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  1. Mediocre job performance is better than the alternative JAY BRYAN, The Gazette Published: 7 hours ago Canada's job market is in mediocre shape, we discovered yesterday, and when you look at the alternative, this is wonderful news. For the past few weeks, many economic forecasters have been nervously asking themselves if Canada could resist the powerful recessionary undertow from a slumping U.S. economy or whether we'd fall into a downturn similar to the one that's under way south of the border. The final answer might not be available for a little longer, but yesterday's August job reports out of Ottawa and Washington make it clear that, for now, Canada is doing much better than the U.S. and is certainly nowhere near recession. In Canada, employment grew by a solid, if uninspiring, 15,200 jobs, returning to growth after two months of declines. That left the unemployment rate at 6.1 per cent, just above its record low of 5.8 per cent in February. So far this year, the Canadian economy has created 86,900 jobs. In the U.S, by contrast, August proved to be the eighth month in a row of shrinking employment, with 605,000 jobs lost (divide by 10 for a rough equivalence to Canadian numbers) since the beginning of this year. Unemployment south of the border jumped to a five-year high of 6.1 per cent - which sounds low to Canadians, but because of differences in measurement methods, is approximately equivalent to a Canadian unemployment rate of 7.1 per cent. Canada's modestly good job report reinforces the rationale for the Bank of Canada's decision to hold interest rates steady this week. The bank's targeted rate is already quite low at three per cent, and there's no clear need to pump emergency stimulus into the economy. Indeed, one of the the country's weakest sectors in recent years, manufacturing, has shown surprising resilience this year. As of August, factory employment was down by just 14,000, or 0.7 per cent, for this year. That's quite an accomplishment, given the plunge in car purchases by U.S. shoppers, who are the key market for Ontario's giant auto industry. In fact, Ontario has done quite well for a manufacturing province heavily dependent on U.S. customers. So far this year, it has created 51,900 jobs and its unemployment rate has actually edged down to 6.3 per cent from last December's 6.5 per cent, thanks to strong employment in construction and service industries. Ironically, Quebec, another big manufacturing province, hasn't done nearly as well, even though its big aerospace industry is much healthier than the auto industry, helping Quebec's factory sector create some jobs this year. Still, Quebec is one of the few provinces not to have enjoyed overall job growth so far in 2008. In fact, employment has shrunk by 25,200, while the unemployment rate has risen to 7.7 per cent from 7.0 per cent at the end of last year. Montreal's unemployment rate is up just 0.1 per cent so far this year, to 7.3 per cent in August, but this doesn't reflect any better performance than Quebec's on the employment front. The city actually lost 15,700 jobs in the first eight months of the year, but this was mostly offset by the 13,000 workers who abandoned the Montreal job market, making them disappear from the unemployment calculation. They might have found better opportunities elsewhere, gone back to school or simply stopped looking after a tough job search.On the provincial level, Quebec construction employment has been lukewarm and consumer-oriented service industries like retailiing have been shedding jobs, notes economist Sébastien Lavoie at Laurentian Bank Securities. As well, education employment has shrunk in Quebec as it grew in Ontario. Lavoie suggests that Quebec consumers may feeling worried enough to be cutting back on spending, while in Ontario's bigger, more diverse economy, there are still enough areas of growth to offset the auto industry's distress. Nevertheless, Ontario's ability to shrug off the U.S. economy's distress could be living on borrowed time, warns economist Douglas Porter at BMO Capital Markets. There are layoff announcements and factory closings that have yet to go into effect, he notes. And as for Ontario's boom in condo and office construction, "I have to wonder how long it can hang on."
  2. http://www.theglobeandmail.com/report-on-business/ssq-financial-buys-intact-unit/article2180067/ http://en.wikipedia.org/wiki/Intact_Financial It didn't take long for it to change hands, yet again.
