Northern Gateway and Nexen show need for modern industrial strategy

 

The fact a last minute proposal to more than triple the cost of the Northern Gateway project by adding a $13 billion oil refinery is being taken seriously in many quarters highlights the problems caused by not having a modern industrial strategy in Canada. 

James Clancy, Member, Canadians for a Modern Industrial Stategy

The fact a last minute proposal to more than triple the cost of the Northern Gateway project by adding a $13 billion oil refinery is being taken seriously in many quarters highlights the problems caused by not having a modern industrial strategy in Canada.

Without a modern industrial strategy, projects are being debated in isolation with no thought as to how they affect other priorities for Canadians. And, in the process, we lose opportunities to build our economy and create good, well-paying jobs.

We have seen this with the debates on both the Nexen takeover and Northern Gateway.  The debate on Northern Gateway has focused on the environmental impact and revenue sharing. With the Nexen takeover, foreign ownership of our economy, particularly by a company owned by another government, has dominated the discussion. In both cases the proposals are being discussed without considering how they fit into the economy as a whole.

A modern industrial strategy provides a framework for making choices about where our economy will go. It reflects the reality that governments are directly or indirectly involved in most major economic projects and that the choices that have to be made have a considerable impact on the living standards of Canadians.

To succeed a modern industrial strategy must involve government, business, labour, academic institutions and other stakeholders. That is the reverse of what is happening now where key decisions on our economy are being made on an ad hoc basis as individual proposals come forward.

We see this with both the Nexen and Northern Gateway proposals.

Currently the only criteria foreign takeovers of Canadian companies need meet is that there be a “net benefit” to Canada. Even the Industry Canada panel reviewing the policy admitted that no one can be sure how the current policy will be applied in each case. There is a long history of foreign companies taking over Canadian firms to get their hands on key assets/resources and then closing the rest of the company down. The lack of a framework for evaluating takeover bids means we can't be certain that history won't repeat itself if CNOOC is allowed to takeover Nexen.

A modern industrial strategy would also provide a framework for evaluating proposals against other options for the energy industry and objectives for the economy as a whole.

Enbridge's plan for Northern Gateway would have us exporting crude oil to be refined overseas. Our country may look very different, but 18th century fur traders in Montreal would have no problems recognizing the economic model.

From Sir John A. MacDonald onwards, Canadian governments have been trying to move Canada away from just being an exporter of raw materials. Proposals for the large scale export of raw materials to be processed elsewhere, like Northern Gateway, effectively reverse those efforts. But the absence of a modern industrial strategy means this shift in direction is occurring without any discussion.

On the bright side, the suggestion that a refinery be built in Kitimat as part of the Northern Gateway project recognizes that we should be trying to ensure jobs from processing our natural resources stay in Canada. That is a step forward.

But the problems with the refinery proposal illustrate the problem with making decisions about major projects without any kind of framework. Saying yes to what would be the eighth largest refinery in the world would close off other options. The proposal to build the refinery overseas and assemble it in Canada would also eliminate opportunities to use our natural resources to develop other sectors of our economy and there are still concerns about oil tankers in B.C. Coastal waters

There are a lot of different opinions about what a modern industrial strategy will look like. Many feel building a greener economy provides considerable opportunity. Former federal energy minister Jim Prentice has suggested a strategy based on energy megaprojects. Should we focus on value-added sectors or exporting resources. The range of opinions makes it all the more important that we have the discussion that includes all stakeholders including provincial premiers, the federal government and citizens.