North American Brief
Issue 22 | Nov/Dec 2024

Special Two-Part Issue (longer than normal but well worth the read!)

Part 1 – Beyond the obvious on the U.S. elections plus Trump’s tweet and the Canadian response (aka – throwing Mexico under the CUSMA bus.)

Part 2 – Project 2025: Our second installment of insights into what the MAGA/America First trade agenda could mean for Western Canada.

PART 1 

The elections are the obvious top story. The big story for Western Canada is less about who won and more about what we can expect from the incoming administration. We provide an analysis of the trade policy documents produced by the leading MAGA (insight number one: the better term is America First) think tanks in this brief and explain why they are important despite Trump’s disavowal.

Election Insights

We found three points that signal a necessary retooling of our engagement strategies with the U.S.

  1. The first is succinctly summarized in this clip from New York Times (right of centre) opinion columnist and PBS panelist David Brooks. His point (a deeper explanation in the Atlantic) is one that we’ve made – the old republican-democratic, black-white, gender-based dichotomy is not the lens through which to view the U.S. electorate. The correct lens is populist vs elite. The elite-populist framework is also useful for thinking about the internal workings of the parties, as there will be major battles within the democratic party and also between the MAGA/ America First factions.
  2. To this point, stop looking for logical consistency and rationality, as in ‘how can a movement based on elite antagonism adore Elon Musk and continue to push tax cuts for the wealthy?” As an opinion piece from a UC Berkeley sociology professor put it, “Pundits ask about ‘Trump’s strategy’ and search for logic and fact in a campaign platform that does not exist.” An even better analysis of the intellectual and moral flexibility that allows voters and the America First community to hold two or three or more contradictory ideas at the same time is in a piece in the American Journal of Sociology this past summer, ‘When Truth Trumps Facts: Studies on Partisan Moral Flexibility in American Politics’ that finds that seeking logical consistency to predict actions taken by a second administration will be counterproductive.
  3. The America First policy community understands that their (not Trump’s – their) policy will harm their own supporters and damage the U.S. economy. So, following the first two points – traditional use of logic and perceived interest will not always work when trying to understand this administration. For Western Canada, this means not taking comfort in a rational deduction that a Trump administration will not impose tariffs on oil because it will damage the U.S. economy. See our previous issue of the North America brief for an explanation. The decisive victory in this election will only embolden the incoming administration. The just tweeted 25 per cent tariff is an object lesson that we should have learned by now.

Lack of Lighthizer: As of writing this brief, Trump has named his Commerce and Treasury secretaries and Trade Representative without picking his former Trade Representative, and leading architect of much of the America First policy work on tariffs, Robert Lighthizer. Even though Politico had reported that Lighthizer, who is an advisor to two of the most important America First think tanks working on trade issues, was holding the pen on the economic documents for the transition team, he is, as of writing, nowhere to be found. He is a key architect of the new, global tariff proposal, the ‘starts at ten per cent and rises, or drops five per cent every year’ tariff proposal. His absence may at least partially be why Trump went with a 25 per cent tariff on Canada and Mexico instead of the more developed, strategic approach developed by Lighthizer, Peter Navarro and others. The strategic tariff approach we discussed in the last brief was a key interest of the economic populist wing of the America First movement.

Throwing Mexico under an Ontario EV

To the incredulity and amusement of reporters, Ontario Premier Doug Ford forcefully and directly pitched “kicking Mexico out of North American free trade pact” to quote the CBC headline. The muted, non-confrontational response of Prime Minister Trudeau to being blindsided by the Premier was understandable given domestic politics and reflected genuine concerns about the potential for Mexico to become a backdoor for China to enter the North American market and harm Canadian manufacturing. Days after his suggestion, Ford was in the news again – this time incorrectly announcing that premiers in Canada backed cutting Mexico from the North American trade agreement with a move toward two bilateral agreements – one with the U.S. and another with Mexico.

To be clear, according to Newfoundland and Labrador Premier Andrew Furey, what was agreed upon was a contingency plan to pursue a bilateral deal with the U.S. should the current CUSMA agreement not be renewed. This idea, as opposed to kicking Mexico out of the agreement, is at least viable.