  3. Ontario in decline: From Canada's economic engine to clunker Can Dalton McGuinty see the light and reverse the decay with his forthcoming budget? By Paul Vieira, Financial Post March 23, 2009 A month before Dalton McGuinty, the Liberal Ontario Premier, hit the election trail in the fall of 2007 to seek a second mandate, an ominous warning sign of the province's crumbling economic stature emerged that should have provided fodder for the campaign. An analysis from leading Bay Street economist Dale Orr said Ontarians' standard of living had plummeted -- from a peak of 15% above the Canadian average in the mid-1980s to just more than 5%. Accompanying the analysis was a warning of further erosion by 2010. Alas, the eye-opening report hardly generated buzz during the election campaign. Instead, most of the talk was about a Conservative proposal to provide government funding for faith-based schooling. Ontarians didn't warm to the idea and re-elected Mr. McGuinty's Liberals with another majority. Reflecting today on that report, Mr. Orr said his nightmare scenario for Ontario has unfolded as envisaged. If anything, the situation in the province may be worse. As the McGuinty government prepares to table its sixth provincial budget on Thursday, it does so knowing the province that was once the country's economic engine is now the clunker of the confederation. While former have-nots such as Saskatchewan post surpluses this fiscal year, Ontario is bleeding red ink--a cumulative two-year deficit of $18-billion. Ontario's dramatic decline comes as no accident. It was decades in the making, based on a combination of mismanaged public finances and the ascent of emerging economies at the expense of high-cost manufacturing. Upon taking office in 2003, Mr. McGuinty moved to pour tens of billions of dollars into improving government services -- health care, education and social programs targeting the downtrodden -- while neglecting the changing economic landscape. To help finance this agenda, he raised corporate taxes and slapped a health-care levy on households. These moves, analysts say, helped cement Ontario as one of the least attractive places for companies to invest. Analysts wonder whether the economic crisis is finally going to force Mr. McGuinty and Dwight Duncan, his Minister of Finance, to make tough choices on spending and undertake the kind of tax reform -- as displayed this week by New Brunswick-- that will help the province attract investment to offset heavy job losses in Ontario. Derek Burleton, senior economist at Toronto-Dominion Bank, said Thursday's budget presents a possible turning point for the province. "There is no doubt we are undergoing a period of transformation as some of the industries that have driven healthy gains in living standards are on the decline," said Mr. Burleton, who co-authored a report with TD chief economist Don Drummond last fall that called on the province to embrace a "sweeping" new economic vision. "Given the sizeable deficit the province faces, that will put increasing pressure on the government to prioritize." One of those priorities is for Mr. McGuinty to cease his preferred manner of dealing with difficulties in the industrial heartland -- funneling tens of millions of dollars to the manufacturing sector, particularly automotive, through targeted tax relief or direct subsidies. "What the province should have been doing over the years was to make the province more flexible in attracting new businesses and not diverting resources into declining sectors," said Finn Poschmann, vice-president of research at the C. D. Howe Institute, a Toronto-based think-tank that has been critical of Ontario's tax breaks for struggling sectors such as autos and forest products. "Do you want to steer resources to the sectors where the outlook is positive and growing? Or do you want to divert resources from these stars, which are more likely to generate the long-term employment and wage growth that Ontario is accustomed to?" The manufacturing sector, and its high-paying jobs, used to be the province's crown jewel. But as a component of Ontario's GDP, it has dropped from a peak of 23% in 2000 to roughly 18% on factors such as a richer Canadian dollar, higher energy costs and offshore competition. It is expected to fall further once the dust settles from this crisis. The province was largely able to mask the decline in manufacturing through a combination of a booming housing market, a surge in public sector hiring and a robust financial services sector. The financial crisis, however, has exposed those flaws. For the period starting in 2003, only Quebec and Nova Scotia have produced weaker growth than Ontario. Forecasts suggest Ontario was the only province whose economy shrank last year, and economists say it will record either the worst, or second-worst performance, among provinces this year. Scotia Capital, for instance, has Ontario's economy contracting 2.9% in 2009, and posting meagre growth of 1.4% in 2010, below the expected national average. Of the roughly 295,000 jobs lost in Canada since October, nearly half have come from the province. The result? Unemployment in Ontario, at 8.7%, is now higher than it is the United States (8.1%) and above Quebec's 7.9% jobless rate-- the first time that has happened in three decades. The news is not expected to get any better any time soon. "We believe that the unemployment rate in Canada's largest province should hit 10% by 2010, even if the automobile sector's restructuring plan works," said Sebastian Lavoie, an economist at Laurentian Bank Securities. Further, Mr. Lavoie said wage growth in the province is destined to take a hit. In the past, companies were forced to offer comparable wages and benefits based on what the Canadian Auto Workers would negotiate with the Detroit car makers. But Mr. Lavoie said that will no longer be the case, with CAW accepting salary freezes and making concessions on perks such as cost-of-living-allowance. The financial crisis has just exacerbated a growing trend, said Mary Webb, senior economist at Scotia Capital. Ontario's receipts from foreign-bound exports last year represent an 11.7% drop from a peak of $185.1-billion recorded in 2000. For the same time period, Quebec's receipts fell by just 2.9%. For the rest of Canada, excluding Ontario and Quebec, receipts have surged a whopping 72%. Compounding Ontario's problem is the emergence of big deficit, fuelled in part by shrinking tax revenue and years of escalated program spending. Under Mr. McGuinty, program spending now stands at $23-billion per year more than when he took office in October, 2003, an increase of 36%. In fiscal year, 2007-08, program spending climbed more than 10% to $87.6-billion, compared with a 5.4% increase in tax revenue. Observers note Mr. McGuinty's ascent to power in 2003 can be attributed to a desire for change among Ontarians after years of the hard-nosed, right-leaning Conservative regime that earned scorned for cutting government services. Mr. McGuinty's two terms have been dominated by a push to restore spending on public goods such as education, health care, infrastructure and social services. Analysts say Mr. McGuinty was on the right track to bolster some key building blocks, such as post-secondary education. To help pay for this, Mr. McGuinty raised the corporate tax -- to 14% from 12% --in his first budget. "The balance of [McGuinty's] approach was not quite right," said Jack Mintz, public policy professor at the University of Calgary and renowned tax expert. "The problem was trying to [reinvest in public services] while at the same time trying to maintain a vibrant industrial sector." Mr. Mintz and other analysts say Ontario's tax regime, as currently structured, is suffocating the province's ability to attract investment and rebuild the economy. Last year, Jim Flaherty, the federal Finance Minister, suggested the tax system was making Ontario the "last place" businesses wanted to invest. Mr. Flaherty took lots of heat for that remark, but he was on to something. Mr. Mintz's research indicates the province's marginal effective tax rate on capital, which encompasses all levies slapped on investment in the province, stands at 35%, six points higher than the Canadian average, 29%. Further, the Ontario rate ranks as the ninth-highest in the world, tied with Japan. Despite moves to eliminate capital tax in 2010, and other business tax reductions from the federal government, Ontario's marginal rate is expected to drop only three points to 32% by 2012 -- still higher than all provinces and exceeding the national average. "Ontario will not be successful in retaining existing businesses and attracting new ones if its taxation system is not on sound competitive footing with other provinces and countries," said the TD report by Messrs. Burleton and Drummond. There are signs that Mr. McGuinty is acknowledging the need to change. Despite previous opposition, he said in January the province would take a "long, hard look" at harmonizing its provincial sales tax with the GST. As currently structured, Ontario's sales tax derives almost half of its revenue from taxing business inputs such as productivity-enhancingequipment. Harmonizing with the GST would shift the tax burden to households, but economists argue it would boost business investment and make Ontario more attractive. In a C. D. Howe research paper he released yesterday, Mr. Poschmann said putting an end to the "archaic" sales tax and harmonizing with the GST would move Ontario from a high-tax jurisdiction to a medium-tax jurisdiction by 2012, with the marginal rate on investment falling just over 10 percentage points. A signal toward sales tax harmonization could be contained in Thursday's budget, although observers are hedging their bets given the potential voter backlash. Any further moves on taxation, whether business or personal, may have to wait given the province's monster deficit and an unwillingness to give up further revenue to fund public service initiatives. "Ontario is going to be deeply challenged," Mr. Mintz said, "because it is going to be very hard for the government to do anything when you are so fiscally restrained-- unless it wants to make the deficit even bigger now." Glen Hodgson, senior vice-president and chief economist at the Conference Board of Canada, said the needed tax reductions would not see the light of day until Ontario decides what to do about health-care spending, which is growing at an annual clip of 8% to 10% and is the single biggest expense item in the budget. "This is a catalytic moment for the province," Mr. Hodgson said. "The light bulb has gone on, but it is not burning brightly yet. A lot of people would like to return to the Old World. But I think the Old World is gone -and that's the dilemma Ontario faces." --------- MANITOBA, N.B. SET EXAMPLE: As Ontario attempts to pull itself out of its economic quagmire, it can look to the provinces of Manitoba and New Brunswick for leadership. While the recession is expected to hit every province, Manitoba comes out near the top in most forecasts as one of the country's better performers in 2009. In its outlook, the Conference Board of Canada projects slight growth in the province of 1%, powered by infrastructure projects and tax cuts. Jack Mintz, public policy professor at the University of Calgary, said Manitoba was, along with Ontario, considered a high-tax jurisdiction for business investment. But the government has moved and Manitoba's marginal effective tax rate on investment dropped from 37% in 2007 to 33.8% last year. It is now scheduled to fall to 26.7% by 2012. "It is on the high side, but it will be closer to the national average" in 2012,Mr. Mintz said. "From the point of view of people who need to make investment decisions now, they know these changes are in place over the next several years. So Manitoba looks more appealing." Manitoba also benefits from having one of the most diversified economies in Canada. Roughly 30% of its economy is agriculture, which is more resilient to economic downturns. Further, Manitoba has a diversified manufacturing base with aerospace and buses playing key roles - and, unlike autos, demand for those products continues to be fairly solid. It also has abundant, cheap hydroelectricity. In contrast, questions abound over the reliability of Ontario's power grid, especially in light of the 2003 blackout that blanketed the province and much of the U.S. northeast. Meanwhile, analysts have applauded New Brunswick for taking aggressive steps on taxation this week in an effort to make the province more attractive for both investors and workers. The main change is the replacement of the existing four-bracket personal income tax structure to a simpler two-bracket structure by 2012. The lowest rate will be 9% for workers earning less than $37,893. Beyond that threshold, a flat tax of 12% will be applied. Perhaps more stunning, however, is that New Brunswick plans to lower its general corporate tax rate from 13% to 12%, effective this year, and all the way down to 8% by 2012 - the lowest in the country. "The New Brunswick government appears to be relatively more proactive compared to other jurisdictions, taking bolder steps to improve its economic and fiscal roadmap," said Carlos Leitao, chief economist at Laurentian Bank Securities, in his analysis of the province's budget. Source: Paul Vieira, Financial Post [email protected] ONE-TIME POWERHOUSE CAN'T KEEP UP WITH REST OF THE COUNTRY: Ont. Export Receipt Drop 11.7% Que. Export Receipt Drop 2.9% Receipt Rise Rest Of Canada 72% Ontario GDP Decline, 2009 2.9% RANKS OF WORKERS IN CANADA'S LARGEST PROVINCE TAKE IT ON THE CHIN: Ontario Unemployment 8.7% U.S. Unemployment 8.1% Quebec Unemployment 7.8% Ontario Unemployment, 2010 10% © Copyright © National Post
  4. Ontario - Switzerland - Pennsylvania Quebec - Denmark - Washington Alberta - Venezuela - Maryland --- B.C - Czech Republic - Connecticut Saskatchewan - Ecuador - Delaware Manitoba - Dominican Republic - Maine Nova Scotia - Costa Rica - Montana Newfoundland / Labrador - Kenya - North Dakota New Brunswick - Panama - Vermont --- Northwest Territories - Malawi P.E.I - Kyrgyzstan Yukon - Sierra Leone Nunavut - Cape Verde What else is interesting, is that Ontario's GDP 36.7% of the total (Canada). Toronto GDP accounts for almost of half of Ontario GDP. Ontario GDP = Chicago GDP Ontario: 13,210,667 -- 917,741 sq.km Chicago: 2,853,114 (city) -- 606.1 sq.km Quebec GDP = Detroit GDP Quebec: 7,886,108 -- 1,365,128 sq.km Detroit: 910,920 (city) -- 370.4 sq.km Toronto GDP = Detroit GDP = U.A.E GDP (approx.) Montreal GDP = Cairo GDP = Peru GDP (approx.) Yet you have cities like Tokyo and New York that have GDP larger than Canada's GDP and other nations. Tokyo / New York = India's GDP.
