Eleven: Making a Western Living

A Strategy for Diversification

Some visitors to the Calgary Olympics apparently expected to confirm that Albertans are for the most part either cowboys or oil wildcatters. In fact the 1986 national census indicates that only about 100,000 persons in a work force of 1.2 million in Alberta are employed in basic agriculture and oilfield work: less than ten percent. Contrary to another common myth, only 29,000 British Columbians work directly in forestry or logging in an active work population of 1.4 million persons. In Saskatchewan, which is still occasionally thought of in terms of wheat alone, only 88,310 of a 500,000-person work force are involved directly in the primary sector of agriculture. In Manitoba, the most diversified western economy, the largest single industry grouping is currently "manufacturing," with 66,000 persons in a work force of 542,000. Over two-thirds of all Westerners today are in service occupations and these are increasingly of a professional nature.

The Historical Perspective

During the "frontier period" between 1870 and 1900, the major source of economic development in the West was the relocation process itself. Furs were no longer the dominant export by 1870, but even though a little export grain left Manitoba during the 1870’s, wheat was not yet an important regional staple on the Prairies. In British Columbia, gold had quickly petered out and the age of forest products had not yet come. In such circumstances, expanding Canada’s frontiers massively beyond the St. Lawrence valley was a brilliant and courageous policy regardless of whether Sir John A. Macdonald’s dominant motive was to use the settlement process as an engine of growth for Central Canada or to develop the potential of the West.

From the beginning, Ottawa policy-makers saw grain exports and ranching in prairie Canada and mining in British Columbia as the major future economic activities of our region. In an era when agriculture was the dominant occupation of Canadians everywhere, western development along these lines was seen as essential both in attracting immigrants to Canada, and in eventually providing the exports which would allow Canada to continue to attract the investments from Britain and elsewhere which had helped to develop both Atlantic and Central Canada before Confederation.

Some large subsidies were provided by Ottawa for the opening of the West, including the free homesteads modelled on the earlier American experience and publicity spread throughout the continent of Europe. Cash subsidies paid to the Canadian Pacific Railway for completing its continental line were alone so large by the standards of the day that they pushed the debt charges of our new country to a third of total revenues by the early 1890s. High protective tariffs which began in 1879 to maximize the benefits of frontier settlement to eastern businesses were a key feature of the package of policies which became known as the National Policy, which endured essentially unchanged until the Great Depression in 1930. In practice, there was little western growth anywhere until 1898 because the combination of declining wheat prices and high rail transportation costs in the West discouraged most immigrants from homesteading. As late as 1891, less than two percent of the world’s wheat production came from Western Canada.

Several factors moved dramatically in the West’s favour after 1898. The region’s population more than tripled between 1891 and 1911, during what became known as the Laurier boom. Other developments included a drop in the cost of moving grain to Europe, advancements in dry-farming techniques, the closing of the American homestead frontier, and the economic pressures on farmers in various European countries which caused many to emigrate to Western Canada. In response to western political pressure, the Laurier government agreed to build two new continental rail lines, and these provided a boost to western coal mining and construction. Urban centres sprang up to serve adjacent farm communities. Saskatoon -- which did not even exist in 1891 -- had a population of 12,000 by 1911, and Winnipeg, with 25,000 people in 1891, had become the third largest city in Canada by 1911 with 130,000 people. Vancouver reached a population of 100,000 by 1911 although it was founded only in 1886. Economic growth on the coast occurred mainly in the forest, fishing and mining sectors and, interestingly, 70% of British Columbia’s forest products during these years were sold to the booming construction industry on the Canadian prairies.

Before 1911, few Westerners anywhere questioned the dominant role afforded to wheat farmers by Ottawa through such initiatives as the Crow’s Nest freight rate even if in practice they retarded diversification of the prairie economy. In grain marketing, for example, Parliament enacted before World War I a number of measures to redistribute grain profits from the railways, large grain elevator companies and other middlemen, but did little to diversify the regional economy. As the economic historian Doug Owram puts it, the adjustments made in favour of the West by the Laurier government before 1911 "could be made only within the general framework of the National Policy. When the government did attempt in 1911 to modify the National Policy by means of a reciprocity agreement with the United States, it was defeated by a combination of economic self-interest emanating from manufacturing circles in Ontario and nationalistic concern about American influence over Canada."

The 1911 election -- which ended with the two parties changing places, the Conservatives winning 134 seats to the Liberals’ 85 produced a divided West on the matter of trade with our southern neighbour, something which even Westerners frequently forget today.

The combination of investments being repatriated to Britain in anticipation of the outbreak of World War I, falling wheat prices, and rising freight costs caused a recession throughout Western Canada between 1912 and 1915. The weakened farm sector soon created collapsing real estate prices and growing unemployment in western cities and towns, but a boom in the region returned with the fresh demand for food, metals and timber during World War!. Thousands of new prairie farms were established between 1916 and 1921, and another period of long-term western prosperity seemed assured.

The clouds on the horizon were those over the two new transcontinental railways, the Grand Trunk Pacific and Canadian Northern, both of which were teetering on the edge of bankruptcy. In desperation, the Robert Borden government finally nationalized them in 1918. From that day until the present, prairie farmers have sought not rail expansion, but maintenance of the branch-line system already in place.

An economic bust in the West followed Armistice Day. Unemployment in British Columbia soared to more than 14%. Deep-seated western complaints against Ottawa resulted in 64 seats for the Progressive Party in the 1921 federal election, 39 from Western Canada, on the basis of the need for a New National Policy largely written by the Canadian Council on Agriculture. The movement’s short-lived electoral success demonstrated that Westerners, particularly farmers, did not feel they were being treated justly in Confederation.

The regional population of the West grew from 598,000 in 1900 to nearly three million by the end of the 1920s. Agriculture accounted in 1927-29 for 55% of the net value of production for the four western provinces. British Columbia received almost 80% of its net production value from primary resources and agriculture, forestry, fish and furs. Even in Manitoba, many of the manufacturing and service jobs were dependent on a healthy primary sector. In short, the region’s dependence on a few primary resources was becoming ominous.

The West led the rest of Canada into the worst depression in modem history. Wheat prices had been dropping since 1926 and the amount of unsold Canadian wheat reached 91 million bushels in 1928. No. 1 Northern wheat, worth $1.51 a bushel in 1925, collapsed to as low as 34 cents in 1933. Drought, hail, grasshoppers and diseases ruined millions of acres of prairie throughout the thirties. Realized net farm income dropped from $363 million in 1928 to an astonishing minus $10.7 million three years later. Many western farmers had taken on large loans to expand their production during the 1920s, and even keeping their farms became difficult for many of them.

