As U.S. Rejects Keystone XL, Canada Should Turn to China to Fill Trade Gap

The Keystone XL pipeline project to deliver oil from Alberta’s tar sands to Texas for refinement has once again been shelved by President Barack Obama. This is the second time the U.S. has delayed their decision, much to Canada’s frustration.

Now that the project has been defeated, Canada should begin to open itself up to trade with energy-craving China. Trade with China could have the added benefit of improving Canada’s bargaining position when trading with the U.S.  

We should not be naïve. The U.S. and Canada may be long-time friends and allies, but at the bargaining table they are not equals. The U.S. economy is much larger and diversified; they simply have more options than Canada. And at the negotiating table, options are leverage. The Canadian government should not allow the U.S. to feel it is Canada’s customer of choice.

China has a long-time interest in Canadian energy. Now is the perfect time for Canada to let them in. By gaining access to a stable, high-demand, sustainable, and secure market such as China, Canada gains leverage to use in its U.S. trade relations. The U.S. needs energy, particularly oil. It has shown time and time again a lack of political will to reduce its dependence on foreign oil (i.e. Brazil). They want Canadian oil, but without Canada having another major purchaser, they do not feel pressured to make concessions to get it. This is where China comes in. Essentially, consider trade as a zero-sum game. Trade conducted with China is trade that cannot be conducted with the U.S. 

Over time, trading with China will allow Canada to become less reliant on the U.S. as its primary customer, but also force the U.S. to become more desperate to trade with Canada.

This can pressure the U.S. to pursue Canadian resources with greater impetus.

Canada does not have to replace the U.S. as its primary consumer. It merely has to demonstrate that it has other buyers, and force America’s hand. Having this advantage can help Canada earn better terms and conditions in its trade relations. 

Canada needs to play China and the U.S. against each other for its own benefit. In an environment of economic downturn, Canada has to look out for itself. Canada has been patient and the U.S. has floundered twice already. Diplomatically, Canada does not have to fear any repercussions. 

If the U.S. loses access to Canadian energy, that is its own fault. Having the U.S. pay more to rectify this mistake will play to Canada’s benefit.

Photo Credit: Wikimedia Commons