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Consider the 2.3 per cent levy solution.

What a wimp I was! In April I suggested that Rick Bartolucci should bring in a one-percent levy on metal production for mining-related research in the North. I thought it was a radical proposal, but now I find that Paul Martin wants to go much farther.

The number to remember is 2.3 per cent. The 30 developed countries in the Organization for Economic Co-operation and Development (OECD) invest 2.3 per cent of their total GDP in research and development. Canada drags that average down. We invest 1.9 per cent. Top performers like the U.S., Japan and Finland spend a lot more.

Policy makers for the EU are proposing a target of three per cent. Paul Martin just wants to catch up. He has pledged to raise Canadian investment in research and development to the OECD levels.

Here is where northerners have to think hard. If 2.3 per cent is a reasonable goal for Canada, it is a reasonable goal for the mining industry, and it is a reasonable goal for Northern Ontario. If we ran Northern Ontario like an advanced country, we would invest 2.3 per cent of the value of our mineral production in research.

The total value of Ontario's mineral production was over $5.5 billion in 2003. According to Martin's catch-up policy, at least $127 million a year should be invested in knowledge creation for Ontario's mining industry.

Most of the $3.3 billion worth of metal produced in Ontario came from the North, so, the North should be investing about $75 million every year. That is roughly the same amount it takes to run an entire university like Lakehead or Laurentian.

The current level of research is much lower. The newly announced Deep Mining Consortium, for example, is supposed to save the communities that depend on deep mines-like Sudbury and Kidd Creek. Total spending will be just $1.5 million per year for the next five years. That is roughly one-fiftieth of Martin's target.

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Northern Ontario needs projects that attract brains to the region. PhD students are like baking powder for innovation and growth; they do the real work in most science and engineering labs. High-tech startups use these students the way jets use jet fuel. In 2002, the North had 4.95 per cent of Ontario's undergraduates, but only 0.17 per cent of Ontario's doctoral enrolments. That was about one-thirtieth of our share of Ontario's supply. Since most of the deep mining money will be spent in Ottawa and Toronto, it will actually suck the brains out of Northern Ontario.

Industry does not invest heavily in research, and it has never invested in research that keeps brainpower in the North. In fact, Canada's biggest problem is that industry does not do its share of R & D. OECD statistics show that Canadian businesses invest less in R & D than does their competition in other countries. Ontario's industries don't invest as much as industry in comparable U.S. states.

The $7.5 million Deep Mining Consortium shows how little commitment to northern R & D the mining industry really has. FedNor put in a quarter-million dollars. Ontario's Northern Ontario Heritage Fund is investing $3.5 million and industry's share includes $3 million "in-kind." An "in-kind" contribution usually goes on the books at a vastly inflated price.

Industry won't spend on research because research is risky. Share-holders don't like anything that reduces short-term returns, and the industry can't agree on what it needs. The federal government doesn't spend much on mining or forestry because natural resources are provincial responsibilities. The province won't spend because it is facing a deficit and the south doesn't care about the North.

There is a win-win solution. Northerners have to demand that the province collect a 2.3 per cent research levy on all mineral sales. They should insist that the levy be spent on an intensive research program based in Northern Ontario. Industry gets the research it needs. The North gets a brain-gain. The provincial government doesn't have to pay for the program from general revenues. Dalton McGuinty could even afford to give the mining industry some of the tax reforms it has been begging for.

The mineral levy is the key to northern development, but will northerners demand it? It we don't, we'll know that I'm not the only wimp in the North.

Dr. David Robinson is an associate professor of economics at Laurentian University. He can be reached by e-mail to drobinson@nickel.laurentian.ca
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Title Annotation:OPINION
Author:Robinson, David (American basketball player)
Publication:Northern Ontario Business
Geographic Code:1CONT
Date:Dec 1, 2004
Words:753
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