Brian Lee Crowley

Water, water all around — unless you’re landlocked like Alberta

Being landlocked is a bad place to be generally speaking on the international stage. Coastal states are guaranteed freedom of the seas, but landlocked states may not be able to reach the seas and their commercial bounty without having to bribe neighbouring coastal states. Ottawa was created in 1867 to prevent such extortionary behaviour by Canadian provinces. So what gives when BC is yet again threatening to close off Alberta’s access to tidewater? My views on the issue were laid out in my 12th May column for the Globe and Mail’s ROB. You can read the unedited text below or here online.

Geography distributes its bounty capriciously and the results can be extremely painful for those who end up penalised by their place on the map.  The outcome of the recent BC election may be about the deliver an object lesson in this principle to this country’s only two landlocked provinces: Alberta and Saskatchewan.

Internationally, being landlocked is a very uncomfortable place to be. Unless you are a Botswana exporting diamonds (small, light and high value products that can be shipped by, say, plane) you likely need to put your exports on a ship to get them to world markets, thereby realising their highest value.

Because ocean shipping is so vital to economic success, the world’s nations agree that ships engaged in bona fide commerce will not be obstructed. Nations can’t target the shipping of other countries and demand ransom to let it reach its destination. That’s piracy.

The main exception is when military or diplomatic conflict causes countries to throw up embargoes against offending countries’ goods, or to prevent them from receiving shipments of things like arms or nuclear materials. Such exceptions are exceedingly rare when seen against the volume of ocean-borne trade.

But landlocked states face a completely different obstacle: their goods must cross another country’s territory to get to port. International law is of little help, and the 45 such landlocked states must negotiate access with neighbours who may have conflicting economic interests, historical enmities or simply little interest in helping.

What the neighbours universally have, however, is the whip hand in the negotiations. They tend to use that to extort benefits far in excess of the actual economic value of the infrastructure and services needed to get their landlocked brethren’s goods to port. And having to get their products through a “transit country” makes companies reluctant to invest in the landlocked. It injects a level of political risk that is difficult and costly to manage.

Landlocked countries thus tend to be poorer than their economic fundamentals justify. All because of accidents of geography and the political leverage they create.

Before 1867, the various colonies that were to become Canada suffered from the ability of each to impose tariffs on the products of the other as they crossed their territory. A key benefit of Confederation was explicitly to tear down these barriers, turning Nova Scotian or Quebec products into Canadian products that could move freely across the national territory, including to ports for export to world markets.

But as we’re discovering, the thirst of transit provinces for bounty to allow neighbouring provinces to move their products has never gone away.

Our only Pacific province has lately been the most egregious offender, preying on the vulnerability of landlocked Alberta and Saskatchewan in their efforts to get their resources to world markets.

Take the Kinder-Morgan pipeline, intended to bring Alberta petroleum to Asia via the port of Vancouver. Before the just-concluded BC election, the Liberal premier, Christy Clarke, had already shaken down the pipeline company for $1-billion to “allow” the pipeline expansion to be built. The province has no jurisdiction, pipelines being a federal matter, but the province could threaten enough obstructive behaviour that the company could see that peace with the province might be worth a hefty price tag. This is nothing but Third World corruption carried out at the expense of Canadian resources, a corruption only made possible by the arbitrary fact of Alberta’s landlocked geography and Ottawa’s complaisance.

Now BC has doubled down on transit province bounty-seeking, this time targeting thermal coal. The province has threatened a thermal coal export tax, ostensibly to punish the Americans for their softwood lumber machinations, but the result will be to sideswipe Alberta, which might lose as much as $300-million in sales of such coal now going through the west coast. Saskatchewan hasn’t been targeted yet, but they understand all too well that they are no less landlocked, and therefore vulnerable, than Alberta.

Assuming recounts and other factors don’t change the BC election result, the situation will only worsen. With the Green Party, unalterably opposed to Kinder-Morgan, holding the balance of power count on all the parties to vie to outdo each other in environmental virtue and the chauvinistic promotion of BC interests, as if they can be separated from the national interest of all Canadians. Kinder-Morgan is sure to be a flashpoint. This behaviour is a dagger aimed at the beating heart of federalism.

