North American Brief
Issue 13 | November 3, 2023

In this issue: Good news for Canada on critical minerals and softwood lumber, Deja-LNG on hydrogen.

Critical Minerals

Senate Snubs Indonesia, Tips Hat to Canada (…and Australia): A letter signed by nine U.S. Senators and posted on the website of signee Kevin Kramer of North Dakota, expresses concern to U.S. Trade Rep Tai, Treasury Secretary Yellin, Energy Secretary Granholm and Commerce Secretary Raimondo regarding media reports of a potential critical minerals “limited free trade” agreement between the United States and Indonesia. Reuters had a piece on the Indonesian pitch this past spring. The letter also points to Canada and Australia as better partners.

The Senators’ complaints? Well, there’s half a dozen bolded and a couple more subtle shots. The subtle shot was that Indonesia has been proposing the creation of an OPEC-like critical minerals cartel. Something on which the Financial Times among others has reported. The problem is, of course, that it would exclude the U.S. The six big complaints on Indonesia are: significantly higher embedded CO2 footprint over U.S., Australian or Canadian nickel production, lack of community engagement, waste practices that impact ocean health, the significant biodiversity impacts of open pit mining and lack of environmental protections in law, Chinese dominance of Indonesian mining and refining, and weak labour protections.

But the reality of global nickel (and other critical mineral) production and reserves is that resources lie outside of North America. Thinking about the “Indonesia cartel” concern and who might join them, this figure with data from the U.S. Geological Survey puts it into perspective.

Global Nickel Production 2021

And Canada? All of the complaints make a good case for a North American critical minerals carte…. agreement. In any case, the Senators’ letter has good talking points for any Canadian in D.C. The signees also flag potential allies for other issues – Tina Smith (D-MN), Tammy Baldwin (D-WI), John Fetterman (D-PA), Lisa Murkowski (R-AK), Joe Manchin (D-WV), Bill Cassidy (R-LA), Amy Klobuchar (D-MN), and Sherrod Brown (D-OH).

Softwood lumber round #??…..we’ve lost count

Latest decision mostly a Canadian win. A NAFTA panel (yes, NAFTA) looking at the Trump administration’s 2017 decision to impose countervailing and anti-dumping duties on Canada issued a long-awaited ruling this month. The panel ordered the U.S. Department of Commerce to revisit several decisions including its deducting export taxes collected by Canada under the 2006 Softwood Lumber Agreement from the price paid on softwood lumber subject to export taxes. The Americans got a partial win when the panel said there was enough evidence to justify Commerce picking the four forestry products it chose for action and that Canada thought should have been excluded from consideration.

North American Energy

PEMEX and Mexico’s 2024 federal election was the focus of October’s feature question for experts in an issue of the Latin America Energy Advisor by our good friends at the D.C.-based Inter-American Dialogue. (If you’re in anyway involved in energy issues in North or South America, this is worth the subscription). Here are the questions that the Latin America Energy Advisor put to the experts: The Mexican government presented a 2024 budget on Sept. 13 that included a capital injection of $8.25 billion for state-owned oil company Pemex. The cash infusion is occurring in the midst of the campaigns for Mexico’s presidential election, which is scheduled for June. What’s at stake for Pemex in next year’s election? How do the main presidential candidates’ positions on Pemex differ? How would the company fare under one presidential administration over another? How do the candidates plan to address the company’s debt?

On hydrogen, Is it deja-LNG all over again? To further quote Yogi Berra…maybe. The U.S. government is starting to peel some Benjamins off of its “mobster in Vegas” wad of infrastructure cash. California is to receive US$1.2 billion of the 2021, bipartisan Infrastructure Law’s $7 billion for seven regional clean hydrogen hubs to spur private-sector investment in a domestic hydrogen market. The Department of Energy fact sheet on the hubs is here. According to the Nikkei, Japan is an impetus for the California investment.

Still time for Canada? As InsideTrade notes, this is all at the announcement stage with negotiation and design stages to follow, so it will be a while before private sector money starts to appear. If Canada won’t move energy to Asia, we know who will (hint starts with U has an S and ends in A). Maybe this will be a kick in the pants? Looking back on the history of LNG on the West Coast that doesn’t appear likely, but one can hope.

