Exporting resources not the answer

Back in January 2003, David Baxter of the Urban Futures Institute presented a talk at UNBC to members of the northern business community.

It was an interesting talk and provided an interesting perspective on the economic health and wealth of this province. Specifically, Baxter pointed out that roughly 71 per cent of B.C.'s export wealth was generated outside of urban Vancouver. Area 250, he said, was the economic engine of the province.

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It still is.

During his talk, Baxter did say that the only real wealth created in an economy is that obtained from exports. Maybe from an economic point of view, that would be accurate. If the wealth of British Columbia is based on our exports, that would make sense. We have lots of countries to export to.

But if wealth is only gained from exports, then what is the wealth of the world? And to whom does planet Earth export? Last I checked we are pretty much a closed system.

That aside, the point that Baxter was making is that real wealth comes from real products. It comes from goods. On this basis, logs, lumber, pulp, minerals, oil, and gas are real products with value that provide the economic foundation of our economy.

It is northern British Columbia where we find these materials. Hence, the statement that three quarters of B.C.'s wealth is generated in the north. I doubt that many northerners would disagree.

Economies change, though, and so over the past decade since Mr. Baxter's talk, our exports have floundered. Consider that in 2000, the value of our International Goods Exports was $35.5 billion. It now sits at $34.4 billion, based on constant dollars.

This past decade has essentially seen stasis in the total value of goods exported. Or put another way, British Columbia has not seen an increase in wealth over the past 10 years, according to Baxter's definition.

Further, the percentages of exports and wealth obtained from some of the traditional primary industries have changed over the past 20 years. The biggest change has occurred in mining.

In 1993, this sector accounted for only nine per cent of total export value. It now stands at 22 per cent or roughly $7.5 billion dollars. Of this, bituminous coal and copper ores account for 94 per cent of British Columbia's total international mining exports.

At the same time, wood products manufacturing and paper manufacturing (which includes pulp and paper products) have declined from 58 per cent to 31 per cent. In 2013, total exports from these two sectors only accounted for $10.6 billion.

Oil and gas extraction has increased slightly from three per cent to seven per cent while food manufacturing has remained relatively constant at around five per cent.

On the whole, the concentration of exports in the top five sectors has declined steadily from 73 per cent in 1993 to 65 per cent in 2013. The slack has been taken up by all of the other industrial sectors with metal manufacturing and machinery manufacturing leading the way.

This is the shifting B.C. economy and it is driving a change in the structure of the labour force. The importance of wood and wood products in the overall export picture is declining. Mining and Oil and Gas Extraction are growth areas. And British Columbia has seen significant growth in other areas of production.

But all of this leads to a variety of questions. Perhaps it also shapes some of the present government's vision for going forward.

When one considers liquefied natural gas, for example, this is an area where real growth is possible. It is an area where international exports to our trading partners in Asia could bolster a sagging economy. However, LNG is not going to happen without significant capital investment. Nor is it likely to happen without buy-in from a number of stakeholder groups.

Growing that portion of our export market will also mean beating out stiff competition from the United States and Australia - and they have a significant lead in developing LNG terminals.

The big question for me, though, is: "Should we keep trying to be just a resource exporting economy?"

I asked this question to a group of friends the other day and the unanimous answer appeared to be yes. Basically, the argument that they presented was that we should keep doing what we are good at and what we are good at is making lumber and digging up rocks.

I can't help but think that in a world-wide economy that is increasingly capable of sourcing goods anywhere in the world, we need to be more than just a source of raw materials. We need to be adding value to the materials that we produce. We need to be turning ore into metal and that metal into machinery.

We can keep doing what we do well, but we also need to innovate if we are going to grow our economy and generate exports or wealth.

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