Winnipeg Free Press

Winnipeg Free Press (Newspaper) - January 18, 2025, Winnipeg, Manitoba THINK TANK COMMENT EDITOR: RUSSELL WANGERSKY 204-697-7269 ● RUSSELL.WANGERSKY@WINNIPEGFREEPRESS.COM A9 SATURDAY JANUARY 18, 2025 Ideas, Issues, Insights Finding gains in trading more among ourselves I F one of my young and eager graduate stu- dents of the past was looking for a good thesis topic, I would suggest that the student take a look at Canada’s interprovincial trade. The topic provides significant theoretical and empirical research challenges, but the basic modelling principles are established, data of high quality will be readily available, and the policy impact of the research would certainly resonate today. In 1994, Canada’s first ministers reached the Agreement on Internal Trade, recognizing that there were significant barriers to interprovin- cial trade. Since then, several trade protocols and interprovincial trade agreements have been passed. Yet Canada’s trade focus continues to be outward, resulting in 15 international trade agreements, while trade between the provinces continues to be limited by provincial regulations. Moreover, the international trade agreement with the U.S. and Mexico that matters most is jeopar- dized by incoming U.S. president Donald Trump’s threats to immediately impose unilateral tariffs and renegotiate or cancel the agreement during the term of his presidency. One of the principal tenets of economics is gains from trade, which allow nations to exploit their comparative advantage (producing the things they excel at) and economies of scale in production (using greater volume to produce things more cheaply). From this standpoint, Trump’s disdain for the free trade agreement with his closest neighbours seems foolhardy, but he does not appear to understand or care. And he can afford to, in the sense that the impact of his trade protectionism on the vast U.S. economy will be far smaller than its impact on Canada. The Canadian Chamber of Commerce recently reported that Trump’s 25 per cent tariff plan would shrink Canada’s GDP by 2.6 per cent, or $1,900 per capita. My mythical graduate student could undoubtedly improve on their quick study over the four-year time frame of a PhD thesis, capturing the responses, adjustments, long-term effects and various tariff policies the federal government might pursue. But no one would dispute that a prolonged tar- iff, or a tariff war if Canada responds, would hurt the Canadian economy. Part of the problem, of course, is that the U.S. is our dominant trading partner by virtue of geography. Trade increases the closer a nation is to its trading partner, as well as the size of the trading partner, and our proximity to the U.S. and its gigantic economy makes it very difficult to divert trade to other nations that are farther afield and generally smaller. The principle of gains from trade, however, also applies to interprovincial trade, where proximity presents significant opportunities to counteract the losses of U.S. trade. A Senate report in 2016 listed numerous pro- vincial regulations that differ between provinces and present barriers to trade. Trucking regula- tions differ on when truckers can drive and on what tires. Provincial liquor regulations differ on standard beer bottle size and direct-to-consumer wine shipments. Milk and cream container sizes, organic food standards and maple syrup grad- ing systems differ across provinces. There is no common method of carbon taxation. Companies are often required to undergo a unique registra- tion process in every province in which they do business. Their list is only illustrative of the problems firms face in doing business in other provinces. It does not include the differences in profes- sional certifications and apprenticeship rules that restrict labour mobility and dampen trade in services. Provinces also engage in protectionist procurement policies that favour local suppliers and limit competition from suppliers in other provinces. The Senate concluded that international compa- nies often have easier access to our market than Canadian companies from another province. Even with these restrictions, interprovincial trade constitutes 20 per cent of GDP, compared to 30 per cent for international trade. In other words, the potential impact of elimi- nating unnecessary interprovincial trade restric- tions is considerable. The Canadian Federation of Independent Business estimates that removal of interprovincial trade barriers would increase Canadian productivity by about five per cent or $5,000 per capita. I would want my mythical graduate student to critically assess these figures as well, but the starting point is that the impact of interprovincial trade barriers is not trivial in comparison with Trump’s proposed tariffs. The Agreement on Internal Trade remains in force. In 2010, British Columbia, Alberta and Saskatchewan entered into the New West Part- nership Trade Agreement to reduce barriers to trade, labour mobility and investment. Manitoba joined that Agreement in 2017. Other regional trade agreements between Ontario and Quebec and within the Atlantic Provinces are on the books as well, but clearly much remains to be accomplished. Free trade negotiations are often impeded by the absence of a mechanism for those benefiting to compensate those losing out. Canada’s consti- tutional