By Jeff Mahon
Published in the Globe and Mail
June 25, 2024
Jeff Mahon is director of geopolitical and international business advisory at consulting firm StrategyCorp and an executive-in-residence at the Canada West Foundation.
The world order is changing. It’s moving through an inflection point (but here the timescale is in tens of months, not moments) and, if Canada doesn’t wake up to the signs of this shift, it will miss opportunities and our development will be constrained.
One recent signal is U.S. President Joe Biden’s tariffs against China, covering a variety of sectors, but which most notably concentrate on clean technologies and electric vehicles. These tariffs will inevitably slow the greening of the U.S. economy and, while the fight against climate change remains, the U.S. has laid bare that it sees more immediate concerns at stake.
China’s strategic foresight saw the energy transition coming years ago and recognized the geopolitical power associated with the control of energy systems. It oriented its socialist-market economy and industrial policies to usher in a cleantech industrial base that today is primed for first-mover advantage. The U.S. arrived late to the green energy race, but took action when it saw the threat of being dominated by China and how it could impact jobs, economic competitiveness and supply chain security.
The U.S. clearly understands that economic and political power flows not just from technology but also energy security and export capacity. This is why the energy revolution that unfolded in the U.S. over the past decade continues to be a major geopolitical event. Despite nice words from presidents Barack Obama and Joe Biden about the environment, the U.S. went from an energy net importer to exporter, in turn boosting economic growth, supplying strategic markets and weakening its reliance on Middle Eastern supply. As the U.S. builds out its cleantech base, it is doing so from a position of strength.
Contrast that with Canada, where we’ve been more concerned about our image as a high-per-capita emitter than the economic and geopolitical benefits that flow from our endowments. Canada hasn’t taken the needed steps to leverage our bifurcated economic structure of resource extraction and manufacturing. Instead, through both rhetoric and fiscal action, the government has sought to shore up manufacturing in a push to develop Canada’s cleantech industrial base while inducing uncertainty in the energy and resource sector, in effect scaring off private investment. Given the spillovers and revenue generated from resource development, we’re in a position where “one plus one can be greater than two,” but our current mindset seems intent on eliminating one of the terms in that statement.
Canada’s weak economic growth and declining geopolitical clout at a time of global instability are therefore no surprise. To boost growth, Canada needs to enable investment, instead of shrinking the space for it in the name of the climate. Canadians need to recognize that advancing our resource sector is not a zero-sum proposition with the environment. We should take our cues from our allies, with whom we thought we were in lockstep in the fight against climate change. But the latest American actions highlight that it’s time for Canada to quit believing the talking points and start deriving its worldview from actions.
Doing so will help Canada expand its economic relevance around the world. which will in turn drive up our capacity as a geopolitical actor. It’s symbolic of the opportunity that the first shipment of bitumen that flowed from the Trans Mountain pipeline expansion this year went to China, despite the ongoing challenges in the relationship. Canada is in a better position vis-à-vis China if we’re a reliable supplier of strategic commodities. This logic extends to other important but challenging relationships like India. It would also give our traditional allies and emerging partners in the Indo-Pacific reason to take Canada seriously as a supplier of critical inputs.
This month’s G7 Leaders Summit in Italy brought together the leading liberal market democracies to discuss co-ordination amid a raft of global challenges. With Canada hosting next year’s summit in Kananaskis, Alberta, it will provide an opportunity for Canadians to reflect on the direction of the government’s international and economic policy – and to urge changing course.
As it sets its agenda for the G7 meeting, the government must consider how to instill in the private sector the long-term confidence needed to make investments in both the environment and energy. Canada will need to channel its resourcefulness to meet the global and local challenges. Let’s make sure we leverage all our resources to do it.