Rebranding the Canadian economy in the wake of the oil slump
The commodities supercycle was good for Canada in a lot of ways, including helping to give the West more economic and political might than it has ever enjoyed. But it also masked a host of chronic problems, including a significant loss of factory capacity, deteriorating export competitiveness, anemic productivity growth and a shaky record on innovation and business R&D.
It won’t be easy or cheap to fix those problems, while also filling the hole left behind by a shrunken oil patch.
The cheaper dollar, a byproduct of lower commodity prices, will help a bit, but it’s not a panacea, and it comes at a significant price. The cost to businesses of buying imported technology has jumped by roughly a third, and consumers are taking a hit to their purchasing power and standard of living.
Autos have regained their position as the country’s leading export, for now. But the industry’s glory days of the last century are gone forever as vehicle assembly and parts production gradually migrate to lower-cost locations, such as Mexico and the southern United States.
“We shouldn’t expect any kind of rebound in manufacturing as a share of our economy, even with the dollar where it is,” argued Glen Hodgson, chief economist at the Conference Board of Canada. “There is always going to be someone who can put a car together at a lower price.”
Canada has put too many of its eggs in one basket – energy – agreed Paul Boothe, a former top federal and provincial bureaucrat who now heads the University of Western Ontario’s Lawrence National Centre for Policy and Management. “When the thing that we’ve been focusing on runs into difficulty, we’re at a standstill.”
Billions of dollars’ worth of oil sands and other energy developments that had been on the drawing board have been shelved or cancelled since oil prices crashed late last year, and the outlook remains bearish under a growing school of thought among analysts and executives called “lower for longer.” Goldman Sachs on Friday said oil prices could fall as low as $20 (U.S.) a barrel given the global glut.
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Rebranding the Canadian economy in the wake of the oil slump - The Globe and Mail