Collapses in the farm sector were quickly followed by many elsewhere in the West; the provincial governments themselves were near bankruptcy from relief payments. Generally speaking, the less reliant a district was on wheat the less it suffered. British Columbia’s economic position actually improved relative to the rest of Canada and its per capita income remained in the top two of all provinces throughout the 1930’s. Saskatchewan, on the other hand, the most populous and wealthy western province during the 1920’s, became the poorest in the 1930s and out-migration grew sharply.

Many thousands of western families were completely ruined by the twin calamities of the economy and the climate. The impact of this tragedy was exacerbated by the long-cherished western view that our region was the central economic fly-wheel for the entire country, as it had been since 1900, and considerable bitterness evolved toward whatever or whomever had allowed western ruination. New political parties and solutions sprang up. Relief costs for the government of Saskatchewan had, by 1937, reached $62 million, more than the total revenues of the province.

Prime Minister King appointed the Rowell-Sirois Commission in 1937 to examine the situation, and it quickly became a lightning rod for western discontent. The briefs of all four western governments displayed an amazing similarity of concern. Oppressive national policies were seen as aggravating large regional differences in standards of living. The rail freight rates, natural resource control and the protectionist tariffs were cited as evidence of deliberate unfairness created by Ottawa. One of the more bizarre responses by the King government was to raise tariffs in order to protect a sagging domestic market, but in the late 1930s the vulnerability of a western economy dependent on a few export products. primarily wheat, led Western Canada for the first time to talk seriously about the need for diversification. No real consensus was reached on how to achieve it, but even the discussion of it showed how desperate Westerners had become.

The return of adequate rains and wartime prosperity in the West masked some changes from earlier patterns. For decades, regional prosperity had depended on the state of the western agricultural sector, but a new and expanded manufacturing base in Central Canada became the driving force of the post-war national economy. Agriculture was by the mid-1950s clearly no longer capable of providing general prosperity to Westerners for various reasons, including U.S. farm export subsidies which cut into traditional Canadian markets. More than 200,000 prairie farm families left the land between 1936 and 1961. In the mid-1950’s, increasing numbers of Westerners began to urge Ottawa to divert industrial development from Central Canada in the interest of regional justice. Others, accepting the staples theory, called for the processing and upgrading of all primary products in the region. Manufacturing, much of it related to the primary products of forestry, fishing and mining, began so quickly in British Columbia that by 1951 more than 70,000 British Columbians were employed in that sector.

Alberta’s population grew slowly until oil was discovered at Leduc and Redwater in 1947. By 1961, the oil and gas boom had almost doubled Alberta’s population to well over a million. Capital flooded in with the new residents, and the general prosperity allowed the provincial government to build a good infrastructure of schools, roads, and hospitals. By 1960 in Alberta the mining sector, which included oil and gas, was well ahead of agriculture in terms of its contribution to the provincial economy. Saskatchewan’s dependence on wheat continued until the late 1950’s only because it lacked an alternative. A potash, uranium and oil production boom hit the province in the mid-1960’s and by 1966 a series of wheat and other sales to China saw Saskatchewan farmers regain for the first time since the 1920s the leading economic growth in the country. Manitoba’s mix of agriculture and manufacturing provided stability in the 1950s, but at the price of a decline in both output and per capita income and the province’s share of the national population. During the 1960’s, Western Canada was briskly dividing into two "have" and two "have-not" provinces.

Urbanization in all four provinces, which occurred at somewhat different rates and intervals, had a very significant effect on the regional economy. British Columbia was more urban than rural as early as 1931. Manitoba was 64 percent urban by the mid-fifties, and Alberta became more urban than rural sometime between 1951 and 1956. Saskatchewan did not become predominantly urban until the 1960s. The creation of new service jobs in all four provinces closely paralleled this process.

In the early 1970s, the marketable oil and gas in three of the four western provinces allowed the region to reassert itself as the motor of national prosperity. As Doug Owram stresses, "the concept of growth is, however, deeply imbedded within the western tradition." The subsidy created by Ottawa for consumers of oil after 1973 was seen by many Westerners as an attempt to deflect western prosperity to Central Canada. The conflict was again clear: maximizing western potential for the western region versus using western resources for Central Canada’s purposes. Westerners insisted the presence of natural resources must bring a high degree of related processing in our region.

The Regional Economy Today

The western and northern economies today still depend heavily on natural resources, and we are as sensitive about them as other Canadians are about language issues. Many of us are still actively involved in the exploitation of resources or in their transportation, marketing or distribution. Even more of us in the service sectors depend on resources for part of our livelihoods.

The governments of all four western provinces are aggressively seeking a greater role in the international economy. British Columbia has opened five new offices abroad; Alberta has five; Saskatchewan, four. The governments of Manitoba and Saskatchewan each arrange about 25 overseas trade, investment or tourism missions yearly, British Columbia about 40. Alberta sponsors 100 to 120 trade, 85 investment, and 100 tourism missions per year. This, as the American professor Earl Fry points out, constitutes a far more vigorous effort than that made by any of the thirteen western states.

Much of the impetus for such efforts comes from the recent realization of a long-time Western Canadian fear: that all of our economic pillars could fall at the same time. The international prices for oil, grain, potash, coal and uranium all collapsed during 1986. British Columbia’s forest products faced a continuing threat from new American duties, similar to those threatened earlier against our softwood lumber and imposed on our shakes and shingles. The 1982 recession on the Prairies had lingered on into 1985 and both Alberta and Saskatchewan were hit very hard again when the bottom fell out of world oil prices in November, 1985. In 1986, an estimated 40,000 Alberta and Saskatchewan oil workers lost their jobs. Prices for grain had already dropped significantly because of the ongoing subsidy battle between the treasuries of the United States and the European Community. The non-stop rain and severe frost roughly halved the expected Saskatchewan wheat crop during 1986. The fact that Manitoba’s more diversified economy did better than the other three western ones during the year only confirmed the widespread western conviction that it was necessary to diversify.

Figures released by Statistics Canada earlier this year confirmed that the 1982 national recession has still not ended in parts of Western and Atlantic Canada. The limp state of much of the western economy since then also ended the westward shift of population as so many resource industries in the region were hit with falling prices and markets.

Interprovincial migration, a noteworthy feature of Canadian life, holds particular significance in the four western provinces, as both the level and direction of interprovincial migration tend to relate to regional economic conditions. According to the 1986 census, the westward shift of population of the 1970s -- a direct consequence of the Alberta resource boom -- ended in the early 1980s when falling oil prices brought about economic stagnation and Ontario replaced Alberta as the preferred destination. Between 1981 and 1986, more than 70,000 Albertans had moved to Ontario. The net loss of population for Alberta due to inter-provincial movements equalled 30,000 people, for Manitoba 1,550 and Saskatchewan almost 3,000. Only British Columbia experienced a small gain of some 10,000 people.

