Environmental Action

In Brief

USW National Director Ken Neumann and Environmental Defence Executive Director Rick Smith weigh in on debate about the role of Canada's petro-currency and its impact on manufacturing jobs.

By Ken Neumann And Rick Smith

Alberta Premier Alison Redford and Ontario Premier Dalton McGuinty have kicked off a long-overdue debate about the role of Canada's petro-currency and its impact on manufacturing jobs across the country. It's about time.

With growing attention on the very real environmental impacts of the tarsands, there's been a concerted push by the oil industry and its allies in the Alberta and federal governments to talk up the economic benefits, not just for those in Alberta but across Canada. It doesn't ring true, however, anywhere in the country where the soaring Canadian dollar is squeezing jobs in manufacturing, tourism and other industries.

Back when oil and other commodity prices were lower and the loonie traded at 67 U.S. cents, Canadian manufacturing products could better compete against international rivals, leading to more jobs at home. Now that it's consistently at parity, or above, companies such as Caterpillar Inc. and Controlladora Mabe SA have more incentive to close up shop and move elsewhere.

The latest figures from Statistics Canada show a loss of 627,000 manufacturing jobs over the past nine years - many times higher than the number of jobs created by the oil boom.

The reason the two are connected is due to something called "Dutch Disease." The term was coined in the 1970s after the Netherlands discovered a large natural gas field, putting upward pressure on its currency and thereby hurting its manufacturing sector.

Look at a graph that tracks the price of oil and our exchange rate over the past few years, and you'll see them march largely in lockstep. The Petroloonie is our new national currency.

Not all the pressure towards our high dollar today is because of the oil industry, but Serge Couloumbe, in the department of economics at the University of Ottawa believes that close to 40 per cent of manufacturing jobs lost due to the higher currency can be attributed to oil. That means an estimated 196,000-220,000 manufacturing jobs were lost due to the oil boom, which comes off as one of those faceless statistics until you realize that's a massive number of families struggling with the hardships of unemployment and finding new work.

Uncontrolled expansion of oilsands production could take our dollar even higher, pricing even more of our non-oil products out of international markets.

What can be done, though? The first step, as always, is to admit that we have a problem. That in itself will be a challenge given that Alberta and Ottawa are in full-on sales mode around the tarsands, not only dismissing alternative opinions, but actively attacking critics. It therefore falls to elected officials who represent those with the most to lose to stand up to the bullying and to put the issue squarely on the public agenda.

Policy-wise, we desperately need a conversation about the pace and scale of the tarsands industry, not just on environmental grounds, but on economic grounds as well. Right now there are no chosen limits - exploit things as fast as possible, regardless of the impacts on climate, labour, and currency. That amounts to laissez-faire recklessness that puts Canada at risk on a number of fronts. A better approach would be to consider the broader economic effects on Canada as part of regulatory decisions, rather than assume faster development has only benefits without drawbacks.

We also need to look at countries such as Norway which seem to be managing the economics of their natural resources better than others. For example, Norway recognizes that oil is finite and has therefore used its oil revenues to build a fund of over half a trillion dollars for the day when it has no oil. Moreover, Norway invests that fund outside of its borders in order to avoid the inflationary effect of keeping it at home.

Whether or not Norway's solutions are right for Canada, the point here is that they have engaged in a rational and intentional analysis of issues and options and have consciously chosen a path forwards. There is no reason we in Canada cannot do the same once we overcome our insecurities that surround having an intelligent conversation about oil. It's about time.

Ken Neumann is the national director of United Steelworkers. Rick Smith is the executive director of Environmental Defence.

This article appears in the Ottawa Citizen