Picking battery plants to solve Canada's productivity crisis 'dangerous road,' report says
Canada’s decision to provide billions of dollars’ worth of incentives to companies building battery plants could bolster the manufacturing sector, but may not be the ideal move to boost the country’s overall productivity levels that have been on the decline, says a new report by the Conference Board of Canada.
Instead of picking winners, a better approach would be to cut taxes and allow the market to fight it out and find the right solutions for Canada’s current economic troubles, Pedro Antunes, chief economist at the board, said.
“To be very specifically making deals with three or four companies on battery production, I think is just risky,” he said. “What if it turns out that the solution to our road pollution is different? Who knows what technology comes around the corner?”
The battery plant investments will stimulate economic activity, but it could be a costly approach in the long run since other companies will want similar handouts to invest in Canada, Antunes said.
“It’s a dangerous road for governments to embark on to subsidize and compete to attract dollars,” he said. “It becomes more costly for taxpayers and there’s less room for governments to use those funds for other purposes.”
Canada recently announced deals with Stellantis NV, Volkswagen AG, Northvolt AB and Honda Motor Co. Ltd. to build battery plants. Many expect the agreements to boost the country’s labour productivity levels, which have fallen in 12 of the past 15 quarters, according to government data.
The dire situation compelled Bank of Canada senior deputy governor Carolyn Rogers to describe the situation the country finds itself in as an emergency during a speech in March. Central bank governor Tiff Macklem added his voice to the growing concerns
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