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With latest bailout, Quebec government subsidizes products hazardous to human health

Appeared in the Amherst Daily News, New Glasgow News, Truro Daily News, and Stockwatch.com
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Release Date: July 16, 2012

Canada’s mining industry is globally competitive, and has long succeeded without much in the way of government subsidies. It even thrived in the last recession by responding to market demand. Yet instead of letting markets drive mining investment in Quebec, the provincial government is bailing out the asbestos industry using taxpayer money - and this for a product that is harmful to human health.

In recent years, market demand for chrysotile asbestos produced in Canada shrunk dramatically which lead to a halt of chrysotile mining. But instead of letting mines stay closed, taxpayer funds are now being used to gamble against markets and reopen an unprofitable chrysotile mine.

Quebec Premier Jean Charest recently approved a $58 million dollar loan to allow the closed Jeffrey asbestos mine to reopen. This follows months of negotiation and several extensions of the government loan offer to give private partners more time to raise funds. The Quebec government—and taxpayers across Canada whose federal transfer dollars end up in Quebec’s budget--will now provide financing for two-thirds of what it will cost to renovate the mine so it can reopen.

Even before this bailout was announced, the mine struggled and operated infrequently in recent years. All other Canadian asbestos mines have closed; the last one was shuttered in November. In January, LAB Chrysotile Inc. the other remaining asbestos miner in Quebec filed for bankruptcy.

The demise of Canada’s asbestos industry reflects a declining global demand for asbestos driven by health concerns. The World Health Organization (WHO) estimates that 107,000 people die each year from asbestos-related lung cancer, mesothelioma, and asbestosis from exposure to asbestos in their workplace. Although chrysotile -the type of asbestos mined in Quebec- is relatively less harmful than other types, the key word is ‘relatively.’ All asbestos is considered carcinogenic by the WHO.

Even if chrysotile can be safely mined and handled in Canada, the European Union and more than 40 countries have deemed it too dangerous and have banned its use. Whether or not the health concerns are real, the global market has shrunk. Taxpayers should not be required to subsidize uneconomic activities, let alone carcinogenic ones.

Yet governments refused to stop spending our money. Between 1984 and 1997, Ottawa provided nearly $20 million dollars to the Chrysotile Institute – a not-for-profit organization that provides training and promotes the use of chrysotile internationally. Government support came in the form of $250,000 per year to the Institute as well as an additional $10,000 per year for representatives to attend workshops and conferences in support of the chrysotile industry. The feds also spent an estimated $575,000 in an unsuccessful case to have the World Trade Organization overturn France’s ban on asbestos.

Aside from this federal support, Quebec provided $200,000 per year to the Chrysotile Institute. However, both levels of government have since cut off funding for the Institute and, like asbestos mining itself, the Institute appears unable to continue without government support. In April it announced its intention to dissolve.

Those who support the bailout of the Jeffrey mine claim up to 500 full-time jobs will be created. This works out to more than $115,000 per job. However, the notion that jobs are created is a myth. For one thing, the subsidy money comes from other taxpaying businesses and individuals. Such corporate welfare merely recycles tax dollars from other sectors and thus weakens job creation in those same sectors.

The subsidy is even more absurd in light of the labour shortage faced by the global mining industry. Canadian mining companies need tens of thousands of workers to fill vacancies and meet new demand. By subsidizing mine workers to remain at the Jeffrey mine, public money is being used to distort the labour market and provide incentives for workers to remain in an uncompetitive mine while positions are vacant elsewhere.

Canada has been blessed with many natural resources. It competes globally and does so by responding to market opportunities. In doing so, it prompts innovations and new technologies for more economical, safer and environmentally sound mining. While governments clearly have a role to play in creating the regulatory framework and stable policies to attract mining investment, its role should not be to use public funds to prop up a failing product, let alone one that’s dangerous to human health.



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