2008 ANNUAL REPORT The Board of DIRECTORS

OUR PROFILE The C.D. Howe Institute is a leading independent, economic and social policy research David P. O’Brien Chairman of the Board, institution. The Institute promotes sound policies in these fields for all Canadians through its EnCana Corporation

research and communications. Its nation-wide activities include regular policy roundtables Steven Parker Chairman and Chief Executive Officer, and presentations by policy staff in major regional centres, as well as before parliamentary CCL Group Inc. committees. The Institute’s individual and corporate members are drawn from business, Michael E.J. Phelps universities and the professions across the country. Chairman, Dornoch Capital Inc.

Herbert C. Pinder, Jr. CHAIRMAN Hélène Desmarais Brian K. Johnston, CA President, David A. Dodge, O.C. Chairman and Chief Executive Officer, President, Goal Group of Companies Chancellor, Queen’s University and Centre d’entreprises et d’innovation de Monarch Corporation Senior Advisor, Bennett Jones LLP Montréal Tracy Redies Daniel Labrecque Executive Vice President, VICE CHAIRMAN Marc Dutil President and Chief Executive Officer, Personal Financial Services, HSBC Bank Brian M. Levitt President and Chief Operating Officer, N M Rothschild & Sons Canada Limited Canada Partner and Co-Chair, Canam Group Inc. Osler, Hoskin & Harcourt LLP Richard Legault, CA Aaron Regent N. Murray Edwards President and Co-Chief Executive President and Chief Executive Officer, PRESIDENT AND President, Officer, Barrick Gold Corporation CHIEF EXECUTIVE OFFICER Edco Financial Holdings Ltd. Brookfield Renewable Power William B.P. Robson Donald S. Reimer C.D. Howe Institute Sheldon Elman, M.D. William A. MacKinnon Chairman, President and Chief Executive Chairman and Chief Executive Officer, Past Chairman and Chief Executive Officer, Medisys Health Group Inc. Officer, Reimer Express World Corp. HONORARY DIRECTORS KPMG LLP Joseph L. Rotman, O.C. Robert D. Brown, FCA John T. Ferguson Chairman, Sabi Marwah Chairman and Chief Executive Officer, Roy-L Capital Corporation Marshall A. Cohen, O.C., Q.C. Suncor Energy Inc. Vice-Chairman and Chief Operating Cassels, Brock & Blackwell, LLP Officer, Peter J. George Guy Savard, C.M., FCA Chairman, C. Kent Jespersen President and Vice Chancellor, Merrill Lynch Canada Inc. Chairman and Chief Executive Officer, McMaster University Al Monaco La Jolla Resources International Ltd. Executive Vice-President, Major Bruce Gordon Projects, Brian Shaw John D. McNeil Chairman, Enbridge Inc. Manulife Canada Henry W. Sykes, Q.C. President, Edward P. Neufeld William Morneau Ian Greenberg President and Chief Executive Officer, MGM Energy Corp. Roger Phillips, O.C., S.O.M. President and Chief Executive Officer, Morneau Sobeco Astral Media Inc. Catherine Swift President and Chief Executive Officer, Adam H. Zimmerman, O.C., FCA Eric P. Newell Tim Hearn Chancellor Emeritus, Canadian Federation of Independent Past Chairman, President & Chief University of Business DIRECTORS Executive Officer, Imperial Oil Limited Alfred G. Wirth Elyse Allan President, President and Chief Executive Officer, Paul J. Hill Wirth Associates Inc. GE Canada President and Chief Executive Officer, W. Edmund Clark Harvard Developments Inc., A Hill Company President and Chief Executive Officer, TD Bank Financial Group

CREDITS: EDITOR JAMES FLEMING; ART DIRECTION & DESIGN BY HEATHER VILISTUS; PHOTOGRAPHY BY TOM SANDLER; ROBSON PORTRAIT BY JOY VON TIEDEMANN; PRINTING BY RICOH CANADA INC. A Message from the CHAIRMAN

