iPolitics CABC print edition

MONDAY, NOVEMBER, 19, 2012

FEATURED OPINION

Inequality: Defining the defining issue of our time Diana Carney

Canadians should expect few public displays of affection between Stephen Harper and Barack Obama, but a stoic outward appearance veils a fine romance, writes Robin Sears. See page 7.

CP PICTURE ARCHIVE Sean Kilpatrick

Ottawa seeks private sector help to plug security, safety holes Elizabeth Thompson Smugglers running guns across the Canada-U.S. border. Hackers working on behalf of a foreign government launching malicious attacks on government and private business to gain an economic advantage. An earthquake that rocks the Vancouver area, disrupting power, communications and leaving roads and bridges impassible.

Those are just some of the potential safety and security challenges the Canadian government is calling on business to help it address as part of a new multi-year, multi-million dollar procurement program.

The Canadian Safety and Security Program has launched its first call for proposals for studies, research and new technologies to help the government address everything from natural disasters to terrorist threats and public health emergencies. In the first call for proposals, which ends Dec. 5, companies, academics, non-governmental agencies, or emergency management

organizations will compete for a total $15 million in project funding.

The projects selected will be announced in March 2013 and receiving funding in April 2013.

Three more rounds of calls for proposals are scheduled – in 2013, 2014 and 2015.

According to the government’s guidebook for bidders, three types of projects will be eligible for funding in the first round – studies, research and development (R&D) and technology demonstration.

Studies of known public safety and security issues can receive up to $500,000 in funding and have to be “undertaken within a two year period.”

Research and development projects which “involve applied research that will generate new knowledge or awareness while addressing userdefined capability gaps in critical areas” can receive up to $1 million and have to be performed within three years.

Technological demonstration projects are

eligible for up to $1.5 million and are also supposed to be performed within three years.

However, not just anyone can apply.

In order to qualify for funding, the lead bidder on the project has to be Canadian and at least 50 per cent of the work involved has to be done in Canada. Companies from other countries would have to find a Canadian partner.

The government has invoked a clause in the North American Free Trade Agreement (NAFTA) which allows them to set aside contracts for small and minority businesses.

The project also needs to have two partners including a government partner – either federal, provincial or municipal.

The goal of the program, says the federal government, is a collaborative model that brings some of the best minds together from “government, industry, academia and international organizations” to tackle safety and security Continued on pg. 13

Growing inequality is, according to President Barack Obama, “the defining issue of our time.” In the week following his re-election, the president has vowed not to abandon his resolve to raise taxes on those earning over $250,000.

This fascinates me. What is it that has propelled the issue of inequality to these dizzying heights?

Which straw broke which camel’s back? And why do other, arguably more critical, issues such as climate change and our energy future seemingly fail to ignite the imagination of the public and the president?

Much has been written about the causes and effects of inequality in the U.S. I am going to focus my attention on Canada, where a good deal of ink has also been spilt, often without clear reference to the underlying facts and forces.

Globally, income inequality has never been higher. Certain countries are managing to keep it in check (Brazil, for example), but most middle- and high-income countries are more unequal now than they have been since at least the 1920s. This is certainly true of Canada, which sits near the middle of the OECD inequality rankings. But what do we learn if we dig a little deeper into the various measures of inequality?

The most common of these is the Gini coefficient, which measures the variance between actual income distribution and a theoretical, perfectly equal distribution. Thus, a Gini of zero tells us that there is no deviation and that everyone is perfectly equal. A Gini of 1 means that one individual has all the income, everyone else has nothing: winner takes all, writ large. Three categories of Gini are typically employed: the market Continued on pg. 5

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MORNING BRIEF CABC sweeps into Ottawa • CRTC looks at CBC’s future •Moscow embassy’s a sitting duck •Montreal chooses Anglo as temp mayor •Liberals prepare to fête Herb Gray • Christie tells Romney to suck it up.

Good Monday morning to you. It’s International Men’s Day and the day Parliamentarians come back to Ottawa after a week away.

AP Photo/Becky Bohrer

Harper is not without his competition today. Over at the IDRC, experts on global labour markets are meeting to discuss the 2013 World Development Report. And, Marc Laliberte, president and chief executive officer of Via Rail Canada, speaks at the Economic Club of Canada luncheon at the Westin.

Clean-up cost for ELA remains a mystery

NDP demands federal watchdog made an independent body James Munson

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For seven years, scientists used the Experimental Lakes Area to determine how long mercury from the atmosphere remains trapped inside a body of water.

As part of the METAALICUS experiment (it stands for Mercury Experiment To Assess Atmospheric Loadings In Canada and the United States), the scientists dosed one of ELA’s lakes with the toxic metal and watched what happened.

“When we stopped, the concentration of the mercury in the water quickly declined, the mercury in the fish quickly declined,” said John Rudd, an award-winning scientist and head of the ELA from 1998 to 2002.

“The mercury either returned to the atmosphere or was buried deep in sediments so it was no longer a problem.”

The test was a “chemical addition experiment,” one variant of the dozens of experiments performed at the ELA since its inception in the 1960s.

Other experiments involved displacement, like flooding a wetland and determining how many types of greenhouse gases escaped.

But in all of those tests, which were designed not to permanently damage the lakes, the environment eventually returned to its natural state.

“After every experiment to date, the lakes have fully recovered and we anticipate that with the experiments that are happening now, the lakes will recover,” said Rudd, who has worked on experiments there for 35 years.

The ELA’s environmental health now has new meaning after the Department of Fisheries and Oceans, which runs the so-called “living laboratory,” announced this spring that the site would be dumped due to budget restraints. iPolitics.ca revealed last week that DFO is in talks to hand over the ELA to the International Institute for Sustainable Development,

a UN-backed non-profit based in Winnipeg.

But negotiations are bogged down over the clean-up liability for the site, which consists of 58 lakes stretched over a patch of northern Ontario.

“That’s what’s taking so long,” said a source close to the talks.

Rudd, who may know the region better than anyone else, said there was no permanent damage to the lakes from the ELA’s work, even when you include the five experiments currently taking place there.

“From a scientific point of view, there is no liability,” said Rudd. “I’d be willing to go to court and testify that all of these lakes are in good shape.

“When we do an experiment, we’re always very careful that the experiment won’t leave the lake unrecoverable. Part of our work is to look at recovery. We perturb the lake and then we watch the recovery. That’s part of the research.

“But I guess on paper, or legally, people are worried about this. That the scientists might be wrong and there is a big problem with these lakes we don’t know about. But I don’t think there is.”

The ELA is run by the federal government but sits on Crown land owned by Ontario.

The two governments have an agreement which states that “Canada shall remediate the lakes, watersheds, stream segments and lands used for experiments” if the deal is ever terminated and ownership changes hands.

Neither the DFO nor the IISD are talking about the clean-up liability’s cost while negotiations are ongoing.

But scientists close to the site say the figure has never been calculated.

“There is no number,” said Diane Orihel, head of the Coalition to Save the ELA, which is lobbying DFO to reinstate funding for the site. “DFO doesn’t even know that number.”

Over the past few months, some media outlets have bandied about a

Today is also the day the powerful Canadian American Business Council comes to town. The 25-year-old Washington-based think-tank is holding its 18th now-annual policy forum today at the newly revamped Ottawa Convention Centre. The event also features a business awards luncheon, which this year features a pretty noteworthy keynote: Prime Minister Stephen Harper. Other speakers lined up for the event are Gary Doer, Canada’s Ambassador to the U.S. and his counterpart in Ottawa, David Jacobson, the U.S. Ambassador to Canada; Bruce March, Chairman, President and CEO, Imperial Oil Ltd.; former Harper cabinet minister Jim Prentice, now SVP and Vice Chairman of CIBC; and, Nancy Gibbs, Editor-at-Large, TIME Magazine, and author of the best-seller “The Presidents Club”

$50 million figure, which Orihel attributes to a misunderstanding by a reporter during a news conference she gave in the summer.

The federal government tried to rid itself of the ELA in 1996, and at that time DFO did an estimate of the clean-up liability’s cost and came up with a figure of $25 million.

Since then, there have been many additions to the site, including two residences, a new fish lab, improvements to the communications system and a $30,000 diversion channel.

“The reporter looked at me and said, ‘Double then?’ and I said, ‘Perhaps, I don’t know,’” said Orihel.

“But he reported it as $50 million and then everyone has been reporting it as $50 million, but again, it’s not a real number.”

When DFO cut the ELA from its plans this year, it didn’t have a current estimate of the site’s cost, said Orihel.

Sources inside the department have told her that DFO initially planned to put out a public tender to determine the amount, but then reneged.

“They were afraid of the backlash of the public knowing they were estimating the cost of demolishing the ELA,” she said.

Since then, DFO has decided to determine the cost through its own real property offices, she said. But no one from the department was available to confirm this decision.

While Rudd might be right about the lakes remaining unchanged by the experiments, removing infrastructure from the remote site will be pricey, said Orihel.

There are over 19 buildings in the ELA, as well as cement weirs, sampling platforms and sheds, she said.

“People think it’s a few ATCO trailers — it’s not,” said Orihel.

“It’s almost 40,000 square feet of buildings.

