It’s time for Canada to play trade hardball – Diane Francis (National Post – February 11, 2012)

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The Prime Minister’s visit to China netted more than a couple of pandas for a decade. It got Washington’s attention. The optics, notably concerning the oil sands, were the main aim of the high-level visit. And it worked.

The threat that Canada would divert energy to China instead of to the United States led Mitt Romney to hoist approval of the Keystone XL pipeline to the top of his political agenda.

There is little doubt that a new version of the Keystone, with a different route or by train, will be approved even if U.S. President Barack Obama wins a second term. The Keystone project was ill-conceived from beginning. The route was foolish. Moreover, oil sands production should be upgraded in Canada or shipped by looping existing pipelines from north to south.

The timing made it impossible for any sitting president to approve, especially when to do so would alienate a large chunk of the base of his support. Any mega-project should be broken down into bitesized pieces, avoid election cycles and operate under all radars.

For instance, the equally gigantic Alberta Clipper pipeline, now under construction, was approved in 2009 by Obama to carry oil sands production through Wisconsin to Chicago refineries without a murmur.

Meanwhile, Stephen Harper has vowed to build the Northern Gateway pipeline, despite opposition, to the West Coast, allowing Canada’s crude to be shipped to Asia.

This is the lesson of the oil sands controversies. Canadian corporations and governments must stop being naïve. Politics and geopolitics trump everything, including goodwill, free-trade agreements, contracts, handshakes and trust.

Which brings me to China. Canada cannot be naïve when it comes to Beijing either.

There is no way that Canada should embark on a special relationship with China and, fortunately, the Canadian delegation did not bite when Beijing indicated that China would welcome a “free-trade deal” between the two countries.

A special bilateral arrangement with China would be exponentially more dangerous than relying on the U.S. Congress or U.S. politicians to do what makes economic and energy sense.

China will eat Canada, or any other country, for lunch.

The Prime Minister’s trip to China should be followed up with equally prominent visits to the other major Asia-Pacific nations where Canada is on the short end of lopsided trade relationships. The most asymmetrical relationships involve Singapore, South Korea, Japan, Taiwan and Thailand as well as China.

Canada has a great deal of work to do in Asia: In the first nine months of 2011 Canadians exported $33.8-billion worth of goods to 16 Asia-Pacific nations and imported $64.8-billion in goods. A reversal of these figures must be a trade priority.

Here’s the playbook for the PM in that region:

– The Prime Minister should undertake similar high-level trade missions, even in countries with long-established relationships but which import dramatically less from Canada than they could, like Japan or South Korea.

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