The serious demographic problems created for Western Canada between 1981 and 1986 are clear. According to studies, inter-provincial migration tends to consist of younger, skilled and energetic persons. Emigration from any region reduces local employment and the standard of living whereas newcomers usually add to both. As Atlantic Canadians know so well, inter-regional out-migration reduces productivity and results in higher taxes for a shrinking population in order to maintain public expenditures from a reduced tax base. Because a smaller population decreases local demand for goods and services, some estimate that for every five persons who leave a region two additional jobs will also be lost.

A Western Strategy

Contrary to the view that the major economic assets of Western Canada are wheat, rocks, trees, oil, and so on, the evidence is overwhelming that our real strength is the nature and quality of our approximately seven million residents. Our economic models should be Switzerland, West Germany and Japan. Each has achieved a high general standard of living and relatively full employment by producing a range of high-quality finished products which are exported with real marketing skill and first-class service to customers. All three populations know that success today depends on intelligence, quality control and technology and act accordingly.

Economic life in all four western provinces has historically depended heavily on natural resources: fish, fur, wheat, beef, forest products, coal, oil, gas and minerals. Each still plays an important role in one or more parts of our region. A boom in one resource often carries many of us forward on its wave, just as a subsequent bust leaves many of us beached. Booming and busting have been too long the economic lot of Western Canadians.

There is a strong consensus in the West that we must build boldly on our comparative economic advantages by strengthening and adding new components to our natural resource and other existing sectors.

A more efficient management of our natural resources could bring large gains in terms of jobs with high pay to Western Canada. A recent study by the Institute for Research on Public Policy says that Western Canadians, as owners of their resources, by pursuing some aggressive reforms could receive substantially more economic value from that sector. Six resource industries, nickel in Manitoba, potash and uranium in Saskatchewan, hydroelectricity in British Columbia and Manitoba, the forest industry in British Columbia, and the Pacific salmon fishery, were examined. Grouping their conclusions around maximization of resource rents, distribution of these rents, and political markets, the study concluded: "Despite the problems associated with resource-based economies, the comparative advantages that Western Canada currently enjoys in staples and the potential gains from improved management are so great that policy-makers should be more concerned with rational resource management. For reasons of efficiency and equity, governments must give priority to the collection of resource rents. Efficient rent collection and rational resource policy is admittedly a demanding task, fraught with decisions made under uncertainty and political bargaining. But abandoning the task assures a less desirable future for all concerned."

Diversification

The goal of economic diversification should be to equip Western Canadians to compete more effectively in the emerging global economy and to minimize regional unemployment and instability without harming long-term job growth and average job earnings. A paper in 1985 prepared for the Economic Council of Canada by economists Harry Postner and Leslie Wesa, based on a study of the period 1970-83, concluded that a reallocation of manufacturing and services in the four western provinces could meet these three criteria. In the case of Manitoba, for example, the study concluded that some employment redistribution to sectors such as transportation/communications/utilities, trade, finance/insurance/real estate, food and beverages, printing and publishing, clothing, electrical and chemical products would be "winners." Other sectors with relative instability included mining, construction and commercial services. Machinery- and transportation-equipment manufacturing industries were seen as "losers" in an optimal diversification scenario for Manitoba. There appear to be considerable similarities here for Saskatchewan, Alberta and British Columbia. The oil sector in Alberta is not one which can be reduced because its long-term employment growth rate and average earnings are the highest in the province.

The study, noting in passing that the four western provinces are less diversified than the central provinces, concluded that the four provinces could, in the long term, reduce their employment instability as follows: British Columbia -- 24%, Alberta -- 17%, Saskatchewan -- almost 30%, and Manitoba -- 22%. In British Columbia, for example, more and further processing of forest resources would be useful both in providing diversification and reducing economic instability.

The diversification strategy for the West should therefore operate closely with the four provincial governments to invest both significant funds and a robust political will of a long-term kind in a number of directions of economic policy. I intend to outline only some of the possible directions the western economy could follow with the main central challenge to all of them:

building on existing strengths.

Tax Reform

Western Canadians are certainly in favour -- as is everyone -- of a simpler and fairer system which would significantly increase the take-home pay of individuals through a better balance among the three major elements of the federal tax system -- personal, corporate and sales tax.

It is patently unacceptable that, as was true in 1983 for example, 64 companies which each earned profits of more than $25 million paid no corporate tax whatsoever. Small businesses, which have created most of the new jobs across the country in recent years, paid taxes for 1982 at almost double the rate of businesses with assets of more than $25 million. As a result of tax concessions mostly to large businesses, the share of the income tax burden paid by companies slumped from 50% to 25% between 1950 and 1985, while the share paid by individuals and families increased correspondingly from 50% to 75%.

The administration of the federal sales tax has resulted in large distortions of economic decision-making and badly needs reform. Ours is evidently the only developed country whose tax system favours foreign producers at the expense of domestic ones. We impose a sales tax on exports which averages about one percent, whereas imports are currently taxed at roughly one-third less than comparable domestic goods. Major change is clearly needed here. There appears, however, to be considerable opposition in Western Canada to any business transfer tax applicable to services and food. For example, a tax on transportation services would reduce both the competitiveness of many of our exports and add significantly to the cost of consumer goods trucked or sent by rail from Central Canada.

Western Canada will benefit, in my judgement, if tax reforms:

• remove the biases which currently favour industrial sectors over service work;

• relax the definition of what constitutes research and development for income tax purposes and provide to small firms the same tax incentives for R & D as large manufacturers now enjoy;

• provide incentives for investments in human resources, which are to the service sector what capital goods are to manufacturing, possibly through a tax credit for adding employees; and,

• create strong disincentives to mergers of companies above a certain size, on the premise that these usually lead to lay-offs, an undue concentration of ownership, and inefficiencies. (On the subject of efficiency it may be noted that there are disturbing indications that only 3 or 4 percent of Canadian small businesses grow rapidly, compared with 12 to 15 percent in the U.S.A.)

Agriculture

Unfortunately, agriculture in the final years of the century is declining in its contribution to western output. There were approximately 174,000 farms in the four western provinces in 1982, contributing about 5.2% of the overall regional output and involving less than 8% of Western Canada’s total population. The dropping number of full-time western farmers because of low grain prices, drought, cash-flow and credit-related problems represents a very serious problem for the region. Western farm families have been forced by events to earn much of their income from sources away from their farms. In British Columbia, outside earnings were as high as 80% during 1980.