Outstanding Team, Outstanding Achievement

No annual compendium can ever cover all the life work and events of an ever- Institute President and CEO Bill busy national organization such as the C.D. Howe Institute. This is particularly Robson and his colleagues swiftly true for the past year, during which the Institute has been exceptionally active. responded with wide-ranging work on 2008 marked the C.D. Howe Institute’s 50th anniversary, a significant credit markets, monetary policy milestone of which the Institute is rightly proud. We are also well aware of the responses and fiscal policy fact that reaching it has only been possible because of the support of our interventions. And they did so without David A. Dodge members. In 2008, members again demonstrated their generosity by giving in cutting back other work. I encourage you Chairman of the Board record numbers, ensuring the Institute eclipsed its previous best-ever to read this annual report, which outlines fundraising result. This bears testimony to the high regard that individuals and a year that not only saw your Institute respond to breaking economic events, but organizations continue to have for the C.D. Howe Institute’s research. also witnessed a record number of events and publications in areas as far ranging Thanks are owed to all members, but I would like to thank one in as aboriginal education, municipal finance, provincial budgets, energy and particular. Tim Hearn served the Institute well as Chair these past three years environment issues. and we are grateful to him for his service. Ever the philanthropist, Tim’s These results were achieved because all C.D. Howe Institute staff rose to outgoing act as Chairman of the Institute was a six-figure donation to the the occasion. I commend the staff for their work and Bill Robson and Duncan Institute’s endowment fund for special studies. We thank him very much for his Munn for their leadership. generosity and leadership. The year ahead will pose significant challenges. The pressing need for The year that started on a celebratory high note for the Institute soon smart policy responses will not abate, and the demands on the Institute will tested our mettle as the economy worsened and the need for adept policy increase. We begin the task of examining how to best stabilize the economy in responses grew. The US housing market collapsed. Credit markets froze. Risk the short term, and in the long term, seek policy changes that avoid the models proved as incomplete as regulatory oversight in some jurisdictions. The distortionary incentives that were so clearly imbedded in the global financial results: Institutions failed, and a full-fledged global market crisis ushered in the system. On behalf of my fellow Directors, I thank you for your support. first synchronized global recession in living memory. Canada has not been and We look forward to working together on these important issues. will not be spared. But owing to our stronger policy framework, Canada has faired relatively better than most other jurisdictions. If Canada pursues good policy going forward, it can continue to do relatively better than others. That is why the Institute’s work was so important in 2008 and why it remains so important in 2009 and future years.

"Independent research is critical to debate, and the C.D. Howe Institute is a true Canadian jewel."

