Thank you very much, and thank you for inviting me.
As you have heard, I am the Canada correspondent for The Economist, but I'm here today because of a report on natural resource policy that I researched and wrote last year for the Canadian International Council. It’s called “Nine Habits of Highly Effective Resource Economies: Lessons for Canada”. I'm speaking as the author of that report, not as a correspondent for The Economist.
The premise of the report was that Canada was good at extracting and harvesting natural resources, but could be even better. I looked at energy, mining, and forestry, and I talked to as many people as I could, which ended up being about 160 of them, both across Canada and in other developed countries that have important resource sectors, such as Australia, Norway, Sweden, and Finland.
I asked all of them what Canada could be doing better. The “Nine Habits” in the title of the report are the nine issues that were raised the most frequently, but this is not an exhaustive list.
If I had to sum up what they told me in one sentence, it’s that Canada has to take a longer, broader view of resource development and be more collaborative in its execution. These are very general principles, but they have real impact when it comes to things like expanding markets and diversifying products, which I understand is the work of this committee.
Market diversification is one place where thinking more broadly comes in. I saw that a previous witness told you that achieving market diversity is deceptively simple, that you just build the infrastructure required to get the product to market. I would politely disagree. There are so many obstacles that can trip you up that unless you deal with them first, you won't get the infrastructure built.
The debate over the Northern Gateway pipeline is a perfect illustration. No one could have been surprised by the opposition of some aboriginal groups and environmental groups. The environmental movement has been on the rise since the 1970s, and aboriginal groups have been more assertive about having their say about development on their territories since a series of court decisions starting in the late 1990s.
The lesson to draw from this is that energy policy can't be dealt with in isolation. At a minimum, aboriginal and environmental policies have to be included so obvious problems can be addressed, and you could argue as well that trade, investment, and labour policies should also be part of the discussion. I know you probably don't want to hear this since it simply complicates the work of the committee.
It sounds complicated, but other governments are doing it. Here in Canada, Plan Nord in Quebec is an example that's probably worth looking at. While it's not perfect, it is an attempt to bring together the range of policies in the interest of developing resources in Quebec, and it ties resource policy to aboriginal, infrastructure, tourism, investment, trade, and environmental policies.
If you look abroad, Australia has a very detailed policy on how to penetrate and maintain markets in Asia for its mineral and energy exports. Australia is the nearest comparator to Canada in that it's a federation and the states there have jurisdiction over natural resources.
Again, the Australian plan is not perfect, but it brings together everything from broad international trade policy right down to very detailed education policy, such as the fact that they are going to start teaching Mandarin in primary and secondary schools starting next year.
It’s this type of broader and longer-term thinking that's needed to achieve market diversification, and there's not enough of it being done in Canada. We get hung up on our differences and on the difficulties in getting the provinces and the federal government together, but meanwhile other countries, some of them our competitors, are forging ahead.
If you look at product diversification, which is sometimes mistakenly referred to as value added.... I say mistakenly because adding value to resources is not the only option. There's also extracting value and building value.
In my report I looked at the forest sector here, but I'll try it with bitumen. Refining would add value. If you created new byproducts from the bitumen itself or waste streams, that's extracting value, and if you built a new industry on top of it, that's building value.
I heard recently of a good example of some medical imaging technology in Alberta that's actually been adapted out of technology that's used in the oil industry to locate reservoirs underground. A non-energy example of building value is, of course, the financial and legal sector in Toronto that people don't think of very often, but it has its roots in the mining industry.
Canada has its successes, but overall we’re not doing a very good job of adding, extracting, or building value on our natural resources. I was quite dismayed when I travelled abroad to hear that we're often seen as a rip and ship resource producer.
There's a lot to say on diversification, but I'll focus on one key difference that I've found between Canada and some of the comparable resource producers that's pertinent to product diversification. Their companies are more collaborative when it comes to research. It’s out of research that the new products, processes, and services emerge. These new products can lead to new markets, so the two are connected.
I'm referring here to collaboration among companies for research solutions to common problems and to sharing the benefits of that research. We have several small efforts along these lines in Canada. COSIA in Alberta, which was only created in the last year or two, brings together the major oil sand producers to research environmental challenges. FPInnovations is looking for new products and processes in the forest industry. There are several groups in the mining sector. Most are relatively new, and some are struggling.
Yet again, when you look abroad, Australia has had its Australian Mineral Industries Research Association since 1959. It's so successful that several large Canadian mining firms are now members of it. Australia also has a research program, partly financed by the government, that encourages groups of companies to collaborate. There's also mass collaboration in Sweden and Finland.
The advantage of pooling resource dollars is that companies will get more bang for their research buck. This is actually something that the government could encourage, not by spending any more money on research grants or tax exemptions, but by giving priority to research projects that involve groups of companies instead of individual firms.
I tried to get to the bottom of why Canada is not very good at this, and I have to admit I didn't find any satisfactory answers, but certainly other countries are doing it, and it's to their advantage.
I'll sum up with the idea I started with. One of the big messages I got in talking to other people and other countries about resources is that in order to achieve better market and product diversification, you have to have a broader and more collaborative approach.
Thank you.