Varcoe: Business leaders are using natural resources to increase productivity

Content of the article

Canada faces an ongoing productivity problem that requires thoughtful solutions.

Canadian business leaders believe they already have part of the solution: They should focus on the country’s resource-rich industries, from agriculture and forestry to mining, oil and natural gas.

A new report from the Canadian Chamber of Commerce says a comprehensive national strategy is needed to promote investment in resources.

Content of the article

Growth in these high-paying industries will boost productivity in sectors where the country has a competitive advantage over many other countries, such as minerals (e.g. gold and potash), oil and gas, forestry, and food products.

“We really need to leverage our strengths as a country,” Andrew DiCapua, the report’s author, said in an interview Monday.

“We are fortunate to live in a country where we have abundant natural resources… We should be looking to find ways to attract investment to boost the sector.”

In a report released last week, the national business group said the approach should take into account streamlining government regulations, the need for timely approvals for major projects and policy stability.

It also recommends accelerating tax breaks for investments in projects that reduce emissions and adopting a trade infrastructure plan to ensure the country has enough roads, ports and energy transmission lines to access resources in remote areas.

The natural resources sector is the second largest in Canada, paying out $25,000 more in compensation last year than the national average, the study found. Expanding these sectors could boost Indigenous employment and contribute to economic reconciliation.

Content of the article

Content of the article

“Canada faces significant economic challenges — below-trend growth, falling living standards, regulatory uncertainty and weak business investment — and the Canadian economy is not keeping up,” said DiCapua, the chamber’s senior economist.

“The main recommendation here is to create regulations, policies and regulatory certainty – or rather transparency – to attract investment into this key sector.”

Economists, business leaders and the Bank of Canada have been highlighting the country’s productivity problems for years, but concerns are growing.

As indicated in a TD Economics report released last week, Canadians’ standard of living, as measured by real GDP per person, was lower last year than in 2014.

Earlier this year, Bank of Canada Deputy Governor Carolyn Rogers issued one of the starkest warnings yet, calling the situation a “broken window” moment in an emergency.

Content of the article

Labor productivity measures how much the economy produces for each hour worked, and increasing it means finding ways for people to “create more value while they are at work,” she said in a speech last March.

“It’s a goal to strive for, not something to fear,” Rogers said.

“When a company increases productivity, that means more revenue, which allows the company to pay higher wages to its workers without having to raise prices. Ultimately, higher productivity helps the economy generate more wealth for everyone.”

However, as indicated in the chamber’s report, Canada is experiencing a decline in the standard of living due to low productivity and investment.

Trevor Tombe, an economist at the University of Calgary’s School of Public Policy, notes that real GDP per person in the United States last year was 43 per cent higher than in Canada. It is expected to produce almost 50 per cent more per person this year, double the gap seen between 1990 and 2015, he said Monday.

Finding a range of solutions is critical. This is where investment in natural resources can play a role.

According to the chamber, last year three million jobs — directly and indirectly — were associated with Canada’s natural resources industry, which contributed more than $460 billion to GDP and accounted for about 21 per cent of the Canadian economy.

Content of the article

The report found that the productivity of workers employed in the natural resources sectors is 2.5 times greater than that of workers employed in the overall Canadian economy.

As Anthony Viel, CEO of Deloitte Canada, said, Canada is a trading country and raw materials make up a significant portion of our exports.

Last year, Canadian natural resources exports were valued at $377 billion.

“That’s our strength in bridging this productivity gap, probably our biggest lever that we can use to have the biggest impact on Canada’s productivity,” he said in an interview.

“That’s a key piece of the puzzle that we as Canadians have that some other jurisdictions don’t.”

The key question is how to attract more investment to these growth areas.

One solution would be to make it easier to get much-needed infrastructure projects to the finish line. (Think of the decade-plus odyssey to complete the Trans Mountain expansion.)

The chamber’s report warns that barriers to investment in resources are holding back economic growth and that the priority is to obtain “timely and predictable” regulatory approvals for projects.

“We have what the world needs: essential minerals, food and energy. Let’s send that to the rest of the world,” said Calgary Chamber of Commerce CEO Deborah Yedlin.

Content of the article

“Let’s not get into a regulatory quagmire that makes companies say, ‘I’ll find somewhere else to invest.'”

The province, which plans to host a productivity summit next month with the University of Chicago School of Public Policy, has also expressed concern.

Finance Minister Nate Horner said the current productivity challenge cuts across all sectors. Spurring greater investment in natural resources must be part of any credible strategy to strengthen Canada’s productivity, he said in a statement.

“The oil and gas sector is by far the most productive sector of the Canadian economy,” Tombe added.

“Canada has a comparative advantage in resources and has had it from the start. And it shouldn’t be ashamed of it.”

Chris Varcoe is a columnist for the Calgary Herald.

[email protected]

Content of the article