Ottawa, November 6, 2012—Today’s U.S. election matters to Ontario almost as much as it does to Americans themselves. Ontario’s dependence on the U.S. market has left it vulnerable to a slow economic recovery and fiscal uncertainty in the United States, no matter the results of the Presidential and Congressional elections.
Ontario’s trade has been too dependent on large firms, on intra-firm trade and on manufacturing – especially the auto industry – The Conference Board of Canada argues in a new briefing. As a result, Ontario was hit particularly hard by the 2008-09 U.S. financial crisis and recession.
Although the Ontario economy has rebounded since 2010, its growth is tepid and it continues to face pressures for fundamental restructuring. The Canadian dollar is expected to remain at or near parity with the U.S. dollar. And while the U.S. economy is starting to show signs of life, it still has serious structural problems, notably its labour market and fiscal deficits.
“If Ontario is to sustain high-quality public services and continue to be an attractive place to live, it needs a comprehensive growth strategy that improves capital investment, enhances productivity and competitiveness and bolsters the labour force,” said Glen Hodgson, Senior Vice-President and Chief Economist, and author of Needed: A Comprehensive Growth Strategy for Ontario
Without addressing capital investment, weak productivity growth and a looming labour shortage, Ontario’s economic growth potential will decline to 1.9 per cent annually after 2015, based on a Conference Board of Canada study, Ontario’s Economic and Fiscal Prospects—Challenging Times Ahead.
Ontario could embrace an agenda to reduce and eliminate barriers to trade and investment – both within Canada and internationally. The federal government is already pursuing an aggressive international free trade agenda, which will benefit Ontario firms once improved market access is secured. Ontario firms large and small should be prepared to explore international business opportunities beyond the U.S. market, since the provincial economy needs to diversify its commercial base.
Within Canada, Ontario could join with other provinces to ensure that goods, services, investment capital and people move freely across the country without regulatory or administrative constraints. This could be built on the positive example of the Trade, Investment and Labour Mobility Agreement between Alberta and British Columbia.
Creating a single Canadian market would allow Ontario firms to become preferred suppliers to the expected surge of resource investment in western Canada. This open-market agenda would improve business access to markets internal to Canada and abroad, and increase competition within Ontario – both of which can boost productivity.
A recent Conference Board report, Fuel for Thought: The Economic Benefit of Oil Sands Investment for Canada’s Regions, estimated that nearly one-third of the supply chain benefits from investment in the oil sands will occur in provinces other than Alberta. Ontario is expected to obtain 14.8 per cent of the overall employment gains from supplying the oil sands with everything from manufacturing inputs to business services, and that share could grow further through policies to open markets.