Ontario’s Municipal Pension Fund Start-Up Wiz on Keeping Canada Competitive

The Globe and Mail talks with John Ruffolo, chief executive officer for the Ontario Municipal Employees Retirement System (OMERS) venture capital arm.  Starting in 2011, OMERS started direct start-up capital investing—an “unusual” and “aggressive march” for a pension fund to take.

The topic:  How Canada can keep competing on the global stage.

This is an excellent interview, shows how capital and manufacturing growth and government pensions interact, and gives Canadian policy makers some solid advice. 

Two big-take aways:  (1) Canada may soon be making a positive, “game-changing” immigration shift, and (2) Canada needs to be more like Sweden and Israel, less like Germany: make strategic bests in manufacturing, and don’t try to compete in all fields.

Naturally, the question is in the details:  How do you adopt a strategic manufacturing plan that also protects one-self from manufacturing sector up and downs.  At least Canada has energy to lean on for the foreseeable future.

From the must-read interview: 

Is Canada indeed lacking innovation to become competitive, as some critics say?

I don’t think so. I think that purely from an innovation engineering part of development, I would put Canada up against anywhere in the world. When I’m down in the [Silicon] Valley, they talk about the Canadian engineers, particularly from Waterloo, [Ont]. I was stunned. This is from the top [venture capital] investors in the world.

Innovation isn’t the issue. The issue really is, how do we get more of these folks building companies, to get them the support to be successful. That support includes capital, mentorship, government support. Every country is trying to compete against Silicon Valley.

Right now, I would say the issue for Canadian competitiveness is that the days of Canada thinking we can compete in all industries, at all levels, are over.

With globalization, Canada is going to have to make very strategic choices of where it’s going to focus and innovative industries is one of those. It also means that you’re also not going to be able to do some things that traditionally Canada has supported. And that’s part of the problem [with convincing governments]. It’s very anti-votes. The voters right now tend to be in traditional industries.

…

What should Canada do in terms of public policy to create more and better startups?

…

But the bigger one they’re working on – and I think it’s is going to be far more effective – is looking at immigration policy. They’re working on two immigration policies that I think could be game-changing. One is called a startup visa, and the other one is called the immigration investor program.

Both are designed to get foreign capital into Canadian technology companies and to get more foreign talent here working in Canadian technology companies. One of Canada’s assets is its diversity of people. Now this to me is really smart. … Talent is the No. 1 issue for companies that are growing in Canada. We asked all of our portfolio companies what is the No. 1 issue that you want help from us on. And it was technical engineering talent. Every one. This is going to be key to our future.

…

What countries are getting it right in terms of fostering innovation and global competitiveness?

Germany is one, but look at Israel. For a country that has such a small population, they are very focused. They are a big startup nation. They are strong in high technology, related to the military and defence. In 1989, when the wall fell, millions of Russian Jews, extremely well educated in the sciences, moved to Israel and it created the most massive influx of brain power in a very narrow area of their history. … A number of venture capital firms, largely U.S.-based, were attracted to come to Israel to provide the fuel necessary for these companies to grow.

You see it with advanced manufacturing from Germany, Israel in innovation and Sweden in telecommunications. Sweden very narrowly focused in on the wireless industry. Countries that don’t have the requisite population have no choice but to do that. If you are Brazil, China and the United States, do them all.

TPP Backup Plan? Zoellick, Looking to NAFTA's Success, Pushes an Americas U.S. Trade Agenda for the United State

Zoellick to policy-makers:  "North America can become a new raising power" if the U.S. adopts the right trade approach.  

Former World Bank President Robert Zoellick (and, most recently, head Mitt Romney's national security transition team) pushes an Americas trading block to secure America’s future economic growth, looking to build on the extensive ties between the United States, Canada, and Mexico as a starting block to push closer U.S. trade ties to Brazil.

Could this be Zoellick pushing a back-up plan for the White House should Trans-Pacific Partnership talks falter or delay?

And, before we delve into a condensed summary of the op-ed, could Zoellick's "Americas trade vision" be merged with the in-sourcing phenomenon reported so superbly in Charles Fishman's Atlantic article The Insourcing Boom?

From Zoellick's WaPo editorial:

This is an excellent time to deepen ties. The NAFTA countries should invest in a North American community that would make each stronger at home and around the world. For the United States, a more prosperous, growing, populous, integrated, energy-secure and democratic continental base would enhance private-sector possibilities and national power.

…

North America should work to better connect the trade, sourcing and supply chains in the Americas — and act with hemispheric partners on the next generation of development issues: investment, infrastructure, education, energy, the environment, service sectors, business facilitation, or even democracy and security. 

These Latin American partners can also help shape ideas around the world during a time of great fluidity. Chile, Peru, Colombia and Mexico — all U.S. FTA partners—have created a new Pacific group that is advancing policies for open economies. They can be U.S. friends in a changing Asia-Pacific system, too.

U.S. ties with Brazil are not part of this FTA framework. Yet the current governors of Brazil’s states seem inclined to pursue more interests with the United States, including on energy, inclusive development and democracy. By combining activities with Brazil and partnerships across the hemisphere, the United States could set the stage for economic and security ties among all American democracies.

As the president looks west across the Pacific and is pulled to the Mideast, he also needs a fresh north-south vision. North America can become a new rising power. And the foundation of the future global system can be “Made in the Americas.”

Evening News Wrap

By Keith Edmund White, Editor-in-Chief

So, yes, this is a gross simplification of a BIG BIG week in news.  But we got news at the belly-aches in both nations' legal professions, tax-carping, election-updates, trade, top Canadian fiction, and more!

