Brian Lee Crowley

Thinking, not emoting, about NAFTA

One of the big public policy issues Canada is wrestling with is whether, and on what conditions, NAFTA can be renewed. Unfortunately, the political class seems more intent on whipping up emotion around the topic than helping Canadians to come to grips with the real issues and how we might turn this mess to Canada’s advantage. In order to fill this gap, Sean Speer and I co-wrote three op-eds (and Frank Buckley joined us on the first one) hoping to illuminate for Canadians some of the stakes, the realistic options and where Canada’s interests truly lie in these negotiations. In retrospect I see that the summary of our argument is that the NAFTA negotiations are like any dispute in a long-term relationship, like a marriage. There are three lessons to be learned:

  1. Get to understand what the other person wants. It’s not all about you!
  2. Look inward to find where you might have contributed to envenoming the dispute. You might think all the fault lies elsewhere, but usually responsibility is shared.
  3. Before your roving eye draws you to another potential partner, be sure you really understand how much you have invested in your existing relationship and how hard it would be to replace.

Sean, Frank and I applied Lesson One in the Globe on 3 July 2018 in which the three of us laid out what the Trump administration wants and how their world view is an important break from many of the assumptions of recent decades. The fact that Trump may come up with the wrong answers to the questions that exercise him does not mean he is wrong to ask them. There is also a video version of this piece on the page.

Then Sean and I applied Lesson Two in a 6 July 2018 piece for Macleans’ magazine where we reviewed the many ways that Ottawa has antagonised the Trump administration while bringing no benefit to Canada. As the current occupant of the White House might have tweeted, “Sad!”

Finally, we applied Lesson Three in a 20 July 2018 Globe op-ed examining the idea that “diversifying” our trade, especially to China, will somehow offer some kind of realistic alternative to our deep economic entanglement with the US. Not bloody likely!

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Getting real about China, on NAFTA, national security and trade diversification

I have a bit of a bee in my bonnet these days about China, as any sensible person should. Everyone seems fixated on Donald Trump bullying Canada (and that is a reasonable concern) but the number of people who hold up China as some kind of alternative is truly staggering. If you want real, subtle, long-term bullying in unapologetic pursuit of national interests, you cannot do better than China. Add to that that China is an authoritarian, autocratic and repressive country without even a nodding acquaintance with the rule of law and a hostile relationship with the western alliance, etc., etc., etc., and China gets less appealing every day as a partner for Canada. Here are three recent op-eds in which I develop these various themes:

In the 30 May 2018 edition of the Globe, I took aim at China for its clear threats to Canadians’ national security. The context was Ottawa’s rather unexpected but welcome decision to veto the takeover of Canadian construction giant Aecon by a Chinese firm. As I pointed out, if this means that Ottawa is going to take national security threats from China more seriously (including their to-date insouciance about Huawei’s deep involvement in building Canada’s next generation 5G wireless network) that is very good news indeed and not before time.

Then came the G7 Summit. The G7 seems to me a little adrift these days, an organisation in search of a mission that would unite the disparate interests of Japan, North America and the largest European economies. My suggestion in an 8 July piece in Inside Policy: they should all agree to unite and reinforce their current disparate efforts to confront China’s disgraceful behaviour in the South China Sea that is an affront to the rule of law and freedom of navigation. There is also a video version of this piece.

Finally, Ottawa has been ramping up its focus on “trade diversification” as a kind of defensive card to play in its NAFTA negotiations with Washington. But of all the daft ideas, the one that China can replace or even partially compensate for our trade relationship with the US is surely the daftest. Read my op-ed, co-authored with Sean Speer, in the Globe of 20 July 2018 about why China is no trade saviour for Canada.

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Gender-based Analysis as if *everyone* matters

In the Sun newspapers on 8 June 2018 Sean Speer and I had some fun at the expense of self-righteous government social engineers by pointing out the hypocrisy and double-standards implicit in Ottawa’s policy of “gender-based analysis”. We argue that if GBA is a serious policy, we must look at the differential impact of policies on each sex and seek to mitigate sex-specific harms wherever they may occur. But of course the government thinks that it only matters if *women* are disadvantaged by a policy, not men. A case in point: the many policies currently in place that are placing enormous strain on the natural resource economy. As Sean and I wrote:

“One currently-ignored area ripe for more people-centred analysis, for example, is natural resources and the trade-offs that policymakers are implicitly making between employment and other considerations such as reducing carbon emissions. Proper GBA would reveal that the effects of this policy are relatively minor for women but devastating for men.”

