Lansing, Michigan, Members of the United Steelworkers union place hard hats on the lawn of the state capitol to represent the jobs they say would be lost by the closure of Enbridge Line 5, an oil pipeline that runs under the Straits of Mackinac. Fearing that a leak could cause disastrous pollution of the Great Lakes, Michigan Governor Gretchen Whitmer has ordered Enbridge to close the pipeline. The company says it will defy that order. (Photo by: Jim West/UCG/Universal Images Group via Getty Images)
UCG/Universal Images Group via Getty Images
The decision last Friday night by Canadian Prime Minister Mark Carney to walk away from bilateral trade talks with the United States, and the subsequent “tit-for-tat” sanctions imposed by each nation against the other, have only magnified the significance of the oil and gas infrastructure that runs through and/or affects both countries. Among that infrastructure is the Enbridge Line 5 pipeline, which moves Canadian oil through the United States back into Canada, where it can be processed at the refineries of Sarnia, Ontario, for ultimate consumption.
Instead of looking for ways to improve trade between the two nations, following the trade breakdown, each country has begun looking for pressure points to use against the other. Specifically, Canadian commentators have now zeroed in on elements like uranium and potash and have threatened to stop these sales to the United States altogether. (Source). As the world’s leading exporter of potash, this threat from Canada surely would hurt American farmers who rely on potash as a fertilizer for many of their crops. (Source).
Another potential threat to United States interests raised by Canadian officials lies with oil and gas. Canada supplies nearly four million barrels of crude oil per day to the United States, and Ontario’s Premier Doug Ford has proposed either taxing that product or holding it back from the United States entirely. (Source).
Two can play at that game, however, and the continuing issues surrounding Enbridge Line 5 would only be magnified by a trade standoff between the two countries. (Source). Without continued access to this pipeline, which allows Canadian oil to be transshipped through Wisconsin and Michigan on the way back into Ontario, Canadian oil and gas would find it much more difficult and expensive to get to market. Indeed, the ripple effects of any threatened closure would be felt all the way east to Quebec City, as the Enbridge network supplies jet fuel to numerous airports in Eastern Canada, including Lester Pearson International Airport in Toronto and Jean Lesage International Airport in Quebec City. (Source).
The trade dispute also scrambles the politics around Line 5. Whereas Michigan Governor Gretchen Whitmer has sought to close the pipeline, citing environmental issues as it crosses the Straits of Mackinac, he Trump Administration has actually joined with the Canadian government to try to keep the pipeline open, in spite of Michigan’s opposition. The legal battle has been confused, however, bouncing between United States Federal Court and Michigan State Court for several years already.
Given the current situation of trade threats between both countries, the key question is, in light of the new trade wall, will the Trump Administration now drop its opposition to Governor Whitmer’s plan to force the pipeline’s closure, or will the United States change its position and now side with the Michigan Governor’s demand for permanent closure of the existing pipeline? While any such change in position might seem a temporary victory for the United States in the current trade standoff, in the long run it would set a bad precedent and may even violate United States treaty obligations. Indeed, it would be awfully strange for the Trump Administration now to take a position in favor of closing interstate and international energy pipelines when so much of the Trump Administration’s prior position has been invested in a completely opposite approach.
This sad standoff between two countries who have historically had many symbiotic trade ties to each other shows just how complicated it is for two trade partners whose economies are substantially intertwined to take trade actions against each other when relations break down that do not end up boomeranging against its own interests. Indeed, Canada’s economic performance under the current Carney government has been nothing short of disastrous. Canadian households now carry the largest debt burdens among wealthy nations, (Source). Among OECD countries, Canada’s growth is almost at the bottom (Source) and most commentators believe the growth prospects for Canada are not good. Getting into an ill-advised trade standoff now with by far its largest trading partner would seem like the worst thing that Canada could do to improve its economy.
Politics, however, can lead to strange bedfellows, not to mention foolish and short-sighted decisions. Canada seems to have made the first mistake by walking away from the trade table altogether. North America will be watching to see if President Trump will reciprocate in more trade foolishness by stopping a fossil fuel pipeline of massive importance to two countries.
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