Canada-U.S. News

Life, death, and taxes…and Extraterritorial Application of U.S. Law in Canada.  Canada and the United States are in tax treaty talks, and it seems like Canadian banks are going to have to deal with the administrative burden of checking if their clients are dual citizens.  The lurking issue: dual citizens in Canada avoiding U.S. taxes.

Canada’s Late Entry to the TPP…Not a Huge Worry, But There’s Still Reason to Worry.  While slamming subsidies U.S. states use to lure companies, and how they hurt Canadian merchants, Peter Clark—in this detailed review of the Trans-Pacific Partnership trade talks, it’s impact on Canada, and the global economy—says (1) Canada doesn’t have much to fear with it’s late arrival to the TPP and (2) concludes:

“It’s far too early to either dismiss TPP as a useless exercise or embrace it as a cure for what ails the global economy. While we see problems now, they can be fixed, with flexibility and compromise. If the TPP is a wine, it clearly needs some ageing before we can properly pass verdict on it quality.”

Canada News

Bye, Bye By-Elections!  Mark Abley, at The Gazette, talks on Monday’s by-elections in Canada, arguing that while Canada’s Conservative lost ground, a united Left is the only way to see a change in Ottawa.  Monday’s by-election results in brief: Conservatives held on to seats in Calgary-Centre and Durham, with a NDP-Green battle in Victoria going the NDP’s ways.

CETA Imbalance?  So What?  Paul Wells, taking note of imbalance concerns regarding Canada-EU trade talks, defends progress on the deal.  And at the National Post, Andrew Coyne gives his thoughts on the “logic of trade negotiations” in general:  “The whole situation is an absurdity.  It’s like a hostage negotiation in which both sides have guns to their own head.”

Moving Out:  Financial Post on the rough road ahead for Bank of Canada governor Mark Carney’s coming move to England; and the Globe and Mail on the importance of vetting cabinet officials and the resignation of Quebec’s environmental minister Daniel Breton. Added-Bonus:  Stephen Gordon at Macleans  on how much credit Carney should get from Canada’s robust post-financial crisis economic performance:

“What I take away from this is that we could have done much worse, but I don’t think we could have done much better. Stephen Harper and Mark Carney were dealt good hands and they played them well.”

Must-Read List.  The Globe and Mail picks the top 23 Canadian fiction books of the year.

Legal News

Going to (U.S.) Law School Worth It!  Lawrence E. Mitchell, Dean at the Case Western University School of Law, defends going to law school in the NYTimes:  

"We could do things better, and every law school with which I’m familiar is looking to address its problems. In the meantime, the one-sided analysis is inflicting significant damage, not only on law schools but also on a society that may well soon find itself bereft of its best and brightest lawyers."

Canada’s Lawyers in Crisis?  The Globe and Mail reports on the state of Ontario’s legal profession: “…it was clear that some of the country’s top legal minds believe their profession is, in effect broken.”

BTB & Facilitating Cross-Border Trade: Two Steps Forward, One Step Back?

By Keith Edmund White, Editor-in-Chief

Good news:  The Beyond the Border Initiative (BTB) and the Regulatory Cooperation Council (RCC) make the news! 

Bad news:  Facilitating cross-border trade and securing the border is tough work.

The Financial Post's thoughtful piece lays out the following Canada-U.S. border economic hurdles:

• Regulatory symmetry > customs issues when it comes to barriers for small to medium sized businesses engaged in cross-border trade.  Why's this important?  The success of the Regulatory Cooperation Council, a two-year project to bring greater symmetry along Canada-U.S. regulatory standards, means the success of businesses on both sides of the border.      
• Attempts to cut-down on border custom wait times shifts compliance issues to shipping, favoring bigger companies who (a) have greater awareness of fast-track programs and (b) possess the advanced tax remittance systems these programs require.

From the November 27th article by Denise Deveau:

The Beyond the Border initiative signed between Canada and the U.S. last year, has as many proponents as it does detractors. While most industry observers support the spirit behind the initiative, when it comes to the transfer of goods across the border, there are noticeable gaps between theory and practical application.

...

Because customs has pushed back border requirement compliance to the shippers, the pressure is actually moving further back into the supply chain, he adds. “If they don’t make an investment in systems that comply, then it’s too bad. Customs would argue, why should we worry about releasing your goods if you don’t make the data available to us?”

...

To date, only larger companies have been able to achieve the status because they are the only ones with the sophisticated tax remittance systems required to qualify. “Beyond the Border is supposed to make it easier for anyone to use it,” Ms. Wagner explains. “But there is a lack of awareness on the part of importers that programs are available and not limited to large entities.”

The lack of awareness and slow uptake will make it increasingly difficult for non-“trusted trader” players to compete, she says. “For Beyond the Border to work, we need that uptake. Otherwise it’s too much investment for too little payoff for businesses.”

...

The data argument may be the most high-profile topic to date, but according to Joy Nott, president and CEO of I.E. Canada (Canadian Association of Importers and Exporters) in Toronto, there’s a much bigger one that dwarfs everything else: harmonizing the overall regulatory environment between Canada and the U.S. 

“That’s far bigger than the data elements that customs wants. In fact it has nothing to do with data, and everything to do with standards.”