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A primer on Canada’s pipeline mess for Canadians and others

On the topic of pipelines in general and Trans Mountain in particular, there has of course been much action in recent weeks, including most notably Ottawa’s acquisition of the TM project from Kinder Morgan for $4.5 billion. Here are two examples of my commentary on the issue:

30 May 2018 I published an op-ed in the Financial Post arguing that the Liberals are chiefly the authors of their own misfortune on TM, through their ill-advised political alliance with the hard-line environmental movement. I predict that they will reap the social licence whirlwind when their erstwhile allies really get serious about civil disobedience.

Then on June 12th I sought to explain to an international audience the issues surrounding TM and pipelines in general in the context of Ottawa’s sudden ownership of TM. The Washington Examiner was kind enough to publish my piece. I also did a video version of the op-ed which is available at the top of the MLI page.

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Monarchy’s Contribution to Canada’s Greatness

Of all of Canada’s many misunderstood, abused and underappreciated institutions, monarchy and the Crown perhaps top the list. On few subjects do I hear as much rubbish talked as on the topic of the monarchy. To try and set the record straight and to explain in simple terms this most Canadian of institutions, I gave a talk to the Ottawa chapter of the Monarchist League some months ago. On 30 May 2018 MLI republished this talk, Monarchy’s Contribution to Canada’s Greatness, as a Commentary.

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Of deficits and infrastructure

One of the signature policies of the Liberals in the last election was their promise to increase substantially infrastructure spending and to run a deficit solely for this purpose. As Sean Speer and I argued in this 19 April 2018 piece for Inside Policy their policy has failed on both counts. Not only have they proven woefully ineffective at spending infrastructure dollars, they have nonetheless run up deficits on a host of other spending.  Ottawa’s approach to infrastructure badly needs a rethink.

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Why the SCC must not have the last word on Comeau and barriers to trade

Another hot topic for Canadians in 2018 was the disappointing decision of the Supreme Court of Canada on the Comeau “Free the Beer” case. Here is some of my commentary following that decision:

First, I took the SCC to task for its failure to honour Canadians’ economic rights and its tendentious reading of the plain language of the Constitution. In a 21 April 2018 op-ed published in the major dailies throughout New Brunswick (where the Comeau case originated) I also pointed out that it was probably always a long shot that the profoundly economically-ignorant SCC might solve Canada’s failure to fix its internal barriers problem. That puts the onus right back squarely where it has always been: on Ottawa’s shoulders.

On 30 April MLI released a video of me making the same case.

Finally, on 16 May 2018, Sean Speer and I co-wrote a piece for Inside Policy reiterating these arguments and adding new ones about Canadians’ economic rights!

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Trudeau was selling deficits, but the G7 wasn’t buying

The 2017 G7 meeting in Japan should give Prime Minister Trudeau ‎reason to reflect on his plan for deficit spending as Sean Speer and I argued in an op-ed in the Financial Post on June 3rd 2017. Trudeau arrived in Japan determined to sell other leaders on the merits of budgetary deficits to grow the economy. But his peers weren’t buying. ‎The summit’s 14,000-word communiquĂ© was silent on calls for more government spending. Perhaps the other leaders know something Justin doesn’t…or that he’s trying his hardest to ignore.

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Water, water all around — unless you’re landlocked like Alberta

Being landlocked is a bad place to be generally speaking on the international stage. Coastal states are guaranteed freedom of the seas, but landlocked states may not be able to reach the seas and their commercial bounty without having to bribe neighbouring coastal states. Ottawa was created in 1867 to prevent such extortionary behaviour by Canadian provinces. So what gives when BC is yet again threatening to close off Alberta’s access to tidewater? My views on the issue were laid out in my 12th May column for the Globe and Mail’s ROB. You can read the unedited text below or here online.

