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Diversifying Canada's Trading Options

Today's Globe and Mail front page talks about another step taken by the Martin government to grow our oil trade with China:

China's investment appetite for the Alberta oil sands has climbed so strongly that it could be importing 400,000 barrels of oil a day from Canada within the next seven years, Natural Resources Minister John McCallum says.

The Chinese oil ambitions in Canada, which intensified yesterday when Mr. McCallum met two of China's most powerful oil executives, are a key element in the Liberal government's aggressive push to diversify Canada's energy sales away from its traditional U.S. markets in the aftermath of the softwood-lumber dispute.

Despite denials from Ottawa, the government's new strategy of pitching oil to China is widely seen as a pressure tactic against Washington after its refusal to comply with the NAFTA softwood ruling. The Americans are ignoring a ruling by a North American free-trade agreement panel that U.S. tariffs on softwood lumber are illegal under U.S. trade law.

There are plans in the works to build a pipeline to move Alberta oil to the BC coast for shipping by sea. Canada is also making a small investment in a program to increase wood exports to China.

However, I think it is wrong to consider these developments part of a threat against the United States, or a negotiating tactic. Diversification simply makes sense. Giving Canada more options for exports also makes sense, even if the softwood lumber issue is suddenly resolved tomorrow. (And we should be looking east as much as we're looking west.)

We simply can't afford to rely on the United States for all of our exports. Yes, as the world's largest economy and our closest neighbour, they will always be very important. However, beyond wanting to break free from the ups and downs of the US economy, we also have to face facts about the American attitude to fair trade. No one should have any doubts that the US government will create whatever laws and regulations they feel are to the advantage of their constituents, without regard for any signed trade agreements. (Canada would probably do the same thing if we were that big.)

So, let's not have any illusions about our trade with the USA. It will always be very important to Canada, because there will always be many opportunities to trade with Americans that benefit both sides. However, we can't rely on treaties to guarantee us fairness in every situation, and so, we need back-ups and alternatives.

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