As for the much vaunted new free trade agreement between the provinces, it is silent on this issue, proving yet again what a paper tiger it is. Meanwhile Ottawa, created in 1867 in part to be the guarantor of the integrity of Canadians’ freedom to trade, looks on benignly.

Who speaks for Canada? Answer came there none.

Brian Lee Crowley (twitter.com/brianleecrowley) is the Managing Director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: www.macdonaldlaurier.ca.

 

 

 

Big cities an antidote to poverty, except in Africa

Cities everywhere are perhaps the moist important drivers of prosperity, pulling millions out of poverty and putting them on the ladder of economic success. As I argued in my 28th April column for the Globe and Mail’s Report on Business, however, Africa remains something of an exception. It’s cities do not generate the same kind of economic progress that others do elsewhere, including in Asia and Latin America. Why not? My answer? You can read it yourself in the unedited column text below or you can read it online:

 

According to Harvard’s Edward Glaeser, “Cities are the best path we know out of poverty.” This is echoed by prominent economist Paul Romer who has made the richly documented case that humanity’s urbanisation over the last 10,000 years has been the main driver of human progress. He argues that the present century is the one where the urbanisation trend finally reaches into every corner of the globe, and the world’s population will stabilise at 10-11 billion people, with 70-80 percent of them living in cities.

But alas it is not sufficient to shepherd people in to growing urban areas for them to participate in the economic benefits of urbanisation. I was put in mind of this the other day when I read a piece by a journalist detailing the challenges he faced flying out of Kinshasa, the capital of Congo. Kinshasa is a city of some 12 million people and the third largest in Africa, so its challenges are emblematic of the obstacles to cities bringing widespread prosperity to that continent.

When I lived in Kinshasa over 30 years ago, hardly anyone flew out of the local airport. When I left I took the African Queen-like ferry across the Congo River to Brazzaville whence you could connect to French international flight networks.

Apparently it is slightly better now in Kin, as the locals call the city. Now there are 11 international flights a day. Still a paltry number for any self-respecting city of 12 million residents, for one of the ways cities create wealth for their inhabitants is through dense networks of connections with other cities. There are 1400 flights a day through Heathrow and 1100 through Pearson.

And it is not just airline schedules.

When I lived in Kinshasa almost no one had a telephone. Copper wire was so valuable that even if you could get a phone connection installed (in itself a minor miracle) the chances were that scavenging gangs would quickly rip out the connection. Making an international call was a hilarious undertaking. Since the country never paid its bills to the national telecom companies in other countries, international operators would never accept calls from Congo. You had to go down to the main telephone exchange  and bribe an operator to start calling every country in the world until they came across an operator that hadn’t got the memo that calls from Congo were verboten. Mobile telephony has surely improved things, but not nearly enough.

These tiny examples illuminate the larger principle about much African urbanisation, namely that unlike, say, China or Korea or even much of Latin America,  Africa is urbanising without globalising; Africans are getting only a tiny part of the benefit that growing cities might confer on them.

Fixing this will perhaps be the single most important thing that could be done to help pull Africa out of poverty and connect it with global opportunities. But that means focusing on the right problems and the right solutions.

The biggest obstacle African cities face to realising their full potential is the weakness of the institutions on which they are based. Yes, people come to cities because there are more jobs, higher levels of specialisation and therefore higher wages, educational opportunities, infrastructure and other advantages. But mostly they come because successful cities have rules of behaviour that protect the investment that companies and individuals make to improve their business and their lives.

If organised gangs can take what you have worked so hard to create, why invest in your education or your business? If the government can bulldoze your little shanty on a whim or ownership isn’t even available because slumlords backed by violence control vast slums, how can you build a stable life? If water, sewer and electricity hookups are a luxury available only to elites, how can you avoid epidemics or connect to the Internet?

What makes cities in the West such magnets for people from all over the world is that property rights are clearly defined and enforced, when your safety and security is threatened you can call the police and they will come and they won’t extort you, if you sign a contract it will be enforced pretty even-handedly on the parties. We have created the certainty needed for investment to be made in the provision of services such as water, sewers, electricity and data pipes, not to mention education, transport and health care.

Lagos, Kinshasa, Nairobi and other emerging African megacities show that the continent is getting the easy part right, with urban dwellers doubling every 20 years. But services and institutions are falling behind.  Institution-building will determine whether those cities can realise the promise of prosperity too.

