When the Quebec government shut down non-essential business activity in the province last month to deal with the deadly coronavirus, it promised to help kick-start the economy again once the danger had passed.
Though Quebec hasn’t yet reached its peak number of new COVID-19 cases, it appears likely to avoid the worst-case scenarios feared by public health experts. The current plan is to gradually begin reopening the economy early next month.
But as the provincial government gets ready to make good on its promise to business owners, it is realizing they will be confronting a radically different global marketplace.
“It will be a new world,” Quebec’s economy minister, Pierre Fitzgibbon, said in a recent interview.
Fitzgibbon is expecting that not only will consumer behaviour change, so, too, will the behaviour of governments around the world.
Most governments will be heavily indebted from the expensive emergency relief measures needed to support millions of unemployed workers and backstop thousands of businesses.
Fitzgibbon said he believes that will impel them to defend their investments.
“There is going to be a geopolitical environment of increased protectionism,” he said.
In that context, Quebec needs to rethink how it secures stable access to the goods and services needed to keep its economy, and society, running smoothly, he said.
“Because depending on international markets will be less desirable, it will be very important for us to target what we want to protect in terms of supply chains.”
Donald Trump gives the shivers
The best way to do that, Fitzgibbon said, is making parts of the Quebec economy less reliant on imports.
Quebec has already announced a buy-local initiative, the Panier Bleu, an inventory of made-in-Quebec products.
But the government is also in the early stages of exploring how to ensure more pharmaceuticals, medical supplies and food is produced within the province.
“I think all countries will want to be self-sufficient when it comes to strategic goods,” Fitzgibbon said.
Many were already thinking that way early in the crisis, when China began shutting down its factories to deal with the outbreak. Recent events have only reinforced that mindset.
When Donald Trump sought to block exports of N95 protective masks, needed for front-line health-care workers but in short supply the world over, “we all had shivers,” Fitzgibbon said.
Though 3M, the mask’s maker, eventually reached a deal with the White House to allow it to ship to Canada, the message was received.
“That definitely sparked a lot of introspection about the economy,” Fitzgibbon said.
Have supply chains become too fragile?
The lean, international supply chain is one of the defining features of globalization as it’s been practised since the 1980s.
Before products hit retail markets — be it cars, smartphones or medicine — they are likely to have been assembled from component parts made in different countries around the world.
It’s a complex process that allows companies to outsource production to countries where the cost of labour is cheaper. And consumers, in the end, can access more affordable products.
But it’s also a process that is highly vulnerable to disruption. A late shipment here, or factory shutdown there, can cause costly delays at the retail end.
When those products are medical supplies essential for keeping health-care systems operating during a pandemic — such as the N95 mask — those delays are not just costly. They’re potentially deadly.
At his daily news conference in Quebec City, Premier François Legault often indicates how many days worth of supplies remain for critical items such as surgical gloves and gowns, and more recently, the chemicals required to perform COVID-19 tests.
The inability of global supply chains to deliver such products during the pandemic has prompted questions about how manufacturing processes are organized.
In making supply chains so efficient, have they become too fragile to withstand minor, let alone major disruptions?
“This is a major crisis, but there will be other crises. And we’re learning that you can’t be overly dependent on one source,” said Michèle Rioux, a professor at the Université du Québec à Montréal, where she heads a research centre on globalization.
“After the crisis, I think we’ll place more value on the principle of precaution. That will change the way we do business. It will become a little more ordered and regulated.”
Slaying Quebec’s trade deficit
There are two dimensions to the Quebec government’s plan to make the economy more resilient in the post-COVID world.
Fitzgibbon wants to see Quebec increase its capacity to produce strategic medical supplies. He said a local company will begin making a variant of 3M’s N95 mask.
And going forward, he hinted, the provincial government will invest more in the agriculture industry, helping it produce more fruit and vegetables by building more greenhouses and mechanizing harvest.
The industry currently relies heavily on seasonal foreign workers, many of whom haven’t been able to make the trip because of public health directives.
The other dimension of Fitzgibbon’s plan is tackling Quebec’s $20-billion international trade imbalance.
This, he insists, doesn’t entail a rejection of free trade. The government will push Quebec businesses to invest more in technology to increase the efficiency of their factories, an area where they’ve lagged their competitors.
The hope is that such investments will reduce labour costs and make Quebec products more appealing to local consumers, reducing the need for imports, while at the same time making them more competitive in export markets as well.
“Reducing imports and increasing exports is perfectly compatible with free trade,” Fitzgibbon said.
Manufacturers will welcome the help boosting their productivity, said Véronique Proulx, who heads the Quebec branch of Canadian Manufacturers and Exporters, a business lobby.
“I’ve been speaking with a lot of manufacturers who are either partially shut down or shut down entirely. They’re thinking about how to take advantage of this time to invest in new automation,” Proulx said.
“We do need to increase our competitiveness if we still want to be here in 10, 15 or 20 years.”
But if Quebec is serious about addressing its trade imbalance, it will have to be willing to “level the playing field,” she said.
That might require provincial legislation to offset the Buy America and Buy American acts in the U.S., she said, referring to legislation that limits what foreign companies can sell to governments in the U.S.
“There is room to rethink the critical economic sectors in Quebec and Canada,” she said, “as well as to think about where we would like to develop more capacity to be less dependent on external markets.”