Part of the solution to Canada’s poor export performance lies with natural resources, but simply pumping oil out the door won’t suffice, says the Governor of the Bank of Canada.
Mark Carney recently chastised Canadian business for being trade laggards since the 2008 recession, saying they have not done enough to infiltrate growing markets.
Mr. Carney said opportunities in natural resources abound in Canada, but they need to be developed quickly, efficiently – and sustainably.
“These opportunities exist at a time when there are other opportunities in other jurisdictions, other countries. So there is an element of competition here, and we need to be appropriately efficient in their development,” Mr. Carney said in an interview.
Canadian business should count on commodities prices and the Canadian dollar staying relatively strong over the long term and calculate their costs and revenues accordingly, he said.
“The scale of the natural resources opportunities are huge (and) should be developed in a sustainable way,” he stressed, opting to use the “sustainable” word at a time when the Conservative government shies away from it. Prime Minister Stephen Harper’s pre-budget directives dropped the notion of sustainable development and replaced it with “responsible” exploitation of resources.
But to make the most of a global economy with high commodity prices, the natural resource industry needs to look at ways to make sure it is being paid global rates for its products, Mr. Carney said.
At present, energy producers in the West are being paid less than consumers in the East are paying, because Western oil and gas don’t flow all the way to the east.
With the right investments in infrastructure and pipelines, those differences could be reduced to everyone’s advantage.
“Building actual energy infrastructure which would get rid of these differentials,” Mr. Carney said.
Emerging markets are begging for technology and products that allow for a more-efficient use of energy and Canada should be eyeing those markets, he advised.
“The marginal demand for commodities – it’s not the United States any more. It hasn’t been for a while and it’s never going to be again. I don’t think it ever will be again in our professional lifetime.”
Entering into long-term contracts with customers will also help Canadian exporters mitigate the risks of volatile prices, he added.
And substantial investment in infrastructure that would allow more-efficient exploitation of shale gas and other potential resources should also be a consideration, he said.
Exporters also need to rethink how global supply chains will work in the future, Mr. Carney said.
“Supply chains in the world are changing,” he said, and Canadian business is well-positioned to grab bigger pieces of the transforming trade networks.
Supply chains are at great risk of being disrupted by natural disasters, and so it makes sense to have a more “networked” supply chain that is flexible enough to tap into different options – an approach that could favour solid, reliable Canadian producers and local companies that can manage data and technology competitively, he said.
“But you’ve got to be nimble, you’ve got to insert yourself into that. That’s something we can do,” Mr. Carney said.
And exporters need to train their eyes on selling their products to the wider world, not just the United States, since the demand from the U.S. is not growing fast enough to ensure prosperity for Canada’s producers.
Mr. Carney’s comments come in the wake of a federal budget that is focused, in part, on aggressively promoting the development of natural resources and the sale of Canadian oil.
The budget signalled that the government is set to speed up environmental assessments and eliminate any overlap of environmental procedures with the provinces. At the same time, the budget invests in pipeline safety.
But it does not invest in energy infrastructure or set out a well-defined strategy that would allow Canadians beyond the oil patch to participate in the boom.
Nor does it address sustainable development, critics charge. They argue that Ottawa has dragged its feet in regulating emissions from the oil sands, and has no plan to put a price on carbon.
“These are basic principles the Conservatives have simply refused to apply – user pay, polluter pay, internalization of environmental costs over the lifecycle of product,” charged Thomas Mulcair in his first big speech as NDP leader on Friday.
“Any profit made, based on business model like that, is no profit at all.”