Are Canada's Economic Fortunes Turning? Putting Q3 Numbers in (Some) Economic & Policy Context

By Keith Edmund White, Editor-in-Chief

iPolitics and WSJ offer an illuminating one-two punch on the Canadian economy, both--in different ways--putting Canada's not-so-thrilling economic numbers in context. The big economic question:  Is Canada's energy-heavy and (now fading) housing market boom finally weighing down Canada's phenomenal post-08 financial crisis economic performance?  Well, let's start with the snap numbers, and then review the WSJ take.  And when it comes to the policy impact of this news, particularly Canada's relationship with the United States, CBC's report on a confidential Canadian foreign policy report gives some helpful input.  So, with introductions out of the way, let's warm-up that cooling coffee with a Canadian economic web round-up!

iPolitics reports on Canadian third quarter 2012 blues, and America's economic uptick:

“Canada’s economy in the third quarter succumbed to a litany of lapses,” says CIBC World Markets economist Emanuella Enenajor, citing government austerity and weakness in trade, energy shipments, housing, and business investment. CIBC projects the quarterly economic report card Friday will reveal growth slowed dramatically to an anemic annual pace of just 0.5 per cent from 1.9 per cent in the second quarter.

On the other hand, America is enjoying what has typically been Canadian luck in the years following the 2008 financial crisis:

In contrast to Canada, the US economy is picking up steam, with Scotia Capital economists projecting growth third quarter growth there will be upwardly revised Thursday to a relatively robust 2.7 per cent annual pace from the initial 2.0 per cent estimate.

Oh, and let's not ask about the EU:

“In terms of the global third quarter growth scorecard, it looks like the US has picked up some momentum, Canada is slowing down and the European Union is in outright recession,” says Scotia Capital economist Derek Holt. 

So, should Harper be breathing a deep sigh of relief that Canada's electoral system has bought him three plus years to ride out the storm? Well, maybe.

From WSJ:

Most economists say Canada can ride out the storm. But this trade-dependent nation—far less scarred by the recession than its larger neighbor to the south—is suddenly looking vulnerable, just as a number of indicators suggest brighter days ahead for the U.S.

While the recession laid global peers low, Canada's strong bank balance sheets funded continued consumer spending during the recovery. Years of that easy credit in turn helped give rise to a housing boom that has underpinned an economy already benefiting from another surge—in commodity prices.

Today, global commodity prices are weakening, and home prices in some of Canada's hottest markets are leveling off or falling. Canadian households, meanwhile, are as leveraged as they have ever been after years of extremely low interest rates. Since September 2010, the Canadian central bank's benchmark interest rate has been at 1%.

It's no surprise then that Canadian policy makers are pushing increased trade as a way to prop up Canada's declining economic performance.  The solution: expand Canadian access to emerging markets, particularly Asia.  From last week's CBC News report showing revealing a "confidential government document" that urges Canada is expand trading opportunities, even if this means pursuing economic deals with countries "where political interests or values may not align":

A confidential government document obtained by CBC News warns the Harper government has been slow to open new markets in Asia, leaving Canada firmly tied to the troubled U.S. economy for a long time to come.

The document prepared by Foreign Affairs and dated Sept. 6 is a draft of a highly classified new "Canadian foreign policy plan" the Conservative government has been preparing for more than a year.

The draft briefing paper for the federal cabinet states: "We need to be frank with ourselves — our influence and credibility with some of these new and emerging powers is not as strong as it needs to be and could be.

"Canada's record over past decades has been to arrive late in some key emerging markets. We cannot do so in the future."

The Harper government itself took the slow road to China.

So, good news:  An American recovery could help lift Canada, both in manufacturing and likely increase in energy demand.  Downside, a slopping EU isn't going to help matters on either front, and something should be done about that housing trouble--beyond the superficially appealing solution of privatizing Canada's Housing and Mortgage Corporation. 

Canada’s Asian Trade Strategy & the Trans-Pacific Partnership

By Thomas H. Au, Staff Writer

Critics concerned that key Canadian interests in intellectual property, pharmaceuticals and agriculture were impaired by ‘sitting out’ of Round 14 of the Trans-Pacific Partnership (TPP) are focused on a relatively insignificant scene within a much larger mural. Rather, the issue is whether the TPP compliments other Canada trade agreements, or if it conflicts with the function and purpose of other bilateral agreements. Only then can we determine whether the TPP is part of a cohesive, beneficial trade strategy in Asia, or a fractured approach that will create confusion for Canadian businesses operating overseas.

First, this piece outlines the calls for a more aggressive Canadian trade strategy in Asia. Second, it discusses the implications of Canada’s lacking a true seat at the TPP negotiating table in Round 14. Third, it addresses other potential bilateral trade agreements with China and Japan. It concludes that the TPP functions as a baseline to expand trade, upon which other more specific trade agreements can be built, such as those with Japan or China.

Calling for a More Aggressive Asian Trade Strategy

In the last six months, there have been increasing calls for Prime Minister Harper to adopt a more aggressive Canadian trade strategy in Asia.[i] The underlying impetus appears to be a perception that “Canada must negotiate solid, ambitious trade agreements...to help replace declining trade with the USA.”[ii] However, individual initiatives, including the TPP and bilateral trade agreements with China and Japan have received harsh criticism from political opponents[iii] and interest groups.[iv] These mixed messages create a challenging political environment where leaders can be faced with what appears to a “no-win” situation in domestic Canadian politics.

Looking Back at TPP Round 14 and Forward to TPP Round 15

Initially, Canada’s so-called “absence” raised the important question of whether it will “lose” by sitting out Round.[v] At the heart of this issue is Canada’s agreement to abide by the texts that have already been negotiated and agreed upon by the nine current TPP members.[vi] However, this absence has not harmed Canadian interests on key issues including intellectual property, pharmaceuticals, and agriculture.