We can’t kick Mexico out of CUSMA, but we can end the agreement. There is no provision under the current agreement (Chapter 34, Final Provisions) to remove a party from the agreement. An excellent, short run-through of how this works was just published by Canada’s chief negotiator for the original NAFTA agreement. The only way to “kick Mexico out of the agreement” is to end the agreement. That raises the somewhat rhetorical question of whether Premiers Ford and Smith were, indirectly, calling for the current agreement to end. That is by no means clear. It is, however, a catchy way to phrase things, one that would grab media attention but cause confusion, problems and damage to a serious process.

….Ontario First Trade Policy: The other part of Premier Ford’s call to kick Mexico out of the North American trade agreement was a clear, forceful and unequivocal ‘Ontario First’ trade policy.  As a political stunt, the Premier got a news cycle’s worth of attention and, with a group of Ontario construction (but not auto?) workers standing behind him (footage for a future campaign ad? And thanks to Brian Lilly for photo link). But it is damaging to aggressively and gratuitously attack allies that Ontario and others in Canada will need at some point to manage the Trump administration on issues like Country of Origin Labelling and whatever the new U.S. administration develops. Western Canada has already taken a potential hit to one of its key exports, canola, due to China’s response to Canada’s implementation of a 100 per cent tariff on EVs to protect potential future auto jobs in Ontario. Premier Ford’s freelancing on foreign policy threw not just Mexico under an EV but potentially Western interests as well.

Alberta Response: If Ontario is going to join La Belle province in taking a ‘Sauve qui peut la vie’ (everyman for himself) route to advance its interests in North America to win provincial elections, then the Prairie provinces will need a stronger voice in response. Although Premier Smith has mused about taking a “Canada first” approach to trade, joining Ontario in throwing Mexico under the bus is not what is required – at least not yet. As we laid out in the Financial Post, whether the new Mexican administration/government turns out to be a friend, frenemy, or just trouble has yet to be seen. Gratuitously attacking the country before the verdict is in on the new Mexican government will only alienate an ally Alberta will need in the Country of Origin Labelling fight with the Americans.

The danger for Western Canada in all of this is that following any advice from the Trump camp, including former U.S. Trade Representative Robert Lighthizer, for a go-it-alone approach to dealing with North American issues is to play into the Trump administration’s hands. Canada almost got badly burned going that route during the negotiations for the current agreement. The Canadian Global Affairs Institute has details on how Mexico turned from being a problem into saving Canada from being kicked out of the agreement the last time the country fell into Lighthizer’s ‘divide and conquer’ trap: Trump announces U.S.-Mexico trade deal to replace NAFTA, and says ‘we will see’ if Canada can join. Canada was suddenly presented with – “sign an agreement that Mexico and the U.S. had negotiated or else.” We were saved by Mexico which had been briefing Canadian negotiators, who were, as a result, prepared and averted Lighthizer’s trap.

A second danger or lesson from the previous NAFTA renegotiation is thinking that alignment with U.S. interests will protect Canadian interests in areas where we compete with the U.S. This belief persists despite our past experience with Trump. During the previous negotiations, the Americans inserted a clause into the finished agreement limiting us from engaging in trade negotiations with China. But at the same time, the Americans were negotiating their own Phase One agreement with China that directly threatened to take market share from Canadian ag exporters.

What could the West do in response to a new, more lethal Trump administration? Western provinces are extensively engaged in the U.S. But it’s being done, as far as we can tell, in an uncoordinated, idiosyncratic, everyone-for-themselves manner. The Americans have limited time for Canada, so combining Western outreach in a systemic, coordinated and strategic manner may improve the return on our investment in the limited opportunities that we get in the U.S. A combined voice also helps balance or correct messages on energy coming, or more often not coming, from Ottawa. Alberta joining the Governors’ Coalition for Energy Security is a great step by Alberta. It could be more powerful still if the other Western provinces that export energy to the U.S. also joined. Renewing the annual attendance of Western Premiers at the annual summer meeting of Western governors is another missed opportunity. The Western Premiers are the only group in Canada that does not annually meet with their U.S. counterparts since Gary Doer led the effort to do so when he was premier of Manitoba.

