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Emerson hints oil would be back on table if U.S. reopens NAFTA

Canadian Press

Emerson hints oil would be back on table if U.S. reopens NAFTA

27 February 2008

OTTAWA - Trade Minister David Emerson suggested the United States has a sweet deal over access to Canada’s oil under the North American Free Trade Agreement, saying the two Democratic presidential candidates calling for renegotiations may not know just how good the U.S. has it under the deal.

Emerson said Wednesday that reopening the three-country trade deal would not be a one way street and that Canada also has its list of concessions it would seek if the continental pact was renegotiated.

"There’s no doubt if NAFTA were to be reopened we would want to have our list of priorities," Emerson said.

"Knowledgeable observers would have to take note of the fact that we are the largest supplier of energy to the U.S. and NAFTA has been the foundation for integrating the North American energy market. When people get below the rhetoric and pick away at the details, they are going to find it’s not such a slam dunk proposition."

The trade minister’s comments came after Democratic presidential rivals Hillary Clinton and Barack Obama said during a debate Tuesday night that if they become president, they will pull out of NAFTA unless changes are made to the trade deal.

The continental trade agreement, as well as expanded trade with China and other low-wage countries, have come under fire from labour groups in the U.S., who blame free trade for the the loss of hundreds of thousands of U.S. manufacturing jobs.

In response to a question on whether she’d be willing to withdraw from NAFTA in six months, Clinton called the trade agreement flawed and said her plan includes telling Canada and Mexico that the U.S. will opt out unless the core labour and environmental standards are renegotiated, and the enforcement mechanism is enhanced.

Obama also said he would make sure the U.S. renegotiates the deal, and "use the hammer of a potential opt-out as leverage" to ensure they get labour and environmental standards that are enforced.

Emerson did not say Canada would insist on putting access to Canadian oil back on the table, but that provision in the deal has been a major concern to Canadian critics who argue that Canada would not be able to claim preferential treatment in a crisis.

Under the trade agreement, Canada is prohibited from cutting off oil exportss to the United States if there is a worldwide shortage or supply disruption unless supplies are also rationed to Canadian consumers by the same amount.

Earlier Wednesday, Finance Minister Jim Flaherty said Clinton and Obama may be misinformed about NAFTA.

"NAFTA is of tremendous benefit to Americans, and perhaps the nominees have not had the opportunity to familiarize themselves with the benefit to Americans and the American economy of NAFTA, because there’s a tendency to say ’it favours Mexico, or it favours Canada,’ rather than to recognize the mutual benefits that come out of free trade," he said after a speech in Toronto.

Most studies of the nearly 15-year-old continental trade deal conclude all three countries have benefited in increased trade, but Canada and especially Mexico gained an advantage in the balance of trade with the U.S.

But Emerson said weighing exports and imports is too simplistic, noting that a car made in Canada and shipped to the U.S. is counted as an export, but includes many parts and inputs from the U.S.

"All three partners have gained and have gained substantially," he said.

"These people (Clinton and Obama) are seasoned political veterans, and while they are under grassroots pressure at the moment and that probably won’t go away, I think sound wise judgement will prevail at the end of the day."

He added that the United States’ current economic problems stem not from NAFTA, but from the country’s own self-made subprime mortgage crisis that has battered the housing sector and from growing competition from Asia, particularly China.

Nevertheless, Emerson said he is concerned with the growing stridency of protectionist forces in the U.S., including many in Congress.

If NAFTA were to be torn up, Emerson said little would change in the short term but that disputes could increasingly spring up with no neutral way of resolving them.

"It’s not so much more fights as a less neutral, well-defined way of resolving them," he said.

"The dispute resolution mechanism, Chapter 19, has been generally speaking a real benefit for Canadian industry with the possible exception of softwood lumber."