Prime Minster Justin Trudeau wears his social justice credentials on his sleeve, but does he have the capacity for tough love?
He’s going to need lots of it if he’s to take on captains of the railroad industry, opportunistic politicians in British Columbia, environmentalists and an abundance of protest groups to do what needs to be done for the agriculture and oil-and-gas industries, which together form about one quarter of Canada’s gross domestic product.
Both sectors rely extensively on rail to get their products to domestic and external markets.
This year’s debacle with grain movement — the second major backlog in five years — highlighted problems with infrastructure that must be addressed if Canada is to ensure its competitive advantage in this globalized economy.
Ottawa is investing a lot of political and monetary capital in both sectors, yet how can that pay off if we cannot reliably move our commodities?
Last year, the prime minister’s economic advisory council identified agriculture and agri-business as a growth sector for Canada. Agriculture directly employs more than 2.1 million people and accounts for 6.7 percent of the nation’s GDP.
The oil industry is struggling with lower prices, but still comprises 18 percent of the country’s GDP. In 2016, Canada’s oil exports were valued at $39.5 billion, yet capital investment declined 62 percent in three years.
A report by the Canadian Association of Petroleum Producers cited government regulations and insufficient infrastructure as reasons for not being able to attract enough capital to the industry.
A consistent, reliable mechanism for moving grain, and oil and gas to external markets evades us. The 2013-14 backlog is estimated to have cost the western Canadian economy upwards of $8 billion.
Alberta’s plans to eliminate its deficit rest largely with the construction of three key pipelines: Kinder Morgan’s Trans Mountain, Enbridge’s Line 3 and the Keystone XL. All three have approval, but face delays.
If Canada doesn’t make advances on railway and pipeline infrastructure, we will find ourselves losing world market share, as other countries fill the void in markets where we are unable to export.
While the environmentalists would have us leave Alberta’s oil in the ground and instead turn to green energy, Canada does not have a comparative advantage in that area. Virtually any country can enter the green energy market with enough government subsidies.
Yet we have oil. The world will need much of it for years to come. Why let Venezuela or Saudi Arabia, neither of which is interested in the environment, meet market demand?
To ensure these commodities reach their growth potential, as much as possible, oil and gas will have to be moved off railroads into much safer pipelines.
That will require a great deal of grit from the Trudeau government. At some point, pipelines will likely mean removing chained protesters and dealing with the B.C. government’s intransigence.
And Canada’s railroads, which have regional monopolies, will have to be marshalled into ensuring more capital investment, or farmers will be at a competitive disadvantage globally, despite having the safest and healthiest agricultural commodities in the world.
None of this is politically desirable, but it is the leadership that Canada needs.
Karen Briere, Bruce Dyck, Barb Glen, Brian MacLeod and Michael Raine collaborate in the writing of Western Producer editorials.