Kevin G. Lynch, Clerk of the Privy Council and Secretary to the Cabinet

WWW.CDHOWE.ORG C.D. HOWE INSTITUTE ANNUAL REPORT, 2008 3 A Message from the PRESIDENT & CEO

Confronting Crisis: Strategic Vision; Nimble Response

If ever a year demonstrated the need for that ensured policymakers got needed timely, high-quality analysis and sound economic policy – both well- advice. grounded strategies for building a As a result, the C.D. Howe Institute set new records for numbers of dynamic economy, and adept reactions to publications and events. Notwithstanding our relatively small budget, we limit damage when crises occur – 2008 topped all Canadian think-tanks for high-quality media citations. From the was it. Prime Minister and the Governor of the Bank of Canada, through provincial Sadly, in much of the world, and leaders and officials, to senior businesspeople and top-flight academics, the especially in the United States, the C.D. Howe Institute engaged Canadians coast to coast, and bolstered its consequences of unsound strategies made position as Canada’s foremost provider of top-quality, independent and the headlines. Tax and credit-market practically oriented policy debate and guidance. distortions that promoted Among the most positive and important aspects of that engagement is William B.P. Robson overconsumption of housing and much our contact with the Institute’s supporters. The Institute is blessed with a President and CEO else, dysfunctional financial regulation, committed, engaged and extraordinarily able Board of Directors. And in unsustainable fiscal positions, bubble-inducing monetary policies, 2008 more than ever, I appreciated the extent to which our members mercantilist trade policies and exchange-rate manipulation – all these helped continued to give the intellectual, moral and material support that enables push the world economy to the brink. the C.D. Howe Institute to shape, implement, and communicate policy- Canada’s experience in 2008, while bruising, shows the importance of relevant work that is not only of the highest quality, but is also directly sound economic strategies and adept crisis responses in a more positive pertinent to the challenges facing public- and private-sector leaders. light. There is good reason for the often-repeated observation that Canada I am also proud of the contributions made by the Institute’s team – the entered the crisis in better shape than most countries. On every dimension – outside authors, Fellows, and research team guided by Vice President, tax and credit-market policies, financial structure, fiscal stance, stable Research Finn Poschmann, and the outstanding events, development, and monetary policy, openness and free-floating exchange rate – Canadian communications organization led by Senior Vice President and Chief economic policy has been good by historical and world standards. Operating Officer Duncan Munn. The following pages tell an extraordinary Aided domestically by the buffering effect of these favourable story of dedication and energy, turning the support of our members into a circumstances, Canadian policymakers have shown clarity of vision and crisp nation-leading program of publications and events. execution that other countries must envy. The lessons of 2008, and the In addition to being a year of extraordinary economic challenges, 2008 challenges of 2009, should inspire Canadians to recommit to the high also marked the C.D. Howe Institute’s 50th anniversary. As the Institute enters standards for economic policy that supported prosperity in the past, and can its second half-century, we are committed to building on the tradition of help us get through the slump faster and more easily. rigour, independence and pertinence that has earned the respect of Amid the turmoil, I hope the C.D. Howe Institute’s supporters will take policymakers and the support of Canadians in past years. We will do our part satisfaction from the Institute’s encouragement of good policy in Canada in to help Canada navigate the difficult months to come. And we will continue to 2008. promote the high-level analysis and counsel that has promoted sound On the strategic side, my colleagues and I made regular contributions economic and social policy in Canada in the past, and will provide a in such key areas as growth-friendly taxation, fiscal accountability, better foundation for renewed prosperity in the years ahead. pension funding and coverage, energy and environment issues, educational achievement, aboriginal advancement, and other framework policies where the Institute has had positive impact in the past. On the tactical side, we weighed in regularly on subjects such as interest-rate setting, fiscal responses, and credit-market policy, with a publication and events program William B.P. Robson President and CEO

4 C.D. HOWE INSTITUTE ANNUAL REPORT, 2008 WWW.CDHOWE.ORG 2008 GOALS & RESULTS

Dedicated Efforts, Tangible Results

uring 2008, the C.D. Howe Institute made solid progress in its mission to improve D Canadians’ standard of living. Our overall success is tangible in the way Institute research has prefigured reform in policies ranging from more The Institute's senior management team: from left, Finn Poschmann, Vice competitive corporate income tax rates to the President Research; Duncan Munn, Senior Vice President and Chief Operating Officer; William Robson, President and CEO; Monique Cormier, Vice President introduction of the Tax Free Savings Account. It is Administration; James Fleming, Editor and Director of Communications. also quantifiable to the degree we matched our goals for 2008 with successful results. INDEPENDENT REASONED RELEVANT

GOAL: Expand breadth and scope of policy research agenda. GOAL: Increase rapid media response to policy issues. RESULT: Increased publications output by 12 percent, RESULT: 150 percent increase in opinion and editorial articles. targeting five core areas: Fiscal and Monetary, Social, Growth, GOAL: Strengthen Institute’s national presence. Trade and Governance issues. RESULT: More than 100 major events and staff appearances GOAL: Assist policymakers in responding to market crisis in cities nation-wide, as well as consultations with policymakers as it unfolded. at the provincial and federal levels. RESULT: Consultation with the Prime Minister, The Right GOAL: Ensure C.D. Howe Institute maintains strong Honourable Stephen Harper, in advance of G-20 meetings; major financial footing. monetary policy conference attended by Bank of Canada RESULT: 11 percent increase in fundraising revenues over Governor Mark Carney. 2007, making 2008 the best fundraising year yet. GOAL: Strengthen research team. GOAL: Reduce costs through operating efficiencies. RESULT: Bolstered capacity with two new Fellows RESULT: Managerial reorganization produced lasting in Residence and new internal policy analyst. savings in cost structure. GOAL: Strengthen events and conferences. RESULT: Record number of events OUR MISSION and conferences; Institute became new The C.D. Howe Institute is a national, nonpartisan, nonprofit organization that aims home for Sylvia Ostry Lecture. to improve Canadians’ standard of living by fostering sound economic and social policy. The Institute promotes the application of independent research and analysis to GOAL: Increase electronic policy major economic and social issues affecting the quality of life of Canadians in all paper dissemination. regions of the country. It takes a global perspective by considering the impact of RESULT: 15 percent increase international factors on Canada and bringing insights from other jurisdictions to the in website publication downloads discussion of Canadian public policy. Policy recommendations in the Institute’s over 2007. publications are founded on quality research conducted by leading experts and subject to rigorous peer review. The Institute communicates clearly the analysis and recommendations arising from its work to the general public, the media, academia, experts, and policymakers.

