Bold steps for B.C.’s economy More than just cutting taxes and red tape, B.C needs to develop sustainable industries By Stephen Vogler With tourist dollars dropping on our town like heavy west coast manna, you may not have noticed that B.C.’s economy is in an official slow-down. But you don’t have to go far out of town to find the effects that low world commodity prices and slumping Asian markets have had on our province’s resource economy. The permanent closure of the mill in Squamish last year was only one among a string of mill closures across the province. Unable to make a profit, the corporations are pulling up stakes and moving on to greener pastures. Many of those left behind are beginning to point fingers at the provincial government. The cost of doing business in B.C. is simply too high, they say. There’s far too much red tape, taxes are too high and environmental and labour regulations are keeping foreign investors out. And it’s not just the forestry sector that is raising its voice. At the B.C. Business Summit in Vancouver last November, business representatives from across the province pooled their ideas into a set of recommendations for the B.C. government. The motto of the conference was that "bold steps, not small steps" must be taken to remedy our economic ails. Guest speakers included B.C. businessman, Jimmy Pattison and New Brunswick Premier, Frank McKenna. Ontario’s and Alberta’s economic reforms were lauded, and despite a certain amount of government bashing, delegates said they were there to work in partnership with, rather than against, government and labour. "They want the same thing we do," said Summit co-chair Naomi Yamamoto, "and that’s to make B.C. the most attractive place for investment so we can create more jobs." Mitchell Edgar, Economic Development Officer from Squamish, also attended the conference. "The environment within B.C. has to be competitive," he said. "You have to look at your other competition out there. We’re in a global economy and investment will go where it wants to go, where it can do well. And if you’re not willing to compete than you’re not prepared to win. Is B.C. prepared to win?" he asked. But others argue that beating the global competition at low cost resource extraction is not a race worth winning. Dr. Michael Goldberg, a professor in U.B.C.’s Faculty of Commerce and Business Administration, says that a more fundamental change is needed in B.C’s economy. "We need to have a whole new set of economic metaphors," he says. "We have to see ourselves as being market driven rather than supply driven, and we have to make a very conscious effort to get out from underneath the commodity world that we’re living in." Many sectors of our economy are still geared toward commodities, Goldberg says, providing undifferentiated products. Producing such products at a lower cost than the world price is not realistic, he says. "We’re a high cost producer, now we have to have some high priced solutions. We need to ask, ‘What would the world do with our unique resources that we can charge premium prices for?’" He points to some industries in B.C. where that approach has been very successful. Smoked salmon sells at a twenty-fold increase. B.C. Hothouse produces tomatoes that sell for $1 to $2 a piece, and wineries have shifted to high quality wines with plenty of spin-offs in tourism. Business can accomplish many of those changes independently, Goldberg believes, but government also has a role to play. To accommodate tourism spin-offs from the wine industry, for example, he would like to see the government reform the outdated liquor act so people can sip wines at all B.C. wineries. "What’s needed is the transformation of other industries the way tourism and agriculture have transformed themselves," Goldberg says. "Same thing with forestry. Make this the new centre of advanced forestry world-wide. Those are new ideas and there’s a partnership needed between business and government to do that." Goldberg would like to see new innovative ideas promoting value-added industries rather than propping up the old economy, as was done with the $340 million bail-out of the Skeena Cellulose plant last year. "I don’t see that as a good use of government money," he says. Jacques Finlayson, VP of policy analysis with the Business Council of B.C., agrees. "I think the industry is going to move in the direction of value-added mainly because it will make economic sense to do so. If we want to encourage that process, we’ve got to have an environment where private capital will come in and invest in the facilities, infrastructure, training and technology that enables us to be competitive in value-added production." He believes that in switching to a value-added type of forestry, there will have to be changes to the tenure system and the way in which wood is allocated. "In the long run, if we’re going to redesign the forest industry — harvest less fibre for example — there has to be some restructuring in the way the industry’s organized. A lot of