Carney’s middle-power aim should be Asia, prominent Japanese economist says

Canada has many opportunities to deliver its energy and resources to Asian markets, but it needs to boost its presence in the region to improve business relationships with potential customers, professor Kazuto Suzuki says.Amir Salehi/The Globe and Mail

Prime Minister Mark Carney should spend more time in Asia if Canada wants to secure energy trade deals with the region, says prominent Tokyo-based academic Kazuto Suzuki.

Canada’s tumultuous trade relationship with the United States under President Donald Trump has led Mr. Carney to court closer ties with Europe. Last month, European Commission President Ursula von der Leyen called on Canada to become the European Union’s first “associate member.” In response, Mr. Carney pitched a new alliance between Canada and the bloc, who will meet in Montreal later this month.

Dr. Suzuki, a professor at the University of Tokyo’s Graduate School of Public Policy and a member of the government’s Council for Japan’s Growth Strategy, said he understands why trade spats with the U.S. are pushing Mr. Carney closer to the EU.

“If being an associate member opens the door for the EU, then probably that’s the right strategy. But the more dynamic economy is in Asia,” he said in an interview at the Calgary Petroleum Club on Friday.

With Europe growing more protectionist, “Canada’s future is in Asia,” he said.

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Japan typically relies on the Middle East for roughly 95 per cent of its crude imports, the majority of which is shipped through the Strait of Hormuz. War in Iran has hampered the Asian country’s access to oil and has the government scrambling to diversify its supply options.

Japanese investors and companies are, as a result, interested in Canadian supplies and the proposed Pacific Link oil pipeline project, Dr. Suzuki said. The conduit would transport roughly one million barrels a day from Alberta to the West Coast.

Japanese refineries are tooled to handle lighter grades of crude from the Middle East, rather than the heavy bitumen that comes from Alberta’s oil sands. But Canadian producers could take various measures to help access the Japanese market, including partial refining, said Richard Masson, the former chief executive of the Alberta Petroleum Marketing Commission who is now working with NorthernNations Cooperative, an Indigenous-led economic group.

Ultimately, though, if Japan wants to secure large volumes from Canada in the long term, it would have to convert refineries to handle heavy crude, Mr. Masson told reporters after a panel discussion alongside Dr. Suzuki.

Japan has for years shied away from investing in refineries, largely because of environmental concerns. But with no end in sight to the war in the Middle East, Dr. Suzuki said Japan is becoming more inclined toward that spending so it can diversify its supply base.

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“It requires one more push to make a political decision, but there is a general consensus that depending on the Middle East is not really safe,” he said.

“When the price level remains to be somewhere around $100 per barrel, that makes it much easier for Japan to reconsider the opportunity with Canada.”

Dr. Suzuki said liquefied natural gas is less of a priority than oil for Japan, because supplies already come from various countries, including Australia, Malaysia, Russia and Qatar, but the broader Asian market has a growing demand for the fuel.

Japan-based Mitsubishi owns a 15-per-cent stake in LNG Canada, which is moving ahead with a $30-billion expansion of the facility on the B.C. coast. Dr. Suzuki said he doesn’t see the company divesting, given the rising regional demand for LNG, particularly in Taiwan and South Korea.

Canada has many opportunities to deliver its energy and resources to Asian markets, but it needs to boost its presence in the region to improve business relationships with potential customers, Dr. Suzuki said – and that starts with more attention from Mr. Carney.

“His presence will demonstrate the commitment of Canada to diversification, commitment to the region, commitment that Canada is serious about finding the necessary relationship with Asia because of this current spat with United States,” he said.

“These days, trust is the commodity.”

While Dr. Suzuki is hopeful for a deeper partnership between Japan and Canada, he said getting there “is up to Mr. Carney.”