“To go in by helicopter in some cases to remove some of that equipment, it’s going to be a huge price tag.”

The CRTC opens public hearing to renew CBC/Radio-Canada’s licences, starting today. Central to the hearings is a proposal by the CBC to permit advertising on two national radio services, Radio 2 and Espace musique, a move the CBC says is necessary to endure the Harper government’s funding cuts but that have private broadcasters up in arms.

The broadcaster receives an average of $1 billion in public money each year which private companies argue gives “the corp” a huge advantage to undersell them in the ad market. Internet companies are also interested in the outcome of the hearings, as the CBC has a dominant place in the online advertising market based largely on publicly subsidized content. iPolitics’ Olesia Plokhii looks at what’s at stake.

While Harper answer what are likely to be relatively genteel questions at the CABC event, foreign minister John Baird can expect a rougher ride from opposition MPs curious about unsettling security flaws in Canada’s embassy in Moscow. Mike Blanchfield of the Canadian Press uncovered internal DFAIT documents highlighting disquieting vulnerabilities at the mission in Russia, both in terms of weak physical barriers against terrorists and outdated cybersecurity measures.

Just how bad is the corruption scandal in Montreal? Ask Michael Applebaum, the city’s first Anglo mayor in more than a century. In a stunning development in the already baffling corruption scandal, the long-time city councillor became the preferred candidate to take over from former mayor Gerald Tremblay when he agreed to serve in an interim capacity and not run in next year’s municipal elections.

The newly reinvigorated Liberal party is celebrating its past tonight with a tribute to stalwart Herb Gray, a former deputy PM and still the standard bearer for the left flank of the party. Tickets to this very nongrassroots shindig run at $199, but only $35 for Laurier Club members — Tuesday is Wilfred’s birthday, after all.

Our friends at The Alpheus Group say it’s a busy first day back for MPs in committee: • Taking a break from budget bill deliberations, the Finance committee shifts focus to pre-budget consultations where the Retail Council of Canada, Grain Growers of Canada and the Building and Construction Trades Department are among the groups appearing.

• Justice Minister Rob Nicholson will make appearance before the Public Safety committee to field questions on the Combating Terrorism Act (S-7).

• A Tuesday deadline for select committees to report back to the Finance committee on their respective reviews of the budget bill, means several key meetings today including: • Environment is scheduled to hear from Minister Peter Kent on the Supplementary Estimates and will also hear from representatives of the Canadian Energy Pipeline Association and professor Meinhard Doelle from Dalhousie University on the review of clauses in the Canadian Environmental Assessment Act, 2012.

And New Jersey Gov. Chris Christie has had just about enough of Mitt Romney coming up with more excuses for losing than New York Jets fans.

“It’s time to pivot and move on,” Christie said on MSNBC’s Morning Joe, slamming Romney for suggesting Obama won because of “gifts” to minorities. “You can’t expect to be a leader of all the people and be divisive, OK?” Have a great Monday.

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MONDAY, NOVEMBER, 19 , 2012

Focus stays on fiscal cliff, Mideast, pipelines and gas prices Eric Beauchesne Ongoing worries that the US economy could be pushed over the “fiscal cliff” at year end, taking Canada’s and possibly the global economy with it, along with fears about escalating conflicts in the Mideast, will continue to dominate the headlines in the coming week.

Those concerns, along with confirmation last week that Europe has officially slipped back into recession, have also weighed heavily on financial markets, with Canada’s benchmark TSX losing ground last week for the second straight week.

They are also dampening growth.

“The uncertainty surrounding the fiscal cliff has already slowed US growth by reducing business confidence, causing the postponement of capital spending and hiring,” says BMO Capital Markets economist Sherry Cooper. “The sooner this crisis is resolved the better.”

Cooper is optimistic that US lawmakers will eventually come to some agreement on how to limit and to proportion the deficit reducing tax hikes and spending cuts to keep that economy from going over the fiscal cliff.

And stock markets made a modest recovery Friday in the wake of comments by Republican and Democrat congressional leaders suggesting they are open to making a deal to avert the full impact of more than $600 billion in tax hikes and spending cuts that will otherwise kick in at year end.

Cooper is also upbeat about the longer-term outlook for Canada’s main export market.

“Underlying US fundamentals are strong going forward,” she says, citing low inflation which will allow the Federal Reserve to continue providing monetary stimulus, an improving job market, the recoveries in manufacturing and the housing market, and pent up consumer demand

and rising consumer confidence.

Further evidence of the recovery in the US housing market are expected in reports this coming week on October home sales and construction starts, even though Hurricane Sandy may have put a temporary damper on the pace of that recovery.

Also boding well for the US, though not for Canada, was last week’s International Energy Agency report that it is becoming more energy self-sufficient.

Here, the report added strength to Official Opposition NDP leader Thomas Mulcair’s call for increased domestic refining capacity and a pipeline to ship domestic crude from Western to Central Canada.

Such a move would not only broaden the market for Canadian oil and as such reduce Canada’s dependency on the U.S. market for oil sales, but would create jobs and possibly lower energy prices in Central Canada where consumers are now dependent on higher priced imported oil to meet its needs.

That argument may get a further boost late this coming week from a new Statistics Canada report Friday _ “Canada’s dual crude oil market and the impact on changes in gasoline prices, 2012.”

It may explain, in part, why motorists pay so much more for gasoline in central Canada _ last week as much as $1.35 a litre in Montreal or $1.21 in Toronto _ but as little as 99.9 cents in Edmonton and Calgary where gasoline is refined from less pricey domestic oil.

The call for a pipeline to move Western Canadian oil east is not new, however.

A Canadian Senate committee report earlier this year also warned that the U.S. could become energy self sufficient within a decade and that Canada “urgently” needed to find new markets and should move ahead on projects to move domestic oil east.

“We believe that now is the time for such infrastructure projects to be undertaken in the spirit of nation building,” it concluded.

Meanwhile, the significant impact of gasoline prices on the Canadian economy will be highlighted this week in the latest monthly retail sales and inflation reports, with easing gasoline prices in October being seen as a major factor dampening inflation that month, but rising pump prices the month before contributing to higher retail sales that month.

“Inflation has been on a downward trend,” notes Emanuella Enenajor, economist with CIBC World Markets which projects the annual inflation rate in October eased to just 1.1 per cent from 1.2 per cent in September. “Much of the weakness was likely due to gasoline.”

Enenajor also notes that retail sale sales, which CIBC predicts rose by 0.3 per cent last month, “have picked up since the summer.”

“September likely saw continued gains in retailing … with costlier gasoline accounting for much of the gains.”

Of course, there’s more than gasoline moving retail sales and inflation.

Weighing on domestic retail sales are record high household debt levels, says BMO Capital Markets economist Benjamin Reitzes. “The allure of cross-border shopping isn’t helping either.”

A surge in car trips by Canadians to the US, seen as an indication of the level of cross-border shopping , has been fuelled by the strong Canadian dollar, more competitive prices in the US, and in recent months the sharply higher duty free shopping limits introduced by the Harper government earlier this year.

The latest indication of the level of cross-border shopping will come Tuesday in the September report on travel between Canada and other countries.

IN BRIEF Russia must do more Defence minister Peter MacKay says Russia – one of Syria’s most important allies – should use its weight to end the conflict. Russia has backed Syria at the United Nations Security Council by repeatedly vetoing resolutions aimed at pressuring Syrian President Bashar Assad’s government to end the war. MacKay says Prime Minister Stephen Harper has recently met with Russian President Vladimir Putin, but did not go into the details of the discussion.

Provinces demand greater cooperation Ontario and Alberta are pushing for more federal recognition of their witness protection programs as part of a national revamp of the patchwork system intended to shield those who risk their safety to co-operate in criminal cases.

Provincial concerns – including frustrations in obtaining identity changes for protectees – are key to a long-promised federal remake of witness protection, documents and interviews reveal.

The federal witness protection program, administered by the RCMP, provides measures ranging from short-term protection to permanent relocation and identity changes. The Mounties spent more than $9 million on the program in 2011-12.

However, several provinces have their own programs, often providing short-term assistance.

Businesses fight back against Quebec’s language laws Several major retailers are taking the Quebec government to court over the provincial language watchdog’s insistence they modify their commercial brand names to include some French.The retailers include some of the biggest brand names in North America – Walmart, Best Buy and Costco.

Their lawyers are expected in Quebec Superior Court on Thursday.

Quebec’s language watchdog, The Office Quebecois de la Langue Francaise, wants the retailers to change their signs to either give themselves a generic French name or add a slogan or explanation that reflects what it is they’re selling.The changes are outlined on a website run by the language agency that gives businesses options on how to change their names. For example, Walmart, a household name on the retail scene that doesn’t really have a French equivalent, could change its signs to “Le Magasin Walmart.”

Manitoba throne speech focuses on consumers Manitoba’s NDP government will focus on consumer protection and support for schools in a new session of the legislature that starts Monday.

NDP house leader Jennifer Howard says the government plans to introduce legislation that would protect people when they buy homes and vehicles — two of the biggest purchases made in a lifetime.

“We know that those are big purchases for people. We want to make sure that … they’re well-protected because they’re huge investments,” Howard said in an interview.

Other legislation will encourage parents to be involved in their children’s school.