Brian Lee Crowley (twitter.com/brianleecrowley) is the Managing Director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: www.macdonaldlaurier.ca.

 

 

Provincial “free trade” is anything but

In my 14th April column for the Globe’s ROB I lovingly debunk the notion put about by Ottawa and the provinces that the latter have somehow torn down the barriers to trade within Canada that they themselves have created. The unedited text I sent to the Globe read as follows:

2017 is a big year for Canada. The country was founded 150 years ago in an act of supreme statesmanship. It is the 100th anniversary of the battle of Vimy Ridge, where we came of age in a sustained act of courage, heroism and determination. Governments in Canada are now claiming that their recently announced Canada Free Trade Agreement (CFTA) deserves to keep such exalted company and will come into force on July 1st, Canada’s 150th birthday.

 

Does the CFTA deserve such hoopla? On the contrary. While it represents some modest incremental progress on creating a national market open to all Canadians on equal terms, this progress has much to be modest about. Moreover the sordid backroom horse-trading that gave rise to it, in which rent-seeking interests allied to various governments saw many of their unfair advantages maintained, was the very opposite of what the founders of Canada thought they were conferring on their posterity.

 

Yes, it’s very nice that every field of economic activity is now covered by CFTA, as opposed to the old dispensation where only those fields specifically included were covered. But the price the provinces exacted for this was well over 100 pages of exemptions and exceptions to the principle of free trade within Canada.

 

The really tough areas, such as liquor, financial services and regulatory harmonisation?  Well they have promised to study those some more. Don’t try and sell milk or eggs or any other “supply-managed” product across provincial boundaries. The barriers that forced Newfoundland and Labrador to sell their electricity to Quebec at a fraction of its value remain and nowhere I can find do the premiers promise to give up their latest fad: claiming the right to veto pipelines that cross their territory. Alberta is already considering creating a Crown corporation to handle government construction projects to escape the opening of government procurement they just agreed to.

 

Finally, on actually enforcing the rules of free trade our political leaders raised the monetary penalties for non-compliance. Again, very nice. But they’re hoping you won’t notice they have essentially maintained their Rube Goldberg mechanism in which the complaints of businesses and individuals about unfair actions or practices will be the subject of endless intergovernmental consultations and panels whose decisions will come long after the original business opportunity has died from neglect, starvation and exposure. God help you if you want to get the courts to intervene to make governments follow their own rules, because the governments have made it clear they don’t want those bolshie judges sticking their nose in the provinces’ business.

 

It didn’t have to be this way.

 

The very purpose of Confederation, we often forget, was in large part about freeing Canadians to carry on their profession or business across provincial boundaries. As George Brown famously described the vision its authors had of Confederation: “the proposal now before us is to throw down all barriers between the provinces — to make a citizen of one, citizen of the whole.” Such freedom was explicitly to be a matter of shared national citizenship.

 

Responsibility for achieving Brown’s vision was granted to the national government in a broader federalist arrangement. The essence of federalism is, after all, the creation of a unified national economic space while buttressing local identities, be they linguistic, cultural, ethnic or religious.

 

 

Matters of nation-building or common interest – such as the functioning of the national economy – were thus to be entrusted to the newly-created national government rather than provincial or parochial interests.  That’s why it got jurisdiction over peace, order and good government, trade and commerce and national infrastructure. That’s why there is a national open market clause (Section 121).

 

But that’s not what happened with the CFTA. There the federal government continued the appalling tradition of its predecessors in neutering federal power in order to appease the provinces and territories. The result is not only another bad deal for Canadian businesses, workers, and consumers, it’s a disavowal of Confederation itself.

 

The founders gave Ottawa responsibility for the national economy because they expected provincial governments to speak for provincial interests. That’s precisely what happened. Someone needed to speak for Canada.  Instead the silence was deafening.

 

The sheer number of CFTA exceptions is a by-product of how ill-suited the provinces and territories are to protect and strengthen the economic union. Provincial and territorial ministers naturally care more about the interests of Ontario wineries, Quebec funeral directors, Nova Scotia fur harvesters and PEI architects than about the national interest.

 

The CFTA is not evidence, as its authors claimed, that “Canada works.” On the contrary, it is eloquent evidence of Ottawa’s unwillingness to face down the provinces when the national interest requires it. Ottawa exists for a reason; that reason is not, as one former prime minister tartly observed, to be headwaiter to the provinces.