An example of joint action: A first step in the direction of combining forces is the joint submission to the federal government on the CUSMA review written by a collection of Calgary-based organizations. This may be the start of a more effective advancement of Western interests in North America, or at least in Canada if it can be expanded throughout Alberta and across the West. This didn’t happen because of a late start and mad rush to (barely) meet the submission deadline. But the formal submission is just the start – the issue remains, and the need for a Western perspective continues. This effort will have to come from and be led by stakeholders outside of government.

PART 2 – CWF EXCLUSIVE!

AN AMERICA FIRST TRADE AGENDA & WHAT IT MEANS FOR WESTERN CANADA: EVIDENCE-BASED ANALYSIS

We often mention looking to the source material for potential Trump administration policy. As opposed to his first term when Trump, and most if not all of his cabinet, were surprised to find themselves in office and many arrived with little to no planning or preparation, this is not the case the second time around. In the intervening four years, much work has been done by a new breed of MAGA or, more correctly, America First think tanks, primarily the America First Policy Institute and American Compass and one completely remade conservative stalwart – the Heritage Foundation. Groups that are part of the Heritage coalition, which wrote Project 2025, have done work that likely will find its way into a Trump administration. The Heritage coalition has produced the clearest writing on trade and trade-related policy with the strongest ties to the former (and as is turning out) future Trump administrations.

We provided a deep analysis in our last North America brief of the work done by American Compass architects (as best we can figure) of the global tariff. In this brief, we turn our attention to the Heritage Foundation’s Project 2025 document. Even though Trump adroitly distanced himself from the blueprint during the campaign, elements of the policies outlined in the document will influence those recruited into the administration and may be brought wholesale into government by appointees who took part in drafting the document. Our “quick read, high level analysis” of the Project 2025 document below is also informed by our analysis of work by American Compass (see our last issue) and the America First Policy Institute.

The Project 2025 document is structured by government department rather than sector or theme, though trade is covered in a ‘trade chapter’ as opposed to a “USTR chapter.” We provide a cursory bullet point identification of opportunities and risks for Western Canada in each department chapter. Note, in some chapters, e.g., trade, two opposing policy directions are presented. Finally, we list the authors of each chapter as a sort of scorecard to see who, if anyone, winds up in the administration.

The first point about this work is that it is not new. To understand what it is, read the opening of Project 2025:

In the winter of 1980, the fledging Heritage Foundation handed to President-elect Ronald Reagan the inaugural Mandate for Leadership. This collective work by conservative thought leaders and former government hands—most of whom were not part of Heritage—set out policy prescriptions, agency by agency for the incoming President…With this volume, we have gone back to the future—and then some.

It’s not 1980. In 2023, the game has changed.

The long march of cultural Marxism through our institutions has come to pass. The federal government is a behemoth, weaponized against American citizens and conservative values, with freedom and liberty under siege as never before. The task at hand to reverse this tide and restore our Republic to its original moorings is too great for any one conservative policy shop to spearhead. It requires the collective action of our movement. With the quickening approach of January 2025, we have two years and one chance to get it right.

The second point is that Project 2025 is more than 50 American conservative organizations joining forces to work together but not necessarily agree. Unlike work by American Compass and AFPI, the Project 2025 document contains dissenting opinions; think court decisions with dissenting judges. For Canada, the most notable instance is in the trade chapter, where the view presented by former Trump director of the White House National Trade Council, Peter Navarro, for an economic nationalist agenda including tariffs is countered by the view of Kent Lassman, president and CEO at the Competitive Enterprise Institute who, in the chapter, calls for the U.S. to rejoin the TPP (pg. 801, note TPP, not CPTPP. It is unlikely that this was a typo.) This fight between advocates for fair trade (economic nationalism) and free trade (economic liberalism) is live within the America First movement. How it plays out in the Trump administration will be one of the most critical inputs into Canadian policy for engaging the new administration.

