Harper's Northern Development Strategy: Too One-Sided for Success?

by Keith Edmund White

Is Harper's Northern Strategy sustainable?  CUSLINexus quickly recaps three articles that question whether the Harper government is jeopardizing Canadian sovereignty and long-term Arctic development to meet short-term cuts to government spending.

The HillTimes reports on the trade-offs Harper is making to develop Canada's Arctic. While pushing billions of dollars in energy development, other government funding is being cut. The National Post last week reported on delays in the construction of a Northern scientific facility and the Nanisivik port, not to mention the Post's May 2012 article reporting on the budget-busting price of of Radarsat satellites and plans for a dozen nuclear powered subsubmarines and the world's largest ice-breaker being scrubbed.

And now the HillTimes (a fantastic resource--and definitely worth, at least, signing up for a free trial) reports on another Harper cut to government services in the North. Mining Watch coordinator Ramsey Hart discusses the closure of the National Aboriginal Health Organization:

“I think a really big concern about the way that this government is treating resource development in the North is with its reliance on economic development as a way to deal with significant social issues that are found in the North,” Mr. Hart said.

He cited the elimination of the National Aboriginal Health Organization in the last budget as an example of an important federally funded program that could not be replaced by resource development. With an annual budget of $4.4-million, the NAHO produced health studies on aboriginal communities in the North. The organization ceased its operations at the end of June.

Mr. Hart said the NAHO was one of the few programs that focused on issues such as the impact of resource development on community health.

“To just assume that these projects will address social issues is really naive and runs the risk of further exacerbating some of the social issues in the North,” he said.

Taken together, these three articles suggest that concrete steps to Canada increasing its footprint to the North are falling behind ready-to-move mining operations.  While this approach is understandable, it may jeopardize attempts of Canada to assert sovereignty over the Arctic's emerging waterways and future Arctic economic development.

And does Canada need the Harper government's spending cuts?  Not according to the Canadian Centre for Policy Alternative--though, it seems unlikely that any major Canadian party would champion this group's progressive tax and government investment strategy.

Quebec Election 2012: The Significance of a CAQ Win

by Keith Edmund White

Yes, the PQ is still leading polls.  But after a reader comment directed me to review the parties' economic platforms, two things became very clear:  (1) the conservative CAQ are definitely in contention and (2) a CAQ government in Quebec would mean big changes to the economic and spending policies coming out of Quebec City.

Quebec Party Platforms

After a reader comment on an earlier post regarding the PQ’s economic platform, I thought readers might appreciate having a few resources on policy positions of Quebec’s three leading political parties: the PQ, the Liberals, and the CAQ.

One can find these parties full platforms at CBC News. (Side-note: to get the PQ’s platform in English, check out this Google-Translate page).

And for those wanting a quick primer, Reuters offers this crib sheet of these parties’ respective economic platforms.

Political Recap: PQ Leads, but CAQ Is on the Rise

The Gazette, a leading Montreal newspaper, offers an excellent report on the dynamics of the 2012 Quebec election. The PQ leads (with around 33%), but is unpopular, and is now shifting its attacks from its Liberal opponents (who have slipped to third place) to the CAQ. Both the Liberals and PQ are polling in the high 20s, but the Liberals are slipping, while the CAQ is on the assent.

The possibility of the CAQ winning a three-way race against the PQ and Liberals is itself a historic and significant development in Quebec politics. As the discussion below of the parties respective platforms will reveal, the CAQ has the opportunity to push a drastically more conservative approach to government spending and taxing in a province where a majority of the voters favor left or center-left on economic policies. Oh, the joys of modified parliamentary systems!

The Economic Politics of Quebec: Left (PQ) vs. the Center-Left (Libs) vs. the Conservative (CAQ) 

Now while I can’t comment on previous governing records in Quebec, the Reuters report allows a few conclusions to be drawn of these parties economic plans. 

1. Balancing the Budget:  All three parties are committed to balancing the province’s budget by 2013-14. 
2. Spending:  The PQ and Liberals favor government spending, but the Liberals’ spending plans are half of those of the PQ. 
3. Taxes:  All three parties are pushing tax increases, but the CAQ’s revenue plans only increase the estate taxes of second homes.  But guess what?  This revenue goes to paying for an income tax cut.