Sources: The Canadian Press, Washington Post

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MONDAY, NOVEMBER, 19, 2012

FEATURED OPINION

CARNEY: Access to opportunity key to solving inequality Continued on pg. 1 income Gini, the total income Gini and the Gini after taxes and transfers (the ‘outcome Gini’ as I like to think of it: this overlays first-cut distributions with societal choices about taxation and supports).

To simplify, let’s take look at the market income and outcome Ginis for the past three decades. Between 1981 and 2010 the market Gini in Canada went up 19 per cent from .434 to .518. Over the same period the outcome Gini went up only 13.5 per cent from .348 to .395. So, overall inequality in Canada has risen — quite a bit, in fact — but taxes and transfers have, over time, offset an increasing portion of this rise (though not enough to smooth the outcome Gini completely).

Now, let’s look at when the big jumps in overall inequality took place. Judging by the recent prominence of the topic, one would imagine that the last few years had been particularly inequitable, but this is not borne out by the data. Pretty much all the increase in the Gini coefficients took place in the 1980s and 1990s. For each measure, the increase between 2000 and 2010 was less than 1 per cent.

This is unexpected. Most of us certainly feel that the world is becoming more unequal (which, in the end, is what matters). So what’s going on?

First, some groups have been doing much worse than others. Median family income rose by about 38 per cent between 2000 and 2010, but if you look at single-earner male couple families, there was no rise — in fact, there was a 1 per cent drop.

So burdens are not equally shared. There are those who have ample cause to complain, though I don’t know if they’re actually the ones doing the complaining.

The ones truly burdened by income inequality typically hail from the very bottom of the income spectrum, and this is where the limitations of the Gini coefficient come into play. Ginis are best at measuring changes in the middle, where most people are clustered. They are less good at capturing change at the very top and the very bottom of the distribution — the tails. In Canada this is where a good deal of the action takes place. Although we sit in the middle of the overall OECD inequality ranking, we are third in the OECD (after the U.S. and the U.K.) in terms of share of pre-tax income going to the top 1 per cent.

Second, there is a markedly higher sense of overall economic insecurity today than in the recent past. Unemployment in Canada peaked at 8.5 per cent in late 2009, having fallen to below 6 per cent a few years earlier (it is now 7.4 per cent). Youth unemployment, though, is significantly higher at 14.7 per cent. So younger people are hurting, especially as they contemplate making their way onto the property ladder. The cost of new housing has gone up by 55 per cent since 2000 — significantly outstripping the increase in median wages

Peter, a healthcare worker from Toronto, joins a march past Toronto’s financial district as part of the ‘Occupy Bay Street’ demonstration on Saturday October 15, 2011. Peter is demonstrating against social inequality.

which, as you will recall, has been only 37 per cent.

Third, we Canadians tend to see ourselves reflected in the experience of the U.S. — and things are a lot worse there. Especially during the election campaign we were inundated with tales of real woe from many of the formerly blue-collar regions of the United States.

By contrast, readers might be surprised to discover that the real hourly wages of Canadians in full time employment actually grew by 14 per cent between 1981 and 2011.

Even more surprising is that fully 10 per cent of that 14 per cent growth took place between 1998 and 2011.

Another interesting marker here is that all of the jobs lost in the recession in Canada have, according to the Bank of Canada, now been replaced. Ninety per cent of the new jobs are in industries paying above average wages.

Again, though, not everyone had the same experience. Between 1981 to 2011 average (real) hourly wages increased by 17 per cent for men aged 45-54 but only 1 per cent for men aged 25-34 (youth gets nailed again). Another surprising fact is that, having risen sharply in the 1980s and the 1990s, the wage gap between those with bachelor’s degrees and those with high school diplomas or trade certificates has actually fallen since 2000. It is likely that this modest degree of wage convergence is attributable to Canada’s energy and resources boom: demand for skilled trades is at an all-time high, just as our tech sector — which employs more highly educated people — has contracted.

Nonetheless, the “education gap” in income between those with post-secondary and those without remains significant: in 2011 it was about 37 per cent for men but a shocking 55 per cent for women.

Reflecting on these data points brings me to conclude that it may not be in the top-line numbers that the real story of inequality lies, at least in Canada. We have to dig a little deeper. I see three root causes of our concern with inequality in Canada (three seems to be the magic number).

First, there is a general lack of confidence in our economic future, as a country and as individuals. In March 2012, polling by Ekos found that 57 per cent of Canadians felt that they would be worse off in 25 years than they are today. This is a staggeringly large number of people in a country that has been an outlier (on the positive side) in terms of economic mobility — the decoupling of one’s own prospects from those of one’s parents.

Related to this is a lack of vision for the future at a political level.

Even our supposed destiny as an energy superpower seems hard to grasp and if we fail in that regard it is not clear what the back-up plan is. Without an alternative vision, it is reasonable to expect that trends around income consolidation at the top of the spectrum will continue, to the detriment of the majority.

Second, the politics of division are coming home to roost. The grass is always greener on the other side and the Occupy movement has provided a voice to many unhappy people. The visibility and excess of

the top 0.1 per cent — the group that has been almost solely responsible for shifts in Canada’s overall inequality rate since 2000 — play a part. (The share of income going to the top 0.1 per cent increased from 2 per cent in 1980 to 5.3 per cent immediately pre-recession in 2007: the share going to the top 1 per cent is up from about 7 per cent to 10 per cent over a similar period.) So does the bursting of the credit bubble that previously masked some of the inequality. Another big factor in Canada is regional inequality, but there is no space to go into details about that here.

Third, I perceive a fear that the institutions that underpin our country and the global system are either threatened, rotten or inadequate to face down the challenges of the future. The global financial system comes first to mind, but with so many recent scandals in the worlds of politics and business it’s no wonder people are nervous.

In Canada this disquiet extends to our education and health systems, both of which have been key to our high levels of economic mobility and both of which face myriad challenges.

How, then, should we address these three root causes? It seems to me that the common thread between them is their relationship to equality of opportunity. People feel that this is slipping from their grasp. The good news — as esteemed economist and recent Canada 2020 guest Larry Summers suggested recently — is that this may be a policy area around which progressives and conservatives can come together.

THE CANADIAN PRESS/ Chris Young.

Bolstering this may end up being the single most important thing that we can do for our economies in the near future.

The promotion — using a wide array of policy tools — of equality of opportunity should help not only to encourage entrepreneurism and boost productivity (which we badly need) but also to remedy the dangerous social fragmentation that goes hand-in-hand with a perception of deepening inequality. If you are in any doubt about the nature of such fragmentation, I strongly advise reading the book The Spirit Level, which correlates almost every societal ill with inequality, and the lack of hope and aspiration that such a condition engenders.

So, let’s embrace inequality as the defining issue of our time and confront it head-on by promoting greater opportunities for all. Then, my hope is that the climate agenda – which I perceive as far more intractable – will steal the spotlight and forcefully demand serious policy action.

Diana Carney is Vice President, Research at Canada 2020, an independent, progressive think tank based in Ottawa. She has a BA in PPE and an MSc. in Agricultural Economics from Oxford University and an MA in International Relations from the University of Pennsylvania. She started her career as a management consultant, then spent two decades working in development policy. Originally from the UK, she has lived in Ottawa since 2003 with her husband and four daughters.

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MONDAY, NOVEMBER, 19, 2012

FEATURED OPINION

A fine romance: How Canada-U.S. relations really work

Publisher and executive editor James Baxter Deputy editor, news Ian Shelton

Robin Sears

Deputy editor, opinion Doug Beazley Reporters Sonya Bell | Labour and environment Eric Beauchesne | Economy Colin Horgan | Politics James Munson | Energy and mining Olesia Plokhii | Reporter BJ Siekierski | International trade Laura Stone | Justice, health and aboriginal issues Elizabeth Thompson | Senior political reporter Michelle Zilio | Foreign affairs Columnists Lawrence Martin Michael Harris Fen Osler Hampson Peter Clark Don Lenihan

AP Photo/David J. Phillip

Alpheus Danelia Bolivar

FIPA fears of environmental payback overblown, say experts

Graphic designer Jessie Willms

BJ SIekierski

Photographer Cynthia Munster Matthew Usherwood Web editors Laura Beaulne-Stuebing Deane McRobie Marketing and sales Sally Douglas | Vp, sales Callie Sanderson Zoe Teale John Butterfield | COO 45 O’Connor St, Suite 530, World Exchange Plaza Ottawa, Ontario, Canada, K1P 1A4 Phone: 613-216-9638 | Toll-Free: 1-877-271-9615 Who we are: iPolitics is independent, non-partisan and committed to providing timely, relevant, insightful content to those whose professional or personal interests require that they stay on top of political developments in Ottawa and the provinces.

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Critics of the Canada-China Foreign Investment Promotion and Protection Agreement (FIPA) are citing Canada’s NAFTA’s Chapter 11 experience as proof the FIPA will lead to the federal government paying millions in compensation to foreign investors for legitimate environmental protection.

Several investment law experts disagree.

“The claim by the critics that NAFTA is a threat to environmental protection and sustainable development — looking at the evidence of all the cases both in Canada and internationally — I think that complaint is completely overblown,” University of Victoria law professor Andrew Newcombe told iPolitics.

