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31. Don’t Count Out U.S. Oil Production as a Market-Shaper

Author:
Patrick Clawson
Publication Date:
03-2020
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
Total U.S. production from all sources will remain the world’s largest no matter how low prices go, leaving Washington (and Texas) with considerable room to help domestic companies and press Riyadh and Moscow on stabilizing prices. Five years ago, U.S. shale production costs were so high that whenever oil prices dropped, the impact was felt first and foremost by American producers. Many commentators and media sources assume that is still the case, but the situation has changed dramatically. A recent IMF report with the dry title “The Future of Oil and Fiscal Sustainability in the GCC Region” listed the “breakeven price” for various sources of crude. Naturally, Gulf oil had the lowest cost at $18 per barrel, but the shocker was that U.S. shale came in second place at $22—50 percent below the average deepwater project, 80 percent below Canadian oil sands, and 90 percent below Russian onshore projects. Since costs vary widely, some projects presumably have a much lower breakeven price and some much higher, but the general findings are nonetheless striking. If the IMF is correct, then U.S. production should not be counted out, since the cost fundamentals are on its side. To be sure, the current market structure is not on U.S. shale’s side. Small U.S. producers have to raise money on financial markets and cannot rely on the deep government pockets available to producers in Russia and OPEC states. As a result, many are staring at a very dire situation.
Topic:
Oil, Natural Resources, Global Markets, Business, and Domestic politics
Political Geography:
North America and United States of America

32. Preferential Trade Agreements vs. Multilateralism: In the New Trump-World, Does Canada Face an Impossible Choice?

Author:
Judit Fabian
Publication Date:
03-2020
Content Type:
Policy Brief
Institution:
Urban Institute
Abstract:
International trade is often framed in starkly divergent terms: either countries choose multilateral trade agreements (MTAs) and advance the cause of global economic liberalization, or they choose preferred trade agreements (PTAs) and put the entire system at risk. Canada has a long track record of pursuing PTAs and with the Trump administration’s opposition to multilateralism, and longstanding opposition in elements of the Republican and Democratic parties, this trend will likely continue. The question is whether progress will come at the expense of the global trade system. Some economists believe PTAs to be trade-diverting, reducing trade with more efficient producers outside the agreement. Others insist that PTAs can create trade by shifting production to lower-cost producers in one of the participating countries. One prominent contrary argument holds that PTAs lead to discontinuities in tariff regimes between countries and regions, increasing transaction costs, disrupting supply chains, creating opportunities for corruption and harming global welfare, especially in developing nations. While debate continues about the effects of PTAs, a closer examination suggests that worries are overblown about their negative impacts on global trade flows. Evidence indicates that they support rather than harm the international trading system. Countries shut out of PTAs are more motivated to seek out agreements in new markets, increasing liberalization overall. They may also seek a reduction in most-favoured nation (MFN) tariffs, which would deprive PTAs of their major tariff benefits. Studies have found complementarity between preferential and MFN tariffs, revealing that PTAs promote external trade liberalization. Even if a PTA reduces a given country’s incentive to push for multilateral liberalization, it raises the odds of that country liberalizing its trade to avoid getting left behind. PTAs are a response to the difficulties of securing sweeping multilateral agreements. The World Trade Organization (WTO) Agreements authorize them under GATT Article XXIV, GATS Article V, and the enabling clause, and the WTO facilitates a degree of governance over PTAs through its dispute settlement process. Over the past 25 years, countries have adopted these deals at a rapid pace. Between 1994 and 2005, the number of PTAs increased from 50 to 200. By April 2018, 336 were in effect. At the same time, global trade has increased significantly. Between 1994 and 2010, the volume of world merchandise exports more than doubled. The proliferation of PTAs has resulted in a rise in international trade governance, because the countries involved shape their relationships in line with the WTO agreements. This juridification makes PTAs subordinate to the international system rather than giving them room to dissolve it. Canada should therefore have no fear of pursuing PTAs within the larger framework of the effort to achieve multilateral trade liberalization.
Topic:
Economics, International Trade and Finance, Governance, Trade, and Donald Trump
Political Geography:
Canada, North America, and United States of America