Conclusion

PQ is pushing (by to use American standards) and pretty liberal economic plan, Liberals are pushing what could be viewed as a center-left plan, with the CAQ’s plan that would probably find a lot in common with the Republican economic platform.

And on a final note, I find myself a touch envious that when Quebec voters go to the polls next week, they'll actually know--to a surprising degree of detail--what policies they're voting for.  The U.S. 2012 election, for all the focus on the role of government in the economy, has yet to see either major party lay out any real details on government spending. 

Marc Garneau on the 1982 Constitution Act and the Quebec Question

Canada’s interesting constitutional history, as discussed by Liberal MP Marc Garneau from the l’Institut du Nouveau Monde’s round-table 30 Years after the repatriation of the Constitution:  Where are we now? earlier this summer.

One interesting note for our American readers:  the 1982 Constitution Act, including Canada’s Charter of Rights, has never been approved either by the Quebec national parliament, the governing party, or public referendum.

For a succinct review of the history of Canada's 1982 repatriation, check out Professor Norman Hillmer's summary at The Canadian Experience.

From Marc Garneau's presentation:

...

In my opinion, repatriating the constitution and entrenching the Charter had benefits for all provinces, including Quebec, even though there were major political consequences.

I will close by stating again that this is not an ideal situation.

It would be better, in my opinion, if the National Assembly were to approve Canada’s Constitution Act.

But before negotiations can begin, there will have to be a very clear understanding among Quebeckers — in other words, a very strong consensus — about the changes they would like and that would make it possible for them to sign.

Canada vs. USA: Canadians Are Wealthier, But Will 'Innovation Drain' Short Circuit Canada's Success?

By Keith Edmund White

In July, a study that found Canadians’ net wealth—averaging $363,202—surpassing that of their Southern neighbors by over $40,000 got a lot of airtime on cable news. 

But is this Canadian wealth-assent here to stay?

Well, first, let's see what Canada's getting right.  For that, check out Stephen Marche’s July 15^th Bloomberg article, Hardheaded Socialism Makes Canada Richer Than U.S.  He cites Canada’s superior Constitutional structure, rich natural resources, and smart policy choices as keys to Canada's wealth success (without much actual analysis).  But that's because his real thesis is much more narrow, and easier to identify:  Marche credits “[t]he stability of Canadian banks and the concomitant stability in the housing market.” But this, at least to me, falls under Canada's superior public policy choices, which--with some of my own reading between the lines--really looks like Marche liking Canada’s left-leaning, parliamentary democracy over America's log-jammed  republic that splits its executive and legislative functions.

But, however one might read into the article, is Marche’s ode to Canada fair?  Canada bucked the financial troubles that have plagued America—and, let's not forget, Europe.  And Marche does admit that a big part of that relative success owes to Canada's burgeoning energy sector (of which America is the biggest buyer).

But is Marche missing Canada's economic Achilles' heel? 

According to the Library of Parliament Research Services (the Canadian version of Congressional Research Services), Canadian citizens and policy makers have reason to fret over their long-term economic health.  Canada is falling behind when it comes to innovation: 

…Canada’s weak innovation performance can generally be traced to the overall poor business investment in innovation.  The panels (past reviews of Canada’s innovation performance) also showed that Canada’s relatively subpar productivity growth will put the nation’s prosperity in jeopardy, if left unaddressed.”  (The Business of Innovation in Canada:  Challenges and Responses, Dillan Theckedath, June 8, 2012)

I recommend reading the report (which may lead you to ponder how to properly define and measure innovation) to appreciate how hard defining, let alone discussing, how best to spur innovation can be.  But the report gives one implicit and one explicit takeaway.

Explicitly, it shows that Canadian industry--owing to Canada's large size but small population--does not encourage its industries to come up with innovative products of techniques.  And, with Canadian worker productivity already in the pits, its shows that Canada's wealth victory over the United States might have as much to do with America's bad choices as Canada's right choices.