requirement of equalization payments, however, provides a vehicle for sharing the gains from improved interprovincial trade such that provincial governments can provide reasonably comparable levels of public services at reason- ably comparable levels of taxation. An effective equalization program should provide some impetus to realize the wealth gains available from increased trade among ourselves. Wayne Simpson is a former professor of economics at the University of Manitoba. Federal program failing in agro-Manitoba A CONSERVATION disaster is quietly unfolding in rural, agro-Manitoba with the potential to set private-land conservation and reconciliation back many years, all fuelled by the federal govern- ment’s current approach to land protection. In 2020, at the Conference of the Parties to the UN Convention on Biological Diversity, partici- pating countries, including Canada, approved a global goal to protect 30 per cent of the planet’s lands and oceans by 2030 to stem the loss of biodiversity (30 by 30). A laudable goal on the surface. One of the programs launched by the federal government to meet their 30-by-30 goal is the ecological corridors program. At a recent funding announcement in Winni- peg, federal officials described an ecological corridor project in southwestern Manitoba as “a safe passage for endangered species like the short-eared owl and red-headed woodpecker,” which would “lay the groundwork for ‘a belt of greenspace’ along the Little Saskatchewan River, eventually linking the iconic national park to pro- tected areas and private lands in the province’s west” (Federal government announces $1M for ecological corridor in Manitoba, Nov. 29). Again, laudable goals, on the surface. The problem is that the program is aimed at private land, which is currently being actively farmed. The program is funded and managed by Parks Canada, an institution that is in the park estab- lishment and land protection business, not private agricultural land conservation. The federal documents describing the ecological corridor program are focused on species at risk and talk about the necessity of “regulatory mechanisms” and the need for “compatible activities,” all insin- uating that the current land-use needs to change, but with no clear plan, measurables or details regarding how this will actually be achieved. So when Terry Duguid, a federal cabinet minister, spoke of “belts of greenspace” and “linking protected areas,” local landowners naturally wondered and feared what this meant for them and their land. Between this language and the lack of engage- ment with the local community, it’s no wonder that landowners are concerned. A group of agricultural producers from the Oak River area have organized themselves in op- position to the ecological corridor program. They have formed an organization called the Manitoba Land Stewards Inc. and, unsurprisingly, their supporters are growing rapidly. In developing the ecological corridors program, the federal government rightly conducted exten- sive engagements with Indigenous communities. You would think they would’ve done the same with agricultural producers, given the program is targeted primarily at private farmland. You’d be wrong. Make no mistake, after a century of bad gov- ernment policy relating to Indigenous commu- nities, all reasonable people would agree it is great to see a concerted effort by government to engage with Indigenous people on land conserva- tion. However, what we are now seeing is a new kind of bad federal policy, focusing almost entire- ly and exclusively on engaging with Indigenous people only. The federal documentation for eco- logical corridors speaks to requiring “Indigenous stewardship” as a guiding principle for program- ming. Remember, we are talking about a project area that is almost entirely private farm land. The program documentation gives lip service to the stewardship provided by the actual landown- ers themselves, which is at best disrespectful. The outcome is the creation of more division between Indigenous and non-Indigenous people, which is tragic and unnecessary. Why not simply include all interests in the process? The Assiniboine West Watershed District is an important local conservation organization that has been doing outstanding community-based conservation work for years. The watershed dis- trict applied for and received a $1-million grant from the ecological corridors program. However, the pushback by landowners against the federal program has now divided the local people in an unprecedented way, so much so that many landowners are vowing not to work with the watershed district, and at least one munic- ipality has pulled out of the watershed district entirely. A tragic outcome and entirely avoidable with better leadership and execution by the federal government in the first place. Taking your ball and going home is rarely a good idea, because the world is truly run by those that show up. So when farmers exit conserva- tion planning tables in protest, such as what is happening in western Manitoba, it isn’t in their best interest, nor is it helpful for conservation interests either because they need to work with private landowners for their conservation pro- grams to succeed. All conservation interests, as well as the Man- itoba government, would do well to take the cur- rent situation in Westman