Is There One Canadian Political Leader with
an Ounce of Strategic Thinking?
By Larry Martin
I watch sadly as Canada’s overall trade balance declines despite a year of low exchange and interest rates, Canada’s agri-food export share declines, and our food processing industry has a
$9 bil/year trade deficit (and growing!). In addition, annual capital investment in food processing has been considerably less than annual depreciation. In other words, Canada is disinvesting in food processing. All this with the fastest growth in demand for food in history by a country with the third largest endowment of arable land per capita and 10% of the world’s fresh water supply. This picture seems out of focus.
From 40,000 feet, it seems so obvious that agriculture and food should be a central part of an economic growth strategy for a country with its resources. But no one who designs policy seems to consider it, and in fact seems to go out of their way to make it difficult to invest profitably.
That’s partly because agriculture leaves the impression it’s a loser because it frequently asks for subsidies. But real leaders would look past this and see the success stories and the potential there is for far more of them if conditions are right. As I work with people in the sector, here are the things I observe that discourage innovation and investment.
Until very recently, there were very few efforts made to increase foreign market access for Canadian food products and the current government is dragging its heels on ratifying TPP. Most industries benefit from economies of size in processing, which can’t be obtained without access to large markets. It’s particularly bad for agriculture and food, maintaining Canada’s cost disadvantage resulting from its small, geographically disperse population, which doesn’t justify size economies. No market access, no investment.
Major industrial provinces continuously raise minimum wages to among the highest in North America. In agriculture, the major beneficiaries of these increases are the economies of Mexico, Jamaica, Philippines, Guatemala and the like, since a high portion of the labour in agriculture is from offshore and they must be paid equal or more than local workers. Thus, higher minimum wages in Canada results in more foreign exchange transfers to their countries and higher costs at home. A few years ago, the last peach processing plant in Canada closed down. The Ontario government asked me to figure out why. They buried the report because it placed the blame on them. The only good news from upward pressure on wages is it increases the incentive to find ways to replace labour with capital, so eventually a few people may earn a very good wage running machines – if the plants and farms don’t stop producing products first.
Consecutive (mainly provincial) governments have moved us from the lowest to nearly the highest costs of energy in North America. The current Ontario government insists on taking step after step to increase them even more. This is done in the name of “greening” the economy. Other jurisdictions perceive that technology and markets will move to alternative energy rapidly, so take advantage of low cost energy while we can and invest in diversification. Apparently, this is not even worth debating in Canada, so we tax our low cost energy sources and subsidize sources that are not yet competitive and send investment elsewhere.
Health Canada and CFIA construct a morass of ponderously slow, inconsistent regulatory processes that discourage investment and innovation in our relatively small economy and encourage great new ideas to be commercialized elsewhere. And, at least in Ontario’s case, the government has accumulated the largest per capita public debt on the continent with things like multi-million dollar payments to teachers’ unions for their “negotiating” costs that could have been used for something useful. Do you suppose that will catch up with us someday?
The underlying issues are obviously important, but there is an increasing tendency to force solutions down peoples’ throats without concern for the consequences. For example, the limitations on neonicotinoids in Ontario, or the new plan to move us off natural gas and onto unstable and much more expensive wind and solar power, or the next set of cap and trade. Thinking strategically would focus on how to use our regulatory systems and resources to simultaneously provide high levels of human and environmental safety and competitive advantage to our industries.
But that would require strategic thinking!