Canada’s “absence” is simply explained by the fact that each negotiating country must first ratify Canada’s participation through their own internal, domestic processes. This process was only completed on October 9, 2012.[vii] Now that Canada has formally joined negotiations, the key is to look forward towards Canadian goals and aspirations for what the TPP should look like in the end.

TPP: A “High Standard” Trade Agreement In Canada’s Interests? 

Some Canadians have raised concerns that not only is the TPP mostly beneficial to the U.S., but that the TPP is redundant in light of other Canadian trade agreements.

First, many consider the U.S. to be the driving force behind the TPP’s most restrictive obligations.[viii] Of the nine countries currently negotiating the TPP, the United States has some of the ‘highest’ levels of regulation across a number of economic sectors. Likewise, the United States is well known for viewing the TPP as a vehicle for a “state-of-the-art” or “high standard” trade agreement.[ix] While not confirmable, the inference that could be drawn is that the United States may attempt to use the TPP either to develop unique “high standards” (think not of NAFTA-2, but more likely something akin to a next generation Paris[x] or Berne Convention[xi] or to conform the rights and obligations available in other nations with those available under existing U.S. law. This has created political friction in Canada. Critics are concerned that participating in a “high standard” agreement means radical changes in Canadian policies, ranging from “drugs [pharmaceuticals], copyright, [to] environmental and public health rules.”[xii]

Second, some dispute that the TPP actually adds any benefit that Canada does not already receive through NAFTA or other bilateral trade agreements (consider Chile and Peru).[xiii] Simply, NAFTA already includes the United States and Mexico, which “make up the lion’s share of the TPP” in terms of market size and trading power.[xiv] This leads to a legitimate question: “How much more free access can yet another [multilateral] free trade agreement provide?[xv]

While the draft texts of the TPP are not public, official statements from the United States do not suggest that any extensive agreements were reached on the issues most pressing for Canadians. For instance, the United States Trade Representative’s press release on the Leesburg Round noted “progress” on issues including market access, customs, rules of origin, technical barriers to trade, sanitary and phytosanitary standards, cross border services, telecommunications and government procurement.[xvi] However, the release only reported a “continued focus” on intellectual property issues.[xvii]

If more extensive agreements had been reached on intellectual property rights, it is likely that these issues would have been listed in the first “progress” or “mov[ing] forward” statements. This suggests that no major agreements were reached regarding intellectual property rights. On the other hand, it is not clear from this statement what types of agreements where reached regarding key Canadian agricultural products, such as dairy, grain, and (loosely defined) lumber. Again, while pharmaceuticals were not directly mentioned, it is unlikely that any significant progress was made on these issues. However, pharmaceutical issues are frequently addressed as a component of intellectual property rights, or even investment or manufacturing (depending on how one wishes to address these issues). This should relieve Canadian concerns, indicating that Canada still has time to make its positions clear and exert significant influence over the outcome of the TPP.

TPP Negotiations: Multilateral, Bilateral, or Other? 

On September 24, 2012, the Office of the USTR held a hearing regarding Canada’s entry into TPP negotiations.[xviii] While seen as a forum for discussing specific interests and objectives,[xix] what is peculiar about the hearing is the official silence from the Canadian government. In fact--during, immediately prior to, and immediately after the 14th Round (as well as the USTR’s public hearing on Canada’s entry into the TPP), there were no official news releases on the subject from Prime Minister Stephen Harper, Foreign Affairs and International Trade Canada (Canadian Ministry), or the Embassy of Canada in Washington, D.C. One would think that participation or comment on these proceedings would give Canada the opportunity to publically advocate for its most important values (for both domestic and international audiences) as well as exert pressure just before Round 15.

In fact, on the eve of Canada’s official joining to the TPP, Ed Fast, the Canadian Minister of International Trade and Minister for the Asia-Pacific Gateway only released a short statement, remarking that “[o]pening new markets and increasing Canadian exports to fast-growing markets throughout the Asia-Pacific region is a key part of our government’s plan to create jobs, growth and long-term prosperity.”[xx]

Canadian Bilateral Trade Agreements with China and Japan 

In Canada’s view, Japan and China are two markets that have remained largely untapped. In 2011, the Canadian-Chinese trade relationship was valued at approximately $46.8 to $65.6 billion USD.[xxi] Similarly, a joint study concluded that a bilateral free trade agreement between Canada and Japan could add $4.4 to $4.9 billion to Japan’s GDP and $3.8 to $9.0 billion to Canada’s GDP.[xxii] While Canada has had a tepid response to Chinese calls to begin a bilateral trade negotiation,[xxiii] Canada and Japan have announced that their first round of negotiations in support of a bilateral trade agreement will commence on Nov. 26, 2012.[xxiv]

---

[i]Don Campbell, Paul Evans & Pierre Lortie, A Coherent Strategy Towards Asia Needed (Sept. 12, 2012), http://www.asiapacific.ca/editorials/canada-asia-viewpoints/editorials/coherent-canadian-strategy-towards-asia-needed.

[ii] Peter Clark, TPP Negotiations Present Far More Questions Than Answer, iPolitics (Oct. 12, 2012) http://www.ipolitics.ca/2012/10/12/peter-clark-tpp-negotiations-present-far-more-questions-than-answers/.

