Economic Club of Toronto
January 9, 2009
Check against delivery
Thank you very much (emcee), and thanks very much to the Economic Club of Canada for the opportunity to speak here today.
Let me begin by saying what an honour and a privilege it is to serve as Canada’s Minister of Natural Resources.
I guess more people in these parts know me from my time at the Toronto Port Authority and left wondering how that meshes with my new role.
But I am also the daughter of a Cape Breton coal miner. So I understand, in a very personal way, what it means to live in a household that depends on our resource industries.
And, if anything, my time in the boardroom only further hammered home the point that so much of Canada’s trading economy still depends, in large part, on our resource industries. Something we see most clearly in how the Canadian dollar often tracks closely to commodity prices.
So I came into this job with an understanding of the importance of our resource industries to the people who work in them- as well as the impact they have on our economy as a whole.
Which is a good thing. Because these days the serious challenges in the global economy are taking their toll on many of our resource-based industries. This presents challenges to workers. It also presents challenges to our wider economy. Managing these two big challenges is what I consider to be my biggest responsibility.
My immediate focus is on managing the impacts of the current global recession without jeopardizing our long-term success. Our federal Budget, that will be presented on January 27th, will be designed to provide support for regions and industries heavily affected by the global slow down.
Our Government will take deliberate and substantial action on the economy but we all need to work together if we’re going to get this right. That is why we are continuing to consult with Canadians in every sector as we prepare this Budget.
I have been meeting with my provincial and territorial colleagues and energy, mining and forestry stakeholders from coast to coast to coast listening to their views on actions our Government can take in dealing with this unprecedented period of economic uncertainty.
I have been in listening mode – hearing the impacts the global economic downturn is having on individuals, families, and their communities that depend on our resource industries. And what I’m hearing, I’m taking back to the caucus and cabinet table.
That’s why no matter who I am speaking with during my budget consultations- I always try to get answers to the following questions:
- What measures can our Government implement in the resource sector that will generate economic activity in the short term?
- What measures are necessary to ensure each sector’s long-term success?
- Are these approaches complementary?
- And can they be implemented in a way which avoids a permanent structural deficit that would put future progress at risk?
What I’ve heard is that there’s a strong desire for additional investments in infrastructure, and to find ways to cut through the red tape at all levels of government so this spending can happen quickly.
Support for regions and industries heavily affected by the global slow down is also important. Everyone in our caucus understands how critical industries like the auto sector, forestry and mining are to our economy.
And we are prepared to run deliberate, substantial, short term deficits to support our economic recovery package.
And this brings me to what I’m going to talk about today: Not just how critical our natural resources are to the quality of life of so many different people, but also how they came to play such an important role in our economy- and what that tells us about where we need to go from here.
To start, it’s worth remembering just how crucial the resource sectors are to Canada’s economy — to consider the kind of wealth they generate and the impact this economic activity has on the quality of life of Canadians.
Let start with a couple of numbers.
In 2007, natural resources accounted for:
- more than 12-and-a-half percent of GDP;
- more than six percent of total employment — that’s 900,000 direct jobs;
- over 40 percent of our merchandise exports;
- 25 percent of total investment in Canada; and
- more than 60 percent of the direct foreign investment in this country.
In fact, the resource sectors account for more than a third of the country’s entire stock of direct foreign investment.
There is concern over whether natural resources can continue to drive prosperity in this way. And at the same time there is concern over whether enough is being done to protect the environment from the effects of natural resource production and use.
Obviously, the recent shocks in commodity markets will make 2008 numbers look rather different. We’re already seeing production cutbacks and major projects being delayed and cancelled.
Finding the solutions to these challenges requires the public and private sectors to work together in a complex economic and jurisdictional environment.
Global markets, the forces of supply and demand and geopolitical conditions establish the price of energy and many vital resources.
As the recent volatility has shown, over the short-term at least, Canadian resource companies can do little but weather the storm.
The reality is, as a major exporting nation, Canada is being impacted by three external shocks: a worldwide economic downturn, a global increase in financing costs and a sharp decline in the prices of many commodities.
The long-term outlook for resources remains strong, but the recent financial downturn still presents clear challenges to Canada’s resource prosperity.
We need to better understand these challenges and respond to them strategically if we are to preserve and enhance the economic performance of these sectors.
For, while Canada is unquestionably blessed in this regard- so are many other countries. And if an abundance of resources was all it took, they would all be just as wealthy as Canada. And we know that is not the case.
So having the resources is just the beginning.
Today, it’s about transforming these resources into value-added products and keeping high-quality jobs in Canada. It’s about producing and using natural resources in cleaner ways.
It’s also worth mentioning that there is a ‘human resources’ component to ‘natural resources’. How we manage. How we plan. How we make smart decisions today- and for the future.
In short, it’s about how we combine Canada’s resource strength with its people, knowledge, expertise and systems that makes the difference.
These are the key assets – the resources, the systems, and the people and ideas that have built the resource advantage Canada has enjoyed for some time.
We need to make sure we maintain that advantage.
