Help Ontario cope – comment/editorial – Help Ontario cope
June 04, 2008

Elaborating on his recent prediction that oil prices would just keep rising, Jeff Rubin, chief economist at CIBC World Markets, said, “Two-hundred dollar oil will do more than 100 Kyoto agreements.”

Underscoring that point, General Motors yesterday announced it is closing four facilities that make gas-guzzling pickup trucks and sport utility vehicles, including its pickup plant in Oshawa, which will lose 1,000 jobs. It was just the latest blow to Ontario’s auto sector.

Breaking a number of undertakings the company had just given the Canadian Auto Workers union in recent contract negotiations, GM CEO Rick Wagoner said the higher gasoline prices represent “a structural change, not just a cyclical change – it is by and large, permanent.”

These higher gas prices are exacting a major toll on the Ontario auto industry, which has long been the backbone of the provincial economy. Add in the high Canadian dollar (a reflection of oil wealth in Alberta), and the drag on the Ontario economy is complete.

And yet, like deer frozen by the headlights of an oncoming car, Ottawa and Queen’s Park have done little to move the province out of harm’s way. For its part, Premier Dalton McGuinty’s government has given $500 million to the auto companies in the hope of protecting jobs. With this latest plant closing, GM will have to pay some of that money back. That’s not much consolation because it is an acknowledgement that the government strategy has not achieved its goals.

Worse, Prime Minister Stephen Harper’s approach – cutting taxes and letting the market make every decision – has left the Ontario economy rudderless. As a result, the low-paying retail sector has overtaken high-paying manufacturing as the Number 1 source of jobs.

High oil prices are hurting Ontario as much as they are enriching Alberta. But it need not be a zero-sum game. Ottawa could help restore prosperity in Ontario by putting as much effort into policies promoting high-end manufacturing as it puts into tar-sands development.

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