The University of Ottawa’s Anthony VanDuzer reached the same conclusion in a 2009 paper on NAFTA’s Chapter 11.

“So far, only egregious state actions that were arbitrary and unfair, overtly protectionist or had the effect of eliminating an investor’s investment have been found to be contrary to obligations,” he wrote.

In the Canadian context, though, 18 years of NAFTA haven’t provided many precedents.

There have only been two NAFTA claims in which a foreign investor successfully brought suit against Canada for environmental laws or regulations.

And since no claim has ever been brought against Canada under its 24 existing FIPAs, those two NAFTA cases remain the only basis for suggesting the China FIPA could have the negative environmental impact critics think it will.

For that reason, the facts of the two cases warrant close scrutiny.

Both involved American investors — the Ethyl Corporation in 1997 and S.D. Myers in 1998 — and both, at first glance, make it easy to understand why they have both caused concern.

In the former, Ethyl sued the Canadian government for banning the import and interprovincial trade of a gas additive known as MMT, a suspected neurotoxin.

The legislation that introduced the ban — the Manganese-based Fuel Additives Act — was tabled by then-environment minister Sheila Copps.

Strangely, the legislation didn’t actually ban the production and sale of MMT within Canada — meaning Ethyl was still permitted to establish branch plants and distribution facilities in each province if it wanted to keep producing and selling the product.

That undermined the supposed environmental argument for the ban, as did a 1997 Canadian Senate committee report that was released a month before Ethyl filed its NAFTA claim.

“The evidence relating to the impact of MMT use on emissions of hydrocarbons and carbon monoxide, and consequently on the Canadian environment, is contradictory and therefore inconclusive,” that report said.

In other words, the Canadian government was banning the import of a product for health and environmental concerns it wasn’t even sure were legitimate.

The S.D. Myers case, on the other hand, dealt with the disposal of an indisputably dangerous product:

PCB-tainted hazardous waste.

While a great deal of it was being transported to the U.S. at the time for destruction, the Canadian government imposed an export ban through an order-in-council.

The tribunal sided with S.D. Myers, and in Newcombe’s opinion, they got it right.

The order was thinly-veiled protectionism that actually undermined its ostensible goal: to protect the environment.

“You had Sheila Copps in the Parliament saying that the handling of PCBs should be done in Canada by Canadians. If you read the award, it’s a clear case of preference for national investors, and you can’t do that under NAFTA,” he said.

Secondly, Newcombe followed, officials from the environment ministry questioned the wisdom of an export ban and suggested that — in terms of environmental risk — it might be better to ship the waste a couple hundred kilometers down to the States than to ship it some thousand kilometres to Swan Lake, Alberta.

Simply put, both cases cast serious doubt on how genuine the government’s environmental concerns actually were.

“Do we have cases systemically where environmental measures are being challenged and we’re forced to pay compensation? I think the answer is no,” Newcombe said.

“So does it make sense for Canada to enter into an investment treaty with China? That really depends on political values and a cost benefit analysis, and whether you think it’s worthwhile at the end of the day to protect Canadian investors in China.”

One of the conundrums of Canada/ U.S. relations is that for each side it is a “love that dare not speak its name...” A Canadian prime minister who snubs a U.S. president might not be serving the country well, but it is often good domestic politics, as the streetfighting PM from Shawinigan well knew.

Conversely, one who is seen to sing in sweet harmony with his White House pal suffers sneers and derision, as Brian Mulroney suffered on more than one occasion.

Of course, none of this matters on the other end of the secure phone line. The cost or consequence to an American administration of a bruising or a blushingly intimate relationship with the frozen North is inconsequential. We are expected to be the dependable, if occasionally quarrelsome, little brother we reliably are.

So it’s not surprising that the quiet but surprisingly broad amity between Ottawa and Washington is not acknowledged, let along bragged about, by the Harper administration. It is absolutely the case, however — according to insiders at all levels on both sides — that we have some cross-border partnerships that have not been this good since the Mulroney days.

Mr. Harper and Mr. Obama respect each other, share a somewhat cerebral approach to politics, and

have developed a relationship that works well for both men. John Baird is a Hillary Clinton fan and has established a great relationship with her and her staff. And to complete the trifecta, Canada and the U.S. have traded ambassadors who are respected in their host capitals and work well with each other.

Your reaction to this Hallmark greeting card news might reasonably be either, “So what? That’s their job, for pete’s sake!” or, “What difference does it make to my life?” But you would be wrong. First, this level of amity is not common. Second, it does matter — a lot.

No nation, as Lord Palmerston famously averred, has permanent friends, only permanent interests.

In trade battles and international politics, Canada’s champions fight for our interests with the Americans along with everyone else.

But in dealing with America one has two challenges almost unique among our partnerships: getting them to pay attention, and getting them to abide by agreements.

As Allan Gottlieb powerfully demonstrated during his Washington years, being an ambassador who throws the kind of parties the capital’s A list want to attend means power. Gary Doer exercises influence through his keen understanding of retail politics at the White House and down the road in congressional offices. John Baird’s tough, pointed, ‘values-based’ foreign policy pronouncements,

Prime Minister Brian Mulroney smiles as he shakes

CP PICTURE ARCHIVE -

hands with U.S. President Ronald Reagan follow-

Fred Chartrand

ing the readiing of the communique at the end of the Economic Summit in this June 21, 1988 file photo.

whether you agree with him or not, get American attention.

It’s frequently a challenge to get Americans — still the world’s only real superpower — to accept that international arbitration decisions, Canadian court judgements, or even the outcomes of commercial competition between Canadian and American companies must be respected. After all, the American response, even if diplomatically left unspoken, can simply be, “Says who?”

As we discovered on acid rain, softwood lumber and, most recently, Buy American, neither the law

nor any forms of political pressure were sufficient to move U.S. policy to where we believed they needed to be. Even when you have their attention, the cross-cutting interests of powerful American groups can result in a delay or a refusal of an agreed outcome.

What <em>does</em> make a difference is the ability to pick up the phone and — leader to leader, partner to partner — do serious private horse-trading. Your call does not get answered without that prior relationship having been nurtured.

Your appeal does not get listened to without some shared scar tissue

on previous files. Your American counterpart is not willing to say no to his unhappy local supplicants if you have not given him a reason to care.

So, in high politics, as in small town councils, friendships matter.

Trust, respect, shared confidences and victories underpin the most trivial diplomatic deals.

Don’t expect any smiling, armin-arm photo-ops with Mr. Harper and Mr. Obama, though — theirs will always be a relationship firmly in the closet. On the other hand, be happy that it and the other north/ south partnerships exist. Canada benefits when they do.

The views, opinions and positions expressed by all iPolitics columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of iPolitics.

Robin Sears is a political commentator, former TV journalist and national director of the NDP who directed four campaigns for the party. Under German Chancellor Willy Brandt, he was the assistant general secretary of the Socialist International, the world’s largest community of political parties. He worked on strategic issues with leaders in Europe, Southern Africa and the Middle East. Robin was chief of staff to Ontario Premier Bob Rae during the Accord government, and Ontario’s chief trade diplomat in Asia.

FEATURED OPINION

America’s emergence as an energy power changes everything Tasha Kheiridden

If bilateral free trade defined the Canada-U.S. relationship for the last twenty-five years, the quest for energy independence likely will shape it for the next twenty-five. With shale oil and gas deposits being developed in North Dakota, Texas and other states, the U.S. is on track to outproduce Russia and Saudi Arabia by 2017, according to the International Energy Agency (IEA).

That has implications for businesses north and south of the Canada-U.S. border, and for political relations between our two countries and the world.

Who in the United States will benefit directly from an oil and gas boom? Producers of new sources will win in the short term, but in the long term, increasing production for a single customer could drive down prices and profit margins. That, of course, is the Canadian experience; the United States has long benefitted from our status as a captive supplier.

As reported by CBC News in April 2012, according to the Bank of Canada, in the past three years the difference between the price of Canadian crude vs. Brent crude rose to $40 a barrel, while the spread between the price of our oil and Texas

West Intermediate reached $20 a barrel. Hence the drive to diversify markets and become, not only energy independent domestically, but energy exporters to the world.

In Canada, this naturally increases the pressure to build the Northern Gateway pipeline and sell oil to China. This would give Canada leverage against its American customers, the spectre of which is also pressuring President Barack Obama to approve the Keystone XL pipeline and pump more Canadian crude to the United States. Now into his second term, Obama is arguably in a better political position to give this approval without fear of displeasing the environmentalist constituency he needed for re-election.

Meanwhile, American oil and gas companies are also positioning themselves for future growth abroad and at home. This benefits other players in the energy business, such as refiners, transporters, and makers of oil and gas extraction equipment.

Manufacturers of chemicals and fertilizers also could reap the rewards: billionaire investor Wilber Ross recently told Reuters that he predicts the creation of 800,000 new U.S. jobs in the chemical and plastics sectors as a result of the IEA forecast. And if energy independence also translated into lower domestic gasoline prices,

cost savings could be spread across other sectors, benefitting consumers in the form of lower prices.

