Did you know there is an internal trade war brewing in Canada? It’s between Alberta and British Columbia over the building of an oil pipeline to the Pacific Ocean. Alberta makes a good income from its tar sands and wants to expand its customer base by shipping that oil overland through a pipeline to Burnaby, B.C. The British Columbia government objects due to the threat of environmental pollution and its anti-fossil fuel philosophy.

Alberta has retaliated by threatening to cut off crude and refined oil, gasoline and natural gas to British Columbia. This action would cause petroleum prices to rise in B.C. amounting to a 30 percent increase, according to an April 25, 2018 “Stratfor” article entitled, “In Canada, A Trade War Emerges.” This potential trade war highlights the governmental differences between Canada’s confederation and the U.S. where such issues are dealt with on the national level.

The impact of this dispute will be felt in both Canada and the United States and it foreshadows what could happen if the U.S. and China engage in a much larger trade war.

In Canada, provinces exercise more power and control than the national government in Ottawa. Alberta, the westernmost of the Prairie Provinces, contains 80 percent of Canada’s oil production and 95 percent of its petroleum reserves. It tends to represent what we would call a “red state” mentality in the Lower 48. Jobs and capitalism prevail. British Columbia, separated from the Prairie Provinces by the Rocky and Cascade mountain ranges, has much more in common with the “blue states” of Washington and Oregon, both geographically and philosophically. There, protecting the environment takes precedence, as do objections from what Canadians call “First Nation” concerns.

The long-term U.S. delay in building the Keystone XL Pipeline through the U.S. exacerbated the problem for Alberta to get its petroleum to market. Alberta wants a guaranteed and inexpensive way to ship its oil.

As long as the conservative Stephen Harper was Canada’s prime minister from 2006-15, the national government favored oil production, desiring to turn Canada into a petroleum superpower. In 2017, the political makeup of B.C. was drastically altered with the election of John Horgan, whose New Democratic Party formed a coalition with the Green Party.

The conservatives (called Liberals in Canada) proposed to increase oil shipments to the Pacific from 300,000 to 890,000 barrels per day. Horgan vigorously objected because he needs the support of the Green Party to maintain control of the B.C. parliament, according to “Stratfor.” In November 2017, the National Energy Board ruled that the pipeline company was under no obligation to heed Burnaby’s ordinances. Burnaby is a Vancouver suburb and the Pacific terminus for the proposed pipeline.

In an attempt to kill the pipeline project, Horgan tried to push through legislation to enact an environmental study with no definite dates for its completion. In retaliation, the prime minister of Alberta, also an NDP member, cut off electricity talks with B.C. and banned the importation of British Columbia wine. The oil pipeline company, headquartered in Texas, threatened to abandon the project unless the national government and the two provinces could come to an agreement by May 31. Saskatchewan, also an oil exporting province, jumped in on the side of Alberta, threatening to suspend shipments to the coast.

Prime Minister Justin Trudeau is seeking to reduce tensions, although he has publicly favored the pipeline. He got the two provincial prime ministers to meet but no deal was reached. Trudeau and the Alberta prime minister then offered to guarantee the financing for the project to assuage the pipeline company’s financial fears. There is much at stake here: 20 percent of Canada’s exports and 17 percent of Alberta’s gross domestic product originate from petroleum sales.

The debate between the various provinces and the national government shows no signs of abating as the May 31 date looms large. If this issue is not settled amicably, the Prairie Provinces will be even more tightly tied to their neighbor to the south.

This conflict highlights the major differences between the Canadian government with its confederation of powerful and independent provinces and the U.S. with a more centralized and powerful national government. The local trade war in Canada may also foreshadow a far larger and damaging trade war on several fronts, based upon President Donald Trump’s tariff decisions in coming months.