  5. Un très bon article du G&M ce matin sur la "résilience" de l'économie québécoise: http://www.theglobeandmail.com/report-on-business/few-bumps-in-la-belle-provinces-recession-ride/article1240146/ Few bumps in la belle province's recession ride At Sandoz Canada Inc. in Boucherville, Que., sales are rising and the work force is growing. The generic pharmaceutical producer's growth is more subdued than usual, to be sure. But this isn't the picture of a company struggling through a recession. And so goes Quebec, where the global slump has caused discomfort but not intense pain. The province's economy is contracting, but at nowhere near the pace of devastation as in other parts of Canada. This milder recession is seen in the job market, where employment has fallen just 0.7 per cent in the past year. And in the real estate market, where prices are stable. And at Sandoz, where revenue has climbed more than 10 per cent in the past year. “We've seen, over all, still some growth. And we've done some limited hiring,” said Pierre Fréchette, chief executive officer of the company, which opened a new factory in Boucherville last year. “We've been pretty sheltered from the situation outside of Canada, and outside Quebec.” For the country's second most populous province, it could have been a lot worse, even though the global crisis has struck hard at manufacturing and exports – two areas core to Quebec's economy. Thanks to export diversification, a real estate market that didn't overheat and sheer luck, the province that makes up 20 per cent of Canada's economic heft has fared much better than in past recessions. “The main industries of Quebec are not in restructuring mode. This is just a cyclical downturn,” said Sébastien Lavoie, economist at Laurentian Bank of Canada in Montreal. The most obvious example of the mild nature of the recession in Quebec is in the labour market. The 0.7-per-cent drop in employment in the past year compares with a 1.8-per-cent contraction nationally, and much larger declines in the other major provinces. Compared with previous recessions, Quebec workers have had it easy this time. The 1990s recession cut the provincial work force by 2.9 per cent, while the 1980s recession destroyed 7.4 per cent of jobs. Quebec's unemployment rate, now 8.8 per cent, is slightly above the national average (8.6 per cent), which is usual. But it is significantly below Ontario's 9.6 per cent. And most of Ontario's job losses have been full-time positions, while Quebec's are mainly part-time. Overall growth in Quebec contracted sharply in the first quarter, but, again, not as sharply as the country as a whole, nor as Ontario in particular. Indeed, Quebec's growth has outpaced Ontario since 2006 – a trend that is expected to persist into next year, and something that has not happened in decades. While Ontario and Quebec are often lumped together and characterized, fairly, as Canada's manufacturing heartland, the structure of Quebec's manufacturing sector has changed dramatically since the previous recession, analysts say. “Quebec has gone through a transformation,” said John Baldwin, director of the economic analysis division at Statistics Canada and one of Canada's top authorities on productivity. Free trade with the United States encouraged all of North America to shift from the manufacturing of non-durable goods to durable goods, to take advantage of economies of scale and growing global markets, according to a new paper by Mr. Baldwin. But Ontario's manufacturing and exports had always been concentrated in durable manufacturing – steel, cars, machinery and equipment. Quebec, on the other hand, was the centre of non-durable manufacturing for Canada, with its textiles and shoes. During the 1990s and especially in the past decade, Mr. Baldwin said, Quebec switched over, but expanded into areas where Ontario was not as dominant – aerospace and pharmaceuticals. Quebec had a painful adjustment, scaling back its textile sector and shutting down large parts of its pulp and paper industry in the past decade. But that restructuring is largely over, economists say. In this recession, like recessions of the past, manufacturing has suffered more than other sectors. But since Quebec does not have Ontario's dependence on U.S. consumption of cars, and is not as dependent on energy exports as the West, it has not been as vulnerable. About a third of Quebec's gross domestic product comes from exports, and 75 per cent of those exports go to the United States. But the U.S. market is far more important for Ontario because 42 per cent of the province's GDP comes from exports, and 84 per cent of its exports are sold to Americans. Sales of cars, mainly from Ontario, are down about 40 per cent so far this year. Quebec's aerospace sector has faltered too, recently, but not to the same extent. “We are not in the same situation as the auto sector,” said Joëlle Noreau, senior economist at Desjardins Group. But Quebec's recession is mild not simply because it avoided the crisis in the auto