The logic cliff [Canadian resource development] – by Philip Cross (National Post – February 26, 2013)

The National Post is Canada’s second largest national paper.

‘Bitumen Cliff’ report demonizes Canada’s resource boom

Ever since the staples theory was formulated decades ago, the debate has raged between those who believe natural resource exports can form the basis of sustained growth and those who do not. Canada, one of the richest economies in the world, stands as a testament to the benefits of resource development. But opponents of our reliance on such development are driven to ever more absurd contortions to justify their conviction that natural resources must be bad for us, regardless of what the evidence shows.

The latest example of the anti-­resource lemmings marching determinedly off the logic cliff is the just-released paper The Bitumen Cliff by the Canadian Centre for Policy Alternatives (CCPA). This adds to the demonization of the resource boom that has enriched Canada over the past decade. Since the prosperity generated by the resource boom continues to expand, even reaching the beleaguered forestry industry, the paper draws a bead on what it calls the implications of the “bitumen boom.”

What’s wrong with this thinking? Everything, starting with the title. Bitumen is not an accurate description of Canada’s oil patch, never mind the whole resource sector. Bitumen, broadly defined to include all non-conventional oil, accounted for just over half (56%) of all Canadian oil produced in 2011. The rest is crude oil produced by conventional methods. But surely the occasional fact can be sacrificed in the service of saving us from our natural resources.

Now that the notion of Dutch disease (that a booming resource sector leads to a higher exchange rate that depresses manufacturing) has been so discredited that even politicians shy away from its use, the CCPA’s paper picks up the old anti-resource argument of the “staple trap.” A hinterland (that’s us, by the way) exports to an advanced country (the U.S.) that transforms the product and sells it back at a higher price back to the tuque-wearing peasants in the hinterland.

The “staple trap” does not even make any sense for bitumen, the paper’s poster boy for resources. We export bitumen to the U.S., which refines it into gasoline which, well, Americans quickly consume in their cars, some built by the Canadian Auto Workers, whose chief economist is one of the paper’s authors. The CCPA wants Canada to refine oil here rather than importing it. We already do just that and make billions doing so.

Last year, we exported $14.1-billion of refined petroleum products, while importing $11.8-billion. The rising share of raw materials imported into Canada for processing — reflecting many commodities, such as Latin American gold, Jamaican bauxite and North Sea oil — is so contrary to the authors’ prejudices that it doesn’t even figure in their report.

For the rest of this article, please go to the National Post website: http://opinion.financialpost.com/2013/02/25/the-logic-cliff/

 

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