To make the point painfully clear

  • While Trump has disavowed the document (likely from a combination of political expediency and ego), some of the policies and thinking behind them will still enter the 15 executive departments and agencies, commissions, etc., that make up the administration.
  • The 50 organizations that participated in writing the document, some with massive staff, represent the technical and intellectual capacity of the America First movement from which a Trump administration will draw staff.
  • Which policies and staff enter the administration and how much influence they have will depend on too many variables to give exact estimates or guesses.
  • But what does appear likely is that influence will be tied to Trump’s concern and attention, with a greater likelihood of influence in areas where Trump has little interest.

So, what’s in the document and who wrote what?

Of the 30 chapters in the document, again built along a department-by-department framework, 10 are the most critical for Western Canada:

  • Agriculture, Energy, EPA (environmental protection), Interior
  • Transportation, Commerce and Trade (listed, interestingly, as such instead of Office of the U.S. Trade Representative)
  • Defense, Homeland Security and State (triangulation on China trade policy that impacts trade)

The high-level analysis below is an attempt to provide more substance than off-the-cuff “tweets” from President-elect Trump to guide thinking about how those in Western Canada can prepare for the incoming administration. Of the plethora of information in the Project 2025 chapters on these topics, we have winnowed out a few that present potential opportunities or challenges, but all of which require some thinking before the administration takes office. None of what is proposed by Project 2025 is guaranteed to occur, but some of it will be implemented, and in preparation, we are, for a change, better safe than sorry.

Agriculture

Daren Baskt, Director, Center for Energy and Environment at the Competitive Enterprise Institute

From the opening of the chapter:

The U.S. Department of Agriculture (USDA) can and should play a limited role, with much of its focus on removing governmental barriers that hinder food pro­duction or otherwise undermine efforts to meet consumer demand. The USDA should recognize what should be self-evident: Agricultural production should first and foremost be focused on efficiently producing safe food.

Considerations for Western Canada

The removal of the U.S. from UN and international initiatives that tie food production, including growing and processing, to ancillary issues, including climate change

  • Would Canada have a competitive advantage or disadvantage if it chose the opposite path? That is a question for some game theory work by Canadian ag stakeholders.

A reform (cut) to farm subsidies. (Ninety-four per cent of subsidies go to corn, cotton, peanuts, rice, soy and wheat.)

  • Is there a potential benefit to Canadian farmers if wheat and soy subsidies are cut?
  • A call to repeal the federal sugar program, which subsidizes U.S. sugar producers and limits foreign imports, could, depending on if and how reform is done, open more market share for Southern Alberta sugar beet producers.

Allowing state-inspected meat to be sold out of state.

  • This topic has been under discussion in Canada and could gain momentum if adopted by the U.S.

A reduction of charges U.S. farmers pay for marketing orders and checkoff programs, which charge U.S. producers a set fee per unit of production for producer associations to fund research and other activities.

  • This could lower costs for U.S. vs Canadian producers.

A change in focus of USDA’s foreign sales activities to focus on trade policy over export promotion, including legislation to repeal export promotion programs and instead focus on addressing market access issues, non-tariff barriers, etc.

  • This has been argued by CWF as a step for Canada. Seeing how the Americans fare if this is done is important. In the short-term, it may be an opportunity to expand market access.

A strong push to reduce discrimination against GMOs inside and outside the U.S., including repealing the federal GM labelling mandate and “use all tools to remove improper trade barriers against ag biotech.”

  • Canadian ag, especially crops like canola, will benefit immensely from this shift in U.S. policy.

Forestry (falls under USDA)

Increase in U.S. government timber sales as part of measures to reduce forest fire risk, e.g., reduce fuel buildup.

  • Cooperation and joint funding on relevant areas of forestry management, such as deeper integration of forestry firefighting capacity.
  • An increase in timber sales poses obvious challenges to Canadian exporters.

