MNI: Canada Needs Bigger Push Than Commodity Boom-Ex-Ministers

Surging energy prices won't be enough to revitalize Canada's resource-dependent economy so officials must keep advancing measures to lift private investment and diversify exports away from the United States to China and India, former ministers and an ex-central bank official told MNI.

"We have lots of things going for us, but it's a highly competitive world, and other people have some of the things we have," former Deputy Prime Minister Anne McLellan said in an interview. "Are they able to build projects faster, diversify, take that risk that may be required, faster than some of our companies? We hope not."

Leaders like Prime Minister Mark Carney have made a welcome shift to focus on long-term growth that's in line with what executives need to see alongside higher prices to invest more in Canada, McLellan said. What's missing is the execution needed to convince investors the changes will be long lasting, she said.

Canada just began major overseas exports of liquified natural gas last year that sets the stage for more shipments to Asia, while most of the country's oil production also still heads to the U.S. even after a long-delayed expansion of the TransMountain pipeline to the west coast. (See: MNI: Canada Years Away From New Pipeline Investor – Officials) Oil in particular going mostly to the U.S. sells at a discount to global prices that costs Canada tens of billions of dollars a year.

"It's not necessarily a given that Canada is going to reap the benefit of whatever kind of strife is happening in the oil and gas market out there," Lisa Raitt, a former natural resources and transport minister, told MNI. "It just means that we're now part of the conversation, and it completely is up to Canada to figure out whether or not we're going to be a player in this world." 

NOT GOING BACK

McLellan and Raitt have spent the last few years compiling annual reports on Canada's lagging competitiveness and how to fix it, finding this year that business investment has fallen to the lowest since the 1950s as a share of GDP. 

Their view that the economy is at risk of continued weakness even in a potential commodity boom triggered by the Iran war contrasts with the country's historic exports of lumber, minerals and energy. Central bank and government forecasts for revenues and economic growth are still often based on commodity prices.

Both former ministers also alluded to recent tensions with President Donald Trump and the near-recession Canada experienced last year when he imposed tariffs, exposing firms that had grown accustomed to the U.S. buying 75% of Canada's exports. 

“Things are not going back to the way they were, even when Mr. Trump leaves the White House,” McLellan said. 

NO SAILING INTO INDIA

"The future markets of the world are in Asia Pacific," she said. "We say we have more comprehensive trade agreements with other countries and regions of the world than any other nation, right? We have not maximized the benefits of those trade agreements."

Political leaders must keep rebuilding trade with nations like China and India for companies to diversify, Raitt said. Those relations faltered under former PM Justin Trudeau. 

“Asking corporate Canada to decide that they're going to sail into India and they're going to show why they're the best in the world, it ain't going to happen. That's not the way trade in this geopolitical world works anymore. You kind of have to go in with the government,” Raitt said. 

This year Raitt and McLellan sought advice from former Bank of Canada Senior Deputy Governor, Carolyn Wilkins. She told MNI seeking overseas buyers will come to nothing if Canada doesn't build ports and railways needed to deliver the government's goal of doubling non-U.S. exports. 

“The capacity of these things in Canada is very restricted, so that needs to change if we're really going to be able to get things off our shores,” Wilkins said.