Five Big Problems With Canada

# 4 in the "What's Wrong With Canada" series" - We are not playing to our strengths.

Oct 14, 2024

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Canada is often described as a nation rich in natural resources, blessed with abundant forests, minerals, oil, and natural gas. Yet, despite having all the tools needed to be an economic powerhouse, we seem increasingly ashamed of our commodity-driven economy.

Based on generally agreed-upon metrics, Canada is the 19th richest country in the world; Ireland has passed us and will soon be passed by Malaysia and South Korea. With competent management and better institutions, we could be wealthier than Norway.

We are the only nation in the world's top six in natural oil and gas deposits, minerals and agricultural potential. We have America to our south, oceans on both coasts and the Arctic to the north (we have left undefended and are now susceptible to Russian attack)

Instead of embracing our strengths, we’re doing everything possible to downplay, undermine, or even kill the industries that have long sustained us.

While other countries maximise their natural advantages, Canada is like a giant ashamed to walk upright and crawl from place to place.

The most glaring example of this self-sabotage is how we turned down a huge offer from Germany for liquefied natural gas (LNG) in 2022. This decision perfectly illustrates Canada’s growing discomfort with its wealth.

\In the summer of 2022, Germany—facing an energy crisis due to the war in Ukraine and its reliance on Russian natural gas—came to Canada with a desperate offer: they wanted to secure long-term contracts for Canadian LNG. With its abundant natural gas reserves, Canada was in a perfect position to help fill the void left by Russia’s dwindling exports while establishing itself as a major player in the global energy market. It was a win-win, or so it seemed.

Yet, during a press conference, Prime Minister Justin Trudeau dismissed the idea, saying there was “no business case” for exporting LNG to Europe.

You get this when voters want sunny ways at the expense of economic literacy.

Trudeau pointed out the lack of infrastructure for exporting LNG on the East Coast and hinted there wasn’t enough interest from the private sector. This decision left many scratching their heads. Germany offered a once-in-a-generation opportunity to supply energy to one of the world’s largest economies, and Canada simply walked away. Other countries, like the United States and Qatar, quickly stepped in to fill the gap, securing lucrative deals that will benefit their economies for decades. But Canada? We turned our backs on the offer. But after we turned down their business, we threw wads of cash at Volkswagen. It’s like going to Costco, and at the till, they won’t take your money, let you take your groceries, and the lady at the door - instead of checking your receipt passes you two sacks full of cash.

The rejection of the German LNG deal is symptomatic of a broader problem in Canada: we are increasingly ashamed of our natural resource wealth.

We are the only country that wants to commit to economic hari-kari in supposed service to climate change. However, we produce more than 1.5% of the world’s CO2 emissions, and the Chinese, Russians, and Indians (amongst others) are not on board. Our sacrifices are simply virtue signalling and can have no effect.

While countries like Norway and Australia proudly embrace their resource-driven economies, Canada seems to be undergoing an identity crisis.

We are like the quarterback with all the talent in the world who makes poor decisions under pressure.

We act as though being a commodity-driven economy is something to be embarrassed about, as if producing and exporting oil, gas, and minerals is somehow beneath us.

But here’s the thing: natural resources are Canada’s golden goose.

Our economy has been built on the back of commodities for centuries. From the fur trade in the 17th century to the oil sands today, natural resources have always been at the heart of Canada’s economy. According to a 2021 report from Natural Resources Canada, the resource sector employs over 650,000 Canadians and contributes more than 17% to our GDP. And that’s not even counting the indirect jobs created in manufacturing, transportation, and services.

Without our natural resources, Canada wouldn’t be the prosperous country it is today.

Yet, despite this, there seems to be a growing movement that wants to “kill the golden goose”. Environmental groups, some politicians, and even segments of the general public have adopted an anti-resource mindset, pushing for policies that actively hinder the industries that have made Canada what it is. Whether it’s blocking pipeline projects, opposing mining expansion, or, in this case, turning down a massive LNG deal, Canada is undermining its economic future.