sector. It's also because export volumes have surged in other areas, especially in the pharmaceutical industry, rising 80 per cent so far this year from 2008. Most of that growth comes from generic drug companies taking advantage of expiring patents – a cycle that is not at all related to the global crisis, said Mr. Fréchette at Sandoz. “Obviously, we see pressure on our margins,” he said in an interview. “But our business is driven by very specific events. In general, the prospects are good.” While economists say they are tempted to point to clever business strategies and forward-thinking industrial policies as explanations for Quebec's mild recession, they are quick to say plain luck is a major factor, too. “We were blessed,” Ms. Noreau says. As Quebec's roads and bridges fell into disrepair a few years ago, the provincial government responded by investing heavily in infrastructure. Well before the recession started, the government earmarked $42-billion, or 14 per cent of GDP, for a five-year building plan. While other provinces are preparing to spend heavily, too, in a bid to fight off recession, Quebec's plan has already kicked into high gear, she said. Luck is also behind the stability in the housing market, said Marc Pinsonneault, senior economist at National Bank Financial. The prerecession runup in house prices was not nearly as notable in Quebec as in the West and Ontario, he said, so there was no bubble that needed bursting. Stable housing prices have meant that the net worth of many Quebeckers has not plunged as much as elsewhere, a trend that has added strength to the domestic side of the province's economy, Mr. Pinsonneault added. There are, of course, real fears that Quebec's luck could run out. The aerospace sector has stumbled in the past couple of months, and orders are drying up. Aerospace accounts for about a quarter of the province's exports, but sales typically respond to turns in the economy with an 18-month lag, said Jean-Michel Laurin, economist at the Canadian Manufacturers & Exporters. Already, Bell Helicopter, a division of U.S.-based Textron Inc., announced 150 layoffs in July at its Montreal-area plant, linked to sagging demand for its products. In the refinery sector, Mr. Laurin adds, Royal Dutch Shell has warned that it could shut down its Montreal refinery that employs 550 people. The pharmaceutical industry will no doubt come under pressure as indebted governments around the world are pressured to cut health care costs in the coming years, to get their deficits under control. And the strong Canadian dollar is adding yet another burden to exporters' lists of problems, Mr. Laurin said. “Regardless of where you go in Quebec or Ontario, we're all very dependent on the U.S.”
  6. Quebec City seeks to ban billboards Ontario's top court overturns similar bid MARIANNE WHITE, Canwest News Service Published: 13 hours ago For many Canadians, roadside billboards are part of everyday life. But historic Quebec City wants to make them a thing of the past. The municipality said this week it is moving ahead with a plan to ban all billboards across the 400-year-old city, just as Ontario's top court overturned Oakville's attempt to restrict their use. Oakville's city council has been fighting for years to keep billboards out of its community and the recent ruling dealt a major blow to their attempt. The Ontario Court of Appeal found Monday that the bylaw was an unreasonable "intrusion" on freedom of expression and sent Oakville back to the drawing board. But that decision isn't stopping Quebec City council. "We are aware of the situation, but we are sticking to our position," spokesman François Moisan said. "People come to Quebec City because it's beautiful and we want to make it even more beautiful." The city celebrated the 400th anniversary of its founding this year. Quebec is the latest Canadian city to move to restrict billboards. Vancouver has banned large signs on rooftops while some Ottawa city councillors are asking for the power to veto billboards in their wards. Last year, one of the world's most populous cities, Sao Paulo, Brazil, unplugged its neon signs and banned all types of outdoor advertising. But taking down billboards isn't always easy. The case of Oakville has been a long-running legal battle between the city and a billboard firm and it took Vancouver 10 years to finally be able to get rid of its some 300 billboards. Oakville councillor Tom Adams, who has worked on drafting the billboard bylaw, said other Canadian cities are going to benefit from his city carrying the banner on this issue. "This battle is not over yet and other municipalities will obviously be interested in the outcome," Adams said. Rawi Tabello, who runs the Toronto-based website illegalsigns.ca, which keeps track of sign wars, said advertising firms are eager to put up a fight. "Advertisers are getting desperate to attract people because now you don't have to watch ads on TV. So billboards are proliferating because you have no choice but to look at them," he added.