[iii] CTVNews Video, Opposition Grills Harper Over China-Canada Trade Deal,

http://www.theglobeandmail.com/news/news-video/video-opposition-grills-harper-over-china-canada-trade-deal/article4796558/.

[iv] Heather Scoffield, Investment Deal with China Would Leave Canada a Resource Colony: Opponents, Canadian Business (Oct. 30, 2012), http://www.canadianbusiness.com/article/104651--investment-deal-with-china-would-leave-canada-a-resource-colony-opponents; Sheila Harrington, Trade Agreements Costly for Taxpayers, Canada.com (Nov. 2, 2012), http://www.canada.com/Trade+agreements+costly+taxpayers/7487585/story.html.

[v] See, e.g., Inside U.S. Trade, Canada, Mexico To Join TPP Talks In October After Leesburg Round, World Trade Online, August 31, 2012, available at http://insidetrade.com/Inside-Trade-General/Public-Content-World-Trade-Online/canada-mexico-to-join-tpp-talks-in-october-after-leesburg-round/menu-id-896.html.

[vi] CBC News, What Is the Trans-Pacific Partnership? CBC News World, June 20, 2012, available at http://www.cbc.ca/news/world/story/2012/06/20/f-trans-pacific-partnership-explained.html.

[vii] Press Release, Honourable Ed Fast & Foreign Affairs and International Trade Canada (Oct. 9, 2012) available at http://www.international.gc.ca/media_commerce/comm/newscommuniques/2012/10/
09a.aspx?view=d.

[viii] Peter Clark, TPP Negotiations Present Far More Questions Than Answer, iPolitics (Oct. 12, 2012) http://www.ipolitics.ca/2012/10/12/peter-clark-tpp-negotiations-present-far-more-questions-than-answers/ (“The TPP could result in extra-territorial application of U.S. laws, particularly in the Intellectual Property area including criminalization of non-commercial infringement.”).

[ix] See, e.g., USTR, FACT SHEET: The United States in the Trans-Pacific Partnership: Increasing American Exports, Supporting American Jobs, June 19, 2012, available at http://www.ustr.gov/about-us/press-office/fact-sheets/2012/june/us-tpp-increasing-american-exports-supporting-american-jobs; see generally, Banyan, Parners and Rivals, Another Ambitions Trade Agreement Gets Bogged Down, Sept. 22, 2012, http://www.economist.com/node/21563292.
[x] World Intellectual Property Organization, Summary of the Paris Convention for the Protection of Industrial Property (1883), WIPO.int, http://www.wipo.int/treaties/en/ip/paris/summary_paris.html (last visited Nov. 13, 2012). 

[xi] World Intellectual Property Organization, Summary of the Berne Convention for the Protection of Literary and Artistic Works (1886), WIPO.int http://www.wipo.int/treaties/en/ip/berne/summary_berne.html (last visited Nov. 13, 2012).

[xii] Brent Patterson, NEWS: Council Critiques Canada’s Entry into the Trans Pacific Partnership Talks, Council of Canadians, June 20, 2012, available at http://canadians.org/blog/?p=15828; but see UPS, Canada Using Global Trade to Grow Economy, Says UPS COO (June 19, 2012) available at http://pressroom.ups.com/Press+Releases/Archive/2012/Q2/ci.Canada+Using+Global+Trade+to+Grow+Economy,+Says+UPS+COO.print.

[xiii] John Hancock, The Wrong Trade Agreement, Canadian Int’l Council, June 21, 2012, available at http://www.opencanada.org/features/blogs/roundtable/the-wrong-trade-agreement/.

[xiv] Id.

[xv] Id.

[xvi] USTR, Progress Continues in Trans-Pacific Partnership Talks, USTR.gov, Sept. 15, 2012, available at http://www.ustr.gov/node/7751 (emphasis added).

[xvii] Id.

[xviii] USTR, USTR Holds Public Hearing on Canada and the Trans-Pacific Partnership, USTR.gov, Sept. 24, 2012, available at http://www.ustr.gov/about-us/press-office/press-releases/2012/september/USTR-hearing-Canada-TPP.

[xix] See, e.g., John Kelly, Clay Hough Testifies on Canada Joining TPP Talks, IDFA.org, Sept. 26, 2012, http://www.idfa.org/key-issues/category/global-markets/details/7689/.

[xx] Press Release, Canada Formally Joins Trans-Pacific Partnership, Foreign Affairs & International Trade Canada (Oct. 9, 2012), http://www.international.gc.ca/media_commerce/comm/news-communiques/2012/10/09a.aspx?view=d.

[xxi] Economic Partnership Working Group, Canada-Chinese Economic Complementaries Study. 3.4.1, Foreign Affairs & International Trade Canada (Oct. 29, 2012), http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/china-chine/study-comp-etude.aspx?view=d#cn-tphp.

[xxii] Randall Palmer, Canada, Japan to Start Trade Talks Next Month, Reuters (Oct. 29, 2012), http://ca.reuters.com/article/domesticNews/idCABRE89S19320121029.

[xxiii] Paul Vieira, Canada Trade Min: Committed to Deeping Trade/Investment Ties with Canada, WSJ (Oct. 1, 2012), http://online.wsj.com/article/BT-CO-20121001-708453.html.

[xxiv] Plamer, supra note 20. 

Canada’s Severing Ties with Iran: A Counter-Terrorism Maneuver?

