Crisis in BC's resource sectors driven mainly by global factors

New CCPA study highlights failure of resource corporations to adequately invest in the province
July 26, 2000

(Vancouver) The BC Office of the Canadian Centre for Policy Alternatives released a groundbreaking new study today. Follow the Money: Understanding the Crisis in BC's Resource Sector finds that the 1990s crisis is mainly the result of two problems: lower international prices and a failure by BC's resource corporations to adequately invest in their provincial operations.

International factors--increased global competition, oversupply in basic commodities, a demand drop-off in Asia, and depressed commodity prices--dealt a serious blow to BC's forestry, mining, and fishing industries over the 1990s.

Dale Marshall, resource policy analyst with the Centre and author of the study, says that these global problems were made worse by the investment decisions of the province's resource corporations. "BC's resource companies have continued to focus on basic commodities and have failed to adequately invest in more value-added production," says Marshall. At the same time, they have shifted new investment to low-cost jurisdictions with lax environmental regulations, such as Chile.

"Such short-sighted investment decisions have worsened global oversupply in basic commodities, further depressing commodity prices," says Marshall. The lack of investment has also left BC's resource companies in an uncompetitive position vis-a-vis other global competitors.

"Not surprisingly, BC resource companies have tried to capitalize on these global conditions. They have sought to convince the public that the resource sectors' problems stem almost exclusively from BC public policy," says Marshall. "We have heard a lot about 'red tape' and the high cost of doing business in BC. The reality, however, is that these companies have used the crisis of the 1990s to get major tax and regulatory concessions from government, as well as concessions from workers."

"The clamour from the province's resource companies about high costs and regulation has drowned out a more important debate," says Mashall. "It is BC's resource dependent communities, and the workers and families who depend on the resource sector for their livelihoods, that are paying the price for these problems. We need to find ways to break with a 'volume not value' industrial strategy."

The report examines BC's forestry and copper and gold mining sectors, as well as the salmon fishery. In each of these case studies, the report looks at the actual forces behind layoffs and closures, and tracks BC's poor investment record relative to other jurisdictions (including those with higher labour and environmental costs).

The report suggests several policy options that would help make BC's resource sectors both economically and environmentally sustainable.