Brian Lee Crowley (twitter.com/brianleecrowley) is the Managing Director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: www.macdonaldlaurier.ca.

 

The enemy of my enemy is my friend. Friends can buy LAVs

The Grits are fumbling the defence of the LAV sale to Saudi Arabia. And they’re not just fumbling a little bit.  It’s a Bob-Stanfield-dropping-the-football photo op kind of fumble. Yet the arguments in favour of the sale (we’re at war with ISIS in the Middle East and the Saudis are our allies, among other things) are more compelling than the hamfisted “They’re nasty people and we should only sell to nice folks” narrative of the government’s critics. The sale of the LAVs is not bad; it’s the lesser of two evils. And that’s a perfectly acceptable and defensible standard, especially where Canada is putting its own troops in harm’s way in this conflict. Read my full analysis in my column for tomorrow’s Ottawa Citizen and other Postmedia newspapers.

Premiers once again fail internal trade test. When will Ottawa step up?

As I argue in my March 26th column for the Ottawa Citizen and other Postmedia papers, the Liberals have chosen internal trade liberalisation as the one issue where they see eye to eye with the Tories in looking to the provinces to tear down those barriers. Yet the premiers’ own self-imposed deadline of mid-March for an extensive new deal has come and gone without a peep from any of them. The truth is that the provinces are too busy protecting local interest groups to protect Canadians’ rights in this area. Ottawa alone has the authority and legitimacy to do it, but not yet the will despite the fact that it is Canadians’ rights at stake. Bipartisanship in Ottawa deserves a more worthy standard-bearer than this.

Will tougher rules for approval win over pipeline opponents?

At a time when the federal and several provincial governments have raised the bar on environmental and other standards for the oil patch it is not churlish to ask the question: will these moves, which will add both time and money to already demanding approval processes, win over those people who oppose pipelines and claim that they have no “social licence”. That’s the issue I explore in my column today for the Ottawa Citizen, Calgary Herald and other PostMedia papers. You will be unsurprised to learn that my answer is, “No”. And that means that at some point politicians will have to stop pretending that all that is required is process tweaks, that a better process will win over opponents. It won’t and at some point politicians will have to choose sides. How uncomfortable! Poor things — I almost feel sorry for them. Almost….

China’s two-child policy no better than the old one-child one

Commentary in the West was largely silent or else vaguely supportive when China recently announced it was changing its deacdes-old “one-child policy” to a “two-child policy”. Allow me to be the exception. Whether the policy is one or two children is irrelevant. The fact that the Chinese state arrogates to itself the power to dictate such decisions to their citizens is quite unjustified for any rational policy reason (including “population control”) and is the pretext for an oppressive police state enforcement mechanism that has resulted in well-documented cases of the kidnapping of pregnant women and the forcible aborting of their unborn babies.  It is repugnant and we in the West should not abet it with our silence.

Read the argument in my latest column for the Ottawa Citizen.

Canada paying price for decades of pipeline complacency

For the longest time Canada’s O&G industry reaped the benefits of having privileged access to the US market, serving regions that found it difficult or costly to bring in oil from other sources. But we assumed these golden conditions would last forever. They didn’t. Now instead of a cosy preferred supplier relationship with the US, the fracking revolution plus inadequate piupeline capacity is forcing us to sell our production at a painful discount to world prices–and the world price is low enough as it is! This is an object lesson in how canada traditionally manages its economic vulnerabilities, but shouldn’t, as I argue in my column for the 26 September edition of the Ottawa Citizen and other Postmedia papers.

800 years ago, Magna Carta. Still worth celebrating today!

Click here for my take on why Magna Carta still matters to Canada 800 years after King John signed it under protest on a muddy field at Runnymede. A specially commisioned column by the Ottawa Citizen.

Whose afraid of balanced budget legislation?

In today’s Globe column I weigh in on the issue of whether balanced budget legislation is worth while or not. My view is that the history of parliamentary democracy is the slow groping attempt to submit arbitrary power to transparency and rules. But well-designed rules should not and need not be the death of the discretion politicians need in order to respond to events. So with respect to budget-making we need to get to work on designing the appropriate rules and that may take some time and experimentation. That’s a reason to get on with the job.

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Brian Lee Crowley
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