The shifting meaning of 'market access'
Canada is an open and trade dependent nation – a significant portion of our jobs, wealth and government revenue derives from trade and other forms of commerce with markets around the world. In the simplest sense, market access in this context means the ability to have Canadian goods and services ‘freely’ enter foreign markets – and to ensure we have cost-effective access to imports from elsewhere. By any measure, market access is therefore essential for our economic well-being.
Historically, market access issues have largely centred on our trade relations – first with the French and British and subsequently with the US. Much of the historical tension around market access in Canada-US trade relations diminished with the signing of the Canada-US Free Trade Agreement (FTA) and later, the North American FTA (NAFTA). The positive results of the FTA and NAFTA have been well documented, and debates with respect to the overall benefits of goods and services trade liberalization have largely fallen by the wayside in the Canadian context.[1]
However, market access has more recently taken on an additional and profoundly different meaning for Canada and the Western provinces in particular. Contemporary market access discussions now include a dichotomy-ridden debate over Canada’s ability (or lack thereof) to expand exports of energy commodities into markets both in the US and Asia.
This new definition of market access is driven by three forces that have changed significantly since the NAFTA agreement came into effect. The first has been the dramatic rise of Asia, and China in particular, as an economic force that creates new economic opportunities (and heightened competition) for many countries, including Canada. The second, less well explored factor, is the fundamental and revolutionary shifts occurring in energy supply and demand, stimulated by the shale gas and tight oil revolutions.[2] The third and final force is concern over climate change and the environmental considerations associated with energy development, including the shale gas and tight oil revolutions.
Taken in combination, these three powerful forces have converged to re-shape the energy component of market access dialogues in Western Canada. In this contemporary sense, market access in Canada is now less about trade agreements and more about the relative benefits of being able to sell Canadian energy resources into markets south of the border and into Asia.
In the BC context this new market access conversation has become ground zero in the discussion of energy and resource development. To date much of the debate has centered on issues related to the shipment of oil products from the BC coast to meet growing Asian demand. This debate has been marked by conflict with First Nations and a ‘stake in the ground’ approach from environmentalists who believe that increasing the Western access for oil from the coast of BC is too risky and conflicts with the goal of addressing climate change.
While there are parallels between “old” and “new” market access debates, it would be a mistake to see the potential resolution of the current challenges as following the same path as past disputes – which from an economic lens, would simply be to move forward with allowing Canadian energy products to access foreign markets in the US and Asia and then distribute the significant benefits to business and citizens.
If only it were so straightforward.
The resolution to the contemporary market access debate will involve a far more complex response than the sheer political will and “weathering the storm” of controversy that grounded the passage of the free trade agreements.
Markets have a strong desire to find new equilibria when supply and/or demand change. Ultimately all interests – government, business, communities and all other impacted stakeholders – will attempt to ensure this new market access debate is underpinned by policies and rent distributions that meet economic, social and environmental objectives. While much discussion has taken place and many new initiatives are moving forward to find this elusive new equilibrium, it’s clear we aren’t there yet.
So can Canada have its cake and eat it too – expanding market access for energy products, while building a better country? The answer should be a resounding “yes”.
We’ll find out over the coming months and years how quickly and successfully this new equilibrium can be attained, but for the moment we are in the thick of a market access debate that is thus far producing an unhealthy dose of transitional disequilibrium.
[1] A general review of the (exhaustive) set of empirical analyses shows a near universal conclusion that the negative adjustment impacts of the FTA were more than offset by gains across a wide variety of economic metrics. Note that even the federal NDP, long opposed to trade liberalization, has more recently supported the basic framework for the Canada EU Trade Agreement and has provided conditional support to other trade agreements.
[2] One could certainly argue that the financial crisis and global downturn of 2008/09 merits mention; however the impact on market access was not fundamentally altered as a direct result of the crisis.