Mulcair sticks to 'Dutch disease' diagnosis despite conflicting evidence

OTTAWA – Tom Mulcair isn’t backing down from his controversial diagnosis that Canada is suffering from “Dutch disease,” despite conflicting evidence and a mounting backlash from western premiers.

The NDP leader insisted Wednesday that statistics on manufacturing job losses are “irrefutable” and that “everyone” agrees more than half of those losses are the direct result of the artificially high Canadian dollar created by booming energy exports, particularly from Alberta’s oilsands.

The phenomenon is known as Dutch disease, in reference to the manufacturing decline that occurred in the Netherlands after a boom in natural gas exports in the 1970s.

However, a new study produced by the Institute for Research on Public Policy and the latest Statistics Canada report on manufacturing output cast doubt on just how seriously Canada is afflicted.

The IRPP study concludes that Canada is suffering a “mild case” of Dutch disease, with only about one-quarter of manufacturing output suffering due to the high dollar.

StatsCan, meanwhile, reports that manufacturing output rose in March by 1.9 per cent — the biggest gain since last September — with future indicators suggesting more robust growth to come.

Saskatchewan Premier Brad Wall, who has led the charge against Mulcair’s Dutch disease thesis, pounced on the StatsCan report as proof that Mulcair and the NDP “have their facts wrong.”

“The stats out today put a lie to some of these theories that Mr. Mulcair has been espousing, I think, or certainly stand in stark contradiction to them because we see in Canada, where there is a strong resource sector and an attendant strong dollar, manufacturing is moving in the right direction,” Wall told reporters.

“We have one more message for Mr. Mulcair and that is that his facts are wrong and what he’s doing is very divisive for the country.”

Wall also took issue with Mulcair’s assertion, in a newspaper interview, that the three western-most premiers are simply acting as Prime Minister Stephen Harper’s “messengers” in criticizing his analysis of the impact of the oilsands on Canada’s economy.

“I work for the people of Saskatchewan and if Mr. Mulcair is wondering for whom I am a messenger, I am a messenger for the people of Saskatchewan and for the economic interests of this province,” Wall said.

Alberta Premier Alison Redford chimed in via Twitter: “Is this national leadership? @Thomas Mulcair continues to make divisive, ill-informed and false comments.”

Mulcair was unmoved, arguing that his own analysis is based on data from StatsCan. He conceded that shifting international trade patterns are responsible for some of the 500,000 manufacturing jobs that have been lost in Canada.

But he said: “What’s important to note is that everyone concludes that more than half of them are being lost because we’re maintaining the Canadian dollar artificially high … because we’re not enforcing legislation that would include the environmental costs (of exploiting natural resources).”

“Those statistics with regard to the overall losses of jobs in Canada are irrefutable,” he added. “And they are directly related to the fact that we’re not enforcing federal (environmental) legislation.”

Mulcair said the Harper government is allowing foreign oil companies to “use our air, our soil and our water as an unlimited, free dumping ground.”

He maintains that if resource companies were required to pay for their pollution, the cost of oilsands bitumen and other natural resource exports would rise and the upward pressure on the dollar would ease.

Mulcair said his debate is with the prime minister, not the premiers, and denied that his stance is pitting the resource-producing western provinces against the manufacturing hub in Ontario and Quebec. He argued that exporters all across the country are hurt by the artificially high dollar.

“This is the defining debate we will have over the next three years …. The balanced Canadian economy that was painstakingly built up since the Second World War is being lost right now.”

In the Commons, Harper dismissed Mulcair’s thesis.

“We are not interested in identifying which industries we are going to call diseases and shut down. Our government is interested in the growth of the Canadian economy,” he said.

While Mulcair has been raked over the coals by critics, his stand on the oilsands is consistent with long-standing NDP orthodoxy and his rhetoric is actually substantially toned down.

His predecessor, the late Jack Layton, typically trashed the oilsands, referring to them as tar sands and the “dirtiest” fuel source on the planet, and vowed to cut off “every single penny” of federal subsidies.

Politically, the debate has already begun devolving into a simplistic environment-versus-oilsands, east-versus-west, NDP-versus-Conservative fight.

Natural Resources Minister Joe Oliver went so far Wednesday as to accuse Mulcair of saying “our natural resources are a disease.” He refused to concede any negative impact from the oilsands boom, arguing that natural resource development benefits the entire country, creating jobs, economic growth and revenue for social programs.

But the IRPP study says the issue is “more nuanced than conventional wisdom would suggest.”

The authors — economists Mohammad Shakeri, Richard S. Gray and Jeremy Leonard — studied the impact of energy prices and the high dollar on 80 different manufacturing industries. They found only 25 were negatively affected, with the most pronounced impact on small, labour-intensive industries such as textiles and apparel.

Larger groups, such as food products, metals and machinery experienced only minor impacts, which have generally been offset by strong growth in demand. The auto industry, they concluded, was not affected at all.

“On balance, the evidence indicates that Canada suffers from a mild case of the Dutch disease, which warrants a commensurate policy response,” they conclude.

The authors maintain federal attempts to directly counteract the rising dollar would be futile since natural resources are under provincial jurisdiction. However, they say Ottawa could use increased tax revenue from the energy boom to invest in measures aimed at bolstering the competitiveness of the manufacturing sector.

— With files from Jennifer Graham in Regina