Fossils Cheer, Climate Absent as Canada, Mexico, U.S. Reach New Trade Deal
North American fossils were cheering early this week and climate protection was out of the picture as Canada signed on to the United-States-Mexico-Canada Agreement (USMCA), the trade deal formerly known as NAFTA.
While dueling analyses dug into the implications for dairy and international trucking, steel tariffs and auto sales, critics were quick to point out that the agreement makes no mention of climate change. The fossil industry was looking ahead to a big bonanza. And the Council of Canadians was declaring at least one victory, with the elimination of a “proportionality” clause in NAFTA that was seen as a brake on Canada’s ability to rapidly reduce carbon-emitting fossil production and exports to meet its international climate commitments, if/when it ever decides to.
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“With the original NAFTA agreement, we were very worried that it would take away our energy sovereignty,” said CoC trade campaigner Sujata Dey.
Environmental groups “panned the accord,” Grist reports, “arguing it includes ‘corporate giveaways’ for fossil fuel giants, excludes binding agreements on lead pollution, and contains no mention of human-caused global warming.” Even where the new deal appears to improve on the old—in a controversial investor-state dispute resolution process under NAFTA that was seen to favour corporate rights over local environmental regulation—the fossil industry is exempt.
“The new deal limits those rights, with one major exception: U.S. oil and gas companies,” Grist states. “Under the rules, firms that have, or may at some point obtain, government contracts to drill or build infrastructure like pipelines and refineries in Mexico―such as ExxonMobil Corporation―can challenge new environmental safeguards Mexican President-elect Andrés Manuel López Obrador has vowed to erect.”
“It’s like saying, ‘From here on, we’re going to protect the henhouse by keeping all animals away, except for foxes, they’re cool,’” said Ben Beachy, director of the U.S. Sierra Club’s living economy program.
And “that’s not the only giveaway for the oil and gas industry,” Grist notes. “The updated deal, which requires [U.S.] congressional approval [as well as approval by the Canadian parliament and Mexican senate—Ed.], preserves a provision that requires the U.S. government to automatically approve all gas exports to Mexico, despite another rule mandating regulators consider the public interest.”
The deal also “tosses aside a standard set of seven multilateral environmental agreements that undergirded the last four U.S. trade deals. USCMA includes enforcement language taken from just one of the environmental accords, weakens the language from another two, and makes zero mention of the other four.”
“Trump’s trade agreement with Mexico and Canada is a corporate giveaway intended to sharply limit the powers of government to protect people and the planet,” said Doug Norlen, director of economic policy at Friends of the Earth U.S. “This agreement is an attack on our ability to hold Big Oil and Gas accountable for the damage they cause to our communities.”
“We expect that, after Trump is out of office, we’re going to have to work hard to re-regulate,” Sierra Club’s Beachy added. “Even after [he] leaves office, Trump’s NAFTA (revision) could extend his polluting legacy for years.”
National Observer notes that the deal does include references to forests as carbon sinks, “air pollution” and “pollution from ships,” tracking air quality data, and cooperation on ozone-depleting substances.
But small wonder that U.S. fossils “urge Congress to approve” the USMCA, in the words of the American Petroleum Institute’s Mike Summers. “Retaining a trade agreement for North America will help ensure the U.S. energy revolution continues into the future.”
The Canadian fossil lobby was just as pleased with the outcome of the eleventh-hour negotiations leading up to the USMCA. “The uncertainty in whether NAFTA would exist was definitely having an impact on the market,” Nick Schultz, vice-president of pipeline regulations at the Canadian Association of Petroleum Producers (CAPP), told CBC. “It is, of course, not the only issue we have with competitiveness and investors, but [a trade agreement] is an important step.”
“This is very upbeat news,” Bank of Montreal deputy chief economist Michael Gregory told Bloomberg. “There was a lot of NAFTA uncertainty weighing on economy, stocks, with equities underperforming.” But between the USMCA deal and word of a final investment decision on the C$40-billion LNG Canada megaproject in British Columbia, Gregory foresaw an increase in economic activity.
“Canadian assets may finally begin to feel some love,” Bloomberg writes. “The flurry of developments on trade and energy lift an overhang that’s held back business investment and growth in the world’s 11th biggest economy.”
CAPP’s Schultz said the agreement appears to have addressed a “border bottleneck” that was costing Canadian fossil exporters $50 to $60 million per year, CBC reports. “Under the old NAFTA rules, oil and gas producers had to prove the origin of their product right back to the wellhead if they were to be exempt from duty at the border.” But that was easier said than done with the light oil diluent that fossils must add to tar sands/oil sands bitumen to get it to flow through a pipeline.
“Before Canadian oil travels, it comes from different producers and is mixed in tanks and traded multiple times,” Schultz explained. While the new USMCA allows a proportion of diluent in the exported product with no fee for exporters, he said it’s too soon to say whether they’ll still have to fill out extensive paperwork for their product.
After 14 months of awkward, often tortuous negotiations, Donald Trump predictably bragged about the deal in grandiose terms. But some analysts cast it as a relatively small adaptation of the original NAFTA.
“After spending a year and a half alienating our friends, punishing our farmers and manufacturers with devastating tariffs and counter-tariffs, and fracturing the hard-won alliance we had built to isolate and pressure China, we finally got a new trade deal—and a ‘new’ trade strategy,” writes Washington Post columnist Catherine Rampell. “Yet somehow, they look an awful lot like the old ones.”
Perhaps most notable, though, was the permalink for Rampell’s post, which would have been unchanged after a desk editor adjusted what might have been her original headline for the story: “trump-didnt-blow-up-our-trade-system-whoop-de-doo”.