A grid too far – An apt Remembrance Day analogy for the announcement of the first funding under the U.S. Grid Resilience and Innovation Partnerships (GRIP) Program, the US$10.5 billion dollar program to build out and strengthen the U.S. electricity grid. On the other hand, Reuters reports that officials from all seven U.S. grid operators testifying at the House Energy, Climate, and Grid Security Subcommittee worried that multiplying electricity demand from the energy transition will strain the power supply.

Your Supply Chains’ Supply Chain Pt. 2

U.S. entity list grows. A story that we may repeat in our China Brief also shows up here because it’s something Canadian companies shipping to the U.S. need to know.

Bloomberg reports that the Bureau of Industry and Security at the U.S. Department of Commerce has added new firms to its list of companies banned from exporting to the U.S. under the Uyghur Forced Labor Prevention Act. Now banned are the Ninestar corporation, a producer of laser printers and one of the top 500 companies in China, and  Zhongtai Chemical Co. Ninestar, (which is suing its designation in the U.S. International Trade Court), has eight subsidiaries and Zhongtai 43. This makes 22 companies and countless subsidiaries on the U.S. list of firms that the U.S. government claims have ties to forced labour in China’s Xinjiang province. That’s a lot of firms and subsidiaries to track.

Why does this matter for Canadian business? If a firm imports inputs from China to make or sell products for the U.S. market, it can have goods seized at the U.S. border if any inputs originate with a firm on the U.S. entity list, or even the firm’s suppliers. So, a Canadian business buys inputs from a firm in China not located in Xinjiang and thinks things are fine. But, unbeknownst to the Canadian firm, its supplier uses inputs from Xinjiang, or buys from a firm on the U.S. list. Any of this can lead to having goods shipped from Canada seized at the U.S. border. U.S. Customs and Border Protection (CBP) along with the Department of Homeland security have invested resources to develop the intelligence to track and identify prohibited goods. If U.S. CPB knows your supply chain better than do you, your goods can wind up seized. According to CNBC, since June of this year U.S. Customs has seized over US$1 billion of goods under the Uyghur Forced Labor Prevention Act.  Earlier this year, a former BIS Under Secretary laid out the implications for Canadian firms in our webinar:  You, Your Supply Chain’s Supply Chain and Trouble at the Border.

CWF-IPD Forum shines spotlight on economic security. There will be an economic security panel, The Security-Trade Nexus in the Indo-Pacific, at the 3rd annual Indo-Pacific Strategy Forum in Ottawa on Dec. 4-5, 2023.

Other News

Truth, reconciliation and a toppled statue…Alaska version. An interesting story from Politico on a controversial statue that had nothing to do with the Civil War or slavery coming down in the U.S. The Alaskan town of Sitka (pop. 8,400) voted to remove the town’s statue of the Russian Aleksandr Baranov, Alaska’s first colonial governor renowned for his cruelty and enslavement of the Tlingit and Aleut. How the statue got put up in the first place isn’t covered in the story.

Where’s the beef? Mexico. Canadian Cattlemen magazine reports that exports to Mexico are up despite food inflation in that country. No word though on whether any Mexican Senators are considering Country of Origin Labelling requirements.

Canada beats Mexico in hockey. The one chance for Mexico will ever have for a hockey win over Canada didn’t materialize at the PanAm games this past week. Canada’s women’s team beat Mexico 5-0 in FIELD hockey at the Pan-Am games. (Insert beat like a piñata joke here.) Unsurprisingly, the U.S. leads the PanAm medal count with 171, followed by Brazil with 124 and Canada, literally punching above its demographic weight, in third place with 105 while Mexico is fourth with 89. Full list available here.

Carlo Dade, Director of Trade and Trade Infrastructure

The North America Brief is a compilation of stories and links related to the U.S. and Mexico’s relationship with Canada’s West. The opinions expressed in the links are those of the articles’ authors and don’t necessarily reflect the views of the Canada West Foundation and our affiliates.