Queen's University — Since 1873
31st January 2012

Be better

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At last week’s World Economic Forum in Davos, Switzerland, Stephen Harper revealed plans to aggressively export Canada’s natural resources to China while tightening immigration laws, retirement income support and health care.

We’re better than that.

Canada is supposed to be a world leader. We’re known for a diversified economy based on both natural resources and trade.

We’re not a country that ignores social responsibility to pursue short-term economic gain.

Harper is transforming us into a resource-exporting country, a strategy that encourages international dependency and restricts national innovation.

Harper’s economic plan is short-sighted. It leaves us vulnerable to the Dutch disease, a phenomenon termed after Holland exhausted its natural gas reserves in 1959.

The Dutch disease occurs when a country’s reliance on natural resources leads to a decline in its manufacturing sector. When a resource boom leads to higher currency and a higher exchange rate, manufacturers struggle to stay attractive in the world market.

Dutch disease usually sets in after a resource boom ends, but Canada’s geographic size and diversity means we’re already feeling it.

With 95 per cent of our oil concentrated in Alberta and 75 per cent of our manufacturing industry based in Ontario and Quebec, a Western oil boom hurts Eastern manufacturing economies.

Look at the patterns of our top two export products. Between 2001 and 2007, Canada’s crude oil exports increased from $16 billion to $41.8 billion, while revenue from automobile exports declined from $41 billion to $32.6 billion. Although the Canadian dollar improved strongly in this period, employment rates in Quebec and Ontario still dropped by 2.3 per cent and 2.4 per cent, respectively.

After the recent recession, the Canadian dollar improved, but manufacturing output continued to struggle. From 2009 to 2010, manufacturing employment fell by 2.1 per cent though overall employment grew by 1.4 percent.

The Dutch disease is already here — Harper’s transformative agenda will only perpetuate it.

Canada isn’t set up for a resource-based economy. Since income from natural resources falls primarily into provincial jurisdiction, excessive resource exploitation could permanently damage the cohesion of our federal economy.

A responsible government should instead focus on innovation. Competitive manufacturing industries requiring skilled labour would represent a more sustainable way to tap into emerging world markets.

Otherwise, once that oil boom ends, we’re screwed.

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