Carney announces hydro with Quebec and Newfoundland, pipeline with Alberta
The Wall Street Journal’s Greg Ip, the paper’s chief economics commentator, writes that Prime Minister Mark Carney — who has pointed to his experience managing crises as governor of the Canadian and British central banks — is exploiting the crisis presented by Trump to push through the sort of nation-building projects that could kick-start productivity, tamp down secessionist sentiment and reduce dependence on the U.S.
The projects include a large hydroelectric development and a new oil pipeline. In August, Carney joined Quebec and the province of Newfoundland and Labrador in announcing the hydro development near their shared border, facilitated by a $7 billion federal investment. Two weeks ago, he and Alberta Premier Danielle Smith announced that construction of the new oil pipeline from Alberta to south of Vancouver would begin in a year. Carney’s pitch to Albertans this week is that Canada works, but Alberta needs to cooperate: “You can’t build big things on fault lines.”
Ip writes that Canada’s serious problems did not begin when Trump launched a trade war last year and threatened annexation, and that Trump “may end up being the catalyst that jolts Canada out of its economic and political torpor.” The key question is just how durable any of this is: Carney’s projects could take years, and once Trump leaves the scene, so might the pressure that has flattened homegrown resistance to nation-building.
For years before the trade war, sluggish productivity meant Canadian living standards kept falling further behind U.S. living standards, while the federal government’s capacity to fix the problem was hamstrung by regional obstructionism and burdensome regulation, according to Ip. Canadian per-capita gross domestic product fell from 85% of the U.S. level in 2014 to 78% in 2022, according to the Maddison Project Database.
To be sure, the U.S. outperformed most countries in that time, Ip writes, but Canada suffered specific problems, including a decline in oil and gas investment. That decline hurt because productivity in mining and gas, as proxied by hourly wages, is one of the highest in Canada and higher than in the U.S. By contrast, Canada’s wages are 22% lower than U.S. wages in manufacturing and 36% lower in the information sector.
Trump’s tariffs have exacerbated the productivity problem by threatening access to the U.S. market, a key competitive advantage of Canadian manufacturing centered in Ontario and Quebec. His annexation talk casts an unflattering light on the country’s underfunded military, inadequate infrastructure and fragile political cohesion, Ip writes, all of which plays into the separatists’ case. This week the International Monetary Fund downgraded projected Canadian growth this year to 1.1% from 1.5%.
Those pressures come to a head Monday in Alberta’s referendum. The province has long complained the rest of Canada has held back development of its oil and gas wealth, and some Albertans view secession — what Ip calls “the ultimate act of regional obstructionism” — as the solution.
Jason Kenney, Alberta’s Conservative premier from 2019 to 2022 and now a prominent voice against secession, said “Separatism became an emblem of dissatisfaction for people ticked off with Ottawa policy.” Kenney said the 2015 election of Justin Trudeau’s Liberal government brought a suite of “prejudicial policies” that further inflamed Alberta: a carbon tax, emissions caps and a ban on big oil tankers off the west coast. Nonenergy issues such as vaccine mandates also brought protest from populist conservatives, Kenney said.
It wasn’t just Trudeau, according to Ip. On paper, Canada’s federal government is more powerful than the U.S.’s, but in practice its ability to impose its will is circumscribed by deference to provincial and indigenous prerogatives, often enforced by courts.
Kenney thinks the Alberta-raised Carney, by embracing the “energy superpower” label, has significantly lessened the chances that Alberta will vote to secede. More subtly, Ip writes, even as the U.S. Democratic Party has moved leftward, Carney has moved his Liberal Party to the right, not just on energy but on other issues such as immigration. “I’m a conservative, and I think he deserves credit,” Kenney said. “He’s yanked the Liberal Party from the center-left back to the center, some would say the center-right, deftly, quickly, and so far pretty effectively.”
The contest between national unity and regional resistance is older than the current projects, Ip writes. With most of Canada’s population crowded along the U.S. border, economic gravity has always biased Canadian growth along north-south rather than east-west lines. Britain’s North American colonies united to become Canada in 1867 partly to resist that pull, and the new country set to work building a railway connecting British Columbia, which joined in 1871, to the eastern provinces. More nation-building infrastructure followed in the 1950s, including the Trans-Canada Highway and the St. Lawrence Seaway, the latter co-developed with the U.S. Pipelines illustrated the competing pulls of nationalism and economics: the natural-gas pipeline between east and west followed an all-Canadian route out of nationalist considerations, while the equivalent oil pipeline was routed through Minnesota, Wisconsin and Michigan to save money and time.
In the 1980s, economic gravity began to reassert itself after Canada signed a free-trade agreement with the U.S. Interprovincial barriers made it easier for many firms to do business in the U.S., and a federal energy program that favored consumers over producers birthed a secessionist movement in Alberta.
More recent projects also died. A pipeline between Alberta and the Pacific coast of northern B.C., and one to the east coast, both died because of provincial, municipal, environmentalist and indigenous opposition. When the private developer of the Trans Mountain Pipeline expansion from Alberta to Burnaby, B.C., suspended work, the Trudeau government took it over. Nutrien, a major Saskatchewan-based potash exporter, said last year it would build a new export terminal in Washington state instead of B.C. — the gauntlet of resistance squelches private investment even when Ottawa is on board, Ip writes.
The threat from Trump has helped Carney’s push by tamping down the resistance among provinces and indigenous groups, according to Ip. Carney’s solution, besides seeking a deal to reduce U.S. tariffs, is to unlock more of Canada’s resources and diversify the markets into which they are sold.
Even if Albertans say no to secession, they may say yes to other questions on the ballot demanding more provincial autonomy, such as over immigration, Ip writes. If the rest of Canada refuses to go along, that “becomes fuel for the next argument that Confederation doesn’t work and it keeps the dream of separation alive,” Peter Guthrie, a member of the Alberta legislature, warned on social media.
In Quebec, Ip writes, separatists lost referendums in 1980 and 1995 but never gave up. Having just returned to power in the province, they have promised another referendum — though only after Trump leaves office.