would the Chinese government want to buy Nexen
    rather than the oil it produces? What’s in it for China? And is what
    China hopes to get out of it in Canada’s interests.

    I’m a fairly free enterprise kind of person, but this deal gives me pause.

    • I’ll offer up one possible reason (amongst a number) that I haven’t seen mentioned anywhere.

      O&G companies often enter into joint venture deals as a minor owner in order to gain access to evolving technology/expertise (think of Syncrude consortium).

      The biggest undeveloped oil sands -like deposits (of equal or maybe greater size) are in Venezuela. Chavez is not friendly to western O&G companies (think he nationalized/expropriated some assets in the past) so it has suffered more recently from a flight of capital, and mismanagement by Venezuelan state oil company.

      China is relatively friendly with Venezuela. So, maybe their bigger plans include investing there. And maybe control of Nexen and its knowledge &expertise is the means.

      -just a thought

    • Security and diversity of oil supply. Even if there is no Gateway, in a crisis, they can do oil swaps.

      New oil production would not be developed quickly enough to meet demand if China and India rely only on the private sector, and African countries that need to spend oil profits to run their countries or fill Swiss bank accounts.

      Conversion of some of their trillions of US dollar reserves into inflation-protected hard assets.

      And ou do realize that they are potentially impacted by Muslim extremists going forward.

    • Nexxen is owned by many foreign companies and is totally mismanaged. It’s not really Canadian. So what is the difference? As you say, CNOOC is owned by the Chinese government. Are they too scary? That is what needs to be answered.

    • It helps to not think of the Chinese government as a single monolithic coherent entity. It has thousands of factions which sometimes but not always cooperate with each other. Even if it’s not a democracy, the government still needs the support of a significant amount of its population.

      When I lived in China a decade ago, I frequently heard people say that China should more directly influence resource-rich, low-population countries like Canada. It’s not something a Chinese politician would be caught dead saying in public if they want a political future (most Chinese feel strongly that a country’s internal affairs are nobody else’s business), but politicians in China do make foreign affairs decisions based on internal politics & popularity, just like politicians anywhere. For all we know, aggressively pursuing one-sided deals with other countries is part one one faction’s pandering to a base.

  16. Speaking of that Edmontonian Natural Resources Minister, who is she backing in this race?

  17. I found this fascinating. This was a good 1st shot let’s see what he comes up with next.

  18. This is so cool..thanks so much for the info. Love it!

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