Alex Carrick – It won’t pay for Canada to adopt a passive stance
We live in interesting times. Perhaps too interesting.
Turmoil and upset is seemingly everywhere. Except Canada is an oasis of calm, which may itself be a problem. For the first time in my career, the story I write on one day will often need revising before it goes to press the next day.
Events really are in flux to that degree. Agreement on a bailout for Greece was reached by the European Union, a sigh of relief went up around the world and then Prime Minister George Papandreou made the out-of-left-field announcement he would hold a referendum on the subject.
That was quickly quashed by Germany and France and Papandreou’s tenure as head of his country is approaching an end. He’s agreed to resign, a new unity government will take over and an election will be held early next year.
In Italy, Silvio Berlusconi also appears to be on his way out, but not without rancor. He’s agreed to leave office once the next budget is passed. It’s expected to finally contain the stringent austerity measures that Italy should have put in place a year or two ago.
In his rage against the dying of his political light, he’s labeled those who have helped bring him down as traitors.
Having recently signed free trade agreements with Panama, Colombia and South Korea, the U.S. is now pursuing a Trans-Pacific Partnership (TPP) that woul include at least nine countries in a tariff-reduction zone.
Australia, New Zealand, Singapore, Chile, Brunei, Peru, Vietnam and Malaysia are the other nations that have shown an interest in the TPP proposal. Japan’s sixth Prime Minister in five years appears to have recognized the importance for his country of joining the negotiations.
Economists pride themselves on their objectivity. “Just the facts, ma’am,” could easily be our credo.
My crystal ball these days is being muddied up by all sorts of loose ends. In the staid world of economics, sexual peccadilloes have also been playing a role of late. (Who knows, there may even have been some “role playing”, but now I’m being flip.)
IMF has a new head, Christine Lagarde, because its previous boss was driven from office by a string of allegedly improper and borderline-illegal advances towards women. The aspirations of a Republican frontrunner in the build-up to next year’s U.S. presidential election have been brought low by charges of improper behavior towards several former employees and job seekers. Herman Cain and his staff are currently pre-occupied with denial and full-fledged damage control.
In Berlusconi’s case, few would argue that his attention has been focused laser-like on the financial problems of his country, given his almost perpetual appearance on the front pages of scandal sheets for one act of outrageous conduct or another.
Thank goodness we live in quiet, composed—I suppose it’s going too far to say laid-back—Canada.
Canada’s advantages have left us sitting pretty. Our government finances are in decent shape, our banks are among the most solvent in the world, there’s a majority government in Ottawa with a steady hand on the helm and we have a veritable cave full of resource booty to sell to the rest of the world.
The temptation will be strong to passively stand by and watch problems play out in other jurisdictions. That would be a bad idea. A good offence is almost always the best defense.
The question of whether or not TransCanada’s XL oil pipeline will be approved by the current U.S. administration has been protracted beyond all reasonable expectation. If the Americans don’t want our oil, then steps must be taken to ensure we can deliver it to Asia. Alberta’s heavy oil is too vital a resource to leave locked in the ground.
This will take a prodigious effort to overcome the objections of environmental groups and some native opposition. What naysayers often overlook is that it’s not just about the money. This will be the source of the some of the best and most innovative new jobs.
Development of mega-project resource sites, while also implementing best environmental practices through research and monitoring, can be accomplished side by side. The U.S. wants to pursue more free trade agreements. Why aren’t we embracing this initiative with our neighbours to the west as well?
Attempts to gain better access to markets in an easterly direction do continue to simmer. Little attention is being paid to the steps we are taking to strike a free trade agreement with Europe. What to do about agricultural subsidies and other support measures has always been a stumbling block with respect to lowering trade barriers between developed nations.
Canada is unilaterally taking action to show leadership. The move to eliminate the Canadian Wheat Board’s monopoly is one piece of the puzzle. Agricultural marketing boards are rampant in many countries. Europe, with an overabundance of small farms, has always felt a compulsion to protect rural property owners. The political repercussions of failing to do so might be severe.
Nevertheless, this has to change if global agricultural trade is to become more liberalized. The arguments in favour of such a goal stress the need to increase supplies and lower prices. Across all commodities, food prices internationally have proven to be among the most resistant to downward adjustment.
Finally, there is one other change taking place within the Canadian economy that warrants comment.
Canada’s manufacturing sector, despite all our best efforts, is in monumental decline. At the same time, jobs in the construction sector have kept on increasing and a shortage of skilled workers looms.
Displaced workers from the former sector would seem to be an obvious and excellent source of new talent for employment in the latter.
Canada, with the second largest land mass among nations in the world and a population of only 34 million will continue to be dependent on foreign trade. The extent to which that dimension will change from north-south to east-west remains open to conjecture.
In any event, we need to get on with expanding ports, improving border crossings and adding other infrastructure such as pipelines so that we can proceed with mega resource project investments in full confidence that we will be able to deliver our goods to the world marketplace.
Alex Carrick is Chief Economist with CanaData, a division of Reed Construction Data (RCD). CanaData is the leading supplier of statistics and forecasting information for the Canadian construction industry. RCD is a division of the global publishing firm, Reed Elsevier. For more economic insight from RCD, please visit www.dailycommercialnews.com/features/economy. Mr. Carrick’s lifestyle blog is at www.alexcarrick.com and he would welcome a follow on Twitter (Alex_Carrick) or Facebook.