But the reports implicit finding is probably more important.  When it comes to assessing whatever headlines may grab the attention of the talking-heads for a day, its important to remember that success tends to blur both what's right and wrong with a nation.  Was America’s rise in the 90s owing to particularly stronger political leadership than 2012--let alone a different constitutional framework?  I don't think so.

And with that in mind, American readers should not assume that America's current economic weaknesses mean everything is going wrong at home.  In fact, America i an innovation leader, a characteristic that might just propel America's economic motor to--once again--be the envy of the world.

Canada's Arctic Strategy

By Keith Edmund White

The development of Arctic Canada could generate mineral, fishing, and tourism revenue to the tune of $1 billion dollars.  Furthermore, Canada's sovereignty and control of the emerging waterways through the Arctic is a source of national pride.  So it's no surprise that Prime Minister Harper has made developing the North a key initiative of his government.  But, when it comes to economic development, will the high costs of developing the Arctic--in combination with other countries own newly appreciated energy finds (read:   North American natural gas) require an Arctic rethink?  In any case, simply developing the North--without carefully planning of each infrastructure and energy project-- could result in Canada actually losing money on its Arctic gamble.

Last week, Canadian Prime Minister Stephen Harper kicked off his seventh trek to the Arctic. If you want to learn more about his schedule, check out this informative Montreal Gazette article. Of more interest, to me, is where Canada’s Arctic strategy stands in 2012.

Press Takes on Harper’s Trek

The Calgary Herald, unsurprisingly, comes out in favor of Harper’s Arctic policies. It highlights the Prime Minister’s push to develop and cement Canadian claims to the Arctic. But, to its credit, the article highlights the current costs of developing its Northern region: totaling $2.9 billion for 112,000 people, and funding 77 – 90% of revenues for Canada’s northern territories (the Yukon, the Northwest Territories, and Nunavut. Of a particular note to me is the article’s mention of opposing U.S. and Canadian claims on the Northwest Passage or Canadian Archipelago—with the US claiming the emerging waterway as an international strait, while Canada would naturally prefer these to be Canadian waters. (For those wanting an exhaustive look at Canada’s Arctic claims, check out the 50+ page Sovereignty & Security In Canada’s Arctic, an interim report by a Canadian Senate Committee).

The National Post used Harper’s Arctic tour for discussion on the Polar Bear, probing two questions: (1) whether the polar bear should replace the beaver as Canada’s national symbol, while (2) delving into how Canada patrols its frontier region:

The roughly 4,700 Rangers — sprinkled in 178 communities across the North — are the backbone of the military’s presence in the region.

They conduct patrols across the vast frozen wasteland and are equipped with Lee-Enfields, bolt-action, magazine-fed rifles that were standard issue during the first half of the 20th century.

The Winnipeg Free Press provides a useful counter-weight, highlighting the failure of the Mackenzie Valley Gas Pipeline, a project that has found itself falling prey to the Arctic’s “obvious economic handicaps” of remote from other Canadian industrial centers. Read the section below, or the article, to learn a few more details of the project and the project’s impact of Canadian environmental policy, but the economic message can be summed up in short: Developing the energy-rich Arctic is expensive, and with Canada just one player among many, costly infrastructure projects can go belly-up without careful planning. 

From the Winnipeg Free Press:

The Mackenzie Valley Gas Pipeline project of Imperial Oil and others is one of Canada's greatest unbuilt infrastructure projects. After years of investigation and litigation over aboriginal title and further years of environmental review, the project won National Energy Board approval in 2010. It is not being built, however, because U.S. oil and gas exploration companies have found ways of extracting great volumes of natural gas that were previously not recoverable. In the present glutted natural-gas market and low natural-gas prices, the expense of the Mackenzie Valley line is difficult to justify.

Northerners eager to see the Mackenzie Valley line built believe it was killed by too much environmental review. The Harper government agreed and changed the National Energy Board Act to allow itself to set limits to environmental review and speed up approval. The three-member panel studying Enbridge Inc.'s proposed Northern Gateway gas pipeline from Alberta to the Pacific Coast is now operating under the government's tighter timeline.

