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Expert View: Resource Nationalism and Quebec’s Plan Nord

In a new opinion piece for the Montreal Gazette, American Resources policy expert and associate director of the Fraser Institute’s Global Natural Resource Policy Centre Jean Francois Minardi discusses the issue of resource nationalism in the context of Quebec’s Plan Nord – the Canadian province’s plan to develop its northern reaches in both strategic and sustainable ways.

Minardi’s key points are as follows:

· A commodity “super-cycle” – induced by soaring commodity demand in China and other emerging nations – has raised the specter of resource nationalism as governments seek to increase their share the windfall generated by increased non-oil commodity prices.

· With the 25-year Plan Nord being based on the assumption that metal prices and revenues will continue to rise, the Liberal government and the Parti Québécois are heeding mining activists’ calls and are, among other things, seeking higher royalties and are looking to slap a tax on “excess profits.”

· In light of the risky nature of mining investments, they have usually been made by the private sector. Consequently, the government’s sought-after direct equity investments in strategic mining projects are not in the best interest of Quebecers, particularly should prices fall.

· With the current mining “super-cycle” being based almost entirely on Chinese demand, and China’s economy entering a transitional phase, that super-cycle may end.

He concludes:

Metals are not an inexhaustible source of income. Quebecers should realize that metals are not like oil; their prices are not set by a cartel but reflect global supply and demand. Non-oil commodity prices have traditionally fluctuated greatly and, even if the recent super-cycle has been unusual, the old normal may eventually return.

In this context of high uncertainty, demands to increase the government of Quebec’s slice of the profit pie may prove to be dangerous policy for the future of the province’s mining industry.