PRESIDENT OBAMA’S VISIT TO CANADA – SOME CRITICAL BILATERAL ISSUES NEED TO BE HANDLED CAREFULLY BY BOTH SIDES!

President Obama, reverting to the tradition of newly elected US presidents, will be visiting Canada on his first overseas trip. This trip, dubbed essentially a working visit, will have to grapple with some tricky issues which are bound to be on the table.

One of them is the controversial provision that President Obama’s US$800+ billion economic stimulus plan is proposed to contain. The proposed legislation aims to ban foreign iron and steel used in any building project undertaken under the massive stimulus plan - which could potentially cut out a major portion of the Canadian steel industry's $7 billion in annual exports.

If this provision got implemented to the letter it would be severely detrimental for Canada, so Canada is rightly worried. It should be, it is a serious matter coming as it does when the economy is already in recession. Canada views the proposed legislation, and correctly so, as a protectionist measure on part of US.

It was heartening to see that Canada is being proactive in this matter rather than fume and fret. International Trade Minister Stockwell Day did well to speak with US Trade Representative Peter Allgeier at the economic forum in Davos, Switzerland which ended on Feb 1. Later Day told reporters that he was cautiously optimistic that something could be worked out.

Canada has also conveyed to US that this type of protectionism is exactly what helped push the Great Depression forward at the start of the 1930s. On a parallel track Canadian PM Harper said in Ottawa that such measures would see the U.S. renege on its "international obligations" to eliminate barriers to worldwide trade.

It is a good positive strategy. The message has reached US prior to Obama’s planned visit on Feb 19 – that Canada would like this issue to be resolved to mutual benefit. US acknowledged that it had got Canada’s message. US White House Press Secretary Robert Gibbs said on 30th Jan "the administration is reviewing that provision" and acknowledged the concerns on both sides of the U.S.-Canada border.

Another important matter that would need to be discussed and mutually beneficial path forward identified relates to oilsands fronted crude/bitumen supply to US. Oilsands has attracted lot of attention, of late, from environmentalists. As well, President Obama places great importance on protection of environment. But at the same time Canada is the largest supplier of crude to US – crude both from conventional and non-conventional sources. This pitches tarsands in a dichotomous situation.

Other issues that are likely to form part of the conversation between Obama and Harper are: war against terror – Canada’s role in Afghanistan, NAFTA, ailing auto sector, claims to Arctic assets and security of passage to that area, cross-border security, intelligence sharing, global economic reform.

President Obama is obviously briefed on the importance of US-Canada ties – ranging from NORAD to crude oil. Obama’s economic team led by Treasury Secretary Timothy Geithner is putting together US economic recovery package which is expected to be finalised by middle of February. This timeline adds urgency regarding what assumptions the package is going to be predicated on.

If Geithner et al base their package including some protectionist premise (like, the one relating to steel), that certainly will not portend well for both US and Canada. Or, will there be some selective waiver for friends (Canada), or, the package will prefer not to mention such contentious premises at all?

Obama and Geithner would do well to be aware that a very diverse group of leading economists of all ideological stripes met at a preparatory conference for Davos in Dubai in November 2008. The group said in a formal statement that one of their chief tasks is "advocating against the deregulation backlash." An update right before Davos by this same group stressed the importance of "openness to trade" and "competitive markets."

Both Obama and Harper should be cognizant of what someone said in Davos about the economic downward tailspin that we are in: “I tell you we have not turned the corner, we can't see the corner, we don't even know where the corner is." In such a situation creating new protectionist walls, or getting in to some kind of head-butting will be damaging for either parties.

It is, therefore, imperative that US and Canada handle the bilateral issues carefully and with sensitiveness. Political rhetoric sound good from the podiums placed in political rallies but if they are carried to the policy making blueprint without evaluating the various pros and cons, that is opposite of everything that embodies the word ‘prudence’.

In cooperation with Canada there is so much to be gained for US – towards its goal of gaining independence from crude imports from ‘hostile regimes’, war on terror, joint US-Canada defence partnerships and so on. Canada has already offered a bi-nation energy agreement, and also proffered to participate in environment related joint-action plan. Canada is aware of what needs to be done to make tarsands industry more environment friendly, and actions are already being implemented in that direction.

Finally, the current economic crisis is one such which can be ridden out of only through collaborative, combined effort – on a global basis. Such efforts will be rendered severely ineffective if countries resort to raising trade walls. President Obama has mentioned on a number of occasions that US will ‘lead’ again. Surely, raising protectionist measures (e.g., use of US steel only for US projects) will not raise the US to the moral high ground that it seeks to regain in post-Bush era.