Who loses if North America becomes energy independent? Financially, it’s the alternative energy sector. If the continent is awash in cheap natural gas and oil, more expensive renewable sources will become less attractive to consumers and investors. Watch for the green lobby to get aggressive and creative. Alternative energy companies will fight fossil fuel exploration, development and pipelines based on more than a concern for the environment: they’ll be worried about the bottom line as well. Often dependent on government subsidies both to start and to survive, these companies will find it far more difficult to convince legislators to part with tax dollars if their constituents have cheap fossil fuels to run their cars and heat their homes.

Economically and politically, energy-consuming areas will lose clout to energy-producing ones. The Canadian West provides a perfect example, as it experiences a demographic and economic boom. Calgary is fast becoming Canada’s head office destination of choice: according to a study by Calgary Economic Development, reported in the Globe and Mail, in 2009 Calgary had 9.3 head offices per 100,000 people, almost

double Toronto’s 4.7 head offices per 100,000. Seventy-four per cent of those head offices were linked to the energy sector.

Power follows the money, and the West is calling more and more of the government’s tune on everything from environmental assessments to riding redistribution.

Internationally, North American energy independence will have implications as well. Some observers worry that it could reduce American political engagement in oil-producing regions such as the Middle East.

At the Halifax International Security Forum on November 17, Alberta Premier Alison Redford cautioned against this outcome: “North American energy independence could lead ... North America to turn inwards, away from the demands and conflicts of a turbulent world. (But) we’ve never been shy about standing up for our ideals in many forums in many ways, whether it’s human rights, social justice or democracy. And energy can help to serve those ends.”

Finally, an energy boom could add tension to the relationship between Canada and the U.S., as the two countries compete for access to the same foreign markets. Those markets, particularly China, represent direct competition for superpower status with the United States.

This will affect American and, by extension, Canadian foreign policy, as diverging geopolitical interests potentially put western and eastern nations at odds with each other.

As the exploitation of our natural resources reshapes our relationship, both Canada and the United States should look back to the past twenty-five years for an example of how closer ties can benefit both countries — and how we can move forward to meet the challenges of the future. As with free trade, energy independence will produce individual winners and losers, but as nations, we can both come out ahead.

Tasha Kheiriddin is a well-known political writer and broadcaster who frequently comments in both English and French. After practising law and a stint in the government of Mike Harris, Tasha became the Ontario director of the Canadian Taxpayers Federation and co-wrote the 2005 bestseller, Rescuing Canada’s Right: Blueprint for a Conservative Revolution. Tasha moved back to Montreal in 2006 and served as vice-president of the Montreal Economic Institute, and later director for Quebec of the Fraser Institute, while also lecturing on conservative politics at McGill University.

Tasha now lives in Whitby, Ontario with her daughter Zara, born in 2009.

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MONDAY, NOVEMBER, 19 , 2012

Moscow embassy vulnerable to terror attack, espionage Mike Blanchfield Canada’s diplomats in Moscow will have to work another three years in an embassy compound that’s vulnerable to terrorist attack and the prying eyes of foreign spies, The Canadian Press has learned.

Foreign Affairs Minister John Baird was warned in an internal memo from a senior bureaucrat that Canada’s embassy in the Russian capital offers “almost no protection’’ against a terrorist attack.

A leaked copy of the memo details the stalled embassy project, outlining why diplomats won’t be moving to a more secure facility until January 2016 instead of last July as planned.

The delay has added nearly $30 million to the cost of the project, since Foreign Affairs received approval in 2008 to move the embassy to a more suitable building.

A quarter of the increased cost -- or $7.5 million -- is for extra construction to keep unidentified “threats’’ from spying on Canadian diplomats in the new embassy.

The memo surfaced after the recent high-profile closures of Canada’s embassies in Iran and Syria, decisions that Prime Minister Stephen Harper and Baird have said were made to keep Canadian diplomats out of harm’s way.

Meanwhile, the current Russian embassy remains open even though the ``embassy complex does not meet DFAIT security standards in terms of the building envelope.’’

The Canadian embassy and ambassador’s residence have been housed in a series of connected buildings in Moscow that date back to 1898.

“The possibility of terrorist incidents in Russia is high and the existing site offers almost no protection against an attack. Moscow is an extremely hostile environment and the current site is highly vulnerable to counter-intelligence threats,’’ says the memo from an associate deputy minister.

“These buildings have deteriorated beyond acceptable workplace standards. Compounded by age, numerous physical and structural deficiencies, and severe overcrowding, the chancery poses ongoing health, safety and security risks to Embassy staff and other user(s) of the facility, and impedes the effective delivery of mission programs.’’

A senior Canadian diplomat warned Foreign Affairs John Baird that Canada’s

THE CANADIAN PRESS/

embassy in Russia offers “almost no protection” against terrorist attacks.

Hundreds of people have been killed in terrorist attacks in Moscow dating back to the mid-1990s. The two most recent _ also cited in a Foreign Affairs warning to Canadian travellers _ are the January 2011 blast at Moscow’s Domodedovo International Airport that killed 30 and injured about 100; and the March 2010 rushhour attacks on the Moscow subway system that killed 37 and injured 120.

Foreign Affairs spokeswoman Jessica Seguin said precautions are being taken to ensure that Canada’s personnel, interests and visitors are protected at its Russian embassy.

“This property meets Canada’s immediate needs while respecting taxpayers’ money,’’ she said in prepared media lines delivered over email. “A re-scoping of the proposed project was recently completed and costs are expected to be reduced.’’

The department will absorb the extra project cost, which will impose an added financial burden because the last federal budget called for $170 million to be shaved from Foreign Affairs’ $2.6-billion annual budget.

NDP foreign affairs critic Paul Dewar said the delays in the embassy project raise questions about the government’s ability to manage Canada’s diplomatic missions.

“It shows incompetence at a time when the government is cutting staff overseas. They’re closing embassies and making the claim at the same time that security and safety of their staff is a top priority,’’ Dewar said.

“What’s happening in the

interim? Does that mean, as we speak, we’re vulnerable? If so, what are they doing about it?’’

In February 2008, Treasury Board gave approval to Foreign Affairs to sign a new 20-year lease with the Russian government. Russia’s foreign ministry leases embassy space in the country from an inventory of properties under its control.

The decision to move was made following a 2007 audit by the department that found the embassy deficient.

A lease for a new building was signed in March 2008, contingent on Foreign Affairs coming back to Treasury Board with a revised submission on the final cost.

Canada signed the lease because the Russians offered a building ``at submarket rates’’ that would provide a ``long-term solution.’’

But there was a catch.

“The offer was time-sensitive and required the Canadian government to respond by March 1, 2008 or the property would have been offered to another organization,’’ the memo states.

The new building has since sat unused while the project cost jumped from $78.1 million to $107.3 million, in part because of $9.5 million of “increased rent costs while the building remains unoccupied.’’

Dewar said the government needs to answer publicly for how it negotiated the new embassy with the Russian government.

“Is this the standard for all other

Adrian Wyld

countries, or are we just seen as suckers, or the ones who will pay a king’s ransom for an empty building?’’

The added Russian embassy project costs include $7.5 million to pay for ``increased construction costs to mitigate counter intelligence threats.’’

The embassy move comes amid a full-blown spy scandal between Canada and Russia.

Navy Sub-Lt. Jeffrey Paul Delisle pleaded guilty last month to espionage-related charges and breach of trust for selling classified information to Russia from 2007 to 2012. Delisle, 41, worked as a threat-assessment analyst at a highly secretive military facility in Halifax.

The Delisle affair has sparked concerns that Canada has compromised the secrets of its allies in the ``Five Eyes’’ intelligence group that includes the United States, Britain, Australia and New Zealand.

The memo attributes delays to the ``intelligence-related threats in Russia,’’ but provides no specifics.

“Addressing this threat to the satisfaction of the Department and our key allies has added to the complexity of the project and has required significantly more consultation than typical chancery projects,’’ says the memo.

Other extra costs include $4.6 million for “additional specialized on-site supervision to mitigate counter intelligence threats,’’ and a Russia value-added tax or VAT of $6.6 million.

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“Russia changed its policy for diplomatic entities after 2008 and now requires diplomatic entities to pay VAT at source. Although this is recoverable, the process is neither clear nor timely,’’ says the memo.

Foreign Affairs also blamed delays on the ``byzantine design and building permit approval process in Moscow.’’

Baird was told his department was sitting on a sensitive story that would likely become public because some MPs had noticed problems on a recent visit to Moscow.

“The department will take a responsive approach to questions from the media and members of Parliament, should they arise,’’ says a section of the memo under heading of ``communications implication/ actions.’’

Under the heading “Parliamentary implications/actions,’’ the memo states: ``We can expect some interest by parliamentarians as some of them have visited the Moscow facility and have commented on the inadequacy of the current facilities.’’

The memo doesn’t say when the MPs paid their visit, but it outlines details of what they would have seen.

“For example, overcrowding has turned the hallway to the trade section into a storage space for chairs, which does not provide a professional welcome to clients. The lack of adequate space to host Russian counterparts limits the ability of diplomatic staff to build the relationships necessary to further Canadian interests.’’

That leaves a lack of space for ``surge capacity’’ to deal with planning special events in Russia, including the recently completed APEC summit in Vladivostok, forthcoming G8 and G20 summits, as well as the 2014 Winter Olympics.

