January 18, 2007
Laggard Canada being outpaced
by Dan Cayo, Vancouver Sun, C1
Canada is still a great country -- rich, safe, well-endowed and well-connected -- but we are slowly slipping to the back of the pack of developed nations.
We are laggards in productivity, we are being out-paced by both rich and middle-income competitors, and we are not coping adequately with sweeping changes in the global economy and the emergence of new stars like China, India and Brazil.
Specifically, we do not attract our share of foreign investment, which is a major driver of trade and growth. We are reaching the limits of North American economic integration, yet we still rely too heavily on the U.S. to buy our exports. Although we import more these days from China and other emerging nations, our trade with most of the rest of the world has stagnated or declined. Our service industries are doggedly domestic, too rarely capitalizing on fast-growing international opportunities. And we invest less than many other countries in research, then are slower than others to commercialize worthy innovations.
For Vancouver, some of the specifics are even worse. From 1999 to 2005, for example, Canada's head office employment grew 11 per cent. It was up 64 per cent in Calgary, 28 per cent in Ottawa, and 19 per cent in Toronto. It was flat in Montreal, and down seven per cent in Winnipeg. And here it dropped a staggering 29 per cent -- about 5,000 jobs.
These are among the sobering points underlined in a major Conference Board of Canada report, Taking Stock: Canada's Economic Place in the World, that was released on Wednesday.
Among the continuing challenges it sees for Canada in the immediate future
are:
- The need to marry economic growth and environmental protection.
- The need to rebalance the global economy more equitably between rich
and poor.
- The need to restart stalled initiatives to liberalize global trade.
- The need to capitalize on the golden opportunities presented by emerging
markets while surviving the cutthroat competition they represent.
What to do?
The 120-page report outlines five strategies that it says will help Canada maintain and improve its position in the world.
The first is a national strategy to embrace productivity and competitiveness. Because, the report says, it is a lack of vigorous competition in many sectors that makes them flabby in relation to other countries.
Interestingly, however, this "national" strategy seems to
be more sorely needed by the East than by the West. B.C.'s big employers
-- mining, oil and
gas, wood products and construction -- actually fare quite well in
international
productivity comparisons. But Canada's retailers, finance and insurance
institutions, utilities, and cultural industries -- to name just a
few -- lag, the report suggests,
at least in part because they do not face a very competitive marketplace.
Canada's "capital intensity" in most sectors -- the amount
invested in machinery and equipment to support workers in a sector
-- also lags, the report
notes.
A second key strategy that is needed is to "stop death by a thousand paper cuts" and tackle the web of regulatory and other barriers that pervade Canada's economy. A simpler regulatory framework, plus tax reform designed to remove disincentives to work and invest, would go a long way to create a single Canadian market, the report says. And that is a prerequisite to international competitiveness.
A third strategy is to rethink Canada's workforce, addressing the looming demographic crunch by strengthening immigration policy, finding ways to retain older workers, and putting more money into education and training.
Fourth, Canada needs to revitalize its international investment and trade, both by making more investments abroad and by attracting more foreign money into Canadian industries. Here, again, tax reform should have a role, along with better marketing, better use of high technology, and a greater stress on high-value business services.
The report also calls for a more strategic approach to trade development, including better leadership from Ottawa and more attention to key bilateral relationships, as well as to multilateral deals that would give NAFTA members open access to trade with members of other regional trading blocs.
Finally, it calls for refocusing foreign policy to more effectively improve and maintain Canada's relationship with its biggest trading partner, the United States, and with powerful emerging economies like China and India.
To improve trade relations with the U.S. it recommends close attention to border issues, reducing any remaining regulatory and tariff, liberalizing the transportation sector, reducing the scope for trade disputes, and strengthening the effectiveness of rules-based dispute resolution mechanisms.
For China and what the report calls "the China hub" -- the other Asian tiger economies -- it stresses that exporting raw resources to them, although a huge opportunity, is not enough. If we learn to sell Canadian-made goods and sophisticated services in that torrid market, the potential is there to increase Canadian exports to China six-fold to $47 billion over the next two decades, it says.
And, oh yes, we should not forget about India, Latin America,
Japan, Russia, or Europe.
Individually, these recommendations are neither startling nor
hard to implement. Together, they may add up to a taller order,
but
one that is overdue.
Single pieces of the economy-strengthening puzzle do get dealt with from time to time -- specific tax or regulatory reform measures, for example. But no party in Parliament has laid out a coherent plan to get the economic wheels spinning faster and more smoothly.
With an election looming, this would be a good time to do that. This report is sufficiently comprehensive to serve as at least a guideline of what issues to address, if not a blueprint of how to go about it.
- Economy News -