By Hilarie Henry, Staff Writer

Was Canada giving Iran’s Canadian embassy the pink-slip and pulling the plug on its own Tehran embassy a smart move?  CUSLI-Nexus staff writer Hilarie Henry explores how Canada’s diplomatic severing with Iran follows Canadian counter-terrorism strategy, didn’t cost Canada much, and may just be a template for other nations to encourage Iran to change course when it comes to its suspected terrorism ties and alleged desire to produce nuclear weapons. 

On Friday, September 7, Canada’s Foreign Affairs Minister, John Baird, announced that Canada closed its embassy in Tehran and had given Iranian diplomats in Canada five days to leave.  Canada also listed Iran as a state sponsor of terrorism under the Justice for Victims of Terrorism Act, allowing Canadians affected by Iran-supported terrorism to sue for damages.  In doing so, Baird claimed that Iran is the world’s “most significant threat to global peace and security.”  In addition, he listed a slew of reasons for the closings.  Among these reasons included Iran’s: (a) lack of safety concerns for Canada’s diplomats, epitomized during an attack last November by a crowd on the British Embassy in Tehran; (b) “blatant disregard for the Vienna Convention and its guarantee of protection for diplomatic personnel;” (c) providing arms to the Assad regime in Syria; (d) assistance to terrorist groups; (e) noncompliance with United Nations resolutions concerning its nuclear program; (f) appalling human rights record; (g) and threatening behavior towards Israel, such as engaging in racist anti-Semitic rhetoric and inciting genocide.  This entry will examine whether the embassy closings were in line with Canada’s newly adopted counter-terrorism strategies. 

Overall, Canada’s counter-terrorism approach has focused on risk pre-emption by “allowing risks to be dealt with on . . . an a priori (deterrence) basis rather than . . . a post facto (firefighting) basis.”  On April 27, 2004, Canada adopted a new anti-terrorism strategy with its Securing an Open Society: Canada’s National Security Policy.  This policy places an emphasis on “public safety,” in order to de-politicize its anti-terrorism efforts.  Under the “International Security” heading, the Policy states that, “Canada will continue to play an important role in countering international terrorism, preventing the proliferation of weapons of mass destruction, and defusing key intra- and interstate conflicts.”  In addition, Canada’s International Policy Statement (April 2005) helped to further criminalize and de-politicize Canada’s anti-terrorism efforts by emphasizing that “within the broader context of the Government’s counterterrorism strategy, Foreign Affairs makes a unique contribution.” 

Then on February 9, 2012, Canada launched its Building Resilience Against Terrorism: Canada’s Counter-Terrorism Strategy.  This Strategy’s aim is “to counter domestic and international terrorism in order to protect Canada, Canadians and Canadian interests” through four mutually reinforcing elements: prevention, detection, denials, and responding.  Prevention focuses on the “factors . . . motivat[ing] individuals to engage in terrorist activities.”  Detection emphasizes the identification of terrorists and their plans through intelligence operations and possessing a “solid understanding of the changing threat environment.”  Canada’s goal is to deny terrorists any opportunities by fixing areas of vulnerability and “aggressively intervening in terrorist plan[s] . . . making Canadian interests a more difficult target for would-be terrorists.”  Lastly, in the event of a terrorist attack, Canada wants to have a rapid and organized response that will reduce the effects of such an attack.

Canada now finds taking a firm stance against terrorism and nuclear weapons so serious that it is willing to risk the following consequences.  In particular, by severing all diplomatic ties with Iran, Canada will find it difficult to gather intelligence and monitor Iran’s increased uranium production.  Yet some argue that the closure will not make much of a difference in these areas. They assert that Canada’s embassy was already understaffed at eight people. Therefore, the embassy already could only provide consular support, little effective diplomacy, and minimal intelligence gathering.  While this might be true, it is hard to argue that a small embassy is worse than no embassy at all.  Doug Saunders, Chief of the London-Based European Bureau of the Globe and Mail explained that, “Closing an embassy is rarely done even in moments of hostility.  By its very nature it prevents the possibility of further relations with the country in question, good or bad, influential or ineffective . . . once you’ve pulled the plug, you’re out of the game.”  Whereas, Munk School of Global Affairs director Janice Stein supports “Canada’s firm stand against Iran,” arguing that “as this crisis [between Canada and Iran] deepens and as time begins to move on the nuclear clock, signaling intentions very clearly and firmly at this point is . . . a good strategy.” 

Another cost of the embassy closure Canada seems prepared to endure in order to prevent terrorist attacks on Canadian interests, is the abandonment of its citizens in Iran.  Namely, many Canadians are currently caught up in the Iranian justice system, three of whom are currently on death row.  These people have been directed to contact the embassy in Ankara, Turkey.  The embassy closure will inevitably cause hardships for Canadian citizens in Iran.

While Canada could have criticized Iran through other means, like the UN, summit meetings, or bilateral relations, one cannot argue that Canada acted consistently with its terrorism policies. The closing of the Canadian embassy in Iran delivers a strong message of disapproval toward states aiding terrorists and constructing nuclear weapons against UN stipulations.  Thus, Canada’s decision is in line with the National Security Policy and Building Resilience Against Terrorism Counter-Terrorism Strategy.  With the deteriorating relationship between Canada and Iran, and Iran’s lack of safety measures for embassy personnel, Canada’s decision to close up shop is a pre-emptive act to stave off risks to its civilian embassy employees.  This adeptly follows Canada’s “public safety” and pre-emptive counter-terrorism strategy, placing it ahead of the curve, rather than being forced to respond to an attack against its diplomats after the fact.