A major reason for this, as the Edmonton economists Terrence and Michele Velman point out, is our ongoing cheap-food policy, under which Canadians generally spent in 1982 only 16.3% of disposable income on food. Growth, in short, depends largely on foreign markets for grains, oil seeds, and red meats. As recently as 1982-83, wheat alone comprised about three quarters of our grain and oil seeds exports but the prospects for wheat are important and problematic. The governments of both China and the U.S.S.R. have indicated they will reduce wheat imports in the years ahead. The continuing obscene grain price-war between the United States and the European Community is also causing severe problems for Canada in some of the sixty nations to which we currently sell grain.

The best longer term hope for our grains and oil seeds lies in better penetration of new and existing markets, especially the newly industrialized countries of the Pacific Rim, but new strategies, like the development of agricultural byproducts such as ethanol, are clearly required for western agriculture. Expanded research into the growth of non-traditional wheat types would help us to market better in developing nations, which prefer lower quality wheats and those appropriate for popular products such as noodles. Many studies indicate that agricultural research spending repays itself rapidly, and the Western Diversification Office (WDO) should allocate considerably more funds for research of this nature. WDO funds should also be directed towards helping to restore the soil quality in various parts of the Prairies.

Something is clearly wrong when the Natural Sciences and Engineering Research Council has to inform researchers -- as it did in 1987-- that, because of budget cuts, "new applications will not be accepted" in the research areas of energy, food-agriculture and oceans. Basic food and agricultural research needs more funding, not less, and the WDO must do something really substantial here for the West.

As was suggested in a study by the Canada West Foundation, horticulture (including flowers, fruits and vegetables in greenhouses; plant and tree nurseries; vegetable seed products) offers major potential. Careful WDO investment should also encourage such products as berries (notably strawberries), sod, purebred livestock, horses for recreation, rabbits for meat, and goats for milk and meat.

There are policy initiatives beyond those already suggested for western agriculture which would assist growth. Virtually every related study indicates that agricultural research brings very high returns, yet both the federal and western provincial governments’ contributions to it are inadequate. More research on key matters such as the best production strategy for dry land agriculture in Western Canada, higher-yielding wheat and barley varieties, the indicated change in consumer preferences for red meat and the relative merits of intensive versus less intensive production methods are required. The Velmans contend that improving "the skills, abilities and management capacities of farm families in western agriculture should be emphasized as of the highest priority in any long run growth strategy for the agricultural sector.... More attention must be given to soil and water conservation, and production systems which are ecologically sustainable in the long run must be developed." On water management, they call for "alternatives including the introduction of pricing for water and the reform of water rights systems."

Aside from the very serious reality of drought in large parts of Saskatchewan and Alberta, the livestock industry is enjoying good prices and sales. The economics of the industry are changing and, as the Calgary economist William Kerr has pointed out, markets in the United States and the Pacific Rim, especially Japan, rather than the Canadian market, will provide most future growth. Between 1976 and late 1984, the western beef industry showed no real growth and in fact was characterized by low prices, ranch bankruptcies and a shrunken western slaughter industry. Livestock processing still ranked as the largest manufacturing industry during 1984 by volume of sales in both Saskatchewan and Manitoba, and was second only to oil refining in Alberta.

For the Prairies as a whole, livestock processing is the largest manufacturing employer, has the biggest payroll and is a major consumer of fuel and electricity. It is also a major value-adding industry, using local cereals, but it has considerable excess capacity. Canadian beef suppliers could do more to develop markets in California. The shortfall in the California beef requirement is so large that if Western Canada could supply even 10% of it, as Kerr points out, "this would equal a 22% increase in Alberta production." Much of the shortfall is now supplied from east of Omaha but transportation costs from Calgary are about three percent cheaper than the rates from Omaha to San Francisco.

In Japan, quotas and very high tariffs still restrict the entry of foreign beef, but a liberalization of these practices could offer enormous opportunities for western beef. A reason for Canada’s accounting for less than one percent of Japanese beef imports as recently as four years ago is that our beef is too lean for Japanese tastes and fails to meet their difficult cutting specifications. Other growing markets of the Pacific Rim require a cheaper grass-fed product than is now produced in Western Canada. The grain-fed lean and young beef preferred by Canadians is simply not sought after in the Pacific Rim, and Westerners should address this problem quickly.

Some funding should be directed towards better equipping people in our meat industry with training and knowledge of selected foreign markets, and toward helping to modernize the processing side of the industry at some locations in Western Canada.

The Western Grain Transportation Act’s current method of payment of the Crow Benefit directly to the railways retards diversification in western agriculture because returns to grain producers are higher by about $23 per tonne if they commit their products to export markets. Westerners who wish to diversify into livestock feeding and processing, high carbohydrate crops such as sweet sorghum, canola crushing, adding value to grain, and so on, thus lose much of our comparative regional advantage. The current payment method has a negative impact on the development of a domestic market for feed grains and additional investments in plants and technology for western meat packing and processing.

Western grain producers should be able to choose to have the Crow Benefit paid directly to them on an experimental basis: this would provide a major incentive to our value-adding agricultural industries. There might be a different view on this issue in each of the prairie provinces, so it would seem reasonable to permit all producers to decide by referendum how they wished the payment to be made. Precedents such as medicare and the Quebec Pension Plan already exist for tailoring programs differently for different provinces.

Forestry

The major recommendation of the 1984 study by the Economic Council of Canada on western forestry was that the "stock of mature timber in British Columbia be harvested at a faster rate than present policies permit, as soon as (and whenever) market conditions make it profitable to do so, and that this be done with full provision for environmental protection." A number of knowledgeable Westerners have criticized both the analysis and the conclusion. H.V. Lewis, an economist with the British Columbia Ministry of Forests, pointed out that British Columbia timber harvests "have followed United States housing starts with reasonable accuracy over the past decade or more, particularly if the effect of the exchange rates is taken into account." He added that a substantial increase in British Columbia’s timber harvests would make future harvest reductions much more probable with a range of consequences for cities and regions dependent on forest products. If its analysis was dismissed, the Council at least drew attention to a range of choices in forest policy.

Most forests in the West are owned by their provincial governments which either contract with private firms to manage them or do so through provincial forest services. David Haley of UBC’s Forestry faculty contends that in the first model there are inadequate incentives for efficient long-term management of the resource, and in the second the tendency is increasingly for forests to be seen as "public utilities" rather than as businesses producing an essential raw material for an important industrial sector which must sell the bulk of its product in increasingly competitive world markets. Haley argues that transferring title would result in more efficiently-managed timber production.

World timber consumption is expected to increase by about 50% over the next three decades, but before Canadians can expect to benefit from the estimated 300,000 new jobs the industry could create over the next twenty years, many of them in Western Canada, further major improvements in forest management are required. The distinguished British Columbia forester, Les Reid, estimates that 25,000 new jobs can be created in forest renewal alone, an additional 75,000 through the increased manufacturing of wood products resulting from better harvests.