Other countries have been working hard, moving up the value chain through investments in research and development and innovation. New competitors have made it more challenging for the sector to deal with the inevitable fluctuations in commodity prices.
Competitiveness is increasingly driven, not simply by labour and capital, but by generating knowledge and stimulating innovation.
At the same time, our supply of easily accessible resources, especially in terms of energy, minerals and metals, if not properly managed, will decrease.
There is also the absolute necessity to minimize the impact of both resource development and resource consumption on the health of our environment.
This is about more than good stewardship. Sustainability is fundamental to building long-term competitiveness and maintaining the livelihood of our communities.
It is not an overstatement to say that our success in meeting these challenges will have a very significant impact on our future prosperity as a nation.
To be successful over the long term, Canada must continue to generate knowledge and stimulate innovation. We must build on our strengths:
- our rich and diverse natural resource endowments;
- the ingenuity of our people; and
- our world-class systems – regulation, infrastructure and investment climate.
Knowledge of our resource base and landmass is critical to making informed choices that promote economic development for current and future generations.
Public geoscience has and will continue to play a leading role in building this crucial knowledge base.
To give just a couple of recent examples, geomapping carried out by my department was highly influential in the discovery of gas deposits in the central Mackenzie Valley.
Federal investment in geoscience led to the first economic diamond discoveries in Canada – an industry that’s gone from nowhere to $1.6B/year in barely a decade.
This work is essential to encouraging investment in exploration by the private sector. In fact, every dollar invested in public geoscience attracts five dollars in exploration investment and the discovery of $125 in new resources.
And geoscience is about more than finding new resources. It is critical to achieving environmental stewardship, and it’s crucial to proper management of our groundwater resources. We use it to help us protect communities from environmental hazards like floods, earthquakes, and landslides.
And if you’ve ever searched for a place or business in Canada using Google, chances are that the map that came up was based on information developed by Natural Resources Canada.
Our Government’s newest investment in geoscience – $100 million announced by Prime Minister Harper this summer – emphasizes exploration opportunities for mining and energy development in our North. It also includes measures that will support our international efforts to ensure that Canada’s ownership of the resource wealth of our North is beyond dispute.
Building a greater understanding of our natural resources is of course only part of the equation. We need the progressive systems that will enable those resources to be developed in a way that allows Canadian resource companies to compete internationally. And those same systems need to encourage and enable sustainable resource development.
Modern regulation and international best practices are considered important competitiveness factors that can also contribute to environmental leadership. Regulation of major projects is an area where no modern government can afford to be complacent.
And I am very proud of our Government’s record of putting the conditions for success in place.
We opened the new Major Projects Management Office – the MPMO – in early 2008 with the goal of improving the performance of the federal regulatory system for major resource projects.
The MPMO gives industry a single, efficient point of entry into the federal regulatory process. In addition to improving efficiency and accountability, the Office is maintaining Canada’s world-class environmental standards.
We have recognized that resource development in the North, including pipelines, requires particular attention, which is why we have committed to the creation of a new, stand-alone agency for northern development.
Together with the infrastructure to bring it to the marketplace, the natural gas in Canada’s North will make a significant contribution to our energy security, our prosperity, and to economic opportunities in the North – not to mention the environmental benefits of bringing this cleaner energy source to market.
Our Government is encouraging investment by creating one of the most competitive tax regimes in the developed world:
- We have extended the Mineral Exploration Tax Credit until March 2009 to help companies generate new capital.
- We have expanded the definition of eligible exploration expenses to include the costs of community consultation and environmental studies.
- We are committed to extending the super flow-through share incentive for mining exploration.
- We introduced the accelerated write-off for capital investment in Budget 2008.
- And to further encourage capital investment and increased efficiency in our resource and manufacturing sectors, we have committed to eliminate tariffs on imported machinery and equipment as soon as possible.
By 2010, Canada will have the lowest overall tax rate on new business investment in the G7, and the lowest statutory tax rate in the G7 by 2012.
And, of course, our Government is committed to ensuring the proper function of Canada’s credit markets. In these uncertain times, it is essential that our resource industries can depend on access to financing to invest in expansion, technology, and new projects.
We must recognize that labour and skills shortages also threaten long-term growth in some resource industries. These industries will have to continue to attract foreign talent and under-represented labour pools, as well as support greater skills development in order to reach their potential.
This will require ongoing private-public sector collaboration in order to further facilitate the immigration of highly skilled people to Canada and to upgrade the skills of Canadians seeking work in the resource sectors.
People and ideas are the source of knowledge and innovation. Today, they are the most critical drivers for enhanced productivity, competitiveness and a sustainable future.
Innovation is the lifeblood of our economy. It is essential to Canada’s global competitiveness and the key to maintaining and creating new jobs.
Canada has not been standing still in this regard.
Our resource companies are globally oriented and intense users of all kinds of technology.
Many, while driven by the need to be cost effective, understand the linkages between sustainability, ingenuity and resource development. And many are pushing innovation by investing in new equipment and machinery, adopting new processes that improve efficiency and environmental performance and creating new value-added products.
