Keystone Decision: What “downgrade?” – Canada & U.S. Still Cozy

Dr. Jack Mintz, one of Canada’s more thoughtful policy experts and the Palmer Chair of Public Policy at the School of Public Policy, University of Calgary, recently wrote a piece for the National Post[1], in which he examines the Obama administration’s decision last month to reject the construction of the Keystone XL pipeline.

In his article, Mintz argues that this decision is just the latest in a growing line of slights suffered by Ottawa at the hands of its old friend and largest trading partner – the United States. He continues with the suggestion that this latest incident is tantamount to what he calls a “downgrade” in Canada-U.S. relations, calling attention to what he sees as the U.S. treating Canada “shabbily.” To this end, he enumerates a number of instances which he sees as a further indication of a troubled relationship, including the less-than-ideal terms extended to Canada in the recent renewal of the softwood lumber trade agreement, and President Obama’s omission of Canada from his laundry list of U.S. “friends,” during his State of the Union address several weeks ago. He contends that the Keystone XL decision is the latest and most significant indication of degrading relations between the two neighbors thus far, and he urges Canada to “think hard how to reboot its ties with the United States.”
 Mintz concludes his article by urging Ottawa to attempt to both strengthen its treaties with America, as well as ease border restrictions and trade regulations as a means to mend what he sees as a worsening situation. He recommends that Canada seek other trade opportunities – Asia, in particular – as contingency planning concerning this matter. He reasons that diversifying Canada’s trade profile will demonstrate its independence and strength to Washington, which will in turn “realize that it should not ignore its best ally.”

While Jack Mintz presents a fairly coherent and almost convincing argument for his views on the crumbling condition of Canada-USA relations, he fails to embrace a number of important, if embarrassing truths in his analysis. If these were included, they would serve to give valuable insights into the bilateral decision-making process and the various motivations of U.S. officials, including President Obama. These additional factors, such as the realities of U.S. domestic politics, existing ties to other oil-producing nations, uncertainty over domestic energy policy, and the pending presidential election – offer a less-ominous and more practical explanation for the decision to reject the proposed design of the Keystone XL pipeline. Furthermore, these same realities reinforce the notion that it is simply untrue that any real decline in Canada-USA relations is being witnessed at all, but rather Dr. Mintz’s assertions are more alarmist exaggerations than accurate assessments.

Mintz uses the White House’s decision to reject the current Keystone XL proposal as the launching pad of his stance, in a “last straw” riposte to support the authenticity of his central notion: that this is conclusive evidence of a “downgrade” in the relations between Canada and the U.S. In reality, as with the other instances cited by Mintz, the action is more attributable to domestic American considerations rather than a message to Ottawa. As for the two main benefits of Keystone XL cited by Mintz – energy security and jobs – both are overstated in terms of their importance. With relation to the security of its energy, the U.S. would surely prefer to produce domestically in order to extend full control over supply, but nonetheless has secured long-term supply guarantees from various nations, including Saudi Arabia and Iraq – the “undesired” sources of oil at the heart of the matter. Increasing the current share of Canadian petroleum exports to the U.S. – even to the maximum capacity afforded by Keystone XL – would not have much bearing on Washington’s reliance on Middle-East crude, due to the miniscule increase in supply the pipeline would provide. Keystone XL would increase output by approximately 700,000 barrels of oil per day, which equates to a meagre one-thirtieth of current American daily domestic demand.[2][3] As such, Mintz’s (and others’) assertions that the pipeline promises to reduce dependence on Middle-East oil and heralds the arrival of energy security are not based on any realistic facts. Likewise, as has been widely documented and reported by non-partisan sources, and analyzed by independent firms free of TransCanada’s influence, the true economic impact of the pipeline has been grossly overstated by the company, its affiliates, and self-serving Republican Party candidates.[4] Their initial estimate of close to 120,000 jobs is more than 17 times higher than the U.S. State Department’s most generous estimate of 5,000-7,000 jobs.[5] The company has since recently revised its official estimate to 20,000 jobs, which is still about three times higher than the government findings indicate.[6] Both of these arguments, therefore, become much weaker when considering the facts, and point to less of a cause and incentive for American decision-makers to approve the project. While it is true that appeasing environmental groups was a consideration in President Obama’s decision, the much more important spectre of a potential environmental disaster that would accompany a contamination of the Ogallala Aquifer, and the subsequent forced relocation of Americans, makes the matter a much larger bona fide political issue. The more one examines the multifarious nature of the U.S. domestic debate on the issue and the far-flung implications of approving the current route, the more it becomes fully apparent that the decision was rooted firmly in consideration of American interests, with Canadian corporate contentment as largely a secondary thought. Rather than being an indicator of U.S. affinity towards the Great White North, the decision was merely a practical one for the U.S., and hardly signals a “downgrade” or referendum on relations. After all, as Mintz stated, Canada is the U.S.’s largest trading partner, and will continue to be for the foreseeable future.

Perhaps the even greater truth is that while the President’s decision may be perceived by Canadians as another in a long line of recent snubs by the U.S., Americans don’t seem to see it in the same manner. From Mintz’s perspective, the issue is quite clear and simple: We have oil. You want oil. We are friends. Buy our oil. Such an oversimplification, coupled with perpetual Canadian efforts to both please its southern neighbor and further broaden and deepen its economic ties, has – as in many previous instances – led to disappointment and rejection for Canada, as the expectations for reciprocity in such matters has not always been championed by America. In a way, the relationship is analogous to one of unrequited love. For Canada, it is infuriating to have all of its goodwill and good looks, as well as “advances” rebuffed – even ignored – by the U.S. Conversely, the U.S. acknowledges and must appreciate Canada’s constant efforts at knee-bending, and may even be willing to agree to such a role, but is often too busy and too distracted by a range of complexities, or is simply unwilling to sample the goods; all of which are indigestible to the hypersensitive and anticipatory sensibilities of humble Canadians.