33. Use it or Lose it: Corporate Over-Planning in the Air Force

Author:
Ross Fetterly
Publication Date:
01-2020
Content Type:
Policy Brief
Institution:
Canadian Global Affairs Institute (CGAI)
Abstract:
The Canadian government allocates funds to departments through the annual federal budgetary process. With a Department of National Defence (DND) budget in the fiscal year 2019-20 of close to $22 billion,2 and expenditures spread out across a broad range of very different and distinct activities, expending the full allocation can be a significant challenge. While federal departments are permitted some carry-forward of eligible lapsing funds from one fiscal year to the next, in fiscal year 2018-19 the amount designated was up to five per cent of the operating budgets in their Main Estimates.3 With the federal government projecting significant budgetary deficits in the coming years, restricting or eliminating carry-forward of funding may be limited or eliminated to reduce deficits. Past practice within the department has been for the Investment Resource Management Committee (IRMC), chaired by the deputy minister, to decide on funding allocations of the carry-forward, based on departmental corporate priorities. While from an institutional perspective that aligns funding with optimal funding requirements, the consequence to organizations such as the Royal Canadian Air Force (RCAF) is that only a limited amount of lapsed funding may be allocated the following fiscal year. Thus, the air force has a significant incentive regarding its budget: to “use it or lose it”.4 RCAF corporate over-planning (COP) is a principal in-year strategy to maximize the use of allocated financial resources. Yet, at the operational and tactical level, the concept and application of in-year over-planning is not sufficiently understood. This paper will frame over-planning within the context of the RCAF and then recommend strategies to integrate over-planning into the air force culture. Corporate over-planning is essentially a means toward an end; specifically, that of maximizing output given by defined resource allocation. The paper will first consider defence planning approaches and budget allocations, and then consider the strategic environment within which the organization operates. The third section will emphasize the need for change in how the RCAF manages financial resources, followed by a section on adapting to change. The fifth section will review the concept of over-planning. That will be followed by a discussion of RCAF institutional corporate over-planning. The seventh section will consider budgeting as communication and how this supports maintenance of a common operating picture within the RCAF on over-planning. The final section will focus on RCAF corporate over-planning by discussing the structural unexpended rate, applying an absorption rate in operations and maintenance activities, and planning investment opportunities.
Topic:
Government, Armed Forces, Military Affairs, and Budget
Political Geography:
Canada and North America

34. The Normandy Negotiations Renewed: Divisions at Home and Opportunity Abroad

Author:
David Carment
Publication Date:
01-2020
Content Type:
Policy Brief
Institution:
Canadian Global Affairs Institute (CGAI)
Abstract:
After three years of limited discussion, the leaders of France, Germany, Russia and Ukraine renewed their peace talks to resolve the separatist conflict in Eastern Ukraine (Donbas). Efforts to facilitate a peaceful resolution to the conflict in the Donbas began five years ago with the meeting of the Trilateral Contact Group on Ukraine. This framework, developed by the Organization for Security and Co-operation in Europe (OSCE), attempted to facilitate a dialogue between Russia and Ukraine through the mediation of an impartial actor, and it culminated in the Minsk I (September 2014) and then Minsk II (February 2015) agreements. The Minsk II agreements comprised a 13-point peace plan, chief among which is an arrangement specifying support for the restoration of the Ukrainian-Russian border. While the implementation of the military portions of the Minsk II agreements were finalized within three months of signing, the political and security portions remained unresolved. Though President Vladimir Putin has declared his intent to protect the Russian-speaking peoples of the region, he has also stated he has no interest in reclaiming Eastern Ukraine. Not surprisingly, since Russia’s ultimate goal is undeclared, the conflict has proved very difficult to resolve.
Topic:
Conflict Resolution, Security, Territorial Disputes, and Negotiation
Political Geography:
Russia, Europe, Ukraine, Canada, France, Germany, and United States of America

35. Prime Minister Justin Trudeau: A Foreign Policy Assessment 2015-2019

Author:
Colin Robertson
Publication Date:
01-2020
Content Type:
Policy Brief
Institution:
Canadian Global Affairs Institute (CGAI)
Abstract:
An internationalist and a progressive, Justin Trudeau consistently boosts diversity, social justice, environmentalism and reconciliation with Indigenous peoples. A gifted retail politician, Trudeau prefers campaigning and contact with voters to the hurly-burly of the House of Commons. He possesses an empathy and emotional intelligence most people found lacking in his famous father, Pierre Trudeau. But are these attributes and causes out of sync with our turbulent times? Mr. Trudeau is learning firsthand what British prime minister Harold MacMillan warned U.S. president John F. Kennedy what was most likely to blow governments off-course: “Events, dear boy, events.” As Trudeau begins a second term as prime minister, the going is tougher. The Teflon is gone. He leads a minority government with new strains on national unity. Parliament, including his experiment in Senate reform, is going to require more of his time. Canada’s premiers will also need attention if he is to achieve progress on his domestic agenda. Does he have the patience and temperament for compromise and the art of the possible? The global operating system is increasingly malign, with both the rules-based international order and freer trade breaking down. Managing relations with Donald Trump and Xi Jinping is difficult. Canadian farmers and business are suffering - collateral damage in the Sino-U.S. disputes. In what was supposed to be a celebration of “Canada is back”, there is doubt that Canada will win a seat on the UN Security Council in June 2020. Losing would be traumatic for his government and their sense of Canada’s place in the world. It would also be a rude shock for Canadians’ self-image of themselves internationally.
Topic:
Foreign Policy, Government, Politics, and Justin Trudeau
Political Geography:
Canada, North America, and United States of America

