October 4th, 1987, was the day that I became politically active.
Might seem like a strange day to pick but, for me, the signing of the Free Trade Agreement (FTA) between Canada and the United States was a watershed moment in the economic and political history of our country.
For many people, the promise and allure of lower prices and access to Americans markets sounded too good to be true. (It was.) The FTA promised unfettered freedom to move goods and services across the border. The vast consumer market south of the border would be wide open.
Except, of course, that is not what the FTA was really about nor what really happened.
Many Canadian businesses lost out to larger American firms. Manufacturing headed south to low wage regions. And, if anything, consumer prices in Canada soared as the Canadian dollar lost ground to the U.S. greenback.
But some of our manufacturing companies did succeed. Trade adjusted as it always will do. It doesn't matter that softwood wasn't on the table and we have been fighting that dispute for years. We have grown as a country.
However, all of the other aspects of the agreement aside, the FTA was really only about one thing - getting guaranteed access to our oil.
Indeed, one American congresswoman stood in the House of Representatives and crowed about the success of the American negotiators in securing their energy future for such a small price.
Why bring this up today?
Last week, these pages featured a guest column by former city councilor Don Zurowski that spoke in favour of the Northern Gateway pipeline. Much of what Mr. Zurowski had to say is perfectly true. Our economy is dominated by one trading partner and our oil exports are hampered by low commodity prices to the United States.
But thanks to Prime Minister Brian Mulroney there is very little that we can do about it. Not unless we want to rip up the North American Free Trade Agreement and its precursor, the FTA.
In the explanatory notes to the FTA, it says: "... export restrictions may not reduce the proportion of the good exported to the other party relative to the total supply of the good compared to the proportion exported prior to the imposition of the restriction. It also prevents the use of licenses, fees or other measures to charge higher prices for exports when such restrictions are used for short supply, conservation or domestic price stabilization agreements."
It goes on to say: "For example, if Canada in the future decides to implement measures to limit the consumption of oil, it can reduce exports to the United States proportional to the total supply of oil available in Canada."
In other words, if we export 20% of our oil to the United States in a 3 year period, then they are always entitled to 20% of our oil, regardless of need. And if we pump up domestic production, they are entitled to 20% of any increase. The same provisions are in both the FTA and NAFTA.
Two things arise from this. The first is that since the United States is entitled to a percentage of our production, regardless, they don't really have to pay fair market value. We can't cut them off. Not without drastically reducing our domestic consumption. Nor can we apply licenses, fees or other measures to charge higher prices beyond those that we charge domestically.
But even if we find new markets, through the Northern Gateway Pipeline to Asia, all it will do is ensure that the United States is entitled to even more of our oil at whatever price they have decided to pay. We will, effectively, flood their market which will result in excess supply, decreased demand, and lower prices.
And in the end, it will put us in the awkward position of having differential pricing between our largest trading partner and the market that we are trying to develop. How would you feel if someone said to you: "Since you are a new customer, we get to charge you twice as much."?
Most companies recognize that to secure new customers, one usually lowers the price. Just look at the ridiculous introductory rates for cell phones or cable television.
Yes, we need to diversify our markets. Yes, we need to bring our economy into the 21st Century. Yes, we need to move beyond being "fur traders". Canada is rich in resources but simply exporting them raw to other countries is not a path to future economic success.
One of my colleagues made the observation to me the other day, that Canada is a third world country. We just have the natural resources to afford us a first world lifestyle.
At some point, we need to wake up and remake our economy so that it works for us.