Canada’s demonstrated willingness to aggressively crack down on those supporting terrorism through its foreign affairs channels by closing the two embassies has given muscle to its counter-terrorism strategy.  Doing so conveys in concrete terms that, “building resilience against terrorism is a priority for [Canada’s] government.”  On a larger scheme, if other states follow in Canada’s diplomatic/counter-terrorism footsteps, perhaps Iran will be forced to deter from its alleged terrorist-supporting and nuclear bomb-building ways.

Alberta Conservative Party Soul-Searching

By Keith Edmund White
Editor-in-Chief

A quick news-blurb and short primer on the fascinating party politics of Canada, which should stir the interests of U.S. political watchers--not to mention political comparativists.

The National Post reports on a Alberta Conservative Party motion to strip federal MPs of automatic voting privileges at provincial party meetings.

Why the intra-party tension? Well, in Alberta, while the Progressive Conservatives still run the Legislative Assembly, the official opposition is the Wildrose Alliance Party. And what does the charismatic leader of the Wildrose Party have to say about the Progressive Conservative Party:

[Danielle] Smith said the motion on federal Tory voting privileges is “reflecting the reality that there a lot of federal Conservative MPs who are conflicted about which party is the true voice of conservatism (in Alberta).”  [Source:  The National Post]

Mount Royal University professor Duane Bratt explains the distance between the federal Progressive Conservative Party, which now leads Canada's national government under Prime Minister Harper, and the provincial Progressive Conservative Progress of Alberta, which still leads the right-leaning province, but with some significant heartburn:

"So my sense is that a majority of Albertans, perhaps even a larger majority of Albertans, don't like the policies that Wildrose is promising, but it doesn't matter, because they want to throw the Conservatives out of office and they have a nice, likable, smart woman leading their party." [Source:  CBC News]

Alberta Pushes Toward Single Energy Regulator: Proposal Overview and Concerns

By Keith Edmund White

Editor-in-Chief

Single regulator: Smart, efficient government or sly accountability circumvention?  Short answer:  Time will tell.

Alberta Proposed a Single Regulator:  Mondaq Overview

Bennett Jones LLP offers a fantastic overview of the proposed October legislation to create single Alberta legislator.  From Shawn M. Munro and Bradley S. Gilmour’s Mondaq article:

Key aspects of the current regulatory regime will remain in place, with the primary change being the oversight and administration by a single body of most regulatory aspects associated with the life-cycle of energy resource activities. For example, existing authorization and approvals processes will be similar but will in many cases require only one application; hearings will still be used in the case of objections to energy resources activities; and such activities requiring approval prior to the establishment of the Regulator will continue to require approval under the new regime.4 There are, however, numerous other important changes proposed in REDA. The specific circumstances under which hearings will be held, timing and processes involved, cost awards, and other procedural matters will be dictated by rules and regulations yet to be released. At this time, however, there are a number of important proposed changes evident in REDA in addition to the inclusion of specified enactments like EPEA, the PLA and the WA in relation to energy resources and energy resource activities.

…

Changes to Enforcement

Under various consequential amendments to other legislation by REDA, enforcement penalties are substantially increased.

Corporations found guilty of an offence can be fined up to $500,000 and individuals may be subject to fines of up to $50,000, per day. This is a significant increase from penalty amounts currently levied by the ERCB under various legislation regulating energy activities. Furthermore, any person who, in the opinion of the Regulator, has received proceeds derived directly or indirectly from breaches of an ALSA regional plan,REDA or any enactment prescribed in the regulations, or non-compliance with other terms, orders, etc., may have to provide an accounting of the proceeds and pay a penalty in that amount.

Criticism of the Proposal: Calgary Sun on penalties; Environmental Law Centre’s Concerns

But, as would be expected, this proposed legislation still leaves a lot of dots to be connected by a single energy regulator.  A critical issue: how fines are assessed and where those funds go.  Check out this October 25th Calgary Sun article by Bill Kaufman:

But after reading the legislation, Wildrose utilities critic Joe Anglin said he’s concerned about the possibility landowners or industry could be arbitrarily penalized under the plan.

“There’s a possible lack of due process ... when you have an official able to issue a penalty like Court of Queen’s Bench,” said Anglin, MLA for Rimbey-Rocky Mountain House-Sundre.

…

A spokesman for the environmental activist Pembina Institute said the new regulator could be a positive step, though not enough is known about the process to be certain.

The best plain reading overview of the bill, albeit from a critical eye, must go to the Environmental Law Centre’s November 1st posting by Cindy Chiasson.  Beyond making clear why the proposed legislation omits many details, Chiasson makes clear four concerns: narrower standing test to challenge regulatory actions, cutting out one aspect of judicial review, increased political control of the regulatory process, and unclear accountability standards.  From her post:

While this initiative has been touted as addressing energy and environment as two sides of the same coin, it seems the coin is loaded in favor of energy. Existing environmental regulatory processes would be curtailed and limited:

-the current standing test of “directly affected” under the Environmental Protection and Enhancement Act (EPEA)and Water Act would be changed to the narrower “directly and adversely affected” test for energy developments; and

-appeals under EPEA and the Water Act to the Environmental Appeals Board, an independent quasi-judicial body, would be eliminated for energy developments and replaced with self-reviews by the Regulator of its own decisions.

The Bill would also give Cabinet the ability to modify how environmental legislation applies to the Regulator.

…

We also have concerns regarding the potential transparency and accountability of the Regulator. Bill 2 specifically states that the Regulator is not a Crown agent. There is no clear accountability of the Regulator directly to the public.

