Newfoundland has a lesson for Canada on globalization

Posted on May 22, 2011 in Policy Context

Source: — Authors: – report-on-business/economy/economy-lab
Posted on Friday, May 20, 2011.    Armine Yalnizyan

Last fall, then-Newfoundland and Labrador premier Danny Williams wondered what could drive anyone to let hundreds of millions of dollars slip through their fingers. Last week he got his answer.

The Roil report on the 18-month strike at Voisey’s Bay nickel mine in northern Labrador is an eye-opening case study in 21st century globalization, and has the potential to be a game-changer.

It is the final output of an industrial inquiry commissionappointed by Mr. Williams in October, 2010.

At that time, about 240 United Steelworkers had already been on strike against global mining giant Vale for 14 months. Labour relations had become toxic, and Innu and Inuit communities finally poised to make economic gains had become tragically split down the middle.

The commissioners reported that Vale ultimately lost an estimated $500-million to $1-billion in operating revenues; the workers lost more than $9-million in wages over 2009 and 2010; the union spent about $4-million in legal fees, staff supports and strike pay; and Newfoundland and Labrador’s GDP took at 1.4 per cent hit in 2009 and 2.6 per cent in 2010. (Notwithstanding this, Newfoundland and Labrador’s economy grew fasterthan any other province in 2010.)

Less than three months before the inquiry was launched, Vale had settled a 12-month strike in Ontario,with 3,400 Steelworkers in Sudbury and Port Colborne, one of the longest strikes in Canadian mining history at that time.

Mere days before the inquiry started, the federal government gave Vale a $1-billion U.S. loan, one of Export Development Corporation’s largest. Less than a month after that windfall, Vale announced that it waslaying off 500 workers at the refinery and smelter in Thompson, Man., which has been in continuous operation since the 1950s under Inco.

Vale bought Inco in late-2006 for $19.2-billion, making it the world’s biggest extractor of iron ore and the second largest mining company in the world. Despite the protracted strikes in Canada, Vale reported net profit of $17.3-billion in 2010, more than three times the previous year.

Vale’s revenue base is bigger than the economy of Newfoundland and Labrador (GDP of about $30-billion in 2010), an increasingly common phenomenon as multinationals get bigger, less reliant on any particular location in their network, and production moves to more remote locations.

That’s certainly the case in Canada. Our trajectory of economic growth courses along the veins of resource extraction. Our most resource-rich locations are increasingly found on lands traditionally held by Aboriginal peoples or adjacent to them. From an east-west axis of development that hugs the 49th parallel, Canada’s new growth pole is the north, an emerging economy like so many others in the global supply chain.

Mr. Williams’ decision to appoint an inquiry into the Vale dispute sheds much light on what can go wrong with this type of economic development, and what can be done to make it go right.

Resource extraction used to happen in company towns. Now economic development does not necessarily mean community development.

Voisey’s Bay is a typical example. It has no road access. It’s a fly-in, fly-out operation, courtesy of the employer, with workers coming in for two-week stints, working 12-hour shifts.

Vale’s “home country” has few regulations, weak enforcement of those regulations and negligible labour rights. The concept of stakeholders does not exist in its strategic decision-making. What Vale chooses to do, Vale does.

When problems arise, win-win solutions are hard to find: there is no sense of common purpose or shared future. In contrast, Canada’s institutions, regulations and laws were built on an approach that seeks to balance rights and responsibilities, from the most powerful to the most vulnerable.

Vale and others will say “That was then; this is now.” Partly culture, partly location, the Roil report reads as if Vale doesn’t think anyone is watching, or should.

Not so fast, says Steve Ashton, MLA for Thompson, Manitoba and Cabinet Minister in the NDP Manitoba government. “Vale can’t escape scrutiny. Look at what they do in Thompson. This will be looked at around the world. A Zambian mining president during the strike in Sudbury said if this is the way they treat people in the first world we don’t want Vale in Zambia, in the third world.”

The lesson learned, from this story and countless others in our wired world: no matter how remote, the whole world could be watching.

It remains to be seen what current Newfoundland and Labrador Premier Kathy Dunderdale will do with the Roil report, and if any other political leaders will seize on the importance of its recommendations. I summarize the report in a longer post here.

The commission’s report is less a cautionary tale than a story of possibility. Our goal should be to export the first world economy and conditions, not import a third-world standard.

The Vale example is a wake-up call: We can let globalization shape us, or we can shape globalization. Our choice. Our future. The whole world is watching.

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