A view from America: down but not out

| February 8, 2012 | 0 Comments
The Canada-U.S. border at White Rock, B.C.

The Canada-U.S. border at White Rock, B.C.

Oh America! Still buried in a painful recovery from recession, while coping with record nine percent unemployment levels, the United States appears unable to reach conclusive decisions about a strategic path for recovery. At least to outsiders, the two-party political system seems fatefully polarized and therefore paralyzed. Partly as a matter of style and presidential choice, the United States seems less dominant on the world stage, encouraging NATO to take the lead in some aspects of the air and ground war in Libya, for example, and pulling troops out of Iraq on a schedule outlined by President Obama in his election campaign.

From the Washington perspective, Canada appears quite prosperous and politically content. Following the spectacular decline of the federal Liberal party, as well as of the Bloc Quebecois in Quebec and the corresponding ascendancy of the NDP in the latest federal elections, the majority-government Conservative party under Prime Minister Harper is in a strong position to exercise leadership. Having benefited from the wise fiscal policy of then-Finance Minister Paul Martin and carefully nurtured by Conservatives during their subsequent interregnums as minority government, Canada corrected its fiscal imbalances in timely fashion. Prudently regulated, Canadian banks avoided the “bundling” of opaque securities and therefore escaped the excesses of the financial debacle leading to the recession. Even with a slow-down in the export of manufactures to floundering Europe and struggling America, Canada benefits from the 30 percent of its economy involved with commodity exports, mostly consumed by strong Asian demand.

Yet it is a mistake to misjudge America. Still by far the largest and richest economy in the world, possessing the most flexible and massive military capability, which remains the backstop for global order, the United States enjoys a diverse and balanced economy marked by a capacity for innovation and entrepreneurship. Invention of shale gas “fracking” is only the most recent example of this propensity. Unless dragged down by the fiscal and monetary mess in Europe, the U.S. economy is slowly edging out of difficulty toward a more robust growth path, this time on a much more productive foundation.

But crazy things do happen, politically, in the United States during an election year. Despite the noise and contention, the bills do get paid. The ideal may be the enemy of the good, yet the American Congress will muddle through with minimalist legislation until the signals from the electorate become less ambiguous. This is likely to happen in November. Politics in the time of James Madison [the fourth U.S. president] was no less turbulent than it is today and with similar capacity to point in new directions. Misjudging either the vitality of the American political system, or the capacity of the U.S. economy to recover, is a fool’s game.

 

Global Convolutions

Every news talk show and every newspaper opinion page tells a story about the “rise of China.” Admittedly impressive in terms of rapidity, and massive in scope and economic impact, the ascendancy of China among the Great Powers is not historically unique. China’s power cycle will be shaped by a dynamic that has always mapped the structural trends of history, and it will include the same “critical points” of shifted trend that have challenged every other rising power historically. A single dynamic of structural change is transforming the power cycles of all of the great powers — and the expectations that each has about its future security and foreign policy role. (See the special volume, Power Cycle Theory and Global Politics, published by The International Political Science Review, Vol. 24, No. 1, January 2003).

China’s accelerating rise up its power cycle has been accompanied by ebullient expectations about its foreign policy opportunities. But China will soon pass through an inflection point on its power cycle where everything will change. Governments are then likely to face a very distraught China. The level of its relative power, which had been increasing at accelerating rates, will — even if its absolute growth rate does not diminish — suddenly begin to increase more slowly due to the “bounds of the system” that contours each of the state power cycles.

Suddenly China’s prior foreign policy expectations will look at risk. Half of the country will still be undeveloped. Huge inequalities of wealth will challenge the social message of the Communist Party. Demographic shifts worsened by the onechild policy will disrupt its nascent social net. Nationalism and paranoia inside China concerning its foreign policy role will confront other actors over Taiwan, the South China Sea, and maritime and naval passage. Canada and the United States can help China stick-handle its way through this systems transformation. Yet not just trade and commerce will be at stake in this future interval of crisis. Japan, the United States, Europe, Canada, Australia, Russia, and quite possibly India, will need one another and will require strength, patience and major diplomatic skill.

 

Bilateral Trauma

Consider the bilateral Canada-U.S. stress and strain, for example, regarding the postponed Keystone Pipeline. Is the United States turning its back on Canada? Realism tells a different story. The Obama Administration faces a tough election fight. Environmentalists traditionally support the Democratic Party. Obama needs them. After the November election, a victorious Obama Administration or a triumphant Republican candidate will probably approve the Keystone Pipeline. TransCanada knows this. This is why TransCanada is also working with Nebraska to re-route the pipeline around aquifers so as to bolster its case.

But how do Americans view Canadian strategems? Do they fear sale of heavy oil to China? Are they persuaded by the effort to build an alternative pipeline to the Pacific Coast? Someday that may occur. But such a pipeline faces even greater permitting problems than Keystone. Construction will not happen any time soon.

Similarly, Americans are aware that of the six or so up-grading facilities that were on the books, only one survived the recession. The market determines these commercial outcomes. Both unused refinery capacity of the right type, and large demand, exist on the U.S. Gulf Coast and elsewhere in the United States. Canada is the natural supplier by reason of proximity. The United States needs Canadian oil, both conventional and heavy.

American policy-makers also know that the capacity to make dry tailings commercial could occur within five years. Elimination of wet tailings that now occupy 66 square miles of Alberta’s surface area would make the environmental record of the oil sands look much better. Until technical breakthroughs in the development of alternative energy sources eliminate the need for fossil fuels, the oil sands will supply oil to the United States, paid for at world prices.

 

Don’t Underestimate the United States!

Observers of trade and commerce often are impressed with very high GDP growth rates in Asia. Yet Europe and the United States buy Canada’s manufactures and services, not just its raw materials. With their neo-mercantilist approach to trade, many Asian countries do not. Why substitute growth for development? Political risks in some of these markets are also very high. Moreover, the size of the American and European markets is often undervalued. Of course these regions must escape the drag of the recession. They will, albeit slowly.

Reassessment of priorities, and restructuring, continually take place in Washington. Washington has not given up on the 21st Century — far from it. Knowing the United States well, Canada understands that this determination of the American people and its firms expresses America’s latent dynamism.

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Category: Diplomatica

About the Author ()

Charles F. Doran is director of the Center for Canadian Studies at John Hopkins University.

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