National Post (National Edition)
Is it good for Western Canada if Ontario destroys itself?
Doug Ford, the leader of the Progressive Conservatives and the Premier-elect of Ontario following an election on Thursday, is now in charge of the province. But with Ontario on track for more debt, and no end in sight for its staggeringly high electricity prices, is it entirely bad if the Heartland Province destroys itself ? With Ontario businesses regularly threatening to leave, what’s in it for other provinces? asks Tristin Hopper.
ONTARIO BUYS AN AWFUL LOT OF STUFF FROM WESTERN CANADA
Western Canada makes a whole lot of its money from Ontarians. In 2014 alone, Ontario bought $27 billion worth of stuff from Alberta, its largest non-Quebec trading partner. Meanwhile, Alberta bought $34 billion worth of stuff from Ontario. Add on Saskatchewan and B.C., and Ontario bought another $18 billion in goods from the West. Naturally, it would be quite bad for everyone if all this commerce suddenly disappeared.
IT IS POSSIBLE TO ‘STEAL’ BUSINESS FROM A DEBT-RIDDEN BASKETCASE
In Quebec, the separatist rumblings of the 1970s and 1980s sent scores of businesses fleeing from Montreal
to Toronto. The most famous was Sunlife Financial, which left in 1978 after the passage of the Bill 101 language law. “Reports show that more than 500 firms relocated their head offices from Montreal to Toronto between 1977 and 1996,” wrote the Montreal Economic Institute in a statement to the National Post. What’s more, most of those firms saw immediate boosts to their profitability. So there is precedent to the notion that Ontario could scare away capital. “There are reasons to believe other provinces, including Western Canada, will benefit if Ontario does not take competitiveness seriously,” wrote the Institute.
BUT BUSINESSES DON’T FLEE AS READILY AS ONE MIGHT THINK
“The economy is much more strongly influenced by global forces than by politics, despite what leaders will tell you,” said Ngaio Hotte, resource economist at the University of British Columbia, adding that an Ontario premier would “really have to screw things up good” to spawn a full-blown financial exodus.
AND IF THEY DO FLEE, THERE’S NO GUARANTEE THEY’LL GO WEST
“Manufacturing would likely move to the U.S. or Mexico,” said Mike Moffatt, an expert in international trade at the University of Western Ontario. Tech, financial and insurance firms are more likely to stay in Canada, but they might head for Quebec or Atlantic Canada. Those places not only have cheaper workers and better seafood, but also a lot more bilingualism.
ONTARIO MAY ALREADY BE SCARING AWAY FUTURE BUSINESS
For a startup just finding their feet, the incentive to go to Winnipeg, for example, suddenly becomes much more attractive. “The issue may be more about future economic opportunity than current opportunity,” said University of Calgary economist Lindsay Tedds. She used the example of the booming Canadian cannabis industry. Ontario, which is already a pharmaceutical heavyweight, would be a natural fit for the sector. Nevertheless, she says cannabis companies keep hanging their shingle in Alberta thanks to “lower hydro rates, expansive space available, and the risk appetite from the resource sector looking to diversify.” Ontario politicians can really only be fully blamed for the hydro rates part of that equation, and Tedds cautions about obsessing too much over relative tax rates. “If taxes were all that matter, why would firms not all be located in, say, Uzbekistan?” she said.
IT’S GENERALLY BAD FOR A COUNTRY IF A BIG PIECE OF IT GOES NUTS
Western Canada would almost certainly be made poorer if Ontario suffered an economic collapse. Up to 40 per cent of the federal treasury is paid by Ontario. This means that, for about five months a year, the Canadian federal government is running exclusively off Ontario dollars. Losing that money would be generationally devastating to Canada. The right-leaning Fraser Institute is among the organizations most likely to argue that Ontario policies are driving business into the arms of Calgary and Winnipeg. But even they are quick to say that it’s bad for everyone if Ontario goes down in flames. “A strong Ontario is good for Alberta and a strong Alberta is good for Ontario on net and all else equal,” said Ben Eisen, the institutes’ director of provincial prosperity studies. “We’re in this thing together.”