One argument making the rounds these days posits that the energy sector is unbalancing Canada’s economy in favour of the West, damaging less prosperous industries by sucking in foreign investment and driving up the value of our currency.
While not evenly distributed, Canada's resources tend to benefit the country as a whole. Photo Credit: iStockPhoto
These charges, levied by some Canadian politicians, are serious but do they square with the facts, and do they tell the whole story? We would argue no on both counts.
It’s important to remember that as a country chock full of natural resources with a relatively small population, Canada has been a major developer and exporter of natural resources for well over a hundred years.
Resource wealth not a zero-sum game
Today our farm sector is one of the world’s largest suppliers of agricultural products, especially wheat and other grains. Our forestry sector provides valuable building materials and paper. Our metals and minerals are sought after for use in everything from steel to fertilizer. Canada is also a leading exporter of hydro-electricity and until recently, the Atlantic Provinces were major exporters of fish.
These resources have never been evenly distributed throughout the country. Depending on global and national demand for their products, at different times some provinces have always prospered more than others.
But rarely has this been a zero-sum game, where one province benefits at the expense of its neighbour. Rather, Canada’s endowment of natural resources and their development has been an engine of national economic growth and national job creation since Confederation. This is especially true of oil and gas, where our vast and diversified portfolio of energy resources is being transformed into electricity, transportation fuel, petrochemicals and many other valuable products.
Competitiveness, economic crisis at heart of manufacturing woes
Clearly Canada’s strong dollar is unhelpful to the country’s manufacturing sector, but a weak one would not be helpful to those sectors that need to import raw materials either. Moreover, the major growth in oil sands in the last 15 years was not the cause of the manufacturing decline in Canada; it merely coincided with a much more significant problem affecting all rich countries: in the long term, the shift of global manufacturing’s centre of gravity to the lower cost economies of Asia and Latin America; and in the recent short term, the financial crisis and recession affecting Europe and North America.
This thesis is supported by recent research on the subject. In its recently-released report Dutch Disease or failure to compete: A Diagnosis of Canada’s manufacturing woes?, the Institute for Research on Public Policy concluded that the booming energy sector and strengthened currency aren’t the primary cause of our country’s manufacturing issues.
So is energy development in Western Canada really bad for Canada as a whole?
Energy sector a source of prosperity
Current and projected economic benefits from energy development seem to suggest otherwise. Energy development, for example, results in economic benefits not only for Alberta and Western Canada, but for all of the country.
According to the Canadian Association of Petroleum Producers, Canada’s energy industry invested $55 billion in Canada in 2012 and paid $21 billion to governments in 2011 (PDF). Suncor, for example, has almost 2,400 employees in Ontario and Quebec and its combined spend on goods and services in those provinces in 2011 was nearly $1.6 billion.
As noted in a previous OSQAR, the Canadian Energy Research Institute forecasts significant economic benefits from oil sands outside of Alberta between 2010 and 2035, including $63 billion for Ontario alone. Public policy think tank the Macdonald-Laurier Institute also expects Ontario, Quebec and other provinces will reap benefits from energy development that easily trump any challenges posed by a higher Loonie.
Rather than attempting to divide Canadians on the issue of energy development, politicians’ efforts would be more constructively focused by participating in the energy debate and enabling the development of energy sources in a way that provide economic prosperity for the entire nation.
Natural resources are fundamental to the lives of all Canadians. And they will surely continue to be an engine of economic growth for many generations to come.