The Fraser Institute noted in a 2020 study that Canada’s natural resource sector faces growing regulatory hurdles, making it increasingly difficult for businesses to invest and grow. Instead of being a world leader in commodities, Canada is fast becoming known as a place where projects go to die.

Take pipelines, for example. Canada’s oil sands in Alberta are one of the largest proven reserves in the world, yet we’ve faced years of gridlock trying to build the infrastructure necessary to get that oil to market. The Keystone XL pipeline was cancelled after years of political opposition, and the Trans Mountain Pipeline Expansion was mired in delays and protests.

Meanwhile, countries like Saudi Arabia and Russia are pumping oil at full tilt, eager to supply the world’s growing energy needs. They have no qualms about profiting from their natural resources, and they’re all too happy to step in when countries like Canada bow out.

In 2019, Teck Resources, one of Canada’s largest mining companies, withdrew its application for the Frontier oil sands project in Alberta. This project, worth an estimated $20 billion, would have created thousands of jobs and added billions to Canada’s economy. But faced with endless regulatory delays and an uncertain political climate, Teck walked away. The message was clear: Canada is not serious about its resource economy. But we are creating lots of regulatory jobs and diversity officers.

Now, let’s look at Norway, which, like Canada, has abundant natural resources. Norway is known for its oil production, and instead of being ashamed of it, they’ve turned it into an enormous economic advantage. They’ve built a sovereign wealth fund worth over $1.4 trillion, largely funded by oil profits, which they use to invest in their country’s future. Norway’s resource wealth has allowed it to become one of the richest countries in the world, and it continues to be the leader in environmental sustainability while still benefiting from its natural resources. Norway proves that you can be a responsible steward of the environment while embracing the economic benefits of resource extraction.

Canada could follow Norway’s example, using its natural resources to build a prosperous future while investing in renewable energy and sustainable practices.

So why is Canada so reluctant to embrace its strengths? Part of the issue is environmentalism, which has grown in influence over the past few decades. And while environmental protection is undoubtedly important, the conversation in Canada has become so polarised that we’ve reached a point where resource extraction is viewed as inherently bad, no matter how responsible it is.

The irony is that Canada already has some of the most stringent environmental regulations in the world. Our resource companies are required to follow rules that would make OPEC countries laugh. Yet, even when we meet these high standards, we still face fierce opposition.

Another factor is Canada’s inferiority complex. We constantly look over our shoulders at other nations, particularly the United States, and try to figure out where we fit in. While Americans unapologetically pursue their interests, Canada seems preoccupied with being liked at home and abroad, and it’s not working. We are losing our influence and seem so caught up with inner torment that we can’t do anything.

We don’t want to come across as too assertive, greedy, or aggressive. But the reality is that in a global economy, nations act in their own best interests. By not doing the same, we’re hurting ourselves.

Finally, there’s a cultural shift in Canada that seems to value symbolism over substance. We want to be seen as global leaders in climate change, social justice, and progressive policies, but we’re sacrificing economic pragmatism.

Canada needs to wake up and start playing to its strengths. We are a commodity-driven economy, and that’s nothing to be ashamed of. The world needs our oil, gas, minerals, and timber, and we can responsibly provide these resources. Instead of turning down deals, delaying projects, and stifling our resource sector, we should embrace it, just like Norway, Australia, and countless others are doing.

If we continue down this path of self-sabotage, we risk missing out on the economic opportunities right before us. The German LNG deal was just one example of what we stand to lose when we fail to recognise the value of what we have. It’s time for Canada to stop apologising for its wealth and start harnessing it for the benefit of all Canadians. By 2050, our per capita income will be 50% of the US’s; our per capita GDP is declining. We cannot redistribute or debt finance our way out of this. However, the passive Canadian character, our capitulation to the environment, and other squeaky wheels (often paid generously from the public purse) will continue to lower living standards in this country.

We need to grow a pair.

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But I only ask that when you choose your coffee, please choose mine. Cheers.

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Five Big Problems With Canada

# 4 in the "What's Wrong With Canada" series" - We are not playing to our strengths.

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