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Holiday homework: fix forestry in 40 years (01/06)

Almost every report on the Northern Ontario economy includes the phrase “value-added wood products”.

Almost every report on the Northern Ontario economy includes the phrase “value-added wood products”. You can fill the pages with quotations from every level of government, from forest industry representatives, from economists, and even from babysitters. Value-added forestry is the key to economic development in the North.

Dave Robinson-editorial columnist-Northern Ontario Business

Value-added means doing more with the wood before we ship it out. It means more jobs. If Northern Ontario doesn’t start adding value to its forest products, the number of jobs in forestry will keep falling. Half the saw mill and pulp-mill jobs will be gone in 20 years. Towns will disappear, young people will leave the North, and taxes will rise. Newspapers will be full of gloom and doom. Politicians will be telling fewer and fewer of us about all the jobs they are creating.

So why haven’t we succeeded becoming a value-added economy? The trouble is that the laws of economics are working against us.

Basic trade theory tells us that a region can only export what it has a surplus of. Northern Ontario has a surplus of wood and minerals so we export wood, wood fibre and minerals.

Value-added wood products contain more than just wood. The value that gets added has to be quality design and highly skilled labour. Northern Ontario does not have a surplus of skilled designers and craft people. We can’t get rich exporting value-added wood products any more than we can get rich exporting oranges because we can’t export what we don’t have. To be fair, there are companies all across Northern Ontario that succeed in exporting value-added wood products, but the vast majority of the exports from Northern Ontario are simply bulk commodities.

In traditional trade theory, trade is based on natural advantages. We have a natural comparative advantage with our vast forests, so we sell wood and fibre. Unfortunately, success in the commodity industries is based on cutting costs and reducing employment. Success in conventional forestry means layoffs and more layoffs.

There is a new trade theory that offers more hope. In the new theory success depends on skills, imagination, management, inventions, and communication. These are created advantages. According to the old theory we are stuck, but under the new theory we can invest in our people. We can create the design capacity and the craft-skills we need.

The most important fact about Northern development is that if we want a value-added forest economy we have to create a surplus of design and craft capacity in the North. If we don’t want to watch the population of Northern Ontario continue its sad decline, if we don’t want to watch young people leaving and towns shutting down, we have to create a surplus where we now have a shortage.

Unfortunately we don’t have the capacity to train the workers we need. We have a high school system that has systematically reduced the number of shops and shop teachers. We have an elementary school system with absolutely no trades component. Ninety-five percent of our teachers have never worked in factories or built anything from wood. We have counsellors who advise students to take university programs instead of trade programs. We have a school system that works against Northern Ontario’s economic interests.

To make things worse, we are not even producing enough trained trades people for the existing industries. Forestry and mining associations have produced studies predicting major shortages of skilled labour. David Green, a labour economist at the University of British Columbia, says skilled labour shortages and rising commodity prices will mean that wages for skilled workers will go up. It will actually get harder to build value-addend industries. The federal and provincial governments have almost given up on training our own young people for the high-paying jobs that Green talks about. They desperately hope that immigration will solve the problem.

The situation looks like a classic Catch 22. To develop value-added wood industries we need a surplus of people who work with wood. We don’t have a surplus - in fact we have a shortage.

Because we have a shortage we can’t train the people we need. The plans developed by the provincial and federal governments won’t do the job. What do we do?

Think of this as a homework problem. Spend the next month figuring out how to produce a surplus of people who can design and produce high-quality wood products. Your solution has to be feasible, cheap, and it has to make Northern Ontario the world’s leading value-added forest economy within 40 years.

You may begin.

Dave Robinson is a professor of economics at Laurentian University. He can be reached at .