The U.S. wants Venezuelan oil. Does that undercut Canada’s leverage in trade talks?

Just hours after the United States announced it had attacked oil-rich Venezuela and captured its president Nicolás Maduro, the wife of a top adviser to U.S. President Donald Trump issued a stark warning to Canada on social media.

“The U.S. doesn’t need anything from Canada,” wrote Katie Miller, whose husband Stephen Miller is Trump’s deputy chief of staff for policy and homeland security adviser. “Free trade is over.”

It’s a familiar refrain from those within Trump’s orbit, and from the president himself. But the argument has taken on new meaning now that the United States could have access to Venezuela’s staggeringly large reserves of heavy crude oil — similar to what’s produced in Western Canada.

As Ottawa gears up to review the Canada-U.S.-Mexico-Agreement (CUSMA), do the developments in Venezuela undercut the Canadians’ bargaining position? CBC’s The House spoke to experts and former officials about the feasibility of ramping up Venezuelan oil production and the road ahead.

LISTEN | What Trump’s actions in Venezuela could mean for Canada-U.S. trade talks:The same day the U.S. launched its military operation in oil-rich Venezuela, the wife of one of Trump’s top advisers warned on social media that “the U.S. doesn’t need anything from Canada. Free trade is over.” How true is that, ahead of critical trade negotiations? House producer Jennifer Chevalier speaks with Fen Hampson of the Expert Group on Canada-U.S. Relations, Laura Dawson of the Future Borders Coalition, RJ Johnston of the University of Calgary, and former U.S. trade negotiator Kate Kalutkiewicz to understand the rocky road ahead.

Can Venezuela displace Canadian oil?

According to RJ Johnston, the director of energy and natural resources policy at the University of Calgary, Venezuela’s oil sector and infrastructure have been deteriorating for more than a decade, which poses significant risks for U.S. oil companies who may want to re-enter the country.

“If the U.S. government really creates a partnership with the U.S. oil industry, and the taxpayers take a lot of risk and provide a lot of capital — that will change the calculus,” Johnston said.

“Left with their own devices, I don’t think those U.S. companies are that eager to go into Venezuela for large projects.”

WATCH | Breaking down Trump’s national security strategy:

How Venezuela fits into Trump’s national security strategy

The capture of Nicolás Maduro by U.S. forces and President Donald Trump’s plan to reinvigorate the Venezuelan oil industry could be seen as a page out of his new national security strategy. CBC’s Eli Glasner breaks down the strategy’s goal to dominate the Western Hemisphere and what it could mean for Canada and the world.

The U.S. government is pressing oil executives to return to Venezuela quickly, and has told those executives they’ll need to invest significant capital to revive the country’s damaged oil industry if they want compensation for assets that were expropriated by Venezuela two decades ago.

Prime Minister Mark Carney, for his part, said earlier this week he’s not worried about the prospect of increased oil production from Venezuela because Canadian oil is cheaper, cleaner and lower-risk.

“We’ve got a competitive product and we’ve been diversifying our markets and that’s one of the reasons why we signed the comprehensive [memorandum of understanding] with Alberta,” Carney said in Paris on Tuesday.

Still, Canadian energy stocks took a hit after the U.S. incursion, as did Canadian heavy oil prices. That matters for Canada’s economy, Johnston said, in particular in Alberta where falling prices mean lower royalty revenues for its budget.

Trump looks for leverage, says former official

Kate Kalutkiewicz, who served as senior director for international trade at the National Economic Council during Trump’s first term, said she doesn’t think the events in Venezuela change the Canada-U.S. energy dynamic in the near term.

“But it is a signal that President Trump is serious about his intent to reduce reliance on any singular trading partner for any particular good or commodity,” Kalutkiewicz said.

On top of that, Trump prides himself on “being a really good negotiator and he is always thinking about how to create leverage in any negotiation,” she said.

