OTTAWA—Ontario’s dependence on the U.S. market has left it vulnerable to a slow economic recovery and fiscal uncertainty south of the border, according to the Conference Board of Canada.
The province’s trade has been too dependent on large firms, intra-firm trade and manufacturing, according to a new report, evidenced by how hard Ontario was hit by the 2008-09 recession.
To combat this assailable position, Ontario needs a strategy put in place to help ward off potential collateral damage should the U.S. economy slip back in recession, according to Conference Board senior vice-president and chief economist Glen Hodgson.
“If Ontario is to sustain high-quality public services and continue to be an attractive place to live, it needs a comprehensive growth strategy that improves capital investment, enhances productivity and competitiveness and bolsters the labour force,” Hodgson, author of Needed: A Comprehensive Growth Strategy for Ontario, said in a statement.
Although the Ontario economy has rebounded since 2010, its growth is tepid and it continues to face pressures for fundamental restructuring.
The Canadian dollar is expected to remain at or near parity with the U.S. dollar, the report says, and while the U.S. economy is starting to show signs of life, it still has serious structural problems, notably its labour market and fiscal deficits.
Without addressing capital investment, weak productivity growth and a looming labour shortage, the Conference Board claims Ontario’s economic growth potential will decline to 1.9 per cent annually after 2015.
Ontario could embrace an agenda to reduce and eliminate barriers to trade and investment—both within Canada and internationally, according to the report.
The federal government is already pursuing an aggressive international free trade agenda, which the Conference Board says will benefit Ontario firms once improved market access is secured.
Ontario firms large and small should be prepared to explore international business opportunities beyond the U.S. market, since the provincial economy needs to diversify its commercial base.
Within Canada, Ontario could join with other provinces to ensure that goods, services, investment capital and people move freely across the country without regulatory or administrative constraints, the report urges.
This could be built on the positive example of the Trade, Investment and Labour Mobility Agreement between Alberta and British Columbia.
The Conference Board says creating a single Canadian market would allow Ontario firms to become preferred suppliers to the expected surge of resource investment in western Canada.
This open-market agenda would improve business access to markets internal to Canada and abroad, and increase competition within Ontario—both of which, it says, can boost productivity.