In close collaboration with the ministers responsible for forests in the four western provinces, the WDO should include the following initiatives:

• further encouragement to harvesting energy from forest biomass, which could provide an economic boost to our forest industries and help Canada to become a world leader in biomass energy technology;

• additional federal support to our western forestry schools (located at the Universities of British Columbia and Alberta);

• the recruitment to public and private forestry service of more scientists, policy analysts and economists; and

• substantially more federal funding for western forest renewal through renewed Forest Resource Development Agreements with all four provincial governments.

Manufacturing

The economist Douglas North argued three decades ago that four types of manufacturing can locate successfully in peripheral regions: material-oriented industries; equipment manufacturers for extractive industries; industries producing consumer goods for local markets; and footloose activities in which transportation costs do not influence location. Meat and fish packing, flour-making, and petrochemicals are examples of material-based manufacturing in Western Canada which exist because of the degree of reduction in the bulk or weight of a primary product. Oil and gas machinery manufacturers in Alberta and transportation-equipment producers in Manitoba are instances of makers of equipment for regional extractive industries. Dairy and bakery products, construction materials, furniture, commercial printing and such products are examples of local consumer goods manufacturers which have located in our larger western regional centres. The growth of biotechnological centres in Saskatoon and other technology centres in Western Canada appears to offer the best hope for footloose future-oriented manufacturing jobs in Western Canada. More effort is clearly needed to develop more footloose industries in all four western provinces.

In particular, as the geographer Neil Seifried has pointed out, if Alberta is to diversify industrially, its manufacturing output must become less oriented to its dominant oil and gas sector than it was during the 1967 to the 1970 period, and more oriented to external markets. Manitoba manufacturing over the same period, particularly its clothing, transportation equipment and electrical products, was focussing more successfully -- from a diversification standpoint - on markets external to the region, including Ontario, Quebec and the United States.

The 1984 Economic Council of Canada development scenario for the West asserted that manufacturing cannot contribute much to the regional economy because our manufacturing base is too small. A 1985 study by Winnipeg economists Norman Cameron, James Dean and Walter Good was far less pessimistic. Examining 49 clothing and 44 transportation equipment firms in Manitoba on the basis of the volatile years between 1970 and 1984, they concluded that manufacturing is not robust enough to drag the rest of the western economy along after it. On the other hand, a rising western population would create large enough regional markets to allow manufacturing to become cost-competitive with manufactured products from outside the region or Canada itself. In both clothing and transportation equipment, a substantial reduction in western imports has resulted; Cameron, Dean and Good believe that textiles and clothing should be added to printing and publishing, metal fabrication, wood industries and furniture and fixtures as sectors with particularly good western prospects. Among the factors which they consider favour additional manufacturing in Winnipeg are an entrepreneurial pool, good employee productivity, local receptiveness to business and industry, an efficient transportation system for raw materials and finished products, and favourable local taxes. This would appear to be equally true of many other urban centres across Western Canada.

There are advantages for some other traditional manufacturing operations which might locate themselves profitably in our region as well. The WDO could be a major catalyst here by targeting some high unemployment areas in the West for enterprise zones similar to the Enterprise Cape Breton model, which provides a package of incentives for new manufacturing operations locating in Cape Breton. It can also be helpful in providing marketing information and assistance about foreign markets for threshold exporters. Domestic opportunities for western firms should be helped by initiatives to ensure that full information is provided to them about federal government procurement and tendering practices. Elemental fair national play requires that both federal government and national institutions, public and private and including the chartered banks, must in future ensure that their procurement and other activities each year reflect the reality of the country. Much improvement in regional equality is needed for both Western and Atlantic Canadians.

Oil Sands, Coal and Natural Gas

A paper presented to provincial energy ministers in 1986 estimated that without new sources of supply Canada will require imports to meet one-quarter of its light crude oil needs by 1990 and more than half by 2000. It seems to me to follow that Western Canada should aim to become the technological world leader for oil sands energy development. A new mined oil sands project at Fort McMurray to start in 1996 and an upgrader in Lloydminster to start in 1993, recently announced amid much controversy as to its economic viability, could become important components of a prairie manufacturing base in the overall national interest.

The private sector is understandably reluctant to undertake such projects because of the uncertainty of price, but might go ahead if Ottawa negotiated a guaranteed price for a fixed volume of the product. The difference between the negotiated price and the world price would become either a loss or a gain according to the package negotiated between the successful consortium and the various governments involved. Security of future supply is so critical that the risk appears warranted. The U.S., for example, now has a strategic oil reserve of about 515 million barrels, which at $20 (U.S.) per barrel represents a $10 billion investment in oil security without including carrying charges on the investment.

Ottawa must also recognize that the oil sands sector badly needs help in other spheres. For example, new oil sand extraction technologies appear. to hold real promise for efficiency and reduction of water and air pollution when compared to the hot-water processes now used by Syncrude and Suncor at Fort McMurray. Imaginative new research and development programs funded by Ottawa should assist the more promising of these technologies with a view to enhancing existing western strengths. World leadership, with all its spin-offs in terms of exports of services, should be the goal.

Western Canada’s coal reserves are virtually limitless, and available data indicates that its liquefaction for fuel becomes economically viable in the $25 (U.S.) price range. At present there are more than 20 promising methods on the horizon. Ottawa should select for research funding perhaps ten not already being funded by provincial governments. After a period, the two levels of government might together choose the two or three most promising for further development. Ottawa should also support research on new technologies for co-processing coal with bitumen/heavy oil.

Major new markets for Western Canada’s coal now appear to exist in Western Europe. One recent estimate is that Europeans might fairly soon absorb up to ten million tonnes of Western Canadian coal yearly, shipped through Port Churchill by rail from northern Alberta and B.C. Again, Ottawa should seek to become a catalyst.

Substantial growth for gas exports from Western Canada was predicted in a late 1986 study by the National Energy Board. If, however, the Board does not permit exports beyond 1991, as is a possibility, a cost-benefit analysis by the Alberta Research Council predicts a virtual calamity for exploration and development in this important western industry. It estimates that the present value of a no-export policy after 1991 for Canadian consumers, because of resulting lower prices, would be $8.8 billion between 1988 and 2003, but the net present loss to Alberta producers alone would be $25.3 billion, making a net loss to the economies and governments of the western provinces of $18.3 billion over the period. Given the indications of large quantities of gas still to be found within the western provinces, it is surely in the general national interest to continue exports beyond 1991. Ottawa or WDO might usefully address this issue, if only by funding further research on the employment and other costs to the West of alternative gas export policies.