WATCH | Carney on upcoming CUSMA talks:

Carney says sectoral tariffs will be part of CUSMA renegotiation

Prime Minister Mark Carney sat down for a year-end interview with CBC News chief political correspondent Rosemary Barton, where he laid out his expectations for the CUSMA review next year.

Fen Osler Hampson, co-chair of the Expert Group on Canada-U.S. Relations, echoed Kalutkiewicz’s assessment and said the events in Venezuela don’t directly affect trade talks, but it shows Trump and his team view the Western Hemisphere as their playground.

“We’re going to be subjected to pressure over critical mineral supply chains, Arctic resources, energy infrastructure, because the United States clearly views these all as core matters of its own national security,” Hampson said.

“We’re well on the road to being downgraded from a sovereign neighbour of the United States to a junior resource appendage,” he said. “That’s the direction clearly that the United States is headed. That is the message it has sent with its invasion of Venezuela.”

WATCH | Tapping into Venezuelan oil holds many challenges:

What we know about Venezuela’s oil

Venezuela sits on one of the largest oil deposits in the world – but not all oil is created equal. CBC’s Johanna Wagstaffe explains how millions of years of buried seabeds and oil-eating bacteria turned that reserve into some of the heaviest, hardest-to-extract crude on the planet.

When asked what leverage Canada may have over the U.S. in trade talks, Kalutkiewicz said that Canada is still deeply reliant on the U.S. economy — which could make it difficult to push back against the president.

“Canada, I think, is going to have to focus a lot on expanding its economic relationships with other economies to show the U.S. that it’s not the only game in town. Absent that, it may struggle to find some leverage in these negotiations,” Kalutkiewicz said.

Hampson argues that Canada can take its money to other countries and buy their finished products, like electric vehicles from China and agricultural goods from Mexico.

“As a consumer, as a purchaser of American goods, we have leverage and we also have options,” Hampson said.

Will CUSMA survive?

Looking beyond oil, the United States has said it has a number of demands that Canada must meet to extend CUSMA, and they’re not cheap.

U.S. Trade Representative Jamieson Greer told Congress last month that Canada must bolster “market access for U.S. dairy products” — a swipe at supply management — and the Canadian government must address provincial boycotts of U.S. alcohol.

Greer also said the U.S. will take aim at the Online Streaming Act, which brought online platforms like Netflix, Spotify and YouTube under Canadian broadcasting rules.

WATCH | Trump outlines his CUSMA demands:

Trump administration lays out demands to stay in CUSMA

The Trump administration is listing specific changes it wants from Canada in order to stay within the Canada-U.S.-Mexico Agreement. The list includes policy changes on energy, more access to dairy markets and bidding on certain government projects, as well as changes to the Online News Act.

That legislation was brought about to force U.S. web giants to contribute financially to the domestic media ecosystem and make Canadian content readily available on their platforms, which have become ubiquitous as traditional TV, cable and satellite providers shed subscribers.

Laura Dawson, executive director of the Future Borders Coalition, said it’s “difficult to say what kind of concessions will be brought to the table during the 11th hour when the horse trading takes place.”

But Dawson cautioned concessions are not like a board game: “You are trading the livelihoods and interests of people in your economy. So you have to do that very, very carefully.”

While Dawson thinks a brand new North American trade agreement is unlikely to come out of these talks, she also doesn’t believe “we’re anywhere near the point where [CUSMA] would be abandoned.”

Kalutkiewicz said some of Trump’s actions — like carve-outs for CUSMA-compliant goods in some of his tariffs — show he’s been convinced the North American supply chain “is critically important for U.S. economic competitiveness.”

“Rhetoric aside, I feel very optimistic that the structure of CUSMA, the structure of the North American economic relationship, remains very strong,” Kalutkiewicz said.

Article source: https://www.cbc.ca/news/politics/united-states-venezuela-trump-canada-cusma-9.7039587?cmp=rss