36. Financing Capital Assets: The Missing Link in Defence Procurement

Author:
Vern Kakoschke
Publication Date:
03-2020
Content Type:
Policy Brief
Institution:
Canadian Global Affairs Institute (CGAI)
Abstract:
Defence procurement in Canada has had some well-known challenges in recent years. Many commentators have suggested possible strategies for fixing the defence procurement system. The identified problems include overspending on defence programs, unnecessary and undue delays in re-equipping Canada’s fleet of aircraft, ships and ground transport, and defence budgets that remain unspent. The problems also include procuring authorities experiencing a shortfall in manpower and expertise, the inability to execute on defence procurements, unjustified sole-sourcing without a proper competition, political interference in selection issues, and the list goes on. The proposed solutions often address process-related matters: establish a single agency responsible for defence procurement or perhaps a cabinet secretariat to manage the involvement of three of four government departments who are often not on the same page. To date, not much has been written or discussed in public policy forums on a critical question: How should the necessary capital assets be financed? At one extreme, Canada could simply write a cheque and pay for them up front, thereby placing the assets on Canada’s balance sheet. At the other extreme, Canada could drop the financing obligation into the laps of private-sector bidders and let them worry about the most efficient way of raising the necessary capital. A middle-ground solution could involve a public-private partnership (P3) structure, a model which seeks to balance the interests of the public and private sectors in a manner that leads to a better solution for all parties. Any public policy discussion often begins with first principles. What is the government’s policy objective? It is to procure the best available equipment, with the most benefit to the Canadian economy or local interest groups and at the lowest possible cost. All three goals must be balanced in a manner that is politically acceptable, meets budget constraints and withstands public scrutiny. In major procurements, capital can be the largest single cost of a defence procurement.
Topic:
Defense Policy, Government, Armed Forces, Finance, and Public Policy
Political Geography:
Canada and North America

37. Complex Project Delivery Capability Matters

Author:
Ian Mack
Publication Date:
03-2020
Content Type:
Policy Brief
Institution:
Canadian Global Affairs Institute (CGAI)
Abstract:
Canada’s experience with the Phoenix pay system is not just a pay problem. It points to wider problems in Canada’s management of complex major projects. Learning from Phoenix is important for the Government of Canada as a whole and the Department of National Defence specifically, the latter arguably responsible for the largest portfolio of complex projects – both for weapon systems platform and information technology initiatives. Fortunately, it appears that the Liberal government has taken notice. In the most recent Mandate Letters to Ministers, the Treasury Board President has been directed to ‘improve project management capabilities so that all major projects in government are led by a certified professional with at least five years of experience’. Additionally, the new position of Minister of Digital Government was tasked to ‘lead work to create a centre of expertise that brings together the necessary skills to effectively implement major transformation projects across government, including technical, procurement and legal expertise’ (and to lead in the replacement of the replacement pay system). This paper attempts to shed some light on the matter of pursuing complex projects and the enormity of the task at hand. I say “enormity” because complex projects are difficult to deliver at all (let alone on time and budget), as in evidence by the number that continue to fail in the private and public sectors, regardless of the complex project capabilities of those responsible for delivering them.
Topic:
Government, Budget, and Public Policy
Political Geography:
Canada and North America

38. Canada’s Campaign for a Seat on the United Nations Security Council: The Historical Context

Author:
Adam Chapnick
Publication Date:
01-2020
Content Type:
Policy Brief
Institution:
Canadian Global Affairs Institute (CGAI)
Abstract:
On Feb. 11, 2016, Prime Minister Justin Trudeau briefed the Ottawa press corps after a meeting with the United Nations (UN) secretary-general, Ban Ki-moon. Having pledged during the 2015 election campaign to re-engage with the UN, he noted that doing so would include “looking towards a bid for the Security Council.” Perhaps this comment should not have surprised. The Conservative government’s failure to win a Security Council (UNSC) seat in 2010 had been a subject of Liberal ridicule for years. Yet, council membership was not included among the Liberals’ 167 campaign promises, nor was it mentioned specifically in then-Foreign Affairs minister Stéphane Dion’s mandate letter. One month later, Trudeau met with Ban again, this time in New York. Afterwards, with Dion looking on, Trudeau announced that Canada would be joining the 2020 Western European and Others Group (WEOG) election for one of two non-permanent seats on the Security Council in 2021-2022. The move was unprecedented. It marked the first time that a Canadian prime minister, and not the Foreign Affairs minister or a member of the foreign service, had publicly declared Canada’s initial interest in a council seat. It was also the first time that Canada had deliberately entered an already contested election: Ireland, Norway and San Marino would be its opponents for two WEOG seats. This brief history of Canadian interest in Security Council membership will suggest that attempting to return to the UNSC was the right decision, made at the wrong time, and for the wrong reasons.
Topic:
Diplomacy, Government, Politics, History, and UN Security Council
Political Geography:
Canada, United Nations, and North America

