By Elena Cherney
Sometimes a phone is much more than a phone, and a plane is much
more than a plane.
For a country that has long struggled to overcome its
centuries-old overreliance on natural resources, phone maker
BlackBerry Ltd. and jet and train builder Bombardier Inc. served as
proof that Canada was capable of creating innovative global
champions.
Their phones, planes and trains became points of national pride,
sold around the world and cited at home as examples of Canadian
know-how. They seemed to confirm that Canadians could make and sell
products that didn't come directly from the ground.
So when Bombardier, which has made a bold bet on its CSeries
passenger jet, said it was forced to halt work on its new Learjet
85 model and take a $1.4 billion write-down, it was more than just
another setback for an overextended North American
manufacturer.
Thursday's announcement came just hours after BlackBerry, once a
shining symbol of Canada's potential to foster world-changing
companies, was forced to repudiate yet another report that it was
negotiating a deal to be acquired--essentially for its patents.
BlackBerry's woes aren't new, but the report served as a stark
reminder that the company's best days are long gone, and that no
successor has risen up to anchor Canada's technology and telecom
sector.
Adding insult to injury, Target Corp. chose Thursday to disclose
that it was ending a disastrous foray into Canada, closing 133
stores and laying off 17,600 workers. While Target's exit appears
to reflect more on the retailer's own missteps and poor
calculations than on Canada itself, it is still a sad
statement.
This is a bad time to be reminded of how Canada's manufacturing
sector has failed to grow and thrive, and for its retail sector to
lose so many jobs in one news release.
But the real problem for Canada lies back in the land of
extractive industries--energy and mining.
The energy sector alone accounts--both directly and
indirectly--for around 11% of Canada's economic output, according
to government statistics. In recent quarters, growth in
resource-rich western Canada has helped offset a much more sluggish
performance by the former manufacturing hubs of Quebec and Ontario,
allowing Canada to post a respectable annualized growth rate of
2.8% in the third quarter. That compares with 3.9% growth in the
U.S. during the same period.
But the collapse in oil prices will shave growth for the year to
around 2%, according to a consensus forecast by economists. Big
Canadian oil-sands players are slashing their expansion and
investment plans, which will erode job creation and hiring in the
energy patch. Alberta Premier Jim Prentice warned earlier this week
that he might be forced to cut spending and raise taxes to offset
the impact of lower revenue from the energy industry.Already, the
decline in crude prices has pummeled the Canadian dollar, knocking
it down to just below 84 U.S. cents from almost 89 U.S. cents at
the end of October.
Some in Canada argue that the weaker Canadian dollar will prove
to be the silver lining of the energy and commodities bust, since
it could help to strengthen exports of manufactured goods. Last
June, Canadian factory jobs hit their lowest level in 38 years of
record-keeping, a decline also reflected in the nation's shrinking
share of U.S. imports, which are growing overall.
Much of Canada's decline can be traced back to the automotive
sector, which has steadily abandoned Canada in favor of Mexico and
other lower-cost locales.
Given this track record, it's hard to believe that factory
floors in Ontario's industrial cities, like Windsor and Hamilton,
will suddenly start humming loudly enough to offset the oil-patch
slowdown. Very few of those factory floors could claim to be global
champions, even in their best days.
Without buoyant demand from China and other emerging markets to
lift Canada's commodities sector, the failures of its other
industries have been laid bare. For policy makers, especially a
federal government committed to slaying its deficit this year ahead
of an election, that will pose a challenge.
Canadians' failure to overcome their legacy as hewers of wood
and drawers of water has been blamed on many factors. They include
sluggish productivity, a lack of innovation, a tendency toward
protectionism and the challenge of the country's small scale, among
others.
Canada has a lot going for it, including a well-educated
workforce and world-class banks, and its government has moved
aggressively toward pro-business policies on fronts such as
corporate-tax rates and research-and-development incentives.
Many Canadians argue that the issues are less tangible, lying
with the private sector and its weak appetite for growth and
risk.
"In the U.S. there just seems to be an eat-what-you-kill
mentality," said Frank McKenna, deputy chairman of Toronto-Dominion
Bank and a former ambassador to the U.S. "In the U.S., there seems
to be less fear of failure."
The Upshot is column by WSJ bureau chiefs. Ms. Cherney is the
Canada bureau chief.
Write to Elena Cherney at elena.cherney@wsj.com
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