But it is just as reasonable to conclude that the Mackenzie Valley line is a technically good project that just has to wait until somebody needs the gas badly enough to pay for construction of the line. Environmental review didn't kill a good project -- it delayed an unnecessary project. If the Mackenzie Valley line was reaching completion today, it might stand idle for want of buyers for the gas. The investors would be stuck with an engineering marvel that lacks, for the moment, an economic purpose.

Some Arctic Basics & Grading Canada's Arctic Push 

First, just so readers can be hip to Canadian political lingo, Harper announced, in 2009, a four-pillar strategy for Canada Great White North: (1) asserting sovereignty, (2) protecting the environment, (3) promoting social and economic development; and, finally, (4) improving and devolving Arctic governance. The main focus on this posting is on that third aspect—economic development.

Canada is making serious investments in Arctic infrastructure. As detailed in a 2011 Library of Parliament research paper, Canada has spent over $720 million to procure icebreakers; gotten new patrol ships; spent $17 million to establish commercial fisheries in Nunavut; and $100 million “to establish a deepwater port in Nunavut” for its security forces. These are the backbone projects of Harper’s push to develop the Arctic. Should these projects continue and be completed, they could begin the long process of making the Northern territories closer to self-sufficiency (though, Canada should probably use U.S. subsidization of Alaska as a more attainable goal). 

So, without getting into the weeds, how is Canada doing in its Arctic project? Well, according to YahooNews, not that great: “While Prime Minister Stephen Harper and Defence Minister Peter MacKay continue to insist Canada is no slouch in the Arctic, other countries’ Arctic strategies seem to be bigger, stronger and faster.” Reporter Andy Radia then points out that the United States is revving up submarine patrols of the Arctic, Russia is spending over $100 billion on 16 new nuclear submarines, some of which will be patrolling the Arctic, and Sweden and Norway may be in on the Arctic gig too.   

But this focus on whether certain waterways in the Arctic will be Canadian waters or international waters misses the (snowy) forest for the trees.  Canada will never out-militarize Russia or the United States, but Canada has already turned the land and waters of the Arctic into an emerging hotbed of economic activity.  The question is, is even further development worth the public infrastructure costs--let alone the costs of providing security to a no-longer mythical Northwest Passage.

There are three key areas where Canada can develop oil and natural gas: the Mackenzie Valley, the Arctic Islands, and the Mackenzie Valley/Beaufort Sea. A 2012 Lloyd’s of London report found that there’s possibly $100 billion to be made in the Arctic for minerals, fisheries, shipping, and tourism. But the report notes that the extreme weather requires strong public infrastructure investment, effective regulatory control, and greater data-collection on the dangers and benefits of Arctic development. 

The U.S. Energy Information Administration (E.I.A.) sums up the "goods news, bad news" of Arctic economic development:

The Arctic presents a “good news, bad news” situation for oil and natural gas development.  The good news is that the Arctic holds about 22 percent of the world’s undiscovered conventional oil and natural gas resources, based on the USGS mean estimate.  The bad news is that: (1) the Arctic resource base is largely composed of natural gas and natural gas liquids, which are significantly more expensive to transport over long distances than oil; (2) the Arctic oil and natural gas resources will be considerably more expensive, risky, and take longer to develop than comparable deposits found elsewhere in the world; (3) unresolved Arctic sovereignty claims could preclude or substantially delay development of those oil and natural gas resources where economic sovereignty claims overlap; and (4) protecting the Arctic environment will be costly.  The high cost and long lead-times of Arctic oil and natural gas development undercut the immediate importance of these sovereignty claims, while at the same time diminishing the economic incentive to develop these resources.

...

The bottom line for Arctic oil and natural gas potential is that high costs, high risks, and lengthy lead-times can all serve to deter their development in preference to the development of less challenging oil and natural gas resources elsewhere in the world.  Also, the less abundant Arctic oil resources will be more readily developed than the Arctic’s natural gas resources.  Thus, while the Arctic has the potential to be a more important source of global oil and natural gas production sometime in the future; the timing of a significant expansion in Arctic production is difficult to predict.       

