Seeking private-sector led regional cooperation

I read the new 4Front report and I fully support their goals and the rising interest in working together.  I just worry the whole thing will devolve -as have so man others – into a laundry list of things for the government to do.  Not that laundry lists are a bad thing but ultimately we need more than just government to push back if we are to beat this thing.

There are dozens of ways that governments could collaborate but they don’t.  They could collaborate on shared services/back office activity in health care.  But they don’t.  They could cooperate better on energy. But they don’t.  The could cooperate better on immigration and the attraction of foreign students but they don’t.  They could promote the region for global business investment but they don’t.  I could go on and on.

Governments face a political hurdle that private industry doesn’t.  If a decision made in Halifax leads to a greater benefit for Fredericton it isn’t going to happen.  If regional cooperation has ‘winners’ and ‘losers’ it isn’t going to happen.  For example, if you centralized telecare for all four provinces into Summerside, it would mean job loses in three provinces (even though it would mean lower costs for all four provinces).

The truth is we have a ‘beggar thy neighbour’ reality in Atlantic Canada. You know what I am talking about.  If Saskatchewan is booming, we say “good on them”.  If PEI were to boom, our response would be “why not us”?  If New Brunswick is struggling, we need Nova Scotia to struggle too.  It’s no fun having everyone point at Nova Scotia and scold New Brunswick for not doing well.  Newfoundland is a bit different because “they have oil, you know.”

The idea of cooperation among the Atlantic Provinces for better regional outcomes has been around since Confederation. In the 1920s, the Maritime Rights Movement saw the three provinces united in their complaints against what were perceived to be unfair national policies that were hurting the Maritime Provinces. The data suggests that despite a lot of posturing, there hasn’t really been much substantive effort made to improve economic outcomes through better cooperation.

This is not just a government-to-government issue.  There is considerable evidence there is a lack of business-to-business economic cooperation between the provinces.

I have completed economic impact modelling for over a dozen industries in recent years in Atlantic Canada and this data suggests there is very little economic integration within the region.

For example, using Statistics Canada’s input-output tables, we know that New Brunswick’s information and communications technology sector generates very little economic activity in other Atlantic provinces (either through the supply chain or through induced effects).  For every million dollars’ worth of output in New Brunswick, the industry generates only $8,200 worth of gross domestic product (GDP) in Nova Scotia, less than $1,500 on Prince Edward Island and $4,400 in Newfoundland and Labrador.  Compare that to $32,000 worth of GDP in Quebec, $66,000 in Ontario, nearly $5,700 in Alberta and $9,200 worth of GDP all the way out in British Columbia.  In other words, the ICT industry in New Brunswick generates more GDP in British Columbia than it does in Nova Scotia.

Maybe we should be talking about New Brunswick-British Columbia union?

The bottom line is that economic integration in the Maritimes (and NL) is limited by a lack of scale and specialization.  If a NB firm needs a patent lawyer, they go to Toronto. If you need a specialized piece of equipment you will have to purchase it from Quebec or Ontario.  You can look up and down the I-O tables and you will see that Ontario – particularly – generates significant benefits from the economic activity in the Maritimes.  It’s where the head offices are.  It’s where the money is.  When we looked at shipbuilding – it was pretty amazing.  For every dollar of output in Nova Scotia, Ontario’s GDP was boosted by $195.

There have been limited efforts to boost business-to-business in the Maritimes but with limited impact.

In the end, the low hanging fruit from regional cooperation is:

Government-to-government cooperation – from scale and regionalization of effort (difficult).

Industry group to industry group –  Regional IT collaboration as one example.  Incubation, acceleration, capital – Gerry Pond’s efforts.

Economic development group cooperation.

Efforts to promote and raise the brand of the region as a whole.