Who can Canada count on in Obama’s new Washington?


Will you be my friend?

Oh, to be a fly on the wall at the first meeting around Barack Obama’s cabinet table. Wary of yes-men, the president-elect has assembled a “team of rivals”—starting with arch-nemesis Hillary Rodham Clinton for the plum job of secretary of state—but not ending there. On some key issues, his cabinet picks disagree not only with him, but with one another.

On the Middle East, for example, Clinton has in recent years taken a staunchly supportive position toward Israel, while his choice for national security adviser, James Jones, a retired marine general, is seen as more wary. Obama’s nominee for secretary of labour, the Los Angeles congresswoman Hilda Solis, is critical of trade agreements, while his new trade representative, former Dallas mayor Ron Kirk, is a NAFTA-booster who wants normalized trade relations with China. His agriculture secretary, Tom Vilsack, is the former governor of Iowa, where corn and ethanol subsidies are the holy grail of politics—while Obama’s energy secretary, Nobel Prize-winning physicist Steve Chu, an expert in biofuels, is fiercely opposed to corn-based ethanol. How Obama, who has never held an executive position, will channel the debates into policies will be one of the most fascinating stories of the coming months and years. For starters, he’ll be leaning on his new chief of staff, the former ballet dancer, Chicago congressman and political pit bull, Rahm Emanuel, to get everyone in line.

Obama plans to reinstate the tradition of making the first presidential foreign trip to Canada. Everyone expects an enthusiastic reception for the Democrat who enjoys high approval ratings among Canadians—and an urgent agenda of talks about the economy. Obama wants to “upgrade” the labour and environmental provisions of NAFTA. How other Canadian interests will fare in Obama’s Washington is harder to decipher—given the divergent voices in his cabinet and new power brokers in Congress.

Take energy, which is shaping up to be a top bilateral issue as Obama presses ahead with plans to control carbon emissions and encourage renewable energy. Canada is the biggest supplier of energy to the U.S. Two-thirds of production from the Alberta oil sands heads for U.S. markets. Any restrictions on what some Democrats have called “dirty oil” would have huge consequences. So would any carbon trading system that would treat domestic American carbon emitters more generously than those outside the country. Canadian hydro and wind power producers have much to gain from any policies that would encourage the use of renewable sources of energy—and much to lose if such policies privilege only those made in the U.S.A.

At the energy table you will have Jones, who views energy security as a paramount issue in national security. Until Obama picked him, Jones was president and chief executive of the U.S. Chamber of Commerce’s Institute for 21st Century Energy. He has been to Alberta and views Canadian oil as a strategic North American resource—and appreciates Canada as an ally in places like Afghanistan. He is a proponent of carbon capture technology as a way to reduce greenhouse gas emissions. His views could be echoed by secretary of state Clinton, who has spoken about the need to reduce reliance on Middle East oil.

But there will be a cadre of opposing views. Incoming energy secretary Chu is a professor at the University of California at Berkeley, won the Nobel in 1997 for work on cooling and trapping atoms with lasers, and has since devoted his career to finding ways to wean the world off carbon fuels. He has in the past expressed concern about the size of the oil sands’ carbon footprint, which is bigger than that generated by conventional crude production. Then there is Obama’s new “climate czar,” Carol Browner, a former head of the Environmental Protection Agency under the Clinton administration. What her exact role will be is unclear since it’s a new position, but its very existence suggests Obama is serious about combatting climate change, an issue Browner has called “the greatest problem ever faced.” As his top science adviser, Obama named John Holdren, a climate scientist from Harvard, and put other climate change advocates in top jobs.

Given the sinking economy, it is unclear how quickly Obama can move on his campaign pledge to set up a cap and trade system for emissions—and how ambitious the annual limits on emissions could afford to be. His top economic adviser, Larry Summers, is skeptical of the cap and trade approach and wary of increasing energy costs in a recession. Spending on green technologies and energy-efficient retrofitting of schools and government buildings is part of Obama’s big economic stimulus spending plan that congressional leaders hope to pass in February. Passing limits on emissions will take much longer, given opposition from Republicans and some Democrats. “Environmentalists have a better hand,” says a top Washington energy lawyer, Sheila Slocum Hollis, who has advised several provincial governments on energy issues. “But because of the economy they don’t necessarily have the upper hand.”

Environmentalists do, however, have many important allies in Congress, including the new chairman of the House energy and commerce committee. Henry Waxman, whose California district includes Hollywood, is a tenacious liberal Democrat who last year led investigations into wrongdoings by the Bush administration. Last spring Waxman tried to have vague language in the 2007 Energy Independence Act interpreted to ban the U.S. government from purchasing oil sands oil. (The interpretation is still not settled.) The oil sands issue is becoming a hot one in the U.S., not only on its own merits but also because it ties into a debate over the potential development of the oil shale resource in the American West. “Proponents of restrictions on oil sands development are not going to give up,” says Hollis. “You can expect this issue to be kicking around because it affects the oil shale in the U.S. This is a proxy for a bigger debate.”

A potential congressional ally for the Canadian energy sector is New Mexico Senator Jeff Bingaman, the powerful and knowledgeable chairman of the energy committee and natural resources committee, who will oversee the confirmation of Obama’s energy-related appointments. Bingaman disagreed with Waxman on the oil sands. He has also called for strengthening the North American electricity grid to enable more Canadian energy to reach U.S. markets. As Obama’s proposed stimulus package takes shape, will it lead to investments in the shared North American energy grid? Will it create new demand for Canadian energy—oil sands or renewables? Or will it punish those sources and privilege homemade energy? “Take the desirability of green and renewable energy, add an economic crisis and a new administration,” says Hollis. “Now this is three-dimensional chess.”

