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Oil sands an opportunity for Ontario firms, study suggests

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March 20, 2012

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A new study out today by Statistics Canada should be required reading for Dalton McGuinty.

The Ontario premier last month suggested Alberta’s resource wealth had “knocked the wind out of” his province’s exporters and manufacturers by inflating the value of the Canadian dollar relative to the U.S. greenback.

Alberta Premier Alison Redford demanded an apology. Jason Myers, president of the Canadian Manufacturers and Exporters Association, was more circumspect, suggesting the high dollar was less a problem for Ontario firms than soft demand in the U.S.

The issue now festers among economists, but it also provides a useful backdrop to Market Expansion and Productivity Growth: Do New Domestic Markets Matter As Much As New International Markets?, a study released today by John R. Baldwin and Beiling Yan.

In it, the researchers suggest a way out for manufacturers whose traditional share of the U.S export market disappeared during the recession.

They find that manufacturers “that find ways to serve new markets, whether domestic or foreign, should experience faster productivity growth than plants whose market remains essentially unchanged” and that “exporters that cease exporting but find new provincial domestic markets should do better than those that just retreat to those provincial markets that they were already serving.”

The upshot? “[S]uccessful experimentation with new markets produces tangible benefits,” Baldwin and Yan write. Some Ontario manufacturers have already figured this out, and are seeking new business in the oil sands. Time will tell if McGuinty’s minority Liberal government does, too.

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One Response to “Oil sands an opportunity for Ontario firms, study suggests”

  1. cyberclark says:

    While there is a large amount of marginal industries dependent on the oil sands, there is precious little returned to Albertans as the Conservatives strive to operate this province on income taxes and licenses alone, forgoing all revenues that may have been derived from royalty.

    As is stands now we are getting zero for provincial royalty by comparison to BC and Sask who pull in near 20% US. Based on the average output of the oil sands at 1.6 million barrels per day and 100.00 bbl oil, that amounts to 133 million dollars per day in lost revenue for the province only because of Conservative policy!