  7. Ontario's economic engine sputters RICHARD FOOT, Canwest News Service Published: 7 hours ago As Canada's industrial heartland struggles with a reeling automotive sector, high dollar and foreign competition, innovative value-added manufacturers - like Kitchener's Christie Digital - have found a way to thrive in the global economy When Barack Obama accepts his party's nomination for the U.S. presidency at the Democratic convention in Denver next month, his image will be displayed on giant screens at Mile High Stadium by digital projectors made in Kitchener, Ont. Christie Digital's projectors - highly engineered cubes of optical technology that sell from $20,000 to $100,000 apiece - also have been used at the Academy Awards, and are exported from Canada to cinema chains around the world as movie theatres discard their traditional projectors in favour of new digital equipment. Christie and its 400 employees are a manufacturing success story in a province, and a country, where factories are closing and Canadian-made products are steadily being killed off by foreign competition, a high dollar, soaring energy costs and a stagnant U.S. economy. "These are anxious times," Ontario Premier Dalton McGuinty declared during an economic speech in May. Ontario's most severe manufacturing losses have come from the auto sector, which once fuelled the province's economic wealth but has shed more than 25,000 jobs over the past five years, according to the Canadian Auto Workers union. This summer, in particular, has brought an avalanche of bad news for the cities across southern Ontario whose fortunes are tied to those of the big North American automakers and their suppliers: S Three thousand jobs cut at General Motors' plants in both Windsor and Oshawa. S Two thousand jobs cut at Progressive Moulded Products plants near Toronto. S Another 400 jobs lost at the Magna International plant in St. Thomas and 720 at the city's Sterling Trucks. As the Ontario economy bleeds, Canada's resource-rich provinces - including two traditional have-not players, Saskatchewan and Newfoundland - are growing rich off the global commodities boom and surging exports of oil, potash, uranium and grain. Consider their sudden affluence relative to Ontario: In 2002, according to the TD Bank, Ontario had Canada's second- highest nominal GDP per capita, after Alberta, including a seven-per-cent advantage over the national average. By 2007, Ontario's per capita GDP had dropped to fourth among the provinces and was two per cent below the national average. This year, it's expected to fall to four per cent below the average. The TD Bank also predicts Ontario could become an equalization-receiving province as early as 2010. Despite the hardships facing the Ontario economy, there are enclaves of economic strength and good news, where innovative companies such as Christie Digital offer a way forward for manufacturers and resource-rich economies as well. "Selling resources during a commodities boom is great while it lasts," said Ihor Stech, vice-president (operations) at Christie. "But we need to be more intelligent about how we use our resources. Selling more value-added products would create a more permanent, global force out of our economy." Stech works at an old factory in the heart of Kitchener that was once filled with low-skilled workers churning out small electric motors, television sets and other consumer appliances for Electrohome, once one of Canada's most famous companies. While the Electrohome name still hangs on the outside of the building, and company CEO John Pollock keeps an office inside, globalization and low-wage Asian competition have pushed it to the sidelines. Pollock, whose grandfather founded the firm 100 years ago, is winding up Electrohome's affairs. "I have three employees today," he said, "compared to 4,300 in the 1980s." In 1999, Electrohome was a major player in the commercial-projection business, but lacked the cash necessary to purchase new technology, update its assembly line system and compete in the emerging digital-projection market. Rather than watch the business die a slow death, Pollock sold the projection arm, one of Electrohome's last operations, to U.S.-based Christie Digital, whose Japanese parent, Ushio Inc., had the deep pockets to renovate the Kitchener plant and pursue the necessary technology that would allow the operation to survive. "At the time (of the sale), this factory was very tired," Stech said. "It was a dark place - an old, historical building that required a lot of investment. The infrastructure of the plant is now almost completely changed." Today, the inside looks more like a modern surgical unit than a manufacturing plant. Workers in lab coats, hair nets and slippers circulate quietly around the clinically clean, brightly lit assembly floor, where high-tech projectors are pieced together by technicians following blueprints on computer screens. While a high school certificate was enough for most of Electrohome's former workers, many of Christie's employees have college diplomas in electronics, material sciences, plastics and optics. The company also employs 150 engineers on site, who design the projectors and discuss technical changes directly with the production staff. In the eight years since Christie took over, sales at the Kitchener plant have grown from roughly $100 million a year to $280 million and are expected to rise as markets for the company's product continue to expand. Christie's successful formula - a sophisticated, high-end product on the cutting edge of technology, built by a relatively small but well educated workforce - cannot be easily duplicated in the low-cost industrial factories of China or India, a fact that insulates Christie somewhat from cheap overseas competition. It's a business strategy shared by a handful of other thriving, high-tech manufacturers in the Kitchener-Waterloo area, including Research in Motion, maker of the BlackBerry wireless device. David Johnston, president of the University of Waterloo, which supplies many of the young engineers at both companies and fosters a climate of innovation in the local business community, said manufacturers can thrive in Canada in the face of overwhelming global pressures, as long as they remember the lessons of RIM and Christie: relentless innovation and investment, plus a focus on technology as a path to prosperity. "It's not just a challenge for manufacturing centres like Ontario, but for the whole country," Johnston said. "Resource booms come and go. Even in provinces like Saskatchewan, Alberta and Newfoundland, we have to work smarter." Said John Pollock: "The products made in our future factories will require little labour, but they will also require sophisticated components and be assembled in very sophisticated ways. The technology will make it successful, as opposed to low labour rates." Stech agrees that brains and technology are the keys to surviving low-wage foreign competition, but said competing merely with the developing world is not enough. "The threat from low-cost countries is only half the story. Canada also needs to be mindful of competition from countries just like us. A lot of our competitors come from Japan and Norway - not exactly the cheapest markets. "Is Canada really prepared to succeed against the most developed countries? I think we have a long way to go, specifically in terms of government policies." For example, Stech said southern Ontario's transportation infrastructure pales in comparison to what's available in Europe or Japan. He said a fellow executive at Christie's parent company in Japan, who lives in Kobe and works in Osaka, commutes by train every morning, working on his email or catching up on the newspaper, "and comes into the office fully prepared for his day." Stech, who lives in Mississauga and commutes a similar distance each morning, faces only one choice, an hour-long drive on a crowded highway. Stech said Canada's manufacturing heartland is undergoing a similar process of change and adaptation that shook England during the industrial revolution. "Steam engines were putting people out of work, and people said it's the end of living standards because no one will be able to make money. Well, that didn't happen," he said. "Industries and labour reapplied themselves to new technologies. "I believe we are going through that same stage as well. The key to industry in Canada is to keep in mind that we are competing on all fronts - against cheap-labour countries, but also against higher-labour-cost countries, developed countries with secure infrastructure. We need to be mindful of that competition as well."
