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Specifically, the Department of Business New Brunswick (BNB), the provincial government’s economic development arm, has targeted three technology sectors (advanced learning, bio-science and health) and two industrial sectors (aerospace and defence, and energy) for growth. Within this mix, a special emphasis has been placed on high-value precision manufacturing, particularly for export markets, which account for roughly 50 per cent of the province’s $27-billion annual gross domestic product. Says BNB Minister Victor Boudreau: “We’re not ignoring all the others, but these are the areas where we see some real potential, some real opportunities.”
Indeed, the bio-science sector currently hosts 40 companies and research institutions that generate, altogether, annual revenues of $110-million and employ 2,000 people. Aerospace and defence is a $130-million-a-year industry. Meanwhile, advanced learning, health and energy are all claiming expanding slices of New Brunswick’s economic pie. “What we’re trying to promote is a province that is, first of all, a highly competitive location in which to do business,” Boudreau says.
The sentiment explains the Province’s most radical and aggressive manoeuvre to date – other than the Hydro-Quebec deal – executed early last year. The so-called “Plan for Lower Taxes” dropped the corporate levy from 12 to eight per cent. It also flattened the personal income tax regime by eliminating two brackets and pegging the remaining two at nine and 12 per cent. The change, says Graham, was indisputably transformational: “It gave us one of the lowest tax structures among 30 OECD (Organisation for Economic Cooperation and Development) countries and the lowest corporate tax structure in Canada.”
The direct results of these policy shifts are difficult to measure. But there is some evidence that they’ve made an impact. According to BNB’s statistical division, since 2006, New Brunswick employers have created 18,200 jobs, representing a 5.2 per cent increase compared with national employment growth of only 1.6 per cent. In fact, the unemployment rate in the province is now lower than the national average (8.1 per cent, compared with 8.4 per cent in the country overall). Moreover, says a departmental memorandum, “Last year [2008], workers in New Brunswick saw their wages jump at the highest rate in Canada. Statistics Canada showed the average hourly wage in the province rose to $18.96 from September 2008 to September 2009. The six per cent increase was the biggest jump of any province during that time and made New Brunswick’s average wage the highest in the Maritimes.”
It is, perhaps, for these reasons that some economists predict New Brunswick will enjoy above-average export and GDP growth this year, while some businesses are sufficiently confident in the province’s competitive advantages – hard times notwithstanding – to locate their operations there, including Umoe Solar, a Norwegian firm that manufactures polysilicon photovoltaic solar cells and which will invest $600 million in new premises in Miramichi and hire upwards of 350 people. The announcement last year prompted the city’s mayor Gerry Cormier to gush: “This is good news in these tough economic circumstances.”
Yet, for Graham, these promising developments represent the beginning, not the end, of a multi-year initiative to render New Brunswick truly competitive and sustainably prosperous. And, he insists, the deal with hydro-Quebec is a crucial piece of the puzzle, though he acknowledges the validity of many people’s concerns. “I think it’s good to ask what the long-term benefits of this will be,” he says.
“But, I think it’s equally important to wonder what would happen if the rate of inflation rises in New Brunswick without this deal in place. What are our costs going to look like then? What’s going to happen if we have to pay high interest on $4.8 billion in debt? The fact is, going forward, we have the opportunity to provide one of the most competitive corporate tax rates in North America and one of the most competitive power rate systems in North America. Now, we have to leverage those opportunities for future economic development benefits.”
It’s only fair to point out that not everyone in New Brunswick despises the thought of Quebec owning NB Power. Former Premier Frank McKenna had this to say late last year: “This is a good deal for New Brunswick. [It] will mean a better future for our children.” On the other hand, McKenna warned of the personal costs. “I’m not sure I would have been this courageous,” he commented in a news report, almost ruefully.
For now, Graham tries not to think about his rapidly dwindling political capital. “In the next budget,” he says, “we are again going to be looking at reducing government expenditures in some areas to offset the deficit challenges.”
And this, I grin, will not involve the Flower Pot Rocks?
“No,” he laughs. “It most certainly will not.”