Canada and Russia will enter a crucial phase of their relationship next year when Ottawa assumes a two-year term as chair of the Arctic Council. Among other things, the council will help deal with boundary disputes in the resource-rich Arctic.

Shortly after Baird was appointed to the Foreign Affairs portfolio in May 2011, a memo from his briefing book, released under the Access to Information Act, noted that the 2010 budget set aside $450 million over seven years for the Security Abroad Strategy to bolster security at Canada’s foreign embassies.

MONDAY, NOVEMBER, 19, 2012

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Israel strikes media buildings in Gaza, expanding range of targets Ernesto Londoño & Abigail Hauslohner, Washington Post Earlier Sunday, Israeli warplanes struck two buildings used by Palestinian and international journalists. Military officials said the targets included an antenna used by militants to communicate and an office dedicated to producing propaganda.

Witnesses said six Palestinian journalists were wounded, including a cameraman whose legs had to be amputated.

The Foreign Press Association in Israel issued a letter expressing concern and noting that a U.N. Security Council resolution says that journalists covering conflict must be protected.

“The target was not journalists,” military spokeswoman Avital Leibovich told reporters in Jerusalem. “The journalists in these buildings were serving as human shields for Hamas.”

The Israeli prime minister hailed the early results of the operation. “We are extracting a heavy price from Hamas and the terror organizations,” Benjamin Netanyahu said Sunday during the opening session of the weekly cabinet meeting. “The army is prepared to significantly expand the operation.”

Officials said Israel targeted more than 50 “terror sites” Sunday, including underground rocket-launching sites and tunnels.

Israel has activated reservists for a possible ground incursion into Gaza, a step that could markedly intensify the fighting and increase the death toll.

Arieh Herzog, the former head of Israel’s missile defense program, said Sunday that militants in Gaza have stockpiled thousands of rockets in recent years. “They are far from finishing their stockpile,” he said.

“We can expect if any political decision doesn’t stop this, they can continue fighting for many days.”

Cease-fire negotiations in Cairo appeared to make little headway Sunday,

although Hamas’s newly strong standing was underscored as the group’s top leader in exile, Khaled Meshal, met with Egyptian President Mohamed Morsi and Turkish Prime Minister Recep Tayyip Erdogan.

An Israeli envoy arrived in Cairo on Sunday, the Associated Press reported, citing anonymous Egyptian security sources, but as fighting in Gaza escalated, it was far from clear whether the visit was a prelude to a deal. U.N. Secretary General Ban KiMoon planned to visit Cairo on Monday to discuss the situation.

Recalling the ground invasion during the 2008-2009 conflict, Gaza residents have begun to warily contemplate a new round of street fighting. After prayer at the mosque at the Khan Younis refugee camp in the center of the strip, an imam delivered a fiery sermon filled with local news.

Palestinian fighters had shot down an Israeli Apache helicopter over Gaza City to the north, the preacher announced, the latest in a string of rumors in recent days that have turned out to be false. Each time, though, they have raised the prospect of an imminent ground invasion.

Some in the camp think Hamas is strong enough to deter it this time around, said Basil Harb, a university lecturer.

“People say the Israeli troops are afraid of coming into Gaza,” he said.

The angst sometimes gives way to dark humor. Harb said he started to add a new level to the family home last week before the Israeli air offensive started but decided to put the work on hold. “I still need to knock down a wall,” he said, then added with a grin: “I thought about calling the Israelis to send a drone to do it. But what if they sent an F-16 instead and then the whole house would be flattened?”

His brother Sami and their aging mother burst into laughter. But the mood turned dark a moment later. Death has become so normal here, Basil Harb said.

“War, after war, after war,” he lamented.

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Obama says he’s confident of reaching fiscal cliff deal Hans Nichols & Margaret Talev, Bloomberg News President Barack Obama expressed confidence that he and Congress would reach an agreement that will avoid the automatic spending cuts and tax increases that are scheduled to occur at the end of the year.

“I am confident we can get our fiscal situation dealt with,” Obama said at a news conference in Bangkok, where he began a three-nation trip that will include the first visit by a sitting U.S. president to Myanmar.

Before Obama left for Asia, he began on a new round of deficit-reduction talks with top Republicans and Democrats in a bid to avoid the combination of $607 billion in automatic tax increases and spending cuts that threatens to throw the country into a recession next year.

He arrived in Asia today on his first foreign trip since re-election, underscoring the region’s importance to U.S. growth. The Nov. 17-20 trip is built around a summit in Phnom Penh, Cambodia, where Obama will

meet with leaders from China, Japan, Russia, India and other Asia-Pacific countries.

Speaking in a region where some nations are still moving toward allowing greater political and economic freedom, Obama said the squabbling in Washington is an outgrowth of one of the key strengths of the democratic system because it ensures that all sides are heard.

“Democracy is a little messier than alternative systems of government but that’s because democracy allows everybody to have a voice,” he said at a joint news conference with Thailand’s Prime Minister Yingluck Shinawatra. “And that system of government lasts. And it’s legitimate. And when agreements are finally struck, you know that nobody is being left out of the conversation and that’s the reason for our stability.”

While Obama has repeatedly called for an immediate extension of middle-class tax cuts, he has been less vocal on how Congress should try to avert the spending cuts that are also part of the so-called fiscal cliff.

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Canada’s research-based pharmaceutical companies invest more than $1 billion in the research and development of innovative medicines and vaccines each year. They contribute more than $3 billion to the Canadian economy, and they support 46,000 well-paying Canadian jobs. Most importantly, innovative medicines save lives.

To learn more about how pharmaceutical innovation helps us live better and longer visit www.canadapharma.org

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MONDAY, NOVEMBER, 19 , 2012

FEATURED OPINION

FEATURED OPINION

Now’s the time for Obama to earn his Nobel Prize

Is the CPC’s robocall narrative starting to crumble?

Paul Adams

Lawrence Martin “The polling station numbers given out by the Conservative Party… are all wrong,” she writes to the agency’s lawyer. Later in the day she writes again; “The workers in the returning office think these people are running a scam.” In another, she says that some returning officers are reporting that people making calls falsely identified themselves as being from Elections Canada.

The Hawdur emails, obtained

by Postmedia under the Access to Information Act, are among many from agency officials drawing similar interpretations from Conservatives’ activities. The weekend report

by Glen McGregor and Stephen Maher, reporters who are in pursuit of the vote suppression scandal like a latter-day Woodward and Bernstein, marks a big advance in the story. We hear for the first time from Elections Canada officials monitoring the situation at the time of the vote.

Though nothing is conclusive, the revelations, which directly challenge the Conservatives’ version of events, can hardly be of comfort to Stephen Harper’s team.

The story has become a whodunit with phenomenally high stakes. No democratic government is likely to survive if found to have run a widespread vote-rigging operation.

Mr. Harper has denied any involvement by his party in a call campaign to misdirect voters.

His 2011 campaign co-chair Guy Giorno, who said that suppressing the vote is a “despicable, reprehensible practice,” has been equally categoric.

In the run-up to voting day, EC officials had a list of complaints from 13 ridings. They found the alleged abuses so serious that, according to the Postmedia report, they immediately contacted Conservative Party lawyer Arthur Hamilton.

He took a day to get back with a response that denied any wrongdoing, saying the calls were being made to ensure Conservative voters got to the right polling stations.

Unsatisfied, EC officials went back to him again before voting began, but he responded in the same way.

The uncovered emails raise the question that if Conservative campaigners were only trying to assist their own voters, why were they giving out, as the Elections Canada officials saw it, false information on polling station locations? And why, if they were only dealing with their own supporters, would there be such a rash of protestations to Elections Canada?

Maybe the Conservatives’ claims of no wrongdoing will hold up. Maybe mistakes were made and calls went unintentionally to the wrong people. Maybe there were some rogue operators

What we’ve learned from the emails of Elections Canada officials raises suspicions, Big ones. in Conservative ranks – though it is an operation strongly controlled from the centre - that party headquarters were unaware of. It is interesting to note that while many of the 13 ridings in question featured close races, many others did not.

In those ridings it wouldn’t make sense for the party to stage a vote suppression operation. Also, since the Tory phone bank operation had hundreds of callers, why has only one among them come forward to admit making bogus calls?

But there are other questions: Why would the Tories stage a phone blitz on polling locations in the last week when, according to chief electoral officer Marc Mayrand, only 61 of 20,000 polling locations were moved in that week? That’s onehalf of one percent. Then there is the Ekos poll purporting to show the vast majority of poll-location calls went to voters supporting opposition parties. Why would that be? Then there is Michael Sona, the former Tory operative in the Guelph riding, who has referred to the vote suppression operation as being “a massive scheme.”

Anyone wishing to play devil’s advocate could try this theory: The Conservatives, no strangers to questionable political tactics – remember the in and out affair?

– were aware that in every election there are late changes in polling station locations. They decided they could use this as a cover for a calling operation. If suspicions arose, they could say they were just phoning to get their supporters out and maybe a few mistakes were made along the way.

That’s one theory. It may be far off the mark. But what we’ve learned from the emails of Elections Canada officials raises suspicions, big ones.