A note on the America First Policy Institute’s position on ag policy

AFPI president and CEO, Brooke Rollins was named as Trump’s pick for Ag Secretary. So what does AFPI say about ag? Not much, it turns out. Despite listing ag as a policy area, AFPI does not have much ag policy work. Its somewhat intense focus comes from its China Initiative to prevent Chinese ownership of U.S. farmland. This work includes a draft of model legislation for states. A strong part of the rationale for banning Chinese ownership of farmland is, of course, food security. But curiously, the other argument is that “our agricultural land also makes a convenient base for surveillance and sabotage of our military installations and critical infrastructure…”

 Energy (Department of Energy DOE)

Bernard L. McNamee, Partner, McGuireWoods LLP; Former Commissioner, Federal Energy Regulatory Commission (see Federalist Society contributions)

From the opening:

The new energy crisis is caused not by a lack of resources, but by extreme “green” policies. Under the rubrics of “combating climate change” and “ESG” (environmen­tal, social, and governance), the Biden Administration, Congress, and various states, as well as Wall Street investors, international corporations, and progressive spe­cial-interest groups, are changing America’s energy landscape. These ideologically driven policies are also directing huge amounts of money to favored interests and making America dependent on adversaries like China for energy. In the name of combating climate change, policies have been used to create an artificial energy scarcity that will require trillions of dollars in new investment, supported with taxpayer subsidies, to address a “problem” that government and special interests themselves created.

There is too much information in the Energy chapter to provide a fulsome overview. We highlight some of the potentially most interesting developments. Before delving into specific considerations for Western Canada.

It is important to highlight how much of a shift there will potentially be on energy policy. That a shift is coming, and its general direction, is well known but laying it out point by point is still striking –  ‘drill baby drill’ doesn’t begin to cover what is proposed, which is:

  • Promote American energy security by ensuring access to abundant, reliable, and affordable energy.
  • Affirm an “all of the above” energy policy through which the best attributes of every resource can be harnessed for the benefit of the American people.
  • Support repeal of massive spending bills like the Infrastructure Investment and Jobs Act (IIJA) and Inflation Reduction Act (IRA), which established new programs and are providing hundreds of billions of dollars in subsidies to renewable energy developers, their investors, and special interests, and support the rescinding of all funds not already spent by these programs.
  • Unleash private-sector energy innovation by ending government interference in energy decisions.
  • Stop the war on oil and natural gas.
  • Allow individuals, families, and business to use the energy resources they want to use and that will best serve their needs.
  • Secure and protect energy infrastructure from cyber and physical attacks.
  • Refocus the Department of Energy on energy security, accelerated remediation and advanced science.
  • Promote S. energy resources as a means to assist our allies and diminish our strategic adversaries.
  • Refocus the Federal Energy Regulatory Commission (FERC) on ensuring that customers have affordable and reliable electricity, natural gas, and oil and no longer allow it to favor special interests and progressive causes.
  • Ensure that the Nuclear Regulatory Commission facilitates rather than hampers private-sector nuclear energy innovation and deployment.

Considerations for Western Canada

The focus on the physical security of energy infrastructure.

  • There is an obvious opportunity and need to work with the administration on shared infrastructure with the potential to go deeper and expand existing frameworks and initiatives, e.g., cybersecurity for energy transmission. This is a major priority in Project2025. Could spending on defending shared energy infrastructure be counted towards overall defence spending?

The potential expansion of nuclear energy production and improved waste disposal.

  • Opportunities for Saskatchewan to provide uranium. It is doubtful there are opportunities to participate in building in the U.S., given the push elsewhere to create ‘American jobs for Americans.” But this language is missing from the energy chapter. That omission may be an oversite or an opportunity.

The proposed elimination of political and climate-change interference in DOE approvals of LNG exports.

  • Expanded U.S. LNG exports could increase demand for Canadian natural gas. That these exports would increase ‘American jobs in America’ wouldn’t hurt. If this included west coast U.S. LNG exports, it would increase competition for exports from B.C. – but demand in Asia is growing, and Canada has a significant shipping cost advantage over east coast LNG.

The proposed elimination of carbon capture utilization and storage (CCUS) programs.

  • There is obvious potential for loss of the U.S. market to offset costs of developing CCUS technology and added cost for Canadian producers that U.S. producers will not face.
  • There is also the potential for increased Canadian sales of lower emission products if there is global demand for clean energy that is not being met by the U.S.

Process critical minerals from fossil fuel (coal) waste.

  • Unknown

Eliminate energy efficiency standards for appliances.

  • Important for Canadian manufacturers of these products and….no comment.

Eliminate the Office of Clean Energy Demonstration (OECD), eliminate the Clean Energy Corps.

