‘Petro-currency’ limits Canada’s competitiveness,

‘Petro-currency’ limits competitiveness: report

Current federal and provincial policies around oilsands expansion show a “lack of economic foresight that may ultimately limit Canada’s longterm competitiveness,” says a new report made public Wednesday.

The report by the Pembina Institute and Equiterre Centre for Sustainable Development blames the oilsands for pushing up the Canadian dollar — “petro-currency” — which in turn has led to the so-called Dutch Disease that has contributed to the ills of Quebec and Ontario’s manufacturing sectors.

“We are definitely not saying the oilsands need to be shut down,” Sarah Dobson, one of the lead authors of the report, said in an interview. “We are advocating for responsible development of the oilsands that’s going to maximize the value of the resources over time. “

The Pembina report examines the economic merits of the oilsands — leaving environmental impacts aside — and concludes the Canadian dollar’s rise due to energy exports is playing a key role in making central Canada’s manufacturing bases less competitive.

The booming oilsands — fuelled by what the report calls preferential tax treatment — is also making it difficult for companies outside the resource sector to attract workers, the report notes.

“The high demand for skilled and unskilled labour in Alberta drives up wages on average since 2008, the per capita income differential between Alberta and the rest of Canada has stood at over $12,000. This high wage differential attracts new workers to Alberta, diminishing the labour supply in other provinces.”

Stephen Gordon, an economics professor at Laval University, recently argued in a report that higher commodity prices during the previous commodity boom of 2002-08 actually “had a benign — if not positive — effect” on Canada’s manufacturing industry.

“Is there upward pressure on wages that stems largely from investment in the oilsands? Yes. Highly volatile resource? But so is the manufacturing sector. Oilsands not a stable source of employment? Neither is manufacturing sector apparently,” Gordon said in an interview.

The previous commodity price boom and exchange rate appreciation produced a manufacturing sector that paid higher wages and provided its workers with more and better equipment and increased employment in research and development, Gordon argued in his report published by the School of Public Policy at the University of Calgary.