Lawrence Martin is the author of 10 books, including six national bestsellers. His most recent, Harperland, was nominated for the Shaughnessy Cohen award. His other works include two volumes on Jean Chrétien, two on Canada-U.S. relations and three books on hockey.

Here is Anita Hawdur, an Elections Canada officer, in an email a day before the 2011 election, the one for which the Conservatives are accused of attempting to rig the vote by directing voters to the wrong polling stations.

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MONDAY, NOVEMBER, 19, 2012

BOOK REVIEW

Western oilmen and Eastern bastards Colin Horgan

Let the Eastern Bastards Freeze in the Dark Mary Janigan 342 pp Random House Available now It’s fitting that a book like Mary Janigan’s Let the Eastern Bastards Freeze in the Dark should hit the shelves only days after former Alberta premier Ralph Klein — the man who uttered the famous phrase — received what many figured was a long-overdue Order of Canada.

It’s equally fitting that such a book would emerge as the Conservatives stake out a very clear position on how Canada might handle its carbon emissions. Carbon tax?

Over their dead bodies.

It hasn’t always been that way.

In fact, the Conservative party proposed putting a price on carbon in 2008.

But for the Conservatives, these West-versus-East refrains fill a rhetorical vacuum left by the death of the long-gun registry and the termination of the Wheat Board: fodder for the party base, still located largely in Western Canada. The message

is simple: there’s an Easterner in Ottawa who wants to reach across and crush everything you’ve worked for to benefit his own neighbourhood.

The negative effects of the oilsands don’t go unnoticed in the West, but they are also seen as the mark of productivity — the kind of productivity, some would argue, that helps the rest of the country keep its head above water in a tumultuous global economic environment. The oilsands — along with all the jobs the sector generates in hundreds of associated professions — are at the moment Canada’s biggest economic success story.

And most of them will be damned if they’ll let anyone mess with it. The Conservatives know this. Ralph Klein knew it.

In this context, Janigan’s book is both deeply interesting and highly illuminating.

Janigan, an award-winning national journalist, uses a disastrous first ministers’ meeting in 1918 as an anchor point and from there dissects one of the more intriguing inter-governmental spats in Canadian history. At every turn, Janigan lets us in on one more bit of the story of Western alienation, a tale that’s been slowly written since the day Canada acquired Rupert’s Land from the Hudson’s Bay Company — a transaction that would result in an endless battle over who owned what.

Did Eastern Canada buy the West and, with it, the rights to its resources? Or did the burgeoning West have control over those resources?

“In those first years after Confederation, all provinces were asserting their rights against the dominance of Ottawa’s strong central government. But the West had no natural allies ... because the other premiers maintained that their taxpayers had bought the West,” Janigan writes early on.

“Why would the other pre-miers

empower the colonies that were buying needed goods from their manufacturers? Why would they support Western demands for higher subsidies when their taxpayers were still paying off the loan to buy the West?”

Janigan’s book is more than just a story of the West, its introduction into the Dominion, its early trials (the Red River Rebellion, etc.), or its entrepreneurial, go-for-broke attitude, the legacy of generations of immigrants determined to swim rather than sink. It’s also a story about just how difficult it was to establish this country in the first place.

Characters from Ottawa are often portrayed as stubborn elitists.

Janigan recounts how little anyone seemed to know of the endless expanse to the west in 1870. At one point, Ottawa asked the region’s lieutenant-governor to provide a list of laws and regulations the HBC had enforced, as well as the “numbers, wants and claims” of aboriginals. It also wanted to know what kind of currency was circulating in the area.

But what also stands out is the scope of the project Ottawa undertook by acquiring so much land at once, especially under financial constraints and the constant threat of an American influx. As for the East’s failure to understand the West, maybe that’s no mystery. For a long time, nobody making decisions for the region had ever been there. As much as one sympathizes with the West’s desire for what its residents and leaders felt was rightly theirs, one can’t help respecting the tenacity of men like Sir John A. Macdonald who made the whole thing work.

In short, Let the Eastern Bastards Freeze ... does more than explain the region’s ongoing alienation. It explains just about everything you need to know about how Canadians think about one another.

Do you remember what Barack Obama did to earn the Nobel peace prize in 2009?

Of course you don’t. When he received the award just nine months after assuming the presidency, he had done precisely nothing. Other than not being George W. Bush.

It was a grand gesture of wishful thinking: hope, among other things, that he would try to settle wars in the Middle East instead of start them.

In recent days, there has been another explosion of violence between Israel and Palestinians in the Gaza Strip. As usual, each side blames the other, and as usual, each side makes its case with selective history. (For a summary, look here.)

President Obama, we are told, assured Israeli Prime Minister Benjamin Netanyahu that Israel has a right to defend itself while regretting the loss of life on both sides.

If this is truly the gist of what Obama said, it was puerile. Of course Israelis have a right to defend themselves, as do Palestinians. The question is and always has been whether each side has the right to deploy the methods they have been using in “defending” themselves. And whether they are better off reflexively exercising those rights or finding a negotiated path to peace.

At one time, the burning question in the region was whether Palestinian militants had the right to blow up Israeli teenagers at discos and Israeli grandmothers and grandchildren at falafel stands. More recently, it is whether Palestinian groups and their Hamas quasi-government in the Gaza Strip have a right to launch missile attacks of increasing range at random Israeli targets — inevitably, mainly civilian. Killing civilians for a political or military objective is rightly regarded as a crime.

But it is fair to ask also whether Israel, which lost three civilians in the first round of recent Palestinian missile attacks, has the “right” in its defence to kill dozens of times that number of Palestinians, perhaps half of them civilians, some of them infants and toddlers. Here’s a picture of one of them, eleven-month old Omar, the son of a local BBC employee in the Gaza Strip.

Did Obama really mean to say that in order to end the missile attacks from Gaza, Israel had a right to kill Omar, who had not yet taken his first steps?

When Obama received the Nobel prize, there was an momentary illusion – a delusion really – that one man could be a historic force for peace in the Middle East, just as his predecessor had been a force for so much war. The Middle East is more complicated than that. When Obama got his prize the Arab Spring had not yet erupted, a phenomenon which made it clear that even the most skilled chess player could not simply move the pieces around the board at will. Even the pawns sometimes have minds of their own.

But Obama and the United States retain substantial leverage over Israel, which receives more than $3 billion a year in direct military assistance, as well as diplomatic cover and other economic aid.

In his recent book, the liberal American Zionist, Peter Beinhart, details how Obama came to office with a more balanced picture of the Palestinian and Israeli predicaments than his predecessors, and devoted some political capital at the start of his tenure to curbing Israeli settlements and re-starting a path to negotiations. But Obama was

ground down by domestic political pressure orchestrated by the Israeli government and its most unquestioning American supporters.

In the recent election, Obama uttered nothing better than the standard American banalities about standing with Israel.

It is important to understand that the current absence of a track for negotiations is something that Israeli politicians have, to a degree, chosen. It is absolutely true that Hamas, which now controls the Gaza Strip, is an impossible — or at least very unlikely — interlocutor for peace (though some peace advocates argue otherwise).

But it is worth remembering that after Palestinian leader Yasser Arafat died in 2004, his successor was Mahmoud Abbas — a relatively weak figure, but one who was committed to finding a negotiated path to peace. Born in what is now the Israeli town of Safed, Abbas, who still retains authority in the Palestinian West Bank, said recently that he has no desire to return there to live – effectively renouncing his own personal “right of return”.

But instead of building Abbas up as a potential interlocutor for peace, the Israeli prime minister at the time, Ariel Sharon, undermined him. In 2005 Sharon decided to withdraw troops and settlers from the Gaza Strip while maintaining control of its borders, airspace and sea access, in an attempt to shorten Israel’s lines of defence. He did so unilaterally, refusing to negotiate the withdrawal with Abbas.

The result was that when the Israelis left, Hamas claimed a victory for its violent and unyielding tactics, saying it had driven Israel from Gaza, just as Hezbollah had driven Israel from Lebanon a few years earlier.

The one person who could not claim any part of the credit for the Israeli withdrawal from Gaza was the man of peace: Abbas. He soon lost a parliamentary election to Hamas, which has ruled the Gaza Strip since.

Netanyahu has no more taste for negotiations than Sharon had – whether with Iran or with the Palestinians.

Some Israelis have taken to using the metaphor of “mowing the grass” for their current strategic policy – describing military operations against Gaza and other regional enemies as regular, reasonably frequent events. The region, in this view, will be one of perpetual war. And friends of Israel are meant to believe that this policy of fighting every sort of neighbour in perpetuity is a formula for escaping Israel’s existential dilemma.

Behind this is the hubris that suggests Israel can live in regional alienation and isolation, and that its neighbours will always remain too weak, foolish and divided to carry through on what many Israelis fear is their true desire: the elimination of Israel from the map. But a true friend of Israel might ask: For how long is that possible?

Forever? Really?

None of this will change unless Obama uses the considerable leverage he has over Israel. Whether America likes it or not, it will be ineluctably drawn into the conflict again and again as the great funder and guarantor of Israel’s bristling military-strategic policy.

With tragic results for Israel, the region and possibly also for America.

Obama has his Nobel peace prize. Now let’s see him earn it.

Paul Adams is a former Globe and Mail Middle East correspondent.

