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There are smart ways to diversify our exports

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From the Fraser Institute

By Philip Cross

The Bank of Canada recently cut interest rates again, with further cuts likely in response to Donald Trump’s threat to impose tariffs on Canadian exports. This continues the Bank’s reflexive turn to lower interest rates to goose growth every time the economy slows that began during the 2008 global financial crisis and reached its apex during the outbreak of the Covid pandemic when rates essentially hit their zero lower bound.

It’s time policymakers in Ottawa stop relying on easy money policies in response to every hiccup in economic growth. Lower interest rates have introduced major distortions into Canada’s economy. They have fueled excessive debt levels in all sectors of the economy, helped to create a housing bubble that will depress growth when it bursts, undermined our consensus on the usefulness of immigration when excessive demand raised the cost of shelter, and led youths to lose hope of achieving the dream of owning a home. Housing’s unsustainably large share of our economy helps undermine our potential productivity, the lack of which Bank of Canada Deputy Governor Carolyn Rogers last year called a “break the glass” emergency. However, the Bank’s own easy money policies spurs the shift of more resources to housing and encourage governments to ignore taking actions that would boost business investment and exports, the two sectors needed to improve our long-term productivity and competitiveness.

There are policy alternatives to just mechanically lowering interest rates and juicing housing demand. The silver lining in Trump’s tariff threats is they drive home to Canadians the twin follies of not diversifying our energy exports from the U.S. market and not lowering internal barriers to trade among our provinces. We witlessly ignored opportunities to move on both fronts for nearly a decade after Trump fired his opening salvo in the trade war with punitive tariffs on our aluminum and steel industries in 2017.

Energy, our leading export, depends on the U.S. market for 93 per cent of its export earnings. Canada has wasted numerous opportunities over the past decade to open overseas markets for oil and gas. The Trudeau government cancelled the Northern Gateway pipeline that would have sent Alberta crude to Asia. The proposed Energy East pipeline to send oil to New Brunswick and ultimately Europe floundered after the federal government complicated the approval process. Multiple proposals for LNG projects were rejected, although the Quebec government is reconsidering its opposition to ship natural gas from an LNG terminal in Saguenay to Europe. Quebec is not reflexively against pipelines: its former Premier Jean Charest boasts how his government oversaw one connecting crude oil imports landing at Levis to refineries in Montreal by clearly outlining the benefits to Quebecers. Restricting our oil and gas exports to the U.S. has depressed their prices, costing Canada tens of billions of dollars of lost revenue and betraying our European allies when they desperately needed alternatives to Russian natural gas supplies following its attack on Ukraine.

Meanwhile, the federal government displayed little leadership in trying to get the provinces to reduce the thicket of regulations and restrictions that impair trade within Canada. The 2017 Canada Free Trade Agreement provided a road map to potentially lower internal trade barriers, but most provinces have been reluctant to tread that path. It is the height of hypocrisy for Canadians to complain about Trump’s threatened tariffs when we tolerate internal trade barriers that are every bit as important and costly to our economy. Statistics Canada, for example, found that trade within Canada moves as if there were a 7 per cent tariff on goods moving between provinces, while trade within the U.S. flows as if there was no effective tariff.

The shock and outrage Canadians are expressing about Trump’s pending 25 per cent tariff on most exports can be channeled to our benefit. Achieving that will require governments to stop our dangerous over-reliance on low interest rates to stimulate housing. Instead, the focus should be improving our access to markets outside the U.S., which are clearly viable and profitable for goods such as oil and gas. Furthermore, if we truly believe our own rhetoric about the benefits of trade, we need to take concrete steps to liberalize trade within Canada.

Philip Cross 2014.jpg

Philip Cross

Senior Fellow, Fraser Institute

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Alberta

Pierre Poilievre – Per Capita, Hardisty, Alberta Is the Most Important Little Town In Canada

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From Pierre Poilievre

The tiny town of Hardisty, Alberta (623 people) moves $90 billion in energy a year—that’s more than the GDP of some countries.

