AMU: The Northwest Passage: Bargaining chip for Canada and Section 232?

Ever since Canada’s exemption was stripped earlier this year, the market has been handicapping if and when Canada could claw back some of the advantages it previously enjoyed.

The question has always been about what exactly the Trump administration wants from Canada in exchange for concessions. People tend to focus on more micro-economic issue like a sweetheart deal on critical minerals or discounted electricity. We suggest stepping back and thinking in more geo-political terms: namely the Northwest Passage.

Climate change has radically changed the possibilities of regular maritime passage through the Canadian Arctic. The melting of the northern polar ice cap opens up the potential for the Arctic to become a regularly transversed navigational route. Historically, the Northwest Passage (NWP) has been open during the summer months and confined to a few ice-class cruise vessels or military ships.

The NWP route is 7,000 km shorter than the route through the Panama Canal, and the Northeast Passage route is one-third of the distance of the traditional route through the Suez Canal.

Currently, two sea routes cross the Arctic, joining the Atlantic and Pacific oceans. Both routes overlap with the jurisdiction of either Canada or Russia, which raise challenges when Trans-Arctic shipping becomes a reality.

The ownership of the NWP is disputed. Canada claims it as part of its internal territorial waters. The U.S. and other countries define it as an international strait. Canada’s claim of ownership allows it to regulate shipping, control environmental impacts, and ensure the safety of vessels using the passage, which is crucial given its rich national resources and strategic importance.

Canada and the U.S. have agreed to disagree

Canada and the United States historically agreed to disagree on this issue, with the 1988 Arctic Cooperation Agreement allowing U.S. icebreakers to cross after seeking permission from Canada, without the U.S. conceding its position on the Passage’s status.

Both the United States and Canada want to avoid creating unwanted precedents. A concession by the United States could undermine its stance against excessive maritime claims elsewhere in the world, as well as its own freedom of navigation in other strategically important regions. The United States maintains an active Freedom of Navigation Operations (FONOPs) program to fight such claims and preserve global maritime access.

Security concerns

The commercial appeal of the Passage is clear. From a national security perspective, the implications are also clear. Open waters from the Pacific to the Atlantic open up possibilities of Chinese and Russian naval vessels rotating into the Atlantic quickly.

Some analysts note unregulated access by potentially any nation’s vessels (including strategic rivals) could harm North American security. If the Passage is considered an international strait, there would also be an international air corridor above each of its routes. Foreign military or criminal vessels and aircraft might use it to transit through North America’s northern flank – a scenario that would be a concern for both the United States and Canada.

If Canada’s territorial claim were accepted, Canada could legally bar or strictly control foreign vessels and aircraft, preventing Russian or Chinese naval use of the Passage – a practice that the United States would certainly endorse.

Why this matters

The Trump administration likes to justify many of its trade practices around the issue of national security. The Northwest Passage fits this criteria and thus becomes an interesting bargaining chip in the U.S.-Canada trade talks. Canada is not going to surrender its territorial waters claims wholesale. However, one could envision a deal where Canada gives the U.S. liberal access to these waters in exchange for concessions on aluminum.