seriously and correct their path forward. Rob Olson is senior science adviser with the Manitoba Wildlife Federation. Aerospace funding yet another corporate handout LAST week, the provincial government award- ed Magellan Aerospace a combined $17 million in funding, with $8 million as grants and $9 million in the form of a loan to be repaid over 12 years. Premier Wab Kinew declared this as evidence of “showcasing Manitoba as a leader in the aerospace sector and creating good high-paying jobs for Manitobans,” along with “growing the economy and securing the future of Manitoba as an aerospace hub.” The announcement was celebrated by the company, the plant chair of the union local and the head of Red River College, which has a long-standing training partnership with Magellan. It seemed by all accounts to be a “win, win, win,” as Kinew put it. Unfortunately, this funding package is nothing more than a blatant corporate subsidy — and an extremely ethically questionable one at that. For starters, Magellan is a publicly traded company that is majority owned and chaired by N. Murray Edwards, the 35th richest billion- aire in Canada. Edwards made his fortune by building Canadian Natural Resources Limit- ed (CNRL) into one of the biggest oil and gas producers in the country, and also has major stakes in many other companies including the Calgary Sports and Entertainment Corporation (which owns the Calgary Flames), Resorts of the Canadian Rockies (which owns six ski resorts in Canada) and Imperial Metals. Last month, Imperial Metals was charged with 15 violations of the federal Fisheries Act for the catastrophic Mount Polley tailings disaster of 2014, which has been described as the worst mining disaster in B.C.’s history. Of all companies in Manitoba to give $17 million in public funding to, one that is majority owned by Edwards — who has an estimated net worth of $4.6 billion — should already be close to the bottom of the list for a supposedly progressive government. If Edwards wants to invest in an “advanced state-of-the-art machin- ing centre” and “new test environment that will support new space product development,” as boasted about in the province’s news release, he certainly doesn’t require public funds to do so. Magellan is a private enterprise, with even- tual profits largely flowing to Edwards, and should be required to invest its own money, not the public’s. Unfortunately, this decision continues a long-standing trend of many public subsidies to Magellan, including the city selling a piece of land valued at $638,000 to the compa- ny for $1 in 2010. Then there’s the question of jobs. Aerospace companies like Magellan are high- ly capital-intensive operations, using incredibly complex machinery to create high-value parts. The entire workforce at the Winnipeg plant is only 650 people, with this new funding anticipat- ed to create another 64. These jobs are highly skilled and well-com- pensated, surely, but this is far from the most efficient use of public funding for the purposes of job creation. $17 million is an awfully steep price for 64 jobs, representing more than $260,000 per new hire, particularly given that Manitobans won’t see any direct benefit from it. Instead, this funding should have gone to hiring for public services like health care or education. If manufacturing simply had to be the beneficiary, funding jobs that would help ad- vance the province’s infrastructural prepared- ness for future climate catastrophes seems far more prudent. Finally, and most importantly, is the ethical issue of what Magellan actually makes. Along with producing various commercial aerospace products, Magellan manufactures many parts for military operations, most notably via its prominent participation in the F-35 program. The company’s Winnipeg plant is one of the largest contributors to F-35 production in Canada, churning out the crucial horizontal tail assembly that is eventually mounted onto fighter jets on Lockheed Martin assembly lines in Texas. This contract is extremely lucrative, expected to generate about $1.5 billion in revenues for the company over its projected lifetime. But these F-35s are currently being used to wage incredibly lethal and destructive war by Israel in its war against Palestine, which has been described as genocide by Amnesty Internation- al, Human Rights Watch and many top United Nations officials. More generally, these fighter jets are immensely costly, environmentally devastating and contribute to further escalat- ing a global arms race that has catastrophic implications. Kinew and the NDP want it to seem like this $17 million in funding is good for Manitobans who are concerned about jobs and economic security in increasingly turbulent times. Yet it’s nothing more than a corporate hand- out to a billionaire-owned company that won’t provide any real benefits to the province — and instead make the world an even more dangerous place. James Wilt is a PhD candidate at the University of Manitoba and the author of three books, including Dogged and Destructive: Essays on the Winnipeg Police. WAYNE SIMPSON JAMES WILT ROB OLSON EVAN VUCCI / ASSOCIATED PRESS FILES Incoming U.S. president Donald Trump is promising to impose new 25 per cent tariffs on Canadian exports as early as Monday. But there are trade opportunities within our borders that Canadians could be taking advantage of. ;