High Technology

A major comparative advantage of Western Canada lies in biomass (energy, forest, agricultural) and it is probably in that large area that our best technology prospects lie. WDO can help us to seek world leadership in a series of carefully chosen niches here, just as Northern Telecom did in telecommunications. It will have to fund part of the necessary research and development, just as Canadian Bell Telephone users paid for a good deal of the research which led to Northern Telecom’s success.

A study done for the governments of the four western provinces in 1986 by the Science Directorate of the Organization for Economic Cooperation and Development (OECD) assessed our general strengths and needs. It concluded that Westerners are well equipped for a knowledge-intensive economy for many reasons: regional pride; our strong desire to prove that we are an intellectual frontier of Canada; a host of universities, community colleges and technical schools; entrepreneurial dynamism; high quality technologies already available; and a multicultural population. More is needed, however, to link technology to the Western Canadian economies and to enrich existing industries, such as our natural resource and agricultural sectors, with new technologies. Among the recommendations of the OECD study to Ottawa, which could play an important role through WDO, are the following:

• The share of federal government R & D expenditures (both intramural and extramural) going to the western provinces over the 1981-85 period has been stable at about 22%. On a population basis, Western Canada is entitled to 30% of such spending. (Given our economic instability, we probably should have more than that during the next decade.)

• There is need for Ottawa to follow Saskatchewan in establishing a "single window" for programs to help with technology development, marketing, regional development and export development.

• All governments should cooperate fully on priorities and joint goals in such key areas as micro-electronics, telecommunications, and biotechnology and whenever possible relate high technology to our natural resource sectors.

• The federal government should expand western programs to enrich traditional industries through a better diffusion and adoption of new technologies, and become more activist in policies for technology transfers into the western provinces.

Some specific recommendations by the OECD to the federal government should probably be included in WDO budgeting. For example, funds should be provided for programs and support in recruiting top leaders for infrastructure projects, provided they relate to the technological strengths of each province and arc supported by a network of entrepreneurs, industrially experienced academics and private capital markets. Through added human and financial resources, the capability of federal ministries and agencies to contribute to liaison with regional R & D and innovation should be improved, and there should be better use of federally-sponsored facilities to meet provincial needs. While there are excellent centres in the West, they need to better network among themselves and with corresponding provincial organizations.

Similarly, joint initiatives by the federal and provincial governments on international programs, as recommended by the OECD study, might also become part of the WDO:

• commissioning of "competitive analyses" in areas of technology which are commonly the focus of provincial plans for knowledge-intensive economies;

• exchanges of researchers and scientists with foreign countries;

• commercialization of new technologies introduced in the western provinces by mobilization of the scientific and commercial networks and programs for international technology transfer.

Transportation and Tourism

Because of our small population, large distances and dependence on foreign trade, transportation remains very important to Western Canada. The WDO might well take a careful look at whether new VIA rolling stock would allow it to achieve better economies as similar ones appear to have done for AMTRAK in the U.S. Would our regional tourism industry benefit significantly? Again, why do we have no facility for manufacturing trucks when so many of them are sold into the four western provinces? Given the importance of electricity to Manitoba and British Columbia, WDA should do everything feasible to ensure that Western Canadians are actively involved in the world of future industries promised by superconductivity for power systems, electronics, transportation and science.

Tourism is already important to all four western economies and could be much more so. For example, in the summer of 1986, Canadians spent more than $800 million (out of a total of $2 billion) on overnight pleasure travel in the four western provinces.

In Alberta alone, tourism is a $2 billion-a-year industry employing about 85,000 people. About 30,000 people in each of Saskatchewan and Manitoba and some 120,000 British Columbians work in tourism-related industries.

Experts say Western Canada’s tourism industry could be doubled with proper marketing, staff training and resort development. A number of new and intelligent programs to raise the appeal of the four western provinces as a world-class tourism destination, including more public education, could also help us draw many more visitors from other regions of Canada and abroad.

Services

Services are both the largest and most rapidly-growing sector of the four provincial economies. Can they be a major engine of economic growth? In its "Western Transition" report the Economic Council made a number of recommendations with that objective. All current anti-service biases in federal government programs providing assistance to businesses should be ended, and there should be encouragement to the export of western consultant services to Pacific Rim and developing nations generally. Specifically, in my view, the Canadian International Development Agency contracts should be awarded with a much greater determination to assist Western Canadian consultants to achieve the world-class successes already obtained abroad by Montreal-based consulting engineers. The Small Business Loans Act should ensure that services are not discriminated against and that the minimum loan is not of an amount which is unattractive to most new service businesses.

I have offered a long list of measures that are appropriate for a Western Economic Diversification Strategy. Admittedly priorities will have to be tailored according to the financial cloth made available. Some proposals will no doubt have to be postponed. Diversification appears to be an old theme in the economic aspirations of Western Canada. It is time these aspirations materialized and took realistic shape. We need to act boldly and with vision if Western Canada is to enjoy the future that its potential offers.

Canada-U.S. Free Trade Agreement

Canada’s entire trade relations with the U.S. have been at centre stage for three years. The battle lines were drawn as pro-and anti-free trade forces prepared for a major electoral confrontation in 1988, and the rhetoric has been reminiscent of the 1911 national election campaign. Some Ontarians, including their premier, have attempted to scuttle the Canada-U.S. free trade initiative from the outset even though from many indications their province has the most to gain from free trade. The province that now relies on the U.S. market for more than 90% of its exports has the most to lose if no free trade agreement is reached, because the alternative to free trade is not the status quo but growing U.S. protectionism.

In the West, the free trade agreement (FTA) is seen by many as a way to reduce the colonialism created by national governments over decades at the expense of western resources. Ontario, long the main beneficiary of western resources, has become the focus of much western anger and frustration. Recent statements by the western premiers and other Westerners suggest that if the Peterson government continues its stand on the FTA major regional conflicts will arise. It is no coincidence that most of the people in the West who say the NEP was good for the region, now say that the FTA is bad for us.

I firmly believe implementing the proposed FTA is in the best interests of both our region and all other parts of Canada. As a Western Canadian, I share with millions of those in the West and other regions a broader vision of trade that carries the opportunity for benefits to all Canadians.

The way in which many Westerners view free trade is based on a long-standing history of neglect by, and mistrust of, successive federal governments which have often seemed to our region to be of, by and for Central Canada alone. Some of us talk often about "nationalizing" Ottawa. Such questions as who has the power over the natural resources of our region, who can tax them and on what basis, who will transport them, how they will be transported, and who will pay, all remain vital questions with major implications to more than seven million Western and Northern Canadians.