  • By now, the writing on the wall for clean, renewable, new energy is clear. What does this mean for Canada’s renewable efforts?

Expand the DOE International Office of International Affairs and eliminate the State Department Bureau of Energy Resources. There are three potential significant issues here:

  1. Eliminates a State Department concerned with international obligations from the mix and leaves a DOE newly focused on ‘drill baby drill’ in charge of foreign energy policy.

To quote from Project 2025, “The State Department’s Bureau of Energy Resources has generally excluded IA from serious discussions of international affairs to the detriment of DOE and broader interagency policy development. In addition, DOE embassy representatives are generally excluded from giving policy advice to senior diplomats and are used merely as sources of information instead of being active advocates for the Secretary’s priorities.”

  1. The document recognizes that the U.S. still imports large amounts of oil, gas, uranium, lithium, etc. and calls for the development of a strategy to identify and access energy resources to advance and protect U.S. economic interests. The elevation of the Department of Energy over or equal to the Department of State in negotiating these issues is a potential opportunity for Canada.

Interior (Department of the Interior – DOI)

William Perry Pendley, president and chief operating officer of Mountain States Legal Foundation, former Director of the Bureau of Land Management (BLM) under Trump.

DOI has jurisdiction over minerals, about a quarter of the country’s energy resources, and water in most of the Western U.S., oversees National Parks and manages relations with 566 First Nations and Inuit communities. The overlaps with areas of interest to Western Canada are obvious.

A few snippets from the introduction to the chapter, as with the energy chapter, highlight the extent and passion of the likely incoming change.

DOI is abusing National Environmental Policy Act (NEPA) 14 processes, the Antiquities Act 15 and bureaucratic procedures to advance a radical climate agenda, ostensibly to reduce greenhouse gas emissions, for which DOI has no statutory responsibility or authority.

Biden’s DOI is hoarding supplies of energy and keeping them from Americans whose lives could be improved with cheaper and more abundant energy while making the economy stronger and providing job opportunities for Americans. DOI is a bad manager of the public trust and has operated lawlessly in defiance of congressional statute and federal court orders.

  • The proposed agenda for action starts with rollbacks of Biden-era policies and reinstitution of previous Trump administration policies. These actions should be quick to implement once the new administration takes office.
    • There are a dozen Secretary’s Orders, SO, listed here including items such as ending the moratorium on coal leases and moving the Office of Surface Mining to coal country (from D.C. to Pittsburgh). Each is important for Western Canada and needs its own in-depth analysis and game theory exercise.
    • The reinstatement of the opening of most of the National Petroleum Reserve of Alaska for leasing.

The idea of moving BLM headquarters (and the National Park Service) to the American West.

  • 😊 Could we do the Americans one better here? Office space is cheap and available in Calgary, where people still go to the office, National Parks (five) are within a two-and-a-half hour drive and as opposed to Grand Junction, Colorado, which is where the Trump administration wanted to move BLM; Calgary is identifiable on a map and has a major international airport. (ok, back to our analysis)

The idea to promote fossil fuel development and mineral resources on tribal lands and restore the right of tribal governments to enforce environmental regulation on their lands.

  • Canada, and particularly the Prairie provinces, appear to be much further down the road on working with First Nations in not only development but revenue sharing, ownership, financing and management. This could be an area ripe for cooperation to help not just the U.S.-Canada relationship but to help ensure that First Nations in the U.S. benefit from new U.S. policy.
Want more on the topic? See the op-eds below

Alienating Mexico won’t help Canada at the negotiating table with Trump
Financial Post, Carlo Dade, Nov. 18, 2024

Start reading policy papers from U.S. right-wing (i.e., MAGA) think-tanks, Canada
Globe and Mail, Carlo Dade, Nov. 6, 2024

Why a U.S. global tariff is the real existential trade threat facing Canada
Financial Post, Carlos Dade and Dan Ciuriak, Sept. 9, 2024

Carlo Dade, Director, Trade and Trade Infrastructure

The Western North America Brief is a compilation of stories and links on the United States and Mexico’s relationship with Canada’s Mountain West- prairie provinces focusing on stories and topics that are not always “on the front page” in national coverage.