Dutch Disease? There are Worse Problems...

In my column for the National Post, I focus on some recent comments made by Canadian opposition leader Thomas Mulcair:

Thomas Mulcair has taken a deserved media beating over his “Dutch disease” remarks. He’s been criticized for bad economics and divisive politics. He’s been compelled to travel out West and meet the angry premiers. Not a good month for a new party leader.

But as bad as it’s been for Mulcair, he hasn’t yet been beaten enough. Because here’s the bottom-line ironic joke: The more correct Mulcair is about the Canadian dollar, the more appropriate the Harper government’s policies look.

Suppose it’s all true about the Dutch disease: Suppose that it’s because of the oil sands that the Canadian dollar has soared so high. Suppose that it’s because of the high dollar that central Canadian manufacturing is stressed. What should be done about it?

Mulcair’s answer: tax carbon. A carbon tax may be a good way to respond to greenhouse-gas emissions. It would do nothing to help Central Canadian manufacturers. Manufacturers use energy, too — lots of it. A carbon tax will raise the price of their energy inputs and thus the cost of their products.

Ah, you say, but Canada can remit the carbon tax if products are exported; and impose a carbon tax on imports, thus enhancing the competitiveness of Canadian products at home and abroad. Okay. But if Canada remits carbon taxes at the border, then the carbon tax will not raise the price of Canadian oil and gas sold to U.S. buyers. Which means the oil and gas will continue to flow south, and will continue to raise the value of the loonie, Mulcair’s main complaint. Mission pathetically unaccomplished.

Click here to read the full column.

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David Frum

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