Jonathan Yazer: Revitalize Atlantic Canada: It’s now or never

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As we strategy one other federal election, it’s time we acknowledge that a long time of federal financial improvement insurance policies have did not catalyze the long-struggling economies of Atlantic Canada.

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Though unemployment within the Atlantic provinces is decrease than its historic highs, it stays stubbornly increased than in different provinces. Private incomes within the area, particularly outdoors oil-rich Newfoundland, stay nicely under the nationwide common.

The information paints a simplified image. However no matter successive federal governments have been doing to assist the area, it clearly hasn’t labored. It’s time for an overhaul of federal financial improvement coverage.

Because the inhabitants ages and the brain-drain worsens, it’s crucial that our political leaders take daring measures to show the area’s fortunes round.

That coverage has lengthy consisted primarily of piecemeal interventions, akin to loan-making to small companies and subsidies to a couple mid-size employers like name centres, to not point out wasteful efforts to prop up an assortment of untenable industrial ventures. Instead of this selective strategy — at finest distortionary, at worst politicized — federal coverage ought to think about whether or not there are extra normal methods to enhance incentives to spend money on Atlantic Canada.

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One intervention that has not been given ample consideration is the institution of Particular Financial Zones (SEZs) in a number of places within the area. SEZs are geographically outlined areas the place rules, notably with respect to customs, are looser, taxes decrease, than elsewhere within the nation. SEZs are designed to favour funding and different financial actions like manufacturing and commerce contained in the outlined areas.

Though maybe finest recognized for his or her use in creating international locations, most famously in China, SEZs are additionally widespread in lots of developed economies. At present in the USA, there are roughly 230 overseas commerce zones (FTZs) the place commonplace federal customs legal guidelines don’t apply. As of 2012, American FTZs collectively employed about 370,000 individuals.

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Most economists agree that SEZs, on their very own, are incapable of making lasting financial development, any greater than subsidies are. As a current World Financial institution report on SEZs notes, “the business case for SEZs should be primarily based on sustainable sources of competitiveness, not on fiscal incentives.” However as dietary supplements to native aggressive benefits, they can assist to prime the pump. Atlantic Canadian SEZs may have three elements working of their favour:

A talented workforce The normal sectors of Atlantic Canadian economies, akin to useful resource extraction and metal manufacturing, created a legacy of expert labour that may be tailored to a spread of productive financial actions, particularly together with focused retraining packages. Furthermore, the contraction within the Alberta oilsands implies that most of the most expert labourers from the area will quickly be looking for job alternatives nearer to residence.

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Essential infrastructure The World Financial institution report emphasizes {that a} key issue to a SEZ’s success or failure is whether or not it possesses crucial infrastructure, particularly within the areas of transportation and utilities. Adoption of SEZs may hasten funding in doubtlessly profitable infrastructure initiatives which are at the moment within the exploratory section, notably the container terminals into account for Cape Breton.

The Canadian benefit The report additionally states that the “success of an SEZ is nearly totally entwined with the competitiveness of the nationwide economic system and the nationwide funding setting.” A SEZ that made it friendlier to do enterprise inside Canada’s rising, steady economic system would take pleasure in a double benefit within the worldwide competitors for funding capital.

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The prices of building SEZs shouldn’t be onerous. The income the federal authorities presently collects from tariffs in probably the most economically depressed areas of Atlantic Canada is negligible. A profitable SEZ, what’s extra, can create a virtuous circle for municipal governments, through which the additional revenues from an expanded native tax base can be utilized to make communities extra engaging to high-skilled employees and their households.

Reasonably than doling out subsidies to favoured corporations, the Atlantic Canada Alternatives Company could possibly be given the duty of administering SEZs for the area, along with ancillary companies, akin to industry-specific infrastructure funding and employee coaching.

Some would possibly object that SEZs, as far as they created a aggressive benefit for companies finding there, may injury present companies positioned simply outdoors the zone. However SEZs established in economically stagnant areas with restricted enterprise exercise shouldn’t be unduly disruptive. Additionally, following the American FTZ mannequin, present companies inside a sure radius of a zone may apply for SEZ standing with out bodily relocating.

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However, SEZs can be tough to enact politically. The coverage would require robust native political and enterprise champions who can talk its benefits domestically, whereas justifying to different components of the nation why Atlantic Canada deserves such preferential therapy (or certainly why some components of Atlantic Canada must be favoured over others).

Definitely it’s within the nationwide curiosity to alleviate the area’s generational disparities; if SEZs did nothing however displace present failed insurance policies they’d be of some profit, as a lot to Atlantic Canada as to taxpayers elsewhere. Furthermore, SEZs needn’t be a zero-sum sport: a brand new Atlantic container terminal, for instance, would compete predominantly for enterprise with U.S. ports, not Québec and Ontario. An Atlantic Canadian SEZ could possibly be a web achieve for Canada.

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It might be improper to dismiss probably the most economically dire Atlantic Canadian areas as misplaced causes. In Cape Breton, the operations of internationally profitable firms like Protocase and Slyce recommend the potential for development in expert manufacturing and data know-how, given the suitable situations. However time is of the essence. Because the inhabitants ages and the brain-drain worsens, it’s crucial that our political leaders take daring measures to show the area’s fortunes round. In an actual sense, it’s now or by no means.

There are compelling causes to look extra intently at this concept, with its potential for reshaping financial improvement coverage within the area. My hope is that, in the middle of this election marketing campaign, candidates in Atlantic Canada will discover time to debate it. After a few years of disillusionment, the individuals who elect them deserve a consideration of all of the choices.

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Jonathan Yazer is a graduate of the World Governance Grasp’s program on the Balsillie College of Worldwide Affairs.