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Local Economy

Coronavirus: An Economic Pandemic?

How COVID-19 could alter Canada’s oil and gas industry, tourism, education and public health.

Crawford Kilian 18 Feb 2020 | TheTyee.ca

Crawford Kilian is a contributing editor of The Tyee.

For some Canadians, the coronavirus disease now known as COVID-19 is a threat to our culture: the Chinese factories that make NHL hockey sticks have shut down.

Also in Canada, and many other countries around the world, the epidemic is a threat to the livelihood of millions: the people who mine the raw materials China buys, the corporations that depend on Chinese-made goods as part of their global supply chain, and the service industries that rely on Chinese travellers and investors. Even Finnish fur farmers say they face “catastrophe” because Chinese buyers aren’t coming to their big spring auction.

More locally, COVID-19 is a threat not just to hockey, but to Canada’s oil and gas industry, tourism, education and public health.

We forget what a market China is for oil and natural gas as well as coal. But Chinese demand has dropped sharply in the last few weeks, especially for LNG. Fewer people are travelling inside China, and almost none are flying to or from it. Some 50 airlines have ceased flying there, and 20 others are running reduced schedules because they lack passengers.

Meanwhile Chinese factories are struggling to resume production while their workers are locked down at home (or still stuck out of town since the Lunar New Year). China’s coal mines are still largely shut down and transportation is sharply limited in many parts of the country. Apple has warned of a drop in revenue because its Chinese factories can’t produce or ship iPhones, and it closed all 42 of its Chinese stores. Not as many containers are reaching Chinese ports, and fewer freighters are leaving for foreign destinations. So oil prices are down, and so is the price of LNG.

Sleepless nights for politicians

That may be causing John Horgan, Jason Kenney and Justin Trudeau a few sleepless nights: What if they build all their pipelines and no one shows up to buy the stuff in them?

The tourism industry is already in terminal insomnia. Wealthy Chinese travellers drive the European and North American luxury markets as well as the market for Finnish furs, but they’re now hunkered down with everyone else. Over 750,000 Chinese tourists visited B.C. in 2018, but numbers fell sharply in 2019 due to the Meng Wanzhou affair. By September 2019, Chinese visitors were down over eight per cent from the year before. Those numbers aren’t likely to pick up anytime soon.

As for the cruise-ship industry, COVID-19 on the Diamond Princess has taken the charm off the whole idea of floating holidays, at least in Asia. Still, cruise ships might turn up in Vancouver this summer unless the virus establishes itself anywhere on the West Coast.

A new education crisis

B.C.’s education system faces a very serious problem. Our high schools, colleges and institutes have become dependent over the past 25 years on international students, who pay full tuition for their courses. A 2018 report says 13.7 per cent of post-secondary students in B.C. in 2016-17 were foreigners, and 7.7 per cent of the graduating Grade 12s (whose graduation certificates qualify them for regular Canadian tuition fees in post-secondary).

Four out of 10 international students were from China in 2016-17; they tend to enrol in arts and sciences, business and management, and engineering and applied sciences programs. Strikingly, while international enrolments rose by 162 per cent over the previous decade, domestic enrolments have actually fallen by 6.8 per cent. So international students have sustained all the growth in the B.C. post-secondary system.

Now imagine a 10 or 15 per cent decline in Chinese enrolments next fall. The chill in China-Canada relations likely hurt enrolments last year, and that could be aggravated by several factors. Students’ families may not be able to afford the cost; students themselves may fear racist treatment here, or being stranded far from home if the outbreak persists. And whether it does or not, travel could be complicated by elaborate health screening and quarantine requirements.

So our colleges and universities face the prospect of a shortfall in registrations for their key programs. That in turn would mean less provincial funding, fewer course offerings, and faculty and staff layoffs.

Everything from masks to drugs

B.C.’s health system could also run into trouble. North America imports many of its pharmaceuticals and medical supplies from China, but the COVID-19 outbreak has already broken supply chains. Vancouver-area pharmacies ran out of masks weeks ago, while Chinese companies struggle to ramp up production for a huge new domestic demand. A recent article in an anti-Beijing newspaper, the Epoch Times, warned that “China is the dominant supplier of thousands of medicines found in U.S. homes and hospitals, from antibiotics to chemotherapies, from HIV/AIDS drugs to antidepressants to painkillers.”

Last summer Americans worried that China might weaponize U.S. dependence on their pharmaceuticals. Now the threat is that China won’t be able to produce and deliver them. Like the sudden demand for masks, American demand for pharmaceuticals could lead them to bid for Canadian supplies.

Much depends on how quickly China can suppress COVID-19, especially in Hubei province where the vast majority of cases have been found. While daily case counts have been falling lately, new hot spots could develop in Japan, Singapore, Thailand — or, worse yet, in South Asia and Africa. If this turns into a genuine pandemic, global trade and travel will shrink, and we’ll feel the effects on all these fronts, if not more.

Of course, there’s always a bright side. If the whole Chinese economy implodes as some fear, Beijing might be a bit less pushy and bit more eager to mend fences with its neighbours. (China is already warming up to Canada because we didn’t close off travel like the Americans, and we’re sending tons of medical supplies there.)

Even better, the fall in demand for fossil fuels might finish off our neurotic need to grow our economy while somehow also meeting our Paris commitments. We could start looking seriously at renewable energy, and leave commercially worthless bitumen where it belongs.

We might also reconsider globalization as an economic panacea. It’s had a 30-year run and left most us poorer than when it began in the 1980s. We could start making our own pharmaceuticals and medical supplies, funding our schools properly, and encouraging Canadians to tour Canada instead of luring millions from overseas.

And given the number of trees still standing in Canadian forests, we might even rediscover the lost art of making NHL-quality hockey sticks.  [Tyee]

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