The Mess We're In
Did I wake up in the middle of the night to fret about The Mess We’re In? Why yes, I did. Thanks for asking.
I’m not sure the situation is as simple as many (on both sides) are making it out to be. So here are what I think are the four key questions relating to Alberta and Canada’s stances, and my take on each.
Should Danielle Smith have gone to Mar-a-Lago?
Pro: she can be an effective advocate for Alberta’s interests and (perhaps) for Canada’s. It was a unique opportunity to make the case.
Con: it created a perception that Alberta was trying to negotiate an exemption for oil and gas exports and raised questions about where her loyalties lie
My take: The pictures of Smith smiling with Trump and O’Leary haven’t aged well. Her willingness to travel (while on vacation) to Florida to spend a few minutes with Trump, but not to Ottawa to spend the day with her first minister counterparts (which she attended virtually) has taken on symbolic meaning at a critical moment. Her intention to attend the Inauguration will reinforce these perceptions.
Should Alberta seek an exemption from the Trump tariffs for oil and gas?
Pro: Preserves Alberta's economy/revenues significantly and Canadian economy/revenues modestly at a time when other sectors will be taking a significant hit.
Con: Undermines solidarity within Canada and significantly weakens Canada’s negotiating stance. Would shield American consumers from one of the most obvious price increases resulting from Trump’s tariffs.
My take: By seeking an exemption for oil and gas, Alberta undermines Canada’s stance significantly. This is both disloyal and short-sighted. I’m unconvinced by the argument that Canada doesn’t warrant Albertans’ loyalty because it wasn’t sufficiently supportive of building pipelines. Alberta’s willingness to undermine the common Canadian stance means that its interests are less likely to be taken into account as that common stance evolves.
Should Canada contemplate cutting off oil and gas exports to the US?
Pro: This would have significant negative impact on American consumers and industry, at least until they could adapt systems to import from other countries.
Con: This would have devastating effects on the Alberta economy and fiscal situation - imagine a 20 or 25% reduction in provincial revenues overnight.1 It also risks shifting American public opinion against Canada.
My take: The federal government should take this off the table. It would have disastrous effects on the Alberta — and Canadian — economies and on national unity. And to what end? Perhaps it would be a tough enough measure to force Trump to negotiate. But it might also backfire. Rather than blaming Trump for rising prices, American consumers might blame Canada and become more supportive of Trump’s tariffs.
Should Canada contemplate an export tax on oil and gas (if they are exempted from the tariff)?
Pro: This would raise revenues to help compensate affected industries. Its effect on the Alberta economy/government revenues would be less severe than cutting off exports entirely.
Con: Would further inflame regional tensions and would allow Trump to blame Canada for higher gas prices.
My take: I can see the appeal of this option for the federal government, both as a way of sanctioning Alberta for breaking from the national approach and to generate some much-needed revenue to help affected industries. But it would put further strain on national unity at a delicate moment. Worse yet, it might play into Trump’s hands by allowing him to distract from the inflationary impact of the tariffs in other areas by blaming Canada for rising gas prices.
Final thought
It’s difficult not to view this primarily through the lens of national unity. Alberta and Ottawa have been on a crash course for years and appear headed for a spectacular collision in the coming days or weeks. We risk being so focused on our internal conflict that we lose sight of how our actions will be perceived by Americans, and end up strengthening Trump’s hand.
These are extraordinarily difficult choices. I suspect there will be many sleepless nights ahead for those who have to make them.
Back of the napkin math: Bitumen royalties make up about 20% of projected provincial revenue this year. 80% of crude is exported, so there’s a 16% reduction. And on top of that would be reductions to corporate income tax revenues and personal income tax revenues.
Lots of Canadians are losing sleep over this. You've made some solid pro and con arguments for possible actions and consequences of those actions.
The bottom line for me is that Premier Smith should not have taken it upon herself to travel to Mar-a-lago to bend the knee and kiss the ring of the Orange king. She broke diplomatic lines of responsibility with her unprecedented move. She showed her hand as an alt-right Conservative separatist going to Mar-a-lago with the likes of Kevin O-Leary and Jordan Peterson.
In my opinion what former party leaders, present premiers and pundits across Canada are saying is the tone of how most Albertans and Canadians are thinking about Smith. She seems determined to undermine our social programs in Alberta, undermine our Canadian solidarity and undermine our negotiations with a monster who will be the crazy president of the USA too soon.
I lose sleep over how to stop Smith and her caucus from doing more damage to Alberta, and Canada.
"Should Alberta seek an exemption from the Trump tariffs for oil and gas?"
Con: Given that the climate clock is ticking and we've failed to do much to slow it down, anything that reduces our production of GHGs is worth considering. Tariffs may have a silver lining.
Some will say that if we don't produce the hydrocarbons someone else will. But anything that forces us to reduce Albert's production and transition, at least partly, off of O & G is worth considering.