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CANADA AND PLATTSBURGH'S COMPARATIVE ADVANTAGE

More than a decade ago we celebrated 400 years since Samuel de Champlain’s arrival on our lake and in our region. He was not merely a tourist sussing out interesting things in the area. His goals were decidedly commercial.

The prevailing economic theory of his era was mercantilism. This theory claimed that the strength of a nation was measured in its gold and silver reserves and in its trade surpluses with other nations. It seemed to presume that, much like residents of Lake Wobegon from Garrison Keillor’s Prairie Home Companion, every nation could be above average. Of course, such a notion that we can all have surpluses is ridiculous by definition, but it did not stop kings and queens from sending out explorers, from Columbus to Champlain, to find new sources of resources and wealth and hence strengthen their monarchies. This notion that there is some sort of zero-sum game out there in which we each vie for the other’s wealth was repealed a couple of centuries ago. Now the operative term is whether a region can have a comparative advantage rather than an absolute advantage over other nations. This is what we have seen in the North Country for centuries now. Our region was not one of dominance and exploitation, but one in which we believe a rising tide can lift all boats, a metaphor Champlain might have appreciated. This rising tide occurs when we successfully trade with our great partners to the North in a way that is good for both of us. On the shores of the St. Lawrence River, and with the ability to trade with the Great Lakes — then known as Upper Canada —the Quebec and Maritimes region of Lower Canada has been an economic engine for France, Great Britain and even the United States since the forging of our nation. Our region along Lake Champlain and with access to the Hudson River, was a perfect transportation and trade conduit for the centers of commerce of Lower Canada and the New York region. The Erie Canal gave New York access to the Great Lakes well after our region had been trading successfully with Canada for generations. In fact, our region remained quite agnostic to the British throughout the War of 1812 that was fought on our shores. Traders in Northern New York and Vermont were happy to supply combatants on either side. It’s entirely possible that Canada could have met its needs without trade with the United States. Then as today, it has the skills, the resources and the markets to maintain commerce and healthy exchange within the nation and with colonial powers. However, the self-sufficiency of mercantilism misses the point. Our goal should not be independence, but rather interdependence. Why devote resources to produce that which we can, when we can have other regions do some things, and we focus not on what we can do, but what we can do best? As a case in point, there are a number of companies headquartered in Canada, but with significant operations in Plattsburgh. Surely Nova Bus, Prevost, Alstom, and many others could do all their manufacturing adjacent to their engineering and design facilities. But, if human talent is an important resource, why tax that resource too fervently when a company can instead concentrate its resources? That is the comparative advantage our region offers. We have an able workforce and access to markets that make our region attractive. This complements rather than competes with the engineering and sales operations elsewhere. If we look at both regions as a whole, it makes sense to do some things in one well-suited place, and others in another. A line on a map should not artificially distort such choices. This is the enlightened capitalism we see in our region. We don’t expect to dominate in every field of commerce. Instead, we partner with corporations that see we can do some things that can be taken off their plate so they can concentrate on other aspects of their business. This means that our trade with Quebec is not a weakness, but is actually an enlightenment. We recognize the value we bring to the arrangement, and we do our part to make the whole larger than the sum of its parts. Most astute traders get this, even if some politicians do not. Politics typically views things in terms of competing for the pie, whereas commerce and economics focuses on expanding the economic pie. Too often regions try to compete with each other by offering lucrative tax breaks and other enticements to attract new industries. This has induced a “race to the bottom” that the unstainable game of politics creates and corporations are often all too willing to benefit from. It is reassuring that our local businesses have not been promised ludicrous tax breaks to locate here. They think long term, well beyond the expiration of those temporary concessions. They rely instead on the fundamentals of our region that adds value to their business in the long run. When we can be part of a region trading successfully with a significant region to our north for more than four centuries, we can take a longer view. It has worked incredibly well for the North Country, as evidenced by the strong presence Canada has in our economy. May we wish for another four centuries of successful and mutually advantageous trade.

Dr. Colin Read is a professor of economics and finance at SUNY Plattsburgh’s School of Business & Economics. You can read his weekly blogs on the economy at www.everybodysbusiness.online.

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