Geography distributes its bounty capriciously and the results can be extremely painful for those who end up penalised by their place on the map.  The outcome of the recent BC election may be about the deliver an object lesson in this principle to this country’s only two landlocked provinces: Alberta and Saskatchewan.

Internationally, being landlocked is a very uncomfortable place to be. Unless you are a Botswana exporting diamonds (small, light and high value products that can be shipped by, say, plane) you likely need to put your exports on a ship to get them to world markets, thereby realising their highest value.

Because ocean shipping is so vital to economic success, the world’s nations agree that ships engaged in bona fide commerce will not be obstructed. Nations can’t target the shipping of other countries and demand ransom to let it reach its destination. That’s piracy.

The main exception is when military or diplomatic conflict causes countries to throw up embargoes against offending countries’ goods, or to prevent them from receiving shipments of things like arms or nuclear materials. Such exceptions are exceedingly rare when seen against the volume of ocean-borne trade.

But landlocked states face a completely different obstacle: their goods must cross another country’s territory to get to port. International law is of little help, and the 45 such landlocked states must negotiate access with neighbours who may have conflicting economic interests, historical enmities or simply little interest in helping.

What the neighbours universally have, however, is the whip hand in the negotiations. They tend to use that to extort benefits far in excess of the actual economic value of the infrastructure and services needed to get their landlocked brethren’s goods to port. And having to get their products through a “transit country” makes companies reluctant to invest in the landlocked. It injects a level of political risk that is difficult and costly to manage.

Landlocked countries thus tend to be poorer than their economic fundamentals justify. All because of accidents of geography and the political leverage they create.

Before 1867, the various colonies that were to become Canada suffered from the ability of each to impose tariffs on the products of the other as they crossed their territory. A key benefit of Confederation was explicitly to tear down these barriers, turning Nova Scotian or Quebec products into Canadian products that could move freely across the national territory, including to ports for export to world markets.

But as we’re discovering, the thirst of transit provinces for bounty to allow neighbouring provinces to move their products has never gone away.

Our only Pacific province has lately been the most egregious offender, preying on the vulnerability of landlocked Alberta and Saskatchewan in their efforts to get their resources to world markets.

Take the Kinder-Morgan pipeline, intended to bring Alberta petroleum to Asia via the port of Vancouver. Before the just-concluded BC election, the Liberal premier, Christy Clarke, had already shaken down the pipeline company for $1-billion to “allow” the pipeline expansion to be built. The province has no jurisdiction, pipelines being a federal matter, but the province could threaten enough obstructive behaviour that the company could see that peace with the province might be worth a hefty price tag. This is nothing but Third World corruption carried out at the expense of Canadian resources, a corruption only made possible by the arbitrary fact of Alberta’s landlocked geography and Ottawa’s complaisance.

Now BC has doubled down on transit province bounty-seeking, this time targeting thermal coal. The province has threatened a thermal coal export tax, ostensibly to punish the Americans for their softwood lumber machinations, but the result will be to sideswipe Alberta, which might lose as much as $300-million in sales of such coal now going through the west coast. Saskatchewan hasn’t been targeted yet, but they understand all too well that they are no less landlocked, and therefore vulnerable, than Alberta.

Assuming recounts and other factors don’t change the BC election result, the situation will only worsen. With the Green Party, unalterably opposed to Kinder-Morgan, holding the balance of power count on all the parties to vie to outdo each other in environmental virtue and the chauvinistic promotion of BC interests, as if they can be separated from the national interest of all Canadians. Kinder-Morgan is sure to be a flashpoint. This behaviour is a dagger aimed at the beating heart of federalism.

As for the much vaunted new free trade agreement between the provinces, it is silent on this issue, proving yet again what a paper tiger it is. Meanwhile Ottawa, created in 1867 in part to be the guarantor of the integrity of Canadians’ freedom to trade, looks on benignly.

Who speaks for Canada? Answer came there none.

Brian Lee Crowley (twitter.com/brianleecrowley) is the Managing Director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: www.macdonaldlaurier.ca.

