Don’t ask for our love, Alberta – by Matthew Mendelsohn (Toronto Star – March 1, 2012)

The Toronto Star, has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

Matthew Mendelsohn is director of the Mowat Centre at the University of Toronto.

The national media have all sided with Alberta Premier Alison Redford over Ontario Premier Dalton McGuinty on the impact of the oil sands on the Ontario economy.
 
The Alberta premier went down to Chicago and chastised the Ontario premier for not loving the oil sands. When McGuinty declined to profess his love, the media piled on him for being ungracious.
 
But Redford should understand that with Alberta’s new economic and political power comes responsibility. Demanding that everyone prostrate themselves at the feet of the oil patch is not the right approach.

Let’s turn to the substance of the issue. The national media objected to McGuinty stating aloud the truth: the value of the Canadian dollar is heavily impacted by the price of oil and the dollar’s appreciation has hurt many in the manufacturing sector.
 
The impact of the oil sands on Canada outside Alberta is complex. Many benefit. Some in eastern Canada fly out to the oil sands and work part-time. Many in Toronto’s financial and business service sector have clients in the oil patch. And there are manufacturers in Central Canada — particularly of durable goods — who sell a great deal to the Alberta resource sector.

All of these things are in the mutual commercial interest of both parties and one would presume that Canadian businesses in Alberta are happy to do business with their fellow Canadians. These exchanges strengthen the Canadian economy and also increase the influence of Alberta in national political and economic life.

But the oil sands are not an unvarnished good.

As noted by CIBC just this week, economic prospects for exporters in the manufacturing sector “look to be seriously impaired by the structural hit from a strong Canadian dollar.” This is the latest in a long line of economic studies that point out that the high dollar hurts some exporters in the manufacturing sector.

Most economic activities in Canada have largely positive impacts on other regions. The economic benefits of natural resource development, however, are much more regionally concentrated. This is because natural resources are provincially owned, with the resource royalties flowing entirely to the province. It has been estimated that 94 per cent of the economic benefits from the oil sands will remain in Alberta.
 
There are things that can be done so the continued development of the oil sands does less damage to some communities in other parts of Canada.
 
The most sensible would be the creation of a sovereign wealth fund by Alberta, as recommended by the Alberta Premier’s Council. This saves some of the wealth generated by non-renewable assets in a fund for future generations, as Norway has done. Such a strategy would diminish the impact of oil and gas extraction on the value of the Canadian dollar.
 
For the rest of this article, please go to the Toronto Star website:
http://www.thestar.com/opinion/editorialopinion/article/1138935–don-t-ask-for-our-love-alberta

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