Conclusion:  Canada and the Arctic

Undoubtedly, the Arctic holds great economic potential for Canada, as well as other Arctic nations. But if Canada fails to push prudent development, it may find itself paying for extensive Arctic infrastructure while finding the promise of Arctic profits a mirage.

Quebec Election 2012: The (Inward Looking?) PQ Is Back, Liberals Fall, and the Center-Right CAQ Shows Its Staying Power

By Keith Edmund White

For American political junkies bored by the Democratic and Republican conventions, I would recommend tracking Quebec’s provincial election, taking place Sept. 4. Not only is the three-way race close, a center-right party is in striking distance of taking power in Quebec for the first time in modern history.

Admittedly, after four nights of debate, a poll has the Parti Quebecois (PQ)—a party supporting Quebec sovereignty and separation from Canada) in the lead, with 33% of the vote. And this might be the lead story, since 2007 saw support for the PQ implode, and give the party its first third-place finish in decades.

But most dramatic, to me, is the tie between the Liberal Party and the Coalition Avenir Quebec (CAQ)—a new party combining the former conservative Action Democratic Party and parts of the Parti Quebecois, standing at 27% and 28% respectively. Also, of note: the same poll found CAQ leader Francois Legault out-performed his rivals, the PQ’s Jean Pauline Marois and the Liberal’s Jean Charest.

Quebec has been governed by the Liberal Party for the last nine years, and either the Liberals or the PQ have held Quebec's parliament for the last forty years. (Side-note: anyone with a chance to visit Quebec City should really take a tour of the gorgeous parliament building and note the distinct lack of Canadian flags until you enter the near-by Parks Canada Fortifications of Quebec, a national historic site).

Most immediately, the PQ’s rise now has Quebec sovereignty issues grabbing headlines. First, the PQ has found itself twisting over its position on the timing of yet-another referendum on Quebec independence. The issue: whether only a petition of 15% of Quebec’s citizens would trigger a third referendum on independence, or if provincial parliamentary approval would be needed before a referendum took place. The significance: With only 30-40% of Quebec's citizens supporting independence, many voters see focusing on cultural or independence issues—instead of say, focusing on economic issues—not a thrilling prospect.

Second, the PQ is also facing criticism for some pro-sovereignty planks in its platforms. The PQ now wants a French language test for anyone running in provincial or municipal elections and a secularism charter that bans public servants from wearing of “conspicuous” religious symbols.

The National Post probes this inward lurch the PQ, interviewing critics and opponents of the PQ’s platform, gets at two conclusions: (1) demographic changes do show that Montreal may become minority French-speaking within two decades, a troubling development to Quebecers in favor of preserving the city’s French culture; (2) while easily characterized as intolerant, the moves do support PQ’s central goal of independence: (a) both proposals will likely be slapped down the Canadian Supreme Court, making it easy for the PQ to show Quebec doesn’t ‘fit’ into Canada’s federalism and (b) they are measures, if enacted, which could lead to next decade’s young voters pushing a independence reference over 50%.

But more interesting, to me, is the raise of the center-right CAQ. First, it is important to note, that in the 2007 provincial elections, its pre-merger Action Democratic Party finished second, taking advantage of an imploding PQ. But now, even in the face of a reinvigorated PQ party, the newly-minted CAQ is showing that center-rights politics in Quebec aren’t fading fast.

Sympathetic to Quebec’s French identity, the CAQ supports Quebec nationalism, but has promised a moratorium on independence for 10 years. In doing so, it has transformed the election from one between a left-leaning federalist party and left-leaning separatist party, but one that promises either a durable center-right opposition party, or even a possible center-right government in Quebec. In fact, the only thing that seems to be holding the CAQ from getting even more supports are doubts that the CAQ, like the PQ, will push for Quebec’s independence from Canada.

In short, this election matters. Will the PQ hang onto their lead, but then find its return to political power short-lived: with squabbling over a third referendum and court battles robbing it of public support? Will the Liberals hang on, stoking fears that a PQ and CAQ win will focus Quebec politics on independence and culture issues, at the expense of more pressing issues, like the economy and healthcare? Or will the CAQ quash doubts about its commitment to Canadian federalism, and break the left-leaning strangle hold on Quebec politics?