The US wants Venezuelan oil. Does that weaken Canada’s leverage in trade negotiations?
A few hours after the United States announced that it had attacked oil-rich Venezuela and kidnapped its president Nicolás Maduro, the wife of the chief adviser of the American President Donald Trump issued a strong warning to Canada on social media.
“The US needs nothing from Canada,” wrote Katie Miller, whose husband Stephen Miller is Trump’s deputy chief of staff for policy and national security adviser. “Free trade is over.”
A common refrain from those within Trump’s inner circle, and from the president himself. But the dispute has taken on a new meaning now that the United States may have access to Venezuela’s largest reserves of crude oil – similar to what is produced in Western Canada.
As Ottawa prepares to review the Canada-US-Mexico Agreement (CUSMA), do developments in Venezuela undermine Canadians’ negotiating position? CBCs The house spoke to experts and former officials about the possibility of accumulating Venezuelan oil production and the road ahead.
The house10:55How Trump’s national turmoil could escalate Canada-US trade talks
On the same day the US launched its military operation in oil-rich Venezuela, the wife of one of Trump’s top advisers warned on social media that “the US doesn’t need anything from Canada. Free trade is over.” How true is that, before serious trade negotiations? House producer Jennifer Chevalier speaks with Fen Hampson of the Group of Experts on Canada-US Relations, Laura Dawson of the Future Borders Coalition, RJ Johnston of the University of Calgary, and former US trade negotiator Kate Kalutkiewicz to understand the rocky road ahead.
Can Venezuela replace Canadian oil?
According to RJ Johnston, director of energy and natural resources policy at the University of Calgary, Venezuela’s oil sector and infrastructure have been in decline for more than a decade, which poses major risks to US oil companies that may want to re-enter the country.
“If the US government really makes a partnership with the US oil industry, and taxpayers take on more risk and provide more money – that will change the equation,” Johnston said.
“Left with their machines, I don’t think those American companies are willing to enter Venezuela with big projects.”
Nicolás Maduro’s capture by the US military and President Donald Trump’s plan to revive Venezuela’s oil industry could be seen as a page from his new national security strategy. CBC’s Eli Glasner breaks down the strategic goal of dominating the Western Hemisphere and what it could mean for Canada and the world.
The U.S. government is pressuring oil executives to return to Venezuela immediately, and has told those executives that they will need to invest heavily to revive the devastated oil industry if they want compensation for the assets that Venezuela seized two decades ago.
Prime Minister Mark Carney, for his part, said earlier this week that he has no hope of an increase in oil production from Venezuela because Canadian oil is cheap, clean and less dangerous.
“We have a competitive product and we’ve been diversifying our markets and that’s one of the reasons why we signed the full specification. [memorandum of understanding] and Alberta,” Carney said in Paris on Tuesday.
Still, Canadian energy stocks took a hit after the US intervention, as did Canadian heavy oil prices. That’s important to the Canadian economy, Johnston said, especially in Alberta where falling prices mean lower revenue for its budget.
Trump is looking for power, the former official said
Kate Kalutkiewicz, who served as senior director of international trade at the National Economic Council during Trump’s first term, said she doesn’t think the events in Venezuela will change the Canada-US dynamic in the near term.
“But it is a sign that President Trump is serious about his goal of reducing dependence on any one trading partner for any good or commodity,” Kalutkiewicz said.
In addition, Trump prides himself on being a “really good negotiator and always thinking about how to build leverage in any negotiation,” she said.
Prime Minister Mark Carney sat down for a year-end interview with CBC News political reporter Rosemary Barton, where he laid out his expectations for the CUSMA review next year.
Fen Osler Hampson, chairman of the Expert Group on Canada-US Relations, agreed with Kalutkiewicz’s assessment and said that the events in Venezuela do not directly affect trade negotiations, but it shows that Trump and his team consider the Western Hemisphere as their playground.
“We’re going to be under pressure around critical mineral supply chains, Arctic resources, energy infrastructure, because the United States clearly views all of these as core national security issues,” Hampson said.
“We are in the process of being demoted from being an independent neighbor of the United States to being a small resource,” he said. “That is the clear direction that the United States is heading. That is the message it sent with its attack on Venezuela.”
Venezuela sits on one of the world’s largest oil deposits – but not all oil is created equal. CBC’s Johanna Wagstaffe explains that millions of years of sea burial and oil-eating microbes have turned that reservoir into one of the world’s heaviest, hardest-to-remove crudes.
When asked what influence Canada could have on the US in trade negotiations, Kalutkiewicz said Canada is still very dependent on the US economy – which would make it difficult to back down from the president.
“Canada, I think, will have to focus more on expanding its economic relations with other economies in order to show the US that it is not the only game in town. Otherwise, it may be difficult to gain some strength in these negotiations,” said Kalutkiewicz.
Hampson says Canada can take its money abroad and buy their finished products, such as electric cars from China and agricultural goods from Mexico.
“As a consumer, as a consumer of American goods, we have power and we have options,” Hampson said.
Will CUSMA survive?
Looking beyond oil, the United States said it has many demands that Canada must meet in order to extend CUSMA, and they are not cheap.
US Trade Representative Jamieson Greer told Congress last month that Canada needs to strengthen “market access for US dairy products” – which is a form of supply chain management – and that the Canadian government must deal with the US alcohol boycott.
Greer also said the US would focus on the Online Streaming Act, which brought online platforms such as Netflix, Spotify and YouTube under Canadian broadcasting laws.
The Trump administration has listed some changes it wants in Canada to stay within the Canada-US-Mexico Agreement. The list includes policy changes in energy, more access to dairy markets and bidding for certain government projects, and changes to the Internet Media Act.
That law was brought in to force US web giants to contribute financially to domestic news programming and make Canadian content more readily available on their platforms, which have become ubiquitous as traditional TV, cable and satellite providers shed subscribers.
Laura Dawson, executive director of the Future Borders Coalition, said “it’s hard to say what kind of concessions will be brought to the table at the 11th hour when horse-trading takes place.”
But Dawson warned that concessions are not like a board game: “You’re trading the lives and interests of people in your economy. So you have to do that carefully, very carefully.”
While Dawson thinks a new North American trade deal is unlikely to emerge from these talks, he doesn’t believe “we’re anywhere near that point.” [CUSMA] you will be condemned.”
Kalutkiewicz said some of Trump’s actions — such as the inclusion of CUSMA-compliant goods in some of his bills — show that he believes the North American supply chain is “very important to the competitiveness of the US economy.”
“Rhetoric aside, I feel very optimistic that the structure of CUSMA, the structure of the North American economic relationship, remains strong,” Kalutkiewicz said.