Smugglers among security challenges Continued from pg. 1 challenges facing Canada.

Projects must be designed to address one of the priority areas the government has chosen for this round of funding.

“Proposals should address an identified shortfall in science, technology, policy, operational capability or other components that can be addressed to contribute to the prevention/ mitigation, preparedness, response and recovery associated with these or similar types of events,” says the bidders guide.

The bidders guide also sheds light on some of the federal government’s current security concerns and where it feels it is falling short.

For example, one sample scenario outlined for bidders concerns an international smuggling operation between Canada and the U.S. “While the implementation of the Automatic Identification System and the Long Range Tracking and Identification System significantly improve domain awareness, there

remains a lack of persistent wide-area surveillance of Canada’s EEZ (exclusive economic zone) and approaches, particularly in the North,” the guide reveals.

The guide says smuggling of material “across Canada’s maritime borders including inland waters is an ongoing concern” and talks about “the vulnerability of our border to illegal movement of people and material by small vessels in the Great Lakes and St. Lawrence Seaway.”

Another sample scenario involving an influenza pandemic highlights the problems that persist in Canada’s public health system.

“Public health care response and communications systems remain challenged by interoperability, reliability, availability (capacity in times of surge demand) issues and are vulnerable to wide disruption from limited resources and absenteeism,” reads the guide.

“This capability is even more critical in remote and northern regions where communications and resources for health care are limited.

innovative pharmaceutical companies generate $3 billion in economic activity and support 46,000 well-paying jobs — strengthening Canadian communities from coast to coast.

Canada Pharmaceutical Industry Jobs: 14,990 Average Salary: $103,366 Indirect Jobs Supported: 31,009 Economic Impact: $3 Billion Newfoundland & Labrador 70 $102,036 220 $17.2 M

Prince Edward Island 14 $1.1 M

British Columbia

Alberta

Saskatchewan

Manitoba

Ontario

Quebec

New Brunswick

Nova Scotia

607

573

129

191

7,733

5,321

140

212

$102,343

$102,268

$101,577

$102,324

$102,928

$104,662

$101,823

$102,248

2,994

2,974

74

301

12,841

10,924

147

515

$130.5 M

$222.8 M

$12.3 M

$23.7 M

$1.35 B

$1.2 B

$11 M

$30.4 M

www.canadapharma.org

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MONDAY, NOVEMBER, 19 , 2012

In this July 11, 2011 file photo, U.S. and Chiense top generals talk during a meeting at the Bayi building in Beijing.

AP PHOTO/Alexander F. Yuan, Pool

FEATURED OPINION

Could the United States and China go to war?

Derek Burney & Fen Osler Hampson

China selects its new leader much like the College of Cardinals chooses a new pope, albeit without white smoke (or mirrors). The Americans follow a different technique in choosing a president. The consequences of both processes this year, and the degree to which those selected are able to come to terms with one another, will be the most important determinant of global stability for the next four years.

The wraps were finally taken off China’s new leadership last week.

China’s new leader, General Secretary Xi Jinping, is a “princeling,” the son of a prominent member of China’s old revolutionary guard. Though he is considered to be a pragmatist, the six other new members of the downsized Politburo Standing Committee are generally seen as conservative and non-reformers.

These are unsettling times for China’ new leaders. There is mounting social unrest against a regime that is widely seen to be corrupt, privileged and out of touch, even by its own admission. China has gone out of its way to bully its neighbors, notably Japan, Vietnam, and the Philippines, over its territorial claims in the South and East China Seas, where many say it has overplayed its hand.

China’s new leadership also has to come to grips with the fact that no matter what it does, it will not be able to replicate the astronomical, double-digit growth rates China enjoyed over the past decade. Markets in Europe and the U.S. are neither big enough nor growing fast enough to fuel the Chinese juggernaut.

A bigger question is whether China and the U.S. can live at peace

with each other until China’s own internal political transformation is complete. U.S. mismanagement of domestic affairs, which has tarnished its lustre as a world leader, is feeding a mood of global uncertainty. China has no desire to replace the U.S. (yet), but it should not be blamed recklessly for indulgence by the U.S. Corruption, cronyism and the lack of political freedom will put more pressure on China in time than sermons from without.

Here are five reasons why there will be war between the U.S. and China — and five reasons why there won’t.

The first is the historical curse of great power transitions. Since the times of ancient Greece, great power transitions in world politics have had deeply unsettling consequences. As Thucydides wrote about the origins of the Peloponnesian wars, it was the rise in the power of Athens and the fear that created in Sparta that led to war. Today, in an ironic twist, the United States is cast in the role of Sparta and China as Athens in what is the fastest rise of a new economic power in history.

The American strategic “pivot” toward Asia reflects some of the same fears about China’s rise that Sparta felt about Athens. Athens bullied its smaller Aegean Sea neighbors; China is doing the same in its own maritime neighborhood.

A second reason is public opinion. The overwhelming majority of Americans (60 per cent) see the rise of China as competition for the United States and they don’t like it.

Never mind that China is underwriting much of the U.S. fiscal deficit (including the U.S. defence budget) and debt. America’s elites, who really ought to know better, feel that competition even more acutely.

The third reason is U.S. leadership

and its own economic management.

The prospect of a tit-for-tat trade war may be more likely and more ominous — especially if the U.S. drifts aimlessly down a sharp fiscal slope, even if it doesn’t immediately fall off “the cliff.”

Fourth, the United States is working actively to encircle if not contain China by reinvigorating its alliances in the region — notably with Japan and Australia, but also with other Southeast Asian nations, including former adversaries like Myanmar and Vietnam. The much-touted Trans-Pacific Partnership is also part of this containment strategy.

Fifth, China in turn has taken to blaming America for inflaming regional tensions and creating problems that are largely of its own making. Its claims in the South China Sea are legally dubious and its actions could draw in the U.S. in defense of its allies, like the Philippines.

On the other side of the ledger, here are five reasons why there won’t be war.

The first is that China and the U.S. are two of the most highly economically interdependent economies in the world.

China is heavily invested in the U.S. economy and U.S. Treasury Bills. The U.S., in turn, is heavily invested in China. Any kind of major disruption in relations or escalation of tensions would cost both countries dearly. Unlike the U.S. and Russia during the Cold War, or even the relationship between Germany and Britain prior to the First World War, China and the United States are joined at the hip by mutual trade and investment. They may be strategic rivals, but any kind of surgical separation would almost certainly kill off both of these Siamese twins.

Second, China is militarily in no position to challenge the U.S. Its

military power and projection capabilities pale in comparison to that of the U.S., notwithstanding recent increases in Chinese defense spending and China’s acquisition of a bluewater navy. Nor is it at all clear that China wants to go head-to-head with the U.S. by challenging its global military supremacy.

Third, most countries of the Asia Pacific, including ASEAN, won’t join the States in a U.S.-led anti-China coalition. Incidentally, this is one of the reasons why some countries are ambivalent about the security thrust of the TPP and go out of their way to pitch it as a trade deal.

Fourth, Americans have no stomach for opening up another military front. Beset by vast domestic challenges and still recovering from their bloody and inconclusive experiences in Iraq and Afghanistan, Americans in general will be disinclined to look for fresh conflicts. The Chinese have their own domestic worries to distract them; if hostilities open, expect to see them limited to trade disputes, or to bloodless (and publicly deniable) strikes in cyberspace.

The fifth is recent history. The record of Sino-American relations since the Kissinger-Nixon opening in the early 1970s has largely been one of cooperation. China and America cooperated on the withdrawal of Vietnamese troops from Cambodia in the Paris Peace Accords of 1992.

America was a strong supporter of China’s entry into the World Trade Organization. American companies have invested hugely in China and now Chinese companies are trying to do the same in the U.S. (and Canada).

Although China and the U.S. have their differences on how to deal with the consequences of the Arab Spring, especially in Syria, they have shared interests in promoting stability in the Middle East and securing

safe passage for the 20 per cent of the world’s oil supplies that pass through the straits of the Persian Gulf, much of it to China.

The U.S. and China simply have too much at stake to replay the war between Athens and Sparta. The rest of us also must ensure that history does not repeat itself. Canada, Australia, the U.S. and others, for example, might begin by adopting a common, not competitive, approach to investments by Chinese SOEs in their respective resource bases and to the shared threat from cyberspace, thereby making the “Asian pivot” more than a trendy pirouette.

The views, opinions and positions expressed by all iPolitics columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of iPolitics.

To view other columns co-authored by Derek Burney and Fen Hampson, click here. To view articles authored by Derek Burney, click here. To view columns by Fen Hampson, click here.

Derek Burney, an Officer of the Order of Canada, is a senior strategic advisor to Norton Rose Canada LLP. Mr. Burney is a former Canadian Ambassador to the United States (1989–1993) and a visiting professor and senior distinguished fellow at Carleton University. For a more complete bio of Derek Burney, click here.

Fen Osler Hampson is a Distinguished Fellow and Director of Global Security at the Centre for International Governance Innovation. He is also Chancellor’s Professor at Carleton University. He is the author of nine books and editor/co-editor of more than 25 other volumes on international affairs and Canadian foreign policy.

MONDAY, NOVEMBER, 19, 2012

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