Canada and the eternal quest for a foreign economic saviour

I had to let a few weeks pass after the recent visit of Chancellor Scholz to Canada (where this blog is based). I needed the time to let my anger subside at the recurring theme in Canada’s industrial policy – the zombie-like resilience of the staples trap!

But this time it isn’t furs, or timber, or agricultural products. It’s natural gas (once again) with a new companion – critical minerals!

Perhaps I have chosen the most inflammatory article to reinforce my point, but read this and see where I am going:

  • “Volkswagen says it’s looking for stakes in Ontario mines, while Benz will be shipping the materials to Europe.
  • Mercedes-Benz, meanwhile, announced a deal with Rock Tech Lithium that will see annual production of 10,000 tonnes of processed lithium destined for Germany by 2027.
  • VW is looking for sites for a battery facility in North America, while Mercedes-Benz has joined forces with Stellantis in building its own battery-manufacturing venture. Both plants are likely to be built close to their current Tennessee and Alabama facilities, respectively, because of the difficulties in transporting complete battery assemblies.”

So, Canada is sitting on the raw materials to anchor electric vehicles and various other advanced technologies. But rather encourage domestic firms to commercialize these products, or ensure that the processing activities and production of batteries occurs here, we have agreed to:

  • Let the raw materials be exported;
  • Let them be processed in other countries (US, Germany);
  • Then buy back these batteries (embedded in electric vehicles), resulting in essentially a wealth transfer from Canada to other countries.

I wish I could say that this is the first time this has happened, but sadly folks, this is the basic playbook for economic development in Canada. While such critiques are ignored as “nationalistic” or regurgitation of Innis/Watkins, I think there is a plain logic to it. If Canada wants to develop its economy, it must break its 400+ year cycle of pulling things out of the ground, selling those raw materials, and buying them back as processed goods. This is not ideology; this is common sense.

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