How Can Canada’s Natural Resource Sector Remain Globally Competitive?
Less regulation is not the answer, says Andrew Grant.
Following intense debate over Canada’s use of its own natural resources and the conduct of its mining companies abroad, the Canadian International Council is curating a project on natural resources over the next five weeks to examine Canada’s future policy environment for domestic resource extraction, energy security, and international regulatory standard-setting. The project will glean its insights from a variety of stakeholders from government, the private sector, and nongovernmental organizations in order to present a number of perspectives to better explain the challenges that we face moving forward and to delve into some of the controversial aspects of international, national, and provincial politics.
Below is the fourth response from Professor Andrew Grant, Queens University, discussing the trade-offs associated with the exploitation of Canadian resources in light of global market conditions.
Although the Canadian economy is not solely dependent upon its natural resource sector (the Canadian economy has become more diversified over the past several decades), this segment of the economy should be neither dismissed nor undervalued. In 2011, mineral production in Canada generated more than $50 billion worth of economic growth—an impressive figure that excludes the myriad economic spin-offs that accrue to support sectors and government coffers. Oil and gas as well as forestry are other leading examples of multi-billion-dollar natural resource sectors in Canada. In light of ongoing advances in geological survey techniques and technologies, new extractive resource deposits are being discovered across the globe on a regular basis. Hence, Canada is one member of a growing list of countries seeking to promote economic development and growth through the extraction of natural resources.
Global competitiveness has subsequently become a mantra of sorts for governments and natural resource sector firms alike. Thus, a rephrasing of the question might be “how can Canada’s natural resource sector remain globally competitive?” A response that calls for less regulations (or ‘de-regulation’) is not only misguided (recall the subsequent negative repercussions of deregulation in the American securities markets in the 1990s) but also unrealistic in the present climate wherein good governance, best practices, and corporate social responsibility are part of the lexicon of all stakeholders. Natural resource sectors are sophisticated markets that operate best when rules and regulations are fair, responsive, and transparent. Increasingly, good governance and corporate social responsibility are recognized as important sources of global competitiveness by domestic and international investors. Promoting both themes is beneficial and can be applied to efforts to increase domestic manufacturing (e.g., refining, processing, cutting and polishing) of natural resources.
Notably, Canada has another source of global competitiveness that may be leveraged: its post-secondary education system. Canadian universities and colleges are world leaders in providing the requisite, cutting-edge academic tools in earth sciences (e.g., geology), engineering (mineral processing), and social sciences to domestic and international students. This goes beyond mere training in the use of sophisticated geological survey technologies and includes an immersion in the political economy of practical topics ranging from stakeholder interactions to sustainable development.