Canada will never be a true resource superpower until it shuns “rip-and-ship” extraction, embraces sustainability and shares the wealth with future generations.
Those are among the key conclusions of a provocative new report by the Canadian International Council, entitled “Nine Habits of Highly Effective Resource Economies.” Canada has won the “geological lottery,” with vast stores of resources that the world craves, but it risks squandering that inheritance because it lacks a clear national plan to exploit them wisely, the CIC says.
The foreign affairs think tank points to Norway, Sweden, Finland and Australia as the best examples of countries successfully leveraging their resources for maximum economic and social benefit.
“Other resource producers do a better job of collaborating, of finding a balance between environmental protection and the economy, of adding, building, or extracting value from their resources, of saving for future generations, and of being strategic about resource development,” according to the report, written by Madelaine Drohan, The Economist’s Canadian correspondent and former Globe and Mail reporter. “There are smaller countries with fewer resources than Canada that punch far above their weight on the global stage.”
Canada is hampered by a “fragmented approach to resource policy” that is often reactive to external events, such as the U.S. decision to block the Keystone XL oil pipeline, growing opposition to the Northern Gateway pipeline and state-owned CNOOC Ltd. of China’s $15-billion bid for Calgary-based oil producer Nexen Inc., said the report, based more than 160 interviews with industry players and experts.
CIC offers a nine-step plan to put Canada’s resource economy back on track:
1. Treat resource royalty revenue as capital to be saved and invested rather than income to be spent
Use royalties to lessen currency volatility, even out boom-bust cycles and make long-term investments. The best model is tiny oil-rich Norway, which has put $617-billion (U.S.) into its sovereign wealth fund. Only two provinces, Quebec and Alberta, do it now in Canada, but they have just $20-billion (Canadian) saved.
2. Build value on resource base
Emulate Sweden and Finland by providing industry with the tools needed to innovate, including modern infrastructure, skilled workers and public research. And companies have to invest much more money in R&D to overcome the stronger dollar, climate change and new competition.
3. Promote joint research between governments, universities and industry
Ottawa and the provinces should target their R&D spending at collaborative projects and promote a “Team Canada” mindset. The payoff in Sweden and Finland has been more bang for the research buck and more focused results.
4. Put a national price on carbon
The CIC says Canada shouldn’t wait for the Americans to tackle climate change by moving now to put a price on carbon, either through a national carbon tax or through a cap-and-regime. That would give businesses an incentive to make greener products, while enhancing Canada’s brand.
5. Diversify trade beyond U.S.
Ottawa should focus on negotiating with large free trade blocs, such as the Trans-Pacific Partnership, rather focusing on single countries, such as China or the U.S. The government should also help companies access markets via reciprocal investment deals.
6. Foster global corporate players
Governments need to change laws that impede the emergence of global players, including poison-pill rules that limit companies’ ability to thwart foreign takeovers. Canada should also demand reciprocal investment rights in foreign markets and be more explicit about what kind of investment is welcome here.
7. Focus resource-related foreign aid
Canada should collaborate with other resource-rich donor countries, such as Norway and Australia, to promote resource governance and poverty alleviation in developing countries. Ottawa should also implement the international Extractive Industries Transparency Initiative, forcing resource companies to disclose what they pay local governments, and vice versa.
8. Match worker skills to industry needs
Resource industries should curb their growing use of temporary foreign workers by tailoring education programs and tapping into underused sources of domestic labour, including women and aboriginals.
9. Develop a national blueprint for resource development
Canada must overcome partisan bickering and fragmented resource policies to reach a national consensus, focused on the long-term. The CIC advocates broad consultation with all affected parties and compromise between the federal government and the provinces, who control the resources.