  8. Ontario: the Province that thinks it's Canada Amid regional grievances, McGuinty fights for a fair share of taxpayers' dollars MURRAY CAMPBELL From Saturday's Globe and Mail August 2, 2008 at 12:00 AM EDT Dalton McGuinty was doing a favour for reporters afflicted with summer-brain stupor. “Here's the news,” the Ontario Premier said, helpfully, after a speech late last month. “Ontarians are coming together to more effectively assert themselves in the face of an unfairness caused by the financial arrangements between us and Ottawa.” Indeed, it would be news if this coming-together was actually happening, and it would be momentous given the suggestion by the federal government this week that it is prepared to shift some economic powers to the provinces. But the residents of Canada's most populous province do not have an unbroken history of rising up as one to take on the federal government. Ontario is not Alberta, and the philosophy that provincial rights should be paramount has always had to compete with a powerful sense that Canada comes first. Mr. McGuinty embodies this duality. For more than three years, he has wasted few opportunities to make his claim that Ontario is being treated unfairly in Confederation because it receives, by the latest estimate, about $20-billion less in services from federal government than its taxpayers remit to Ottawa. He criticizes the federal equalization program – financed predominantly by Ontario taxpayers – for redistributing money to provinces that are more prosperous than his. He takes issue with health and other transfer payments that are less generous than those given to other provinces. And he asks why an unemployed worker in Ontario is treated more severely than in the rest of the country and why the Harper government wants to leave the province under-represented in the Commons. Ontario Premier Dalton McGuinty gestures during his public lecture 'Ontario's Place in the 21st century' at the London School of Economics and Political Science in London, Monday, May 19, 2008. Hanging over all this is the feeling in Ontario that the 1988 U.S. free-trade pact broke the bargain of Confederation in which Canadians bought their manufactured goods from Ontario in return for a recycling of some of its wealth through programs such as equalization. The Premier is always careful to say that he is a proud Canadian and that he understands his province has been blessed by geography and circumstances that give it a responsibility to share its wealth. But the Premier's sustained effort – reflected in his website fairness.ca – suggests a growing sense of regionalism in Ontario. “My friends, it is time to stand up for our province, time to stand up for Ontario,” he said in his speech last month to the Chamber of Commerce in London, Ont. He suggested that lessons could be learned from other provinces that have gone mano-a-mano with federal administrations although he shied away from emulating Newfoundland Premier Danny Williams, who stormed out of one federal-provincial meeting in protest and then removed Canadian flags from provincial buildings. Ontarians who realize that Newfoundland has a much larger per-capita income than Ontario, thanks in part to $477-million in equalization payments this year may wish their Premier to be as aggressive. But while his tactics may be lower-key, Mr. McGuinty isn't going away. “It's becoming more and more urgent, and there's a continuing need to speak about it, because there hasn't been an appetite at the federal level to really engage in fixing the system,” said an official in the Premier's office. The question is whether Ontarians are likely to respond to his appeal or whether circumstances will transform Ontario into a province with a profound regional grievance. The trend line of estrangement from Ottawa suggests it is possible, but this has to be countered by the strong identification with Canada that Ontario residents have always shown. Mr. McGuinty recognizes other provinces will resent Ontario throwing its weight around. “There is a lazy caricature that is convenient for people, which people can resort to, which is that we're being greedy, we're being uncharitable, we're being un-Canadian,” he told the editorial board of The Globe and Mail in 2006. He also knows that talk of regionalism makes his voters uncomfortable. He is fond of comparing the province's role in Confederation to his own situation growing up as the eldest of 10 children. “My responsibility in the eyes of my parents could be summed up in one word: compliance,” he said in London. “Just be quiet and set a good example. Maybe there is a little bit of that to us here in Ontario.” Neither analysis deals completely with Ontario's complex, shifting history. The province had a very strong sense of identity right from the formation of Canada in 1867 but it also was proud that one of its own, John A. Macdonald, was its first prime minister. And Ontario was conscious that it owed its growing prosperity to the high-tariff walls erected as part of Macdonald's National Policy that sustained its manufacturing industries. But, as historian Randall White notes, long-serving premier Oliver Mowat (1872-1896) battled Macdonald for control of provincial resources (earning the nickname “the little tyrant”) and, later, both Howard Ferguson and Mitch Hepburn fought pitched battles with Ottawa over federal encroachment on provincial jurisdiction. Prevailing attitudes changed during the Second World War, which transformed Canada into a modern industrial state with Ontario at its centre. The postwar province was so diversified