The West’s raw materials became the basis for what has been described as a classic example of mercantilism. The primary business of the West is still too much the production of staples which often continue to be exported from the region in a raw or semi-finished state to Central Canada, where products are then finished and exported back to the West. This is partly because capital development was and is controlled primarily by our five major banks, whose head offices are in either Montreal or Toronto. A resource-based economy will always be vulnerable to the capriciousness of external markets. But it is a source of profound concern in the West that these difficulties should be compounded by a host of discriminatory federal policies which sought to maintain the position of the West as a quasi-colonial resource producer rather than asserting its development as a manufacturing and services sector. Northern Ontarians, non-metropolitan Quebeckers and Atlantic Canadians have a similar complaint.

Some examples of federal neglect and discrimination against the West were discussed in the chapters on alienation, and illustrate the scope of the problem. Most recent economic growth has occurred in Central Canada. Between late 1984 and the end of 1987, an estimated 902,000 jobs had been created in Canada. Almost 670,000 of these (73%) were in Ontario and Quebec.

National unemployment in March 1988 fell to 7.8%, but the levels in many western cities were higher. Saskatoon had a 12.1% unemployment rate, Edmonton 10.1% and Victoria 12.3%. And in May 1988 when Ontario and Toronto enjoyed 4.9 and 3.2% unemployment rates respectively, British Columbia’s and Victoria’s rates remained high at 10.4% and 9.8%.

Tariffs on imported goods initially aided the industrialization of Central Canada and in so doing have provided jobs and profits there. That is all very well, but high tariffs mean that Western Canadians still pay significantly higher prices for manufactured goods without receiving a proportional amount of the jobs and the profits.

The Canada West Foundation estimates that in the last twenty years, the net cost to the West of tariffs on U.S. goods alone is over $5.7 billion, whereas Ontario during the same period gained $6.8 billion from tariff protection on U.S. goods. The net loss to Western Canada of our national tariff system was $51 per person, whereas Central Canada gained $31 per person.

With western prices already inflated by discriminatory transportation policies, it seems unfair to many Westerners that after 100 years they should still be subsidizing Central Canada’s manufacturing sector.

In Canada, twenty-seven percent of our GNP is directly related to exports, one of the highest rates in the world. One in three Canadian jobs depend, in some degree, upon trade. An estimated 2to2.5 million of our fellow citizens depend on exports of goods and services to the U.S. for their livelihoods. This means that there are approximately as many Canadians as there are men, women and children in the four Atlantic provinces combined who would be out of work if the U.S. market closed tomorrow. Even without a free trade deal, the West today sends 65% of its exports to the U.S., and Canada as a whole exports even more. As of 1988, a total of 77% of all products sold outside of Canada will be sold in the U.S.

One recent poll indicates that 49% of all Canadians support free trade. Thirty-four percent are opposed, and 17% are undecided. The agreement is in the interests of most ordinary Canadians in all regions and can benefit a great number of Westerners in such fields as lumber (which employed 87,400 Westerners in 1986), fish products ($90 million worth of these exports were sent south of the border from the West in 1985) and energy (which is currently a $15 billion a year industry with the U.S.). Western Canada also hopes to gain indirectly through the free trade agreement. With American banks being allowed to set up shop in Canada, the grip of our five major banks will, it is hoped, be weakened a little allowing for fresh, new investments and loans throughout the West.

In 1988, Canada expected to top the big seven OECD countries with business investment expected to rise by 17%. (In the U.S. and Japan, by comparison, 10% is expected.) This unprecedented increase in capital spending is partly fuelled by the prospect of Canada’s free trade agreement with the U.S.

Canada West Foundation Perspective

A Western Canadian perspective on the FTA is well articulated in a report published by the Canada West Foundation early in 1988, Evaluating The Fine Print: The Free Trade Agreement and Western Canada. It concludes that for every 100 working individuals in Western Canada, 83 will notice little or no change if the FTA proceeds because the agreement will have minimal effect on them. Two Westerners out of the hundred are in industries on which assistance programs should focus, and fifteen work in sectors that will benefit from greater security in their present American markets (to which two-thirds of western exports of services and goods are now sold). In fact, the fifteen percent are in industries which produce about one quarter of our gross regional output so the effect of the agreement should be to protect existing jobs and create new ones in our most dynamic industries. Western consumers will be big winners because they "will benefit from reduced prices and greater variety with the elimination of tariffs, which are essentially extra taxes, on North American goods." Every western family is expected by the CWF study to save about $1000 yearly from phased-out tariffs once the FTA is fully implemented.

The report sets out the probable effects of the FTA in Western Canada by sectors. Those positively affected, which currently employ 514,000 people, are divided into three groups: enhanced exports (241,000 persons), moderate benefits (93,000), and greater export security (178,000). Those in which the export position will be enhanced include saw mills, meat packing, livestock, metal fabrication, petroleum and coal, electrical power, machinery, non-metallic minerals and chemicals. The second group includes transportation equipment and business services. The industries which should obtain more security of export access for their products from the agreement include oil, gas, minerals, pulp, newsprint, kraft papers, steel and non-ferrous metals. The sectors negatively affected (employing 59,500 persons) include printing, food processing, poultry products, soft drinks, furniture and tobacco. The rest (2.8 million jobs) will experience little or no effect from the agreement because their products or services arc "non-tradeable" (most services), exempt from the terms of the FTA (cultural industries), local-market oriented, protected by unique arrangements (telephone services) or because, in some cases, no clear consensus has emerged as to the impact of the FTA.

Agriculture is a sector which the Canada West Foundation sees as being affected only marginally by the agreement. Tariffs on farm products will be reduced to zero by 1998, but Canadian marketing boards will in practice keep imports in supply-managed products to a small share of Canadian consumption. Western livestock producers arc seen as big winners because the FTA will both exempt them from the U.S. meat import laws and exclude our beef and pork from the American meat inspections which now cause costly delays. The FTA will remove import restrictions on barley and oats: a two-way trade already close to $90 million, with Canada being a net exporter of feed barley and oats. Significant changes for grains are unlikely because the present import licensing will remain in force even if grain export subsidies by the two nations ever become equal. At present, U.S. wheat is subsidized at an estimated $50 per tonne more than Canadian wheat. The value of the bilateral grain trade, moreover, is today only one-tenth the value of cross-border trade in livestock. On balance, the Canada West Foundation judges that the FTA will maintain the status quo in agriculture: Canadians will export beef, pork and fish products; Americans will export fruits, vegetables and miscellaneous food products.

In regard to Canadian energy exports, the CWF concludes that the FTA assures secure market access of several species, and nondiscriminatory access for the U.S. to Canadian energy supplies. Neither country will be able to restrict energy exports or imports except in times of short supply or in the case of national security for defence purposes. Oil, natural gas and electricity producers in Western Canada strongly support the FTA, and the Alberta petrochemical industry is expected to benefit substantially as well. It is anticipated that the western mining industry will do further smelting and refining in the region with the elimination of all metal and mineral tariffs.

