Liz Beale throwing traditional industries under the bus

Sometimes economists can be too literal in their thinking.  Take APEC for an example.  I think they are way to quick to throw forestry, fishing and even general manufacturing under the bus because of a short term trend.

A few points to rebutt Ms. Beale.

One, the NB (and Atlantic) forestry sector is strongly tied to the U.S. market but when housing picks up again there our sector will revive.  I have said it will never come back to the halcyon days of the early 2000s but there is no reason why it will not remain an important sector for a long time to come.   I would say the same with fishing.  Both have the potential to anchor the region for decades to come.  This type of report by Beale’s group I think distorts the potential.

Two, Beale talks about ICT as a growth sector.  It’s a great sector – on all fronts but I would challenge Beale to find out how much of the sector is export-oriented versus providing local services.   From an economic development perspective this is critical.  If the sector is 90% dependent on the local market then growth potential – by definition – is constrained.  We need to stop talking about ICT in romantic terms and take a long hard look at how we can develop policies that support the export of ICT products and services.  New Brunswick has virtually no exporting multimedia (there are a few firms but we don’t even register in the national data.  Our eLearning industry is all but dead.  What companies are exporting e-Health?  There are a few niche products but I think if you surveyed the NB industry, 90% of revenue would come from local markets.  Again, a definitional constraint on growth.

Three, she talks about aerospace and defence.  Again, I ask you to point to the industry in New Brunswick.  It is very nascent – at best.  Not a large scale driver of the economy.  And I worry about the politics of this sector.  Much of the industry is rolled (or should I say doled) out based on politicial influence.

Four, she talks about oil and gas and mining.  Great for NL, good for NS, potential for NB but not much so far.

The following shows New Brunswick’s top export industries in 2009.  Beale has thrown under the bus four of the top five export sectors and ten of the top 25 (fish-related and forestry-related).  You will note that aerospace is nowhere to be found and oil & gas extraction only generates about $100 million worth of exports for NB (compared to $4 billion in NL).    As I said before, forestry is in a lull right now but should come back with a healthy level of growth once the U.S. housing market rebounds.

Top 25 Exports from New Brunswick (2009) $Millions

32411 – Petroleum Refineries

$6,202,357,217

31171 – Seafood Product Preparation and Packaging

$538,774,159

32212 – Paper Mills

$478,991,342

32211 – Pulp Mills

$363,728,451

32111 – Sawmills and Wood Preservation

$190,323,560

21223 – Copper, Nickel, Lead and Zinc Ore Mining

$185,270,555

21239 – Other Non-Metallic Mineral Mining and Quarrying

$182,632,477

31141 – Frozen Food Manufacturing

$151,458,974

33149 – Non-Ferrous Metal (except Copper and Aluminum) Rolling, Drawing, Extruding and Alloying

$150,110,012

11251 – Animal Aquaculture

$121,716,839

22111 – Electric Power Generation

$111,483,329

21111 – Oil and Gas Extraction

$106,964,765

33999 – All Other Miscellaneous Manufacturing

$85,289,384

11411 – Fishing

$70,497,176

11121 – Vegetable and Melon Farming

$62,780,340

32213 – Paperboard Mills

$52,258,586

32121 – Veneer, Plywood and Engineered Wood Product Manufacturing

$47,544,414

31212 – Breweries

$45,815,948

32229 – Other Converted Paper Product Manufacturing

$37,395,701

32221 – Paperboard Container Manufacturing

$37,068,315

32599 – All Other Chemical Product Manufacturing

$35,828,147

33699 – Other Transportation Equipment Manufacturing

$33,748,781

11142 – Nursery and Floriculture Production

$33,664,799

32512 – Industrial Gas Manufacturing

$28,293,400

32619 – Other Plastic Product Manufacturing

$27,868,044

 

In the end I think there are a couple of trends that Beale should be mentioning.  First, the Atlantic Canada economy is diverging.  It is becoming less relevant to talk about Atlantic Canada as a whole.  NL’s oil and iron ore, NS and PEI’s aerospace and multimedia – NB has very little of those.  NB has a huge customer contact centre industry – not touche by Beale – at least in the newspaper account of her report.  NB’s forestry industry – even in its downturn – dwarfs Nova Scotia.   To broad brush the economcy like Beale does – is not smart and does not help policy makers.

Two, there will be manufacturing in North America for generations to come.  There are still millions of people across North America employed in manufacturing and why shouldn’t New Brunswick and Nova Scotia be positioning itself as a good location for manufacturing?  I think people like Beale have convinced governments in this region to forget about manufacturing and I think that is a big mistake.  Tires are still the largest export from Nova Scotia.    I continue to wonder what would have happened if this region had followed up the attraction of Michelin with another couple of dozen similar large scale manufacturers – the economy would have been radically different today.

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5 Responses to Liz Beale throwing traditional industries under the bus

  1. Patrick Lacroix says:

    Once again, David takes the time to offer nuances, thank you!

  2. WJM says:

    NL’s iron ore — well, L’s iron ore, anyway, since the Bell Island mine closed as the Labrador ones were getting into full swing — is a mature, sixty year old industry. Its contribution to the economic divergence should have been factored in decades ago.

  3. Samonymous says:

    I have said it will never come back to the halcyon days of the early 2000s but there is no reason why it will not remain an important sector for a long time to come. I would say the same with fishing. Both have the potential to anchor the region for decades to come.

    I agree. But those industries will still have to find a way to better manage their affairs outside the realm of generous subsidies, especially given the fact that NAFTA (and other bilateral agreements) are still the law of the land.

  4. WJM, your point is a good one but Beale is just looking at the trending. Iron ore exports from NL are up from $914 million five years ago to $1.6 billion in 2009. As for the subsidies, I think that is also a good point but there is that little problem of the other guy. Remember not that long ago the U.S. was hammering central and western Canada for its softwood lumber subsidies and Atl. Canada was exempt because it wasn’t seen to be as large a transgressor.

  5. Samonymous says:

    I was thinking more of the World Trade Organization’s challenge of the employment insurance program in that they believed it was an unfair subsidy for the Atlantic fishery. Another failed attempt to get rid of the subsidy was filed, I believe, under the FTA agreement awhile back by Maine fisherman as well. To be honest, I can see their beef as I always thought that they should have been completely cut off from the subsidy when the catch was sufficient enough to make a comfortable living. Plus, I thought it created a seasonal atmosphere where fisherman thought it best not to work in the winter b/c they could draw UI/EI. Something that has killed the competitive edge in certain parts of this region.

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