The Legacies of Trudeau NEP and Mulroney NAFTA

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The Legacies of Trudeau (NEP) and Mulroney (NAFTA)

• Poli 404D Week 4

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Agenda

• Prelude to NEP
• NEP
• content
• backlash
• compromise
• denouement
• theories of state
• Free Trade
• content of agreement
• the bargain

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Prelude to NEP 1957-1961

• 1959 National Energy Board Created
• 1961 National Oil Policy
• two market policy
• east of Ottawa Valley, cheap imported Venezuela
  oil
• Ontario and west, more expensive Canadian oil
• delivered by Trans-Canada Pipeline
• continental price under umbrella of US
  protectionism
• growing exports to US
• Rapid growth in oil and gas industry

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Prelude to NEP 1973-1980

• 1973 OPEC oil embargo
• link to global geo-politics Arab-Israeli War
• price controls on domestic crude oil and natural
  gas
• subsidized consumption by refiners through oil
  import compensation program (OICP)
• 1975 Petro-Canada establish
• foster resource development
• increase federal government information about
  reserves
• 1979 Iranian revolution led to world price
  doubling
• gap between Canadian prices and world prices
  increased

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1980 Political Economy of Energy in Canada

• Oil coalition federal Conservative Party,
  western provincial governments, and oil industry
• rapid convergence to world prices
• smaller federal share of revenues
• privatization of Petro-Canada
• enabling foreign ownership

• Federal Coalition federal Liberal and NDP
  Party, central and eastern provincial governments
• slower increase in prices
• larger federal share of revenues
• strengthening of Petro-Canada
• regulation on foreign ownership

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National Energy Program 1980

• October 1980 budget
• a centralist, nationalist and interventionist
  political and policy initiative which at its core
  was intended to substantially restructure the key
  relationships of power and the sectoral and
  regional distribution of wealth in Canadian
  energy politics (Toner and Bregha 1984).

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National Energy Program 1980

• 3 goals
• security of supply
• Petroleum Incentive Program (PIP) encouraged
  exploration and development
• Canadianization
• 50 Canadian ownership by 1990 (from 27)
• PIP criteria favoured Canadian firms on Canada
  Lands
• enlarge Petro-Canada through acquisitions
• interregional equity in price and revenue sharing
• 8 Petroleum and Gas Revenue Tax (PGRT)

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Backlash Against NEP

• Universal industry opposition
• Vehement opposition by Alberta led by Premier
  Peter Lougheed
• cutback in oil production
• cancellation of 2 oil sands projects
• Compromise of 1981 produced a new pricing system
• old domestic oil increased to 75 world price
• new conventional oil at world price

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NEP denouement

• Beginning in 1982, world oil prices began to
  plummet

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NEP denouement

• Oil price decline after 1982
• Mulroney Era (Progressive Conservative) begin in
  Fall 1984
• Western Accord effectively dismantled NEP
• deregulated oil prices
• phased out PGRT

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Theories of the State

• Pluralism policy determined by the balance of
  power between competing interest groups
• state as referee
• Neo-pluralism some interests (i.e., business)
  have structural advantage
• Neo-Marxism policy serves the structural
  advantage of business
• Statism policy determine by preferences of
  autonomous state actors

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NEP and Theories

• article argues that statism is best explanation
• convincing?

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Content vs Process

• debate the proposition While it could have
  been handled better politically, the 1980
  National Energy Program was, on balance, good
  policy for Canada given the circumstances.

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Current Conflicts over Energy and Climate Change
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Legacy of Mulroney

• Canada-US Free Trade Agreement
• contested in 1988 election
• enlarged to NAFTA to include Mexico
• agreement Dec 1992
• came into force 1994

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Free Trade Dilemma

• to use energy development as a source of economic
  growth, access to US markets is important
• US history of protection oil import quotas
• guaranteeing access to US markets might involve
  constraints on domestic policy sovereignty
• forgo use to certain policy instruments

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CUFTA/NAFTA

• Article 605 Other Export Measures Subject to
  Annex 605, a Party may adopt a restriction only
  if
• a) the restriction does not reduce the proportion
  of the total export shipments of the specific
  energy good made available to that other Party
  relative to the total supply of that good of the
  Party maintaining the restriction as compared to
  the proportion prevailing in the most recent
  36month period for which data are available prior
  to the imposition of the measure, or in such
  other representative period on which the Parties
  may agree
• b) the Party does not impose a higher price for
  exports of an energy or basic petrochemical good
  to that other Party than the price charged for
  such good when consumed domestically, by means of
  any measure such as licenses, fees, taxation and
  minimum price requirements.

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Risk/Benefit

• Does the benefit of US market access outweigh the
  constraints on autonomy?

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Conclusion

• the triumph of continentalism and provincialism
  over nationalism
• constrains policy instruments available to
  address energy policy