Mining: an essential component of the Canadian trade balance

CIM Bulletin, Vol. 87, No. 983, 1994

R.A. Horn and S.M. Telfer, BP Resources Canada Limited, Toronto, Ontario

Canada has a per capita GDP second only to Japan among the G7 countries and a positive trade balance which ranks third among the world's major economies. International trade represents a very large part of the national economy and as a proportion of GDP is larger than that of all the other G7 countries with the exception of Germany. On the negative side the Canadian current account deficit relative to the size of the economy is significantly worse than that of all major industrial countries, due mainly to the cost of servicing an immense foreign debt and to a large and worsening negative trade balance in manufacturing. The outflow of money may be reduced by increasing the productivity and competitiveness of those sectors of the economy in which Canada already has a leading competitive position and which have the potential for further growth. The mining industry is uniquely qualified in this respect in that Canada is the western world's largest producer of metals and mineral products and has the geology and the exploration skill to replenish reserves assuming that an adequate level of investment is maintained. In 1989 the minerals industry contributed $8 billion to the country's balance of payments and with the exception of forestry is the only sector of the economy which has shown consistently increasing foreign earnings over the long term. In recent years there has been a decline in exploration in Canada and a significant increase in countries such as Chile. The demand for hard currency to finance the development of the newly emerging capitalist economies of the CIS and Eastern Europe is also driving these countries to seek foreign investment to allow them to exploit their natural wealth more efficiently. Canada is therefore facing growing international competition for risk capital and in the future its trade surplus will probably decline in the face of lower cost foreign production. Canada rightly exercises a high level of environmental control on its mining operations; however a significant deterrent to investment is the fundamentally unjust application of the many provincial and federal environmental laws, under which a mining company, even if it takes every measure to protect the environment, runs the risk of eternal and unlimited future liability. If this situation is not rectified the effect will be an increase in global pollution as mines in countries with more lax application of law and regulations controlling environmental damage replace those of Canada. Tax benefits and incentives are a more efficient means than arbitrary regulations in minimizing environmental damage.

Mots Clés: Canada trade balance, Tade balance, Environmental concerns, Mineral economics, Mineral exploration, Mining in Canada.