Host: As part of Bill five, the Protect Ontario by Unleashing Our Economy Act, which passed last year, the province gave itself the power to declare special economic zones. So what are they and what are the risks and benefits? Pedro Antunes is the chief economist at Signal49 Research, and he joins us on the line. Pedro, how are you doing?

Pedro Antunes: I'm good Jeyan. Thank you.

Host: Help us understand here special economic zones. How do they work?

Pedro Antunes: Well, I think traditionally, especially economic zone is meant to kind of spur is a zone marked I guess, by a government and is intended to spur new investment. And typically how they would do that would be to offer up a better tax incentives. They may offer, you know, a reduced import duties if you're operating with it within that zone, they may reduce regulatory requirements. There's all sorts of or, you know, perhaps allow for cheaper labour. As we've seen in some cases, most of these are typically set up in developing economies when they're just trying to spur that investment and kind of adjust the rules a little bit to spur the investment in in a localised area.

Host: Help us understand are these zones really are they geographic zones, or could they be something that you could put on a blanket, say, on an industry in itself?

Pedro Antunes: Well, I guess you could sort of apply them more broadly to an industry, but generally speaking, they have been assigned a special, a specific area. You can think about China, for example, for, you know, as they were transitioning from essentially an agricultural rural economy, they were transitioning to what they have become, which is the manufacturing hub of the world. They were essentially trying to move people to essentially to cities to, to densify a a sorry, I suppose, special areas. And so they were allowing for these zones to have essentially advantages in terms of be it access to energy, be it access to housing, or be it essentially special rules around tax and other policies.

Host: Now, with the passing of Bill five, Protect Ontario by Unleashing our Economy Act last summer, the provincial government has received a lot of flak for using special economic zones. Why would that be?

Pedro Antunes: Well, I mean, I think it's to personally, on a personal level, I think it's a bit of a disappointment that we cannot kind of level the playing field across the board and entice investment in that way. So the provincial government here is looking to try and essentially really the zones in Ontario are really focused in, I think, on resource development. And of course, we've heard about the airport as well. But I think it's essentially to facilitate and expedite investments really around the environmental review process, perhaps around permitting, perhaps around lessening some of those rules as well. Not just not just the the review process itself, but maybe facilitating investment by lowering some of the standards or rules. So we're not quite sure here what's going on specifically, but I think the general intent is to really expedite resource projects in general.

Host: Now, special economic zones seem to have come into everyone's lexicon since the Premier started announcing it with Bill five. But of course, he did not make up this concept. You had mentioned China as one example, but where else in the world can we see special economic zones?

Pedro Antunes: Well, in fact, I was surprised just in preparing here for our talk today as to how widespread they are. I mean, they are pretty much, you know, used across the world in many different countries. But again, when we come back to developed economies, this really segments, you know, it's another problem in terms of segmenting the market, not having a uniform playing field, not allowing for investment to occur where it's more efficient. And I think in the case of the resource projects themselves, unfortunately, what we're trying to do here is, is pick an area where we want to develop and where perhaps there is an economic case to be made for a mine. And we want to kind of bend the rules a little bit for that, for that area to kind of promote that investment. When when I try to look at how we're doing in terms of our internal trade barriers, you know, when we go back to the one Canada, the one Canadian economy bill that the federal government is trying to push to to expedite projects as well, it really is to try and unify our market. And I think this is, unfortunately something that maybe it will be effective in expediting some resource projects. But in the bigger picture, it is going to segment our economy even more.

Host: Well, let's understand from a provincial standpoint, are there other provinces that are using it or have discussed using the strategy?

Pedro Antunes: Well, there I mean, Bill C-5 is is the only one right now in Ontario that actually has defined a special economic zones. We haven't seen any that anywhere else. Alberta has been the Alberta government has been discussing doing so as well, but we haven't seen anything implemented. And again, I go back to an economy like Australia, which is much has been much more successful in attracting investment. It's an economy that is parallel to ours, very similar in many respects, has had a much better productivity performance over the last few decades, and they have no special economic zone. So I think we should really be wary about implementing these these these policies.

Host: Well, with that being said, you know, critics have said in theory these zones sound like a positive move for industrialisation, but in reality can be quite difficult to actually implement. What are some of the negative implications that have occurred globally? I think if we just look at the continent of Africa, we can see a couple of examples there. Can you walk us through some some I guess some fails when it comes to these zones?

Pedro Antunes: Well, I think it goes down. It goes back to this segmenting the market. It goes back to a race to the bottom on environmental review, on environmental rules. And of course, it can lead to and end up with, you know, things that are potentially disastrous on the environment. Just more broadly, though, we've also seen segmenting the market, you know, essentially creating rather than unifying an economy and strengthening and strengthening it in that way. We've seen a situations where we are segmenting an economy and just creating more, you know, as we are, you know, we live here in this country. Difficulty around creating that one market, around having firms able to conduct business across the entire economy and thus becoming bigger, more productive, able to invest more. These are all of the challenges that Canada has been facing over the last number of decades, I would say. And I don't think these are necessarily a solution.

Host: Another factor that we haven't really talked about is labour. When we're talking about, you know, developing nations a little bit harder to accomplish some of these things here in Canada, I imagine, with just labour practices in comparison to other countries.

Pedro Antunes: Well, that's it. I mean, you don't want to start to reduce labour standards. I've been talking more about environmental standards, you know, are rules. You don't want to slacken those, but you don't want to slacken labour standards either. And I think we've seen some examples of that. I mean, just you know in Mexico they have the maquiladora example, which is essentially focused on manufacturing to service the very large US economy just north of their border. And so, you know, there are special economic zones that have been set up, some would say with some success because they have seen manufacturing increase there. But at the same time, it's prevented that kind of, how should I say, enrichment, that increase in productivity that would allow for stronger wages as well. And, you know, now the US is pushing back against trade with economies that have essentially cheaper labour. So again, this creates this kind of sense of race to the bottom, which is not necessarily a good thing, both in terms of tax or in terms of these kind of labour standards or environmental standards.

Host: Pedro, we are going to have to leave it there, but I really appreciate your time and your insights on this. Thank you very much.

Pedro Antunes: Well, it's my pleasure. Thanks for having me.