Business Ethos Blog

Canada: How Long Can We Irritate Our Friends?

Dr. David MielkeCanada is the US’s largest trading partner, largest supplier of energy and most loyal ally in war and peace, but it appears that the long nurtured special relationship is not so special after all.  Has the US been neglecting this partnership and instead irritating Canada and taking the partnership for granted?  Is this relationship and partnership especially important to Michigan economy?    Are there important decisions that need to be made now?  What is the “Right Thing to do?”  Let’s look at some issues:

1.  Canada is our number one customer for exports.  More than 8 million US jobs rely on trade with Canada and one fifth of that commerce comes from Detroit.  We export over $51 billion in autos and parts to Canada.

2. Canada is eager to see the US move forward with the Trans-Pacific Partnership, a proposed free trade agreement with 12 countries.  To expedite this process the President has asked for fast track trade approval from the Senate.  Fast track allows the President to negotiate trade agreements without the necessity to get Senate approval.  In essence, trade agreements are pre-approved and cannot be picked apart by the Senate.  Countries will not negotiate a trade agreement without fast track.  Harry Reid will not allow fast track on the Senate agenda.  As a result, this trade agreement is in limbo and Canada must wait.

3. Canada is our number one supplier of energy and yet the Keystone pipeline continues to be held up by President Obama.  Canada needs the pipeline to increase its sales of oil to the US.  Canada has been waiting for the pipeline approval for 5 years.  Without the pipeline approval, Canada has to build a pipeline to its west coast to ship oil to China and Asia.  Canada receives below market prices for its oil because it has little recourse to sell its oil on the world market.

4. The new International Trade Crossing—bridge between Michigan and Canada–has been held up because the administration has not provided the funding for US customs plaza that is needed to support the new border crossing.  Trade from Detroit to Canada is greater than all of the US trade with Japan.  The cost is $250 million and pales in comparison with US spending on far less important budget items—think green energy and mass transit.  The Public Border Operators Association predicts trucking across the border will double in the next 30 years.

5. Groups including the United Auto Workers and Michigan Farm Bureau have sent a letter to President Obama telling him the need for the bridge is vital for long term job creation and economic growth.

6. Michigan’s Democratic lawmakers in March pushed for the Obama administration to name a point person for the bridge project–he has not done so.

7. The bridge project will provide thousands of direct and indirect jobs for Michigan.  Without the funding for the toll plaza, the new bridge could be delayed well beyond the 2020 expected completion date.

8. Canada has already pledged to provide the $2.1 billion for the new bridge—including the US’s share of $500 million.  Does president Obama think that if he delays long enough that Canada will also cover the cost of our customs plaza?

9. President Obama appointed Bruce Heyman, a former Goldman Sachs banker based in Chicago and a topObama campaign bundler in both 2008 and 2012 as the new ambassador to Canada.  Mr. Heyman made his debut in Ottawa with a dinner speech at the National Gallery followed by a Q&A with former Canadian ambassador to Washington, Frank McKenna.  Mr. McKenna used the event to raise what Canada sees as troubling irritants in the bilateral relationship.  Mr. Heyman used it to explain how insignificant Canada is in the eyes of Washington.

One might say that Canada is the most important country to the US, not just because they are our neighbor, but because of trade, energy and as a strategic partner in world events.  Yet, the Administration demonstrated that Canada, as Rodney Dangerfield said, “gets no respect.”  What is the “Right Thing to do?”  The President could act immediately to move forward, not only to improve relations with Canada, but also to help our economy—provide the funding for the customs plaza, name someone to head the bridge project, approve the Keystone pipeline and force Harry Reid to allow a vote on fast track trade.  He might go to Canada to announce these decisions and emphasize how important Canada is to the US.