The View from the West

Winnipeg Free Press - PRINT EDITION

Obama's loss is our gain

By: Alexander Moens

Posted: 01/26/2010 1:00 AM | Comments: 0 (including replies)

The victory of Republican Scott Brown in Massachusetts' race for the U.S. Senate is a victory for Canada's national interest.

Brown's entry into the Senate will take away the 60-vote margin the Democrats enjoyed and could use to push through legislation filibustered by Republicans. Given that Obama's Affordable Health Care for America Act passed the Senate by a 60-39 margin and still has two distinct versions, one House and one Senate, no final bill may emerge after all. It will be quite sobering for Barrack Obama to see his flagship initiative hit the rocks. If so, Democrats will be empty-handed in the November Congressional elections.

Even if the Democrats can manoeuvre the bill into law, the Massachusetts' victory, which was essentially a referendum on the health bill, does not augur well. Politically, the Democrats have positioned themselves into a no-win scenario. Given that unemployment is still around 10 per cent in the United States, Obama has not been able to take much credit for economic recovery.

Canada has no dog in the health-care fight and nothing to gain from a weakened American president except for two critical things at this point in time.

First, the political setback will stop Obama's cap-and-trade bill on greenhouse gas emissions dead in its tracks. This is excellent news for Canada. The so-called Waxman-Markey Bill, which was passed by the House by a very narrow margin, would dole out green energy subsidies that various states and municipalities are planning to use to discriminate against Canadian energy imports. It would also designate Canada's oilsands as "dirty fuel" and prohibit the U.S. federal government from using it.

Waxman-Markey's cap-and-trade system for carbon dioxide emissions will cause Congress to put levies and taxes on imports -- including Canadian energy and manufactured products -- in order not to price America's trade-exposed industry out of the market. Even if Canada set up a similar system of cap-and-trade, the chances that American lobbies would start trade action is huge. With good sense and prudence, Ottawa is trying to make Canadian rules as similar as possible to the American regime.

Even though punishing carbon is bad public policy based on shaky science, Ottawa would stand to lose greatly in terms of exports by being outside the American regime. However, even if Canadian carbon measures were at par with American emission cuts, small regulatory differences would still expose Canadian industry to American trade action.

Given the history in Canadian-American trade, this is no idle threat. While the Canadian government seeks to harmonize and align CO2 reductions with the U.S., it also wants to keep the power to set internal targets differently as the U.S. does. This is understandable for many reasons. For example, Canadian hydro-electricity generation produces virtually no CO2 emissions while much of America's electricity generation comes from high-CO2-emitting coal. However, a "separate but equal" system would raise the chance of trade action from the U.S. The end of Waxman-Markey is welcome news to Canada.

Secondly, and even more important to Canada, is the fact that Brown's victory will force Obama to make cutting the U.S. national budget deficit his number one priority. This deficit is enormous and is expected to remain large until 2019 according to the Congressional Budget Office. Mounting debt is undermining America's economic recovery. High levels of debt will put downward pressure on the U.S. dollar, making Canadian exports more expensive. Canada needs strong American consumer demand and fiscal discipline in Washington.

Long live the American system of checks and balances.

Alexander Moens is a senior fellow with the Fraser Institute and a professor of political science at Simon Fraser University.

Republished from the Winnipeg Free Press print edition January 26, 2010 A11

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