Alberta’s diplomatic envoy in Washington, Gary Mar, sees a big outreach job ahead. “We are looking forward to working with the new U.S. administration and demonstrating that we are a responsible partner and energy producer,” he told Maclean’s.

Energy aside, perhaps no other individual in Obama’s Washington will be more important to Canada than the incoming secretary of homeland security, current Arizona Gov. Janet Napolitano. The department deals with issues such as the border, passport and identification requirements, port security, intelligence sharing, and law enforcement co-operation. While many border irritants—such as a new passport requirement dictated by the U.S., or red tape such as agricultural inspection fees—have their origins not in cabinet but in Congress, or deep within the federal bureaucracy, the DHS secretary has a big impact on how the issues play out. The first DHS secretary, former Pennsylvania governor Tom Ridge, had a good working relationship with Canadian politicians and was seen as easy to deal with. Relations grew more difficult under Michael Chertoff, a former prosecutor and judge, who brought a law-enforcement view that emphasized security and drew complaints that economic considerations were pushed to the back.

Napolitano’s background is also in law enforcement, having served as Arizona’s attorney general and before that as a federal prosecutor. As governor, Napolitano once called for the deployment of the Arizona National Guard to help secure the border. But she is also well versed in the importance of trade to jobs in her state, and travelled several times to Canada on trade missions. Scotty Greenwood, the executive director of the Canadian American Business Council, hosted Napolitano at a lunch in Ottawa last October and called her “amazing.” “The knee-jerk reaction is to say, ‘Here is a southern border governor and a former attorney general . . . oh great, is this another Chertoff repeat.’ But I think she is more in the model of Tom Ridge in terms of understanding the importance of co-operation. She is going to look at the border in terms of economic security—and that bodes well for Canada.”

And given that the first order of business for Obama’s Washington is a huge infrastructure spending blitz, it offers a tantalizing possibility for Canada: potential funds for improving infrastructure along the Canada-U.S. border and the highways and bridges that lead to it. “The larger problems we face on our border today are not so much security impediments but infrastructure impediments,” Thomas Shannon, the U.S. assistant secretary of state for western hemispheric affairs, told Maclean’s. “We have infrastructure that reflects pre-NAFTA requirements. We are pushing more goods and people across the same bridges and gateways. Right now we are talking about a lot of infrastructure spending. If I were a Canadian or Mexican, I would be raising my hand saying this needs to be a bigger discussion.”

As for the broader trade relationship, Obama’s intentions aren’t clear. When California congressman Xavier Becerra was offered the post of Obama’s U.S. trade representative, he turned it down, saying he thought trade would be low on the to-do list. “I came to the conclusion that it would not be priority No. 1, and perhaps not even priority No. 2 or 3,” he told one newspaper. The nominee for the post, Texan Ron Kirk, has been a backer of NAFTA and his selection was welcomed by business groups (another NAFTA backer, New Mexico Gov. Bill Richardson, was nominated for commerce secretary but backed out).

While these appointments generally appear friendly to North American trade, they raise other issues. There has been a rising chorus in Ottawa calling on the government to replace the system of trilateral summits with the U.S. and Mexico with a more bilateral approach focused on Canada-U.S. issues, on the grounds that the issues with Mexico, particularly on border matters, are very different. But Mexico is likely to remain top of mind for Washington given the parade of cabinet nominees from southern border states to the cabinet, which also includes interior secretary nominee Colorado Senator Ken Salazar. Already the rumblings against the trilateral process have sparked a bit of a backlash in Washington. “It has rankled. It really upsets people,” says Chris Sands, a senior fellow at the Hudson Institute and a specialist in Canada-U.S. relations. “A lot of people [in the U.S. government] who do Canada now are North American-ists who also worked on Mexico. They have seen this as Canada trying to decide who gets invited to the American party.” He adds: “The Mexicans are aware of it and are unhappy. I get invited to the Mexican Embassy to talk about what do we do about the Canadians and why are they so mad at us?”

Sands predicts that one of the major issues that Napolitano will focus on will be the so-called Mérida Initiative, in which the U.S. government is spending US$1.6 billion to help Mexico, Central America and the Caribbean fight drug cartels. “This will take up a lot of her time—time she could be spending on Canada,” says Sands. Given all the other issues the new administration will have to deal with, he says, “I think Canada is lucky to have Mexico keeping them on the agenda. It raises North American issues up—otherwise the tendency is to benignly neglect the Canadian file.” The most likely scenario is that Obama will go ahead with the next trilateral North American leaders’ summit, scheduled for this year in Mexico, and that it will be focused on the economy. “The optics will be, here are the three leaders working on the economy—which given the news lately is the kind of optics they want,” Sands says. Obama already met with Mexican President Felipe Calderón in Washington on Monday.

Shannon, the top State Department official responsible for North America, also argues in favour of keeping the trilateral approach. “So much of what we do economically and in disaster and disease control issues has to take into account Mexico,” he says. But Bill Clinton’s former ambassador to Canada, Jim Blanchard, says adding an annual bilateral meeting would be helpful—as well as informal chats in between. “President Clinton and prime minister Chrétien did regular phone calls without pomp and circumstance and hype. They just picked up the phone and talked for 20 minutes, not necessarily prompted by anything,” he recalls.

Whether Obama puts Stephen Harper on speed-dial remains to be seen.