existing mills and facilities are probably going to go out of business. There might be some new ones that open up. The government has got to let that natural economic ebb and flow occur instead of stepping in, as with Skeena Cellulose, and propping up an uneconomic operation." The type of community forest that Whistler is currently trying to establish might be one model which could work in a value-added forest industry. While Whistler’s interests lie more in preserving surrounding forest land for tourism values, other communities could use community-based control of their forests to sustain a value-added wood products industry. Finlayson’s suggestion of attracting investment for facilities, training and technology would be a key part of creating this kind of forest industry. Better yet, the investment could come from within the province itself — both from the private sector and the Forest Renewal B.C. fund. Value added products in B.C. could go well beyond milled 2x4s. The province could become known as a producer of cabinetry, furniture, musical instruments, paper products, etc. — items that bring in 20 or more times what raw materials do, and provide rewarding, creative employment. But the message B.C.’s private sector is currently sending to Victoria is not likely to bring these kinds of changes about. Calls for weakened environmental and labour regulations, lower taxes for corporations and middle to high income earners, and an all out war on red tape would play completely into the hands of the transnational corporations who are currently looking for other places to do business. The policies that the B.C. Business Summit is lobbying for would bring those corporation back into the province to extract the last of our natural resources and make future transformations in the industry a moot point. Already the NDP government has taken heed of those pressures and lowered stumpage fees, relaxed the Forest Practices Code, loosened regulations on mining exploration and created a Business Task Force on cutting red tape. While these measures are all aimed at re-enticing foreign investment, Murray Dobbin of the Canadian Centre for Policy Alternatives wonders what all the recession mania is about. He points out that B.C. actually had the fastest job growth in Canada in the first 11 months of 1998 (3.6 per cent compared to Ontario’s 3.5 per cent and Alberta’s 3.1 per cent). There’s been a mild 1 per cent downturn in the economy at the worst, he says, and while some sectors grew, there was a downturn in resource-based industry and home building. "You can’t downplay the suffering of communities and families that rely on forestry," he says. "What needs to be done in the forestry sector is to let downturns in Asia have less of an impact here." He points out, however, that even when forestry was in a boom period, it was losing jobs to mechanization. Dobbin agrees to some extent with delegates of the Business Summit over the need for tax reform, but believes it is the poor and lower wage earners who should get tax relief. "There are something like 60,000 profitable corporations in Canada who don’t pay any taxes," he says. He believes a small minimum corporate and inheritance tax could keep the tax base the same while offering a tax break to low income earners, thus stimulating the economy. Dobbin’s colleague at the CCPA, Seth Klein, also questions the message coming out of the Business Summit. He says corporate profits were actually up by 10 per cent in B.C. last year, yet that didn’t result in increased investments. He’s also wary of pointing to Alberta as an example of public policy stimulating the economy. "Alberta’s growth has been primarily export-led, driven mainly by the demand for oil and gas in the U.S.," he says. "It has more to do with resources and their demand than short-term public policy." What some see as a crisis in B.C.’s economy could also be viewed as an opportunity for positive change. Both Finlayson and Dobbin agree that B.C. is currently comprised of little mirage economies which are doing well — high tech, tourism, film and certain forms of agriculture — sitting right next to traditional resource economies such as forestry, mining and fishing that are downturned. The proximity of Whistler and Squamish is just one example of this among many throughout the province. If those in the resource sector take a cue from their newer economic neighbours, they might find ways of transforming their industries into a thriving and sustainable production economy. Such value-added industry would work well in tandem with tourism, and would help to thread B.C.’s fragmented economy back together. Delegates at the B.C. Business Summit are pressuring the government to proceed with "bold steps, not small steps" in attracting foreign investment to B.C. Perhaps a truly bold step would be to find ways of transforming our resource-based economy into a sustainable production economy. Otherwise, those bold steps might march our resource-based industries right into extinction.