economically that it was touched by almost every federal policy. As Queen's University political economist Thomas Courchene has noted, “national policy had frequently had little choice but to be cast in a pro-Ontario light.” Leslie Frost believed that political relations had to reflect these economic ties. When he became Ontario's premier in 1949, he set about building a co-operative relationship with Ottawa. The province surrendered much of its taxing authority and agreed to the equalization scheme that vexes Mr. McGuinty. During Mr. Frost's 12 years in office, the old confrontations died away and the modern notion of Ontario as a helpful saviour of Confederation – exemplified by John Robarts' Confederation of Tomorrow conference in 1967 – took hold. So complete was this subsuming of Ontario's regional identity that historian Arthur Lower concluded in 1968 that the province had little collective will and asked in an article: “Does Ontario exist?” No one laughed and, indeed, historian Peter Oliver questioned seven years later why “anyone would attempt to write the history of a region which isn't.” Ontario was firmly by the federal government's side during the energy battles of the 1970s, supporting Ottawa's move, through the National Energy Program, to gain a larger share of Alberta's oil revenues. And Ontario forsook its old alliances with Quebec to side with the Trudeau government's push to patriate the Constitution and enact the Charter of Rights and Freedoms. The MPs that Ontarians send to Ottawa are still more likely to represent the federal argument to Ontario than vice versa – Mr. McGuinty has found few allies in any federal government caucus – but MPPs at Queen's Park began to fall out of step in the 1980s. The Peterson government was impatient with Brian Mulroney's agenda of fiscal restraint and free trade. In particular, Ontario saw the free-trade pact with the United States – the end of the old National Policy – as evidence that Ottawa was promoting the rest of Canada at its expense. By the early 1990s, Bob Rae concluded that the country seemed to be “based on the premise that everyone else could speak ill of Ontario and that this inherently wealthy place would continue to bankroll Canada.” In a 1993 speech, he described Ontario as “the part of Canada that dare not speak its name.” Mr. McGuinty owes much to Mr. Rae's decision to engage a consulting firm to draft a cost-benefit analysis to buttress his belief that the structure of Confederation in the wake of the free-trade deal and cuts in transfer payments neglected Ontario. Mr. Rae's “fair shares federalism” argument is the precursor of the current premier's “fairness” campaign. Mr. Harris agreed that the structure of Confederation served Ontario ill. He, too, fought the federal government (often along with other premiers) on everything from employment insurance to the Kyoto greenhouse-gas protocol. But the federal government at the time was preoccupied with Quebec, after the wake of the 1995 referendum that narrowly kept that province in the country. The federal Liberals' stranglehold on Ontario gave Mr. Harris's Progressive Conservative government no allies on Parliament Hill and Ontario's fundamental objections remained. Mr. McGuinty has earned some concessions in the past three years but the broad-ranging reform of fiscal relations he is seeking eludes him. His efforts seem to resonate with voters who find the notion of a $20-billion “gap” easy to comprehend. One opinion poll earlier this year gave him two-to-one support over federal Finance Minister Jim Flaherty in their war of words over Ontario's economic strategy. But will 13 million Ontarians find a will to act collectively and heed their Premier's call to arms? Mr. White concedes only that the province “is gradually recovering some sense of a regional identity it lost after the Second World War.” Mr. Courchene, too, is careful about predicting the future. “They're thinking of themselves as meriting better treatment from the federal government,” he said. “Does that make them a region? I don't know.” Certainly not in the way that Quebec is distinctive or the West feels it has been victimized by Bay Street and the NEP. It is also hard to define Ontario: The northwest feels closer to Manitoba and there is little identification with Toronto in the eastern part of the province. In addition, immigrants – and Ontario has been getting 125,000 or more a year – have only to look at their new passports to discern their allegiance. But circumstances may yet push Ontario into regional belligerence as the belief grows that the equalization program is unsustainable. Its taxpayers contribute 40 per cent of the cost of the scheme – $13.6-billion now, and growing by leaps and bounds – and this burden rises every year whether its economy grows or not. Conversely, while Alberta's oil revenues are part of the equation that determines payouts, the revenues themselves are off limits to the federal treasury. Mr. Courchene calculates that, partly as a result of this scheme, Ontario's per-capita revenues trail every other province. The prediction that Ontario will soon become a have-not province and qualify for payments that, absurdly, are largely funded by its own taxpayers casts a harsh light on the scheme's shortcomings. Mr. Courchene calls this prospect “fiscalamity,” and if Ontarians catch his drift Mr. McGuinty will have a blank cheque to throw some weight around. The eldest child may decide he's fed up with setting a good example and looking after the other kids.
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