Securing Canada’s energy future – Part 1

July 7, 2012

By Yuen Pau Woo
Asia Pacific Foundation of Canada
and Roger Gibbins
Canada West Foundation

EDITOR’S NOTE: A recent study released by the Asia Pacific Foundation of Canada and the Canada West Foundation argues that Canada’s approach to energy should be more clearly based on its national interest, not a collection of private interests. It therefore calls for the establishment of a framework that will bring into play the interest of not only the private sector and federal and provincial governments, but also First Nations governments, communities and environmental interests.

VANCOUVER, BC, and CALGARY, AB, Jul 7, 2012/ Troy Media/ – As a medium sized economy dependent on international trade, Canada’s prosperity is inextricably linked to external markets, and the ability to access these markets.

For much of the post-war period, Canadian industry could rely on the United States as the overwhelming source of demand for its commodities, goods, and services. Reliance on the American market was further increased with the signing of the Free Trade Agreement (FTA) in 1988 and the North American Free Trade Agreement (NAFTA) in 1994, which coincided with a more than decade-long expansion of the U.S. economy.

The gravitational pull of the U.S. economy made a sound business case for Canadian companies to focus their attention on the American market. Over the years, the infrastructure of Canada-U.S. trade – including energy, transportation, institutions, people-to-people ties and legal frameworks – has deepened to the point where North-South trade has become the norm and is now largely taken for granted. This decades-long focus of Canadian industry on North American markets has, until recently, meant a general neglect of others.

Government and business leaders now recognize the importance of diversifying Canada’s commercial activities to take advantage of explosive growth in developing countries, and more particularly in the so-called emerging markets. If there was any doubt about the importance of emerging markets, the ‘great recession’ of 2008 underscored the shift in global economic weight away from the west. In the three years following the recession, emerging markets accounted for over 75 per cent of global growth.

Canada has benefited from the rise of emerging markets and was spared a more severe recession in 2009 in part because of robust demand from Asia, especially China, for natural resources (minerals, metals, agricultural, fishery and forestry products). To the extent that some Canadian businesses were already selling into Asia and could meet the growing needs of Asian customers, the switch to a more trans-Pacific focus was relatively easy to accomplish.

However, for many industries in Canada, exporting to Asia is an entirely new activity that requires a fundamental change in mindset, as well as investments in infrastructure, policy frameworks, business development and marketing, and human resources. This is as true for resource industries as it is for manufacturing and services, but it is particularly important for the energy sector, which is so intimately tied to the U.S. market and in which there is virtually no trans-Pacific trade today in either oil or natural gas.

To address this issue, the Asia Pacific Foundation of Canada and the Canada West Foundation established a task force on Canada-Asia energy relations in the fall of 2011. As a group consisting of individuals with backgrounds in public policy, business, aboriginal affairs, academia, economic analysis, and sustainable development, the task force was asked to come up with a framework for understanding the nascent Canada-Asia energy relationship and some ideas on how the relationship could be advanced.

From our perspective, this energy relationship cannot be separated from the broader political, economic, social and cultural relationships between Canada and Asia. As a starting point, we agreed on a number of key propositions that we felt were central to the Canada-Asia energy relationship:

â–  The efficient, responsible and sustainable development of vast natural resource assets in Canada is essential to the growth of the national economy and to continued prosperity for Canadians.

â–  The primary locus of global economic growth for the foreseeable future will be Asia, which has not been the traditional market for Canadian resources, goods and services.

â–  This economic growth in Asia will generate a strong global demand for energy. Canadian energy resources can play a significant role in meeting that demand.

â–  Resources without markets, or without the transportation infrastructure linking resources developments to those markets, have no economic value.

â–  Increased energy trade with Asia needs to benefit all regions of Canada, not just the West.

â–  Canadian resources must be developed responsibly, meeting high environmental standards and satisfying domestic environment priorities, thereby supporting a positive brand image abroad while facilitating international market access. Such development must be better aligned with First Nations’ views of sustainable resource management.

These points lead us to an inescapable conclusion: the full potential of the Canada-Asia energy relationship cannot be realized on a project-by-project, enterprise-by-enterprise basis. Instead, it calls for an over-arching framework for the Canada-Asia energy relationship that involves not only the private sector and federal and provincial governments, but also First Nations governments, community, and environmental interests.

This framework must commit to the diversification of Canada’s energy relationship with Asia to include all of Canada’s energy related assets, including renewable and clean technologies. Furthermore, strong leadership from all governments will be required to establish a framework that benefits all parties, and also embodies a spirit of accommodation. In other words Canada will not be able to seize the opportunities in the Asian market by conducting business as usual.

Yuen Pau Woo is the President and CEO of the Asia Pacific Foundation of Canada and Roger Gibbins is the President and CEO of the Canada West Foundation. To download a complete copy of their report click here.

This backgrounder is FREE to use on your websites or in your publications. However, Troy Media, the Asia Pacific Foundation of Canada and the Canada West Foundation, with links to their web sites, MUST be credited.

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