Other Resources

Blakes November 2, 2012 backgrounder on the proposed legislation.

Huffington Post October 24, 2012 article by Bill Graveland.

Excellent October 26 article that highlights property-owner and political viewpoints on creating a single Alberta regulator by the Calgary Herald’s Tamara Gignac.

CBC’s Jennifer Lee has an excellent news report trumpeting the energy sector’s support for a single Alberta regulator, while also highlighting some of the accountability issues with creating a single regulator.  Two quotes worth particular mention if you have trouble loading up the 2 minute report:

Brad Herald, Cdn Assoc. of Petroleum Producers: “It’s a once-in-a generation opportunity to really calibrate, recalibrate a major system for Alberta.”

Keith Wilson: “They’re essentially going to make this super energy regulator the appeal body of its own decisions. So you’re going to have to go back to that body and say, ‘Well, we don’t think you went fair enough.’ And they’re going to say, ‘Well we’re happy with or decision, get out of here.’ And I think that’s wrong.”

For a distinctive take on the China-Canada Investment Trade Deal, check out this Rick Mercer Report:

President Obama’s Re-Election—for Obvious and Less Obvious Reasons—May Push the Canada-U.S. Relationship to Center-Stage

By Keith Edmund White 

Will Obama’s second term put the Canada-U.S. relationship on center-stage?  A quick round-up of Canadian headlines shows three major issues dominating the post-election Canada-U.S. relationship: (1) in the short-term, Canadian apprehension over America’s ability to reach a debt deal, (2) Keystone XL, and (3) moving forward on the Beyond the Border Initiative.  But let’s not forget two other wrinkles from America’s election night: Heidi Heitkamp’s Senate win and the failure of a state constitutional roadblock to the Detroit River Crossing Project.  And when you add to this Canada’s critical role in the Trans-Pacific Partnership talks, the Canada-U.S. relationship will be getting its fair due during Obama’s second term.

BC’s The Tyee offers a cautious Canadian reaction to President Obama’s re-election.  The article's two chief points: (1) If Obama does not reach a debt deal with Congressional Republicans, who still hold the U.S. House of Representatives, America could tumble into recession, and drag Canada along for the ride; and (2) hope that Obama will clear full construction of the Keystone XL pipeline.  But The Hill calls Keystone XL an energy election-night ‘loser,’ seeing a Romney White House fast-tracking the project.  My guess: with Keystone XL already under construction, I don’t expect the Obama administration to stall Keystone XL’s northern construction much longer.

But, in any case, Heidi Heitkamp’s Senate victory in North Dakota guarantees one strong, Democratic voice in favor of the pipe-line.

And then, of course, one major pit-fall in Canada-U.S. relations was avoided.  Yesterday Michigan voters shot down a state constitutional amendment that would have delayed—and perhaps killed—plans to build a second, bridge crossing connecting Detroit to Windsor over the Detroit River—a project with obvious economic impact in both Canada and the United States, and strongly supported by Canadian Prime Minster Harper.

But one less reported story bears mentioning.  December 2011’s Beyond the Border Initiative (BTB), a Canada-U.S. project to streamline border regulations and bolster border security, might get a jump start.   Birgit Matthiesen offers this BTB post-election update for the Canadian Manufacturers & Exporters:

Over the last four years, Canada has too often benignly neglected by our neighbour. But the next four years presents an opportunity to build a North American manufacturing base. The US business community has a partner in Canada. One-third of our cross border business is intra-company and another third is comprised of intra-industry shipments. Our best ideas are each other's next new product.

The ball is in our court, as it always is when dealing with an American administration. But we do not have to start at square one.

Two initiatives between President Obama and Prime Minister Harper have already been launched – the Beyond the Border Action Plan and the Regulatory Cooperation Council. The ambition is great, but the progress is slow. Now that the elections are behind us, Ottawa and Washington need to get back to the table on these two efforts.

We have a major opportunity right now. 2013 must be the year that celebrates our cross-border partnership and the strength that our industries bring to each other's communities. Obsolete border management policies and unnecessary regulations must be replaced by a modern framework that will protect us from the economic storms ahead.

But, the big story—and not once mentioned on cable news last night—is that an Obama victory will continue progress, without the interruption of a presidential transition, on the Trans-Pacific Partnership (TPP).  As earlier reported on CUSLI-Nexus, Canada may likely play a critical role in ensuring these talks succeed.  And if this massive trade deal succeeds, it will likely—over the medium and long-term—generate more economic growth--and, at times, painful economic shifting--than any stimulus or jobs bill.  Furthermore, how the TPP goes may well portend how the future effectiveness of the World Trade Organization. 

What’s the importance of listing these seemingly unattached policy items?  First, it seems that two big pressure points in the Canada-U.S. relationship—Keystone XL and the International Detroit River Crossing—have (or soon will be) taken care of.  Next, Canada represents low-hanging economic fruit for the United States.  And—after Obama does heavy lifting on a debt deal and a job bill—the name of the White House economic strategy will be (with one major exception) connecting small dots to generate growth.  One major and needless U.S. economic drain?  Canada-U.S. border regulatory burdens that could be eased through smart, cooperative policies.

Now, naysayers may argue the United States has had trouble keeping focus on Canada.   But, if the TPP talks keep moving ahead, the United States simply won’t have this luxury.  Hence, whether pushed by state-specific issues or international trade diplomacy, the Canada-U.S. relationship may just see its fair share of time on center-stage during Obama's second term.