The western forestry sector views the FTA as essential to maintaining present export levels to America, thus increasing the stability of a volatile industry. True, the FTA does not affect the agreement under which a 15 percent export tax was placed on our softwood lumber exports, but overall it will create a better trade environment and diminish the threat of American countervail actions on other forestry products in the future.

Our transportation equipment, communication and computer equipment sectors expect to benefit from tariff-free access to the U.S. Construction, oilfield, woodworking, paper and other specialty machinery made in Western Canada will have enhanced export opportunities. The world-class telecommunications equipment industry in Western Canada will benefit from the removal of the present 8.5 percent U.S. duty. In food processing, meat packing, which is still the largest sector in the West, will gain from the elimination of tariff and inspection barriers under the FTA. The removal of existing high U.S. tariffs on processed oilseeds will assist our oilseed mills. Business services, especially consulting, engineering, architectural and computer services, will grow because business services will obtain indirect employment benefits from better access to and security for primary and manufactured products sold to the U.S.; several business services will thus gain directly from exports of services to the U.S. market.

On the down side, the CWF analysis concedes that about 60,000 jobs, representing 1.8% of the Western Canadian labour force, are in industries which, it is expected, will experience a negative impact from the FTA. British Columbia’s Okanagan Valley wine industry is the biggest loser because of the proposed elimination of markups and tariffs which discriminate against California wines; assistance should be provided to British Columbia growers and processors, as Ottawa has promised. Another 10,000 western jobs are in fruit, vegetable, poultry and other processor businesses which will face some negative effects from the FTA. In the short term, all western food processors now sheltered by tariffs will probably encounter greater adverse consequences than other food products. Western makers of doors, windows, and fme papers will be hurt by the phase-out of protective tariffs. Another 1,000 jobs in western commercial printing firms are likely to be affected when larger contracts become more accessible to U.S. competition under the FTA. Finally, an estimated 3,000 to 4,000 jobs in the western furniture-making sector could be lost because the present 15 percent tariff will be phased out over five years.

Provincial Winners

British Columbia’s economy should benefit very significantly because B.C. sectors which expect a positive impact account for 18 percent of provincial output (and 185,000 jobs) whereas those expected to lose amount to only 2.4%. The softwood lumber, shakes and shingles, and pulp and paper industries on which British Columbians are especially dependent for the creation and maintenance of jobs will all benefit from the increased export security created by the FTA, says the Canada West Foundation. Increased investment, production and employment will also result for the B.C. industries connected with natural gas, lead, zinc, aluminum, and other metals. The CWF feels that new capital investment in British Columbia from Japan, Hong Kong and other Pacific Rim countries seeking tariff-free access to the U.S. will have "a major bearing on the magnitude of economic gains for British Columbia under the FTA."

The positive impact of the FTA on Alberta is expected to be the highest of any western province. More than 165,000 present jobholders, mostly in energy-related industries, are expected to benefit, whereas only about 16,500 can expect worse conditions. Part of this is due to the fact that 75 percent of Alberta’s exports go to the U.S., more than those of any other western province.

Saskatchewan will be the least affected western province because sectors benefitting from the FTA account for only 20% of provincial output and those to be adversely affected amount to only one percent. Put another way, only 41% of the province’s exports during 1986 went south, the lowest share of all ten Canadian provinces. On the other hand, the U.S. takes about two-thirds of Saskatchewan’s non-grain exports and its products which are exported to the U.S., such as uranium and potash, are highly vulnerable to protectionist measures. Overall, the Canada West Foundation report estimates that approximately 85 of every hundred job-holders in the province will be minimally affected by the FTA.

In Manitoba, 48,000 jobs are in sectors expected to benefit from more secure access to the American market compared with 13,800 in industries likely to receive a negative effect. Fifty-five percent of the province’s exports during 1986 went to the U.S. The considerable diversification already present in the Manitoba economy will allow an easier adjustment to freer trade than for the other western provinces. Natural-resource-dependent communities in the province should reduce their vulnerability to U.S. protectionist measures as a consequence of the agreement.

In summary, the free trade agreement is expected by the Canada West Foundation to have numerous positive consequences for the entire Western economy. Significant net gains in employment are anticipated for the region as a whole and for all the regions within the four provinces. For the number of communities and sectors negatively affected, adjustment programs should focus on persons in the forms of employment affected. In order to generate more jobs and investment in sectors materially helped by the greater export opportunities afforded by the FTA, encouragement should be provided to seek new export opportunities. The spin-off in new jobs from increased exports to the U.S. should be felt mainly in the service sector across the West, which now accounts for 78% of our employment and 71% of our regional output.

John W. Dafoe, the legendary editor of The Winnipeg Free Press, speaking as a prairie Liberal in 1911, caught very well the essence of freer trade: "Reciprocity means prosperity to every section of Canada. It means increased population; more trade; larger traffic for our railways; higher values for every foot of land in Canada; enlarged orders for our factories; bigger cities -- in short an advance all along the line."

These sorts of advances will be welcomed in the West, and they are long overdue. More diversified trade is something we all want, especially in Western Canada, given our ties with the Pacific Rim. It is hoped that a bilateral agreement with our neighbour will kick-start all of us to begin looking more aggressively for opportunities everywhere in the world.

Western Canada’s past and present disenchantment is based on both economic and philosophical grounds. The classic elements of Western discontent formed the fabric of its political life and were the greatest impediment to the development of its full potential: the concentration of economic and political power in Central Canada, the lack of an effective regional banking system, the disadvantage to western consumers resulting from protective tariffs on imported goods, the lack of a national freight rate policy that permits western goods to compete in eastern markets, inequality in federal procurement and development funds, and the lack of a comprehensive development policy at the federal level which would lead to decentralization and equitable distribution of economic opportunity.

There are no one-shot remedies for the ongoing economic grievances of Western Canada. The status quo, however, is no longer acceptable, and as long as Western Canada remains a thinly populated economic hinterland within both the Canadian and North American market economies, there is little likelihood that our economic woes will completely disappear, or that the economic friction between the West and the national government will ever be altogether eliminated.

What the West needs is the broad, bold vision of a New National Policy that will encompass fresh economic initiatives, some of which I have outlined here. Central to all of them must be a principle of fairness and equality of opportunity for the part of Canada that worked so hard to strengthen central regions at the expense of its own unrealized potential. For too long, the benefits of the ‘Old’ National Policy flowed to Central Canada, and the costs to the West.

All Westerners should endeavour to see that our potential in human and material resources is developed into the real wealth and prosperity that have eluded us for most of our history. Only a greater degree of political power commensurate with the West’s new economic strength will establish our region for the first time as an equal partner in Confederation.