Inter-provincial competition and the Canadian potash industry

CIM Bulletin, Vol. 78, No. 880, 1985

DAVID L. ANDERSON, Centre for Resource Studies, Queen's University, Kingston, Ontario

The objective of this paper is to describe the potential impact of inter-provincial competition for new output capacity on the Canadian potash industry. It will be shown that the ramifications of such actions are potentially severe, especially since the potash industry is one of the few non-fuel minerals in which Canada purportedly possesses a significant degree of market power. More specifically, the paper addresses the impact of possible expansions in New Brunswick, Manitoba and, perhaps, Saskatchewan. The findings suggest that such initiatives could result in substantial excess capacity and the dissipation of monopoly rents. In summary, given the market structure of the industry, it is unlikely that the employment and economic effects associated with industry expansion will offset the loss in national welfare attributable to rent dissipation.

Keywords: Potash, Potash industry, Markets, Production, Economics, Saskatchewan, Manitoba, New Brunswick.