Canadians also want to be assured that the right balance between economic development and sound environmental stewardship is being struck by business and governments.
Environmental demands will also continue to grow internationally. Canada will likely face increasing pressure to meet new expectations if it wants to preserve market share for traditional resources exports and expand into new product areas, including clean technologies.
There is a great deal more to accomplish, and our Government is committed to working with our partners in the provinces and territories, in the academic community and with resource companies to keep us moving forward.
Companies in the forestry sector have been facing special challenges, and our caucus recognizes the impacts these challenges are having on the industry and the many communities and thousands of Canadians who depend on it.
Our $1 billion Community Development Trust is already helping these and other resource-based communities diversify their economic foundations.
We are committed to working with the industry to accelerate its transformation, and are supporting communities as the sector goes through this period of restructuring.
Our Government created FP Innovations – the biggest public-private, non-profit forest research institute in the world. We will continue to back its efforts. We have also launched the Forest Industry Long-Term Competitiveness Initiative to support the sector’s own efforts to develop new, value-added products and explore new markets.
Canada is also a leader in developing the technologies that will allow us to be cleaner producers and consumers of our conventional energy resources.
We have committed to a substantial investment with SaskPower in what will be one of the world’s first and biggest commercial-scale demonstrations of carbon capture and storage technology.
This technology is generating interest and investment all over the world, and it’s easy to see why.
It offers the potential to reduce our GHG emissions by hundreds-of-millions of tonnes.
Carbon capture and storage offers economic opportunity and it offers environmental opportunity – and we are committed to maintaining Canada’s leadership in developing and demonstrating its value.
Just last month, the UK’s Minister of State for Energy and Climate Change and I signed the Canada-UK Joint Statement on Carbon Capture and Storage – agreeing that our two countries will work closely to develop and promote these technologies.
This approach of integrating economic and environmental interests is key to enhancing Canada’s resource advantage and improving the quality of life for future generations. It is about creating a virtuous circle of innovation and enhanced productivity that contributes to our long-term competitiveness and environmental sustainability.
Along with the need for new, innovative technologies, we can also do a lot more with the technologies we have.
Consider energy – it’s one of the biggest input costs in any operation, whether it’s a mine or a household. It costs money, and when it comes from fossil fuels, it generates greenhouse gases and air pollution.
And although we can’t live without it, we can live with less, and we can cut emissions, and be more competitive at the same time.
Energy efficiency has immediate benefits. We can do it right now, and the benefits continue year after year. With very few exceptions, we already have the knowledge, the technology and the techniques.
And when it comes to energy efficiency, Canadians get it.
The response to our Government’s ecoENERGY Retrofit program, for example, has been amazing. In the last year-and-a-half, we’ve delivered grants to more than 50,000 home- and small-business owners to help with the cost of energy efficiency retrofits.
This is a great investment, over the short-term and the long-term. We’re not just helping people control their energy costs and reduce emissions. We’re supporting the industries that manufacture and distribute the products that go into those retrofits.
We’re also creating and protecting jobs for thousands of Canadians who do that work and manufacture those products. That includes the highly trained and skilled energy auditors and engineers who assess our energy use, and give us the information we need to make the best choices for making our homes and businesses more efficient.
Greater energy efficiency means greater energy security. And the less energy we consume at home, the more we have to sell to others
Going forward, the aim is to reinforce Canada’s conditions for economic success, sound environmental leadership and the safety and security of Canadians.
And our natural resources are crucial to that. They are a cornerstone of Canada’s economy and our way of life.
The goal is to ensure a secure resource future for Canadians by embracing the idea that competitiveness includes environmental leadership.
This vision requires that more Canadians break free from their old perceptions and recognize that it is how we use and transform our resources that matters the most.
This means continuing to work closely with the provinces and others, bringing to bear all of Canada’s assets, with the goal of ensuring a prosperous, sustainable and secure resource future for Canadians.
This is about enabling firms to invest and compete.
It’s about supporting innovation and new technologies and turning the idea of being cleaner and greener into reality faster.
It’s about maximizing the income potential and quality of life of Canadians and enhancing the sustainability of our communities.
It’s about moving away from the complacency of the past, where we relied upon the abundance of its natural endowments for prosperity.
It’s about bringing together the strengths of all our assets – our resources, our systems, our people and ideas.
So my message today is a simple one: we must set the stage for long-term prosperity in our resource sector.
And I am confident we are on the right track. We are building an approach that integrates the strengths of all our assets – the resources, the people and their ideas, and the regulatory, taxation, and infrastructure systems we needs to support them.
The fundamentals are in place – to support and encourage investment in resource exploration; in resource development; and in the innovation that will allow Canada’s resource sector to compete with anyone on price, product and environmental performance.
That has been the goal and the commitment and the motivation of everything our Government has done from the beginning, and that determination has not changed.
We will continue to act to protect the economic security and prosperity of Canadians today. And we will ensure that the actions we take today will generate even greater prosperity for Canadians tomorrow.
I understand we have some time for discussion, and I would very much appreciate hearing your thoughts.