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Why it’s time to repeal the oil tanker ban on B.C.’s north coast

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The Port of Prince Rupert on the north coast of British Columbia. Photo courtesy Prince Rupert Port Authority

From the Canadian Energy Centre

By Will Gibson

Moratorium does little to improve marine safety while sending the wrong message to energy investors

In 2019, Martha Hall Findlay, then-CEO of the Canada West Foundation, penned a strongly worded op-ed in the Globe and Mail calling the federal ban of oil tankers on B.C.’s northern coast “un-Canadian.”

Six years later, her opinion hasn’t changed.

“It was bad legislation and the government should get rid of it,” said Hall Findlay, now director of the University of Calgary’s School of Public Policy.

The moratorium, known as Bill C-48, banned vessels carrying more than 12,500 tonnes of oil from accessing northern B.C. ports.

Targeting products from one sector in one area does little to achieve the goal of overall improved marine transport safety, she said.

“There are risks associated with any kind of transportation with any goods, and not all of them are with oil tankers. All that singling out one part of one coast did was prevent more oil and gas from being produced that could be shipped off that coast,” she said.

Hall Findlay is a former Liberal MP who served as Suncor Energy’s chief sustainability officer before taking on her role at the University of Calgary.

She sees an opportunity to remove the tanker moratorium in light of changing attitudes about resource development across Canada and a new federal government that has publicly committed to delivering nation-building energy projects.

“There’s a greater recognition in large portions of the public across the country, not just Alberta and Saskatchewan, that Canada is too dependent on the United States as the only customer for our energy products,” she said.

“There are better alternatives to C-48, such as setting aside what are called Particularly Sensitive Sea Areas, which have been established in areas such as the Great Barrier Reef and the Galapagos Islands.”

The Business Council of British Columbia, which represents more than 200 companies, post-secondary institutions and industry associations, echoes Hall Findlay’s call for the tanker ban to be repealed.

“Comparable shipments face no such restrictions on the East Coast,” said Denise Mullen, the council’s director of environment, sustainability and Indigenous relations.

“This unfair treatment reinforces Canada’s over-reliance on the U.S. market, where Canadian oil is sold at a discount, by restricting access to Asia-Pacific markets.

“This results in billions in lost government revenues and reduced private investment at a time when our economy can least afford it.”

The ban on tanker traffic specifically in northern B.C. doesn’t make sense given Canada already has strong marine safety regulations in place, Mullen said.

Notably, completion of the Trans Mountain Pipeline expansion in 2024 also doubled marine spill response capacity on Canada’s West Coast. A $170 million investment added new equipment, personnel and response bases in the Salish Sea.

“The [C-48] moratorium adds little real protection while sending a damaging message to global investors,” she said.

“This undermines the confidence needed for long-term investment in critical trade-enabling infrastructure.”

Indigenous Resource Network executive director John Desjarlais senses there’s an openness to revisiting the issue for Indigenous communities.

“Sentiment has changed and evolved in the past six years,” he said.

“There are still concerns and trust that needs to be built. But there’s also a recognition that in addition to environmental impacts, [there are] consequences of not doing it in terms of an economic impact as well as the cascading socio-economic impacts.”

The ban effectively killed the proposed $16-billion Eagle Spirit project, an Indigenous-led pipeline that would have shipped oil from northern Alberta to a tidewater export terminal at Prince Rupert, B.C.

“When you have Indigenous participants who want to advance these projects, the moratorium needs to be revisited,” Desjarlais said.

He notes that in the six years since the tanker ban went into effect, there are growing partnerships between B.C. First Nations and the energy industry, including the Haisla Nation’s Cedar LNG project and the Nisga’a Nation’s Ksi Lisims LNG project.

This has deepened the trust that projects can mitigate risks while providing economic reconciliation and benefits to communities, Dejarlais said.

“Industry has come leaps and bounds in terms of working with First Nations,” he said.

“They are treating the rights of the communities they work with appropriately in terms of project risk and returns.”

Hall Findlay is cautiously optimistic that the tanker ban will be replaced by more appropriate legislation.

“I’m hoping that we see the revival of a federal government that brings pragmatism to governing the country,” she said.

“Repealing C-48 would be a sign of that happening.”

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