39. Taiwan Flashpoint: What Australia Can Do to Stop the Coming Taiwan Crisis

Author:
Brendan Taylor
Publication Date:
02-2020
Content Type:
Policy Brief
Institution:
Lowy Institute for International Policy
Abstract:
Australian diplomacy could ease rising tensions across the Taiwan Strait, if Australian policymakers rediscovered an appetite for involvement in the flashpoint. Tensions between Taiwan and China are rising, driven in part by an increasingly assertive government in Beijing, growing Taiwanese estrangement from the Chinese mainland, and deteriorating US–China relations. If key regional governments fail to help de-escalate tensions, the consequences are likely to be serious. Rather than continue the debate about Australia’s position on its ANZUS obligations should the United States invoke the treaty in a Taiwan conflict, Australia should work with other regional powers to advocate for more robust risk avoidance and crisis management mechanisms.
Topic:
Conflict Prevention, Diplomacy, Territorial Disputes, Multilateralism, and Crisis Management
Political Geography:
China, Taiwan, Asia, Australia, and United States of America

40. Revenue Collection and Social Policies: Their Underestimated Contribution to Social Cohesion

Author:
Francesco Burchi, Christoph Strupat, and Armin von Schiller
Publication Date:
01-2020
Content Type:
Policy Brief
Institution:
German Development Institute (DIE)
Abstract:
Social cohesion is an important precondition for peaceful and economically successful societies. The question of how societies hold together and which policies enhance social cohesion has become a relevant topic on both national and international agendas. This Briefing Paper stresses the contribution of revenue collection and social policies, and in particular the interlinkages between the two. It is evident that revenue mobilisation and social policies are intrinsically intertwined. It is impossible to think carefully about either independently of the other. In particular, revenue is needed to finance more ambitious social policies and allow countries to reach goals, such as those included in the 2030 Agenda for Sustainable Development. Similarly, better social policies can increase the acceptance of higher taxes and fees. Furthermore, and often underestimated, a better understanding of the interlinkages between revenue generation and social policies can provide a significant contribution to strengthening social cohesion – in particular, concerning state–citizen relationships. In order to shed light on these interlinkages, it is useful to have a closer look at the concept of the “fiscal contract”, which is based on the core idea that governments exchange public services for revenue. Fiscal contracts can be characterised along two dimensions: (i) level of endorsement, that is, the number of actors and groups that at least accept, and ideally proactively support, the fiscal contract, and (ii) level of involvement, that is, the share of the population that is involved as taxpayer, as beneficiary of social policies or both. In many developing countries, either because of incapacity or biased state action towards elite groups, the level of involvement is rather low. Given the common perception that policies are unjust and inefficient, in many developing countries the level of endorsement is also low. It is precisely in these contexts that interventions on either side of the public budget are crucial and can have a significant societal effect beyond the fiscal realm. We argue that development programmes need to be especially aware of the potential impacts (negative and positive) that work on revenue collection and social policies can have on the fiscal contract and beyond, and we call on donors and policy-makers alike to recognise these areas as relevant for social cohesion. We specifically identify three key mechanisms connecting social policies and revenue collection through which policy-makers could strengthen the fiscal contract and, thereby, enhance social cohesion: 1. Increasing the effectiveness and/or coverage of public social policies. These interventions could improve the perceptions that people – and not only the direct beneficiaries – have of the state, raising their willingness to pay taxes and, with that, improving revenues. 2. Broadening the tax base. This is likely to generate new revenue that can finance new policies, but more importantly it will increase the level of involvement, which will have other effects, such as increasing government responsiveness and accountability in the use of public resources. 3. Enhancing transparency. This can stimulate public debate and affect people’s perceptions of the fiscal system. In order to obtain this result, government campaigns aimed at diffusing information about the main features of policies realised are particularly useful, as are interventions to improve the monitoring and evaluation system.
Topic:
Development, Finance, Economic growth, Tax Systems, Transparency, and Social Cohesion
Political Geography:
Germany and Global Focus