 

 

 

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Big cities an antidote to poverty, except in Africa

Cities everywhere are perhaps the moist important drivers of prosperity, pulling millions out of poverty and putting them on the ladder of economic success. As I argued in my 28th April column for the Globe and Mail’s Report on Business, however, Africa remains something of an exception. It’s cities do not generate the same kind of economic progress that others do elsewhere, including in Asia and Latin America. Why not? My answer? You can read it yourself in the unedited column text below or you can read it online:

 

According to Harvard’s Edward Glaeser, “Cities are the best path we know out of poverty.” This is echoed by prominent economist Paul Romer who has made the richly documented case that humanity’s urbanisation over the last 10,000 years has been the main driver of human progress. He argues that the present century is the one where the urbanisation trend finally reaches into every corner of the globe, and the world’s population will stabilise at 10-11 billion people, with 70-80 percent of them living in cities.

But alas it is not sufficient to shepherd people in to growing urban areas for them to participate in the economic benefits of urbanisation. I was put in mind of this the other day when I read a piece by a journalist detailing the challenges he faced flying out of Kinshasa, the capital of Congo. Kinshasa is a city of some 12 million people and the third largest in Africa, so its challenges are emblematic of the obstacles to cities bringing widespread prosperity to that continent.

When I lived in Kinshasa over 30 years ago, hardly anyone flew out of the local airport. When I left I took the African Queen-like ferry across the Congo River to Brazzaville whence you could connect to French international flight networks.

Apparently it is slightly better now in Kin, as the locals call the city. Now there are 11 international flights a day. Still a paltry number for any self-respecting city of 12 million residents, for one of the ways cities create wealth for their inhabitants is through dense networks of connections with other cities. There are 1400 flights a day through Heathrow and 1100 through Pearson.

And it is not just airline schedules.

When I lived in Kinshasa almost no one had a telephone. Copper wire was so valuable that even if you could get a phone connection installed (in itself a minor miracle) the chances were that scavenging gangs would quickly rip out the connection. Making an international call was a hilarious undertaking. Since the country never paid its bills to the national telecom companies in other countries, international operators would never accept calls from Congo. You had to go down to the main telephone exchange  and bribe an operator to start calling every country in the world until they came across an operator that hadn’t got the memo that calls from Congo were verboten. Mobile telephony has surely improved things, but not nearly enough.

These tiny examples illuminate the larger principle about much African urbanisation, namely that unlike, say, China or Korea or even much of Latin America,  Africa is urbanising without globalising; Africans are getting only a tiny part of the benefit that growing cities might confer on them.

Fixing this will perhaps be the single most important thing that could be done to help pull Africa out of poverty and connect it with global opportunities. But that means focusing on the right problems and the right solutions.

The biggest obstacle African cities face to realising their full potential is the weakness of the institutions on which they are based. Yes, people come to cities because there are more jobs, higher levels of specialisation and therefore higher wages, educational opportunities, infrastructure and other advantages. But mostly they come because successful cities have rules of behaviour that protect the investment that companies and individuals make to improve their business and their lives.

If organised gangs can take what you have worked so hard to create, why invest in your education or your business? If the government can bulldoze your little shanty on a whim or ownership isn’t even available because slumlords backed by violence control vast slums, how can you build a stable life? If water, sewer and electricity hookups are a luxury available only to elites, how can you avoid epidemics or connect to the Internet?

What makes cities in the West such magnets for people from all over the world is that property rights are clearly defined and enforced, when your safety and security is threatened you can call the police and they will come and they won’t extort you, if you sign a contract it will be enforced pretty even-handedly on the parties. We have created the certainty needed for investment to be made in the provision of services such as water, sewers, electricity and data pipes, not to mention education, transport and health care.

Lagos, Kinshasa, Nairobi and other emerging African megacities show that the continent is getting the easy part right, with urban dwellers doubling every 20 years. But services and institutions are falling behind.  Institution-building will determine whether those cities can realise the promise of prosperity too.

Brian Lee Crowley (twitter.com/brianleecrowley) is the Managing Director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: www.macdonaldlaurier.ca.

 

 

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Brian Lee Crowley