INDEPENDENT REASONED RELEVANT C.D. HOWE INSTITUTE ANNUAL REPORT, 2008 5 The Institute’s 2008 RESEARCH AGENDA

he policy terrain shifted in 2008. And as world financial turmoil reverberated in Canada, putting in stark relief the T role of monetary and fiscal policy in responding to economic shocks, the C.D. Howe Institute’s research program, led by Vice President Finn Poschmann, proved its mettle. The Institute’s research initiatives and publications programs have been running full bore, led by significant new work on pensions reform, financial markets and The research team: from left, Benjamin Dachis, Policy Analyst; Finn regulation, the conduct of monetary policy, and how to respond to large but transient Poschmann, Vice President Research; Claire de Oliveira, C.D. Howe Fellow; fiscal challenges without saddling our children with unconscionable levels of debt. Alexandre Laurin, Senior Policy Analyst; Colin Busby, Policy Analyst. What makes us proud, however, is that these crisp responses to emerging policy needs are generated through our standing research programs. This is possible The research team that coordinates this work, which in 2008 featured because of the foresight and guidance of our stellar roster of Fellows-in-Residence, Robin Banerjee, Colin Busby, Ben Dachis, Alexandre Laurin, Krista Lucenti, and named research scholars and Senior and other Research Fellows. The Institute’s Claire de Oliveira, relies on the executive assistance of Kristine Gray. Special Monetary Policy Council comprises the nation’s very best monetary policy minds in the thanks also to James Fleming, Editor and Director of Communications, and business and academic communities. Members of the Institute’s Financial Services Heather Vilistus, Graphic Designer. All successful efforts are team plays, and we Research Initiative, the Tax Competitiveness Council and the Pensions Advisory Group, are profoundly grateful to the Institute’s members, and colleagues in the public and the program chairs, Edward P. Neufeld, Robert D. Brown, Nicholas Le Pan and and private sectors who so energetically engage with us, for the support and Claude Lamoureux provide outstanding advice and commitment. encouragement that makes this work possible. INDEPENDENT REASONED RELEVANT

Monetary Policy

Effective monetary policy, one of the most prominent economic levers government MONETARY POLICY COUNCIL (MPC) controls, can engineer an environment of low and stable inflation. Against this The C.D. Howe Institute MPC marked its 5th anniversary in 2008. backdrop, efficiently functioning financial markets can facilitate productivity and The MPC is comprised of 12 of Canada’s most distinguished wage growth, and a strong and resilient economy. financial-market and monetary economists. Chaired by the The year 2008 certainly tested Canada’s monetary authorities, and the C.D. Institute’s President and Chief Executive Officer, William Robson, it provides the Bank of Canada, financial-market participants, Howe Institute’s Monetary Policy Council (MPC) seized the spotlight amid a gathering and economic policy commentators with a regular independent financial storm. On November 6, a special session of the MPC provided a briefing on assessment of the stance appropriate to hitting Canada’s policy options for Prime Minister Stephen Harper, followed by an extensive question 2 percent inflation target. and answer session. The MPC convenes to discuss the Bank of Canada’s policy The Institute hosted a conference entitled “Canada’s Monetary Policy Regime toward the overnight rate, the short-term interest rate that is the After 2011,” which gathered Canada’s most important monetary policy minds, Bank’s benchmark interest rate for influencing monetary including Institute Fellow-in-Residence and Professor Emeritus David Laidler, and conditions in Canada, shortly before each of the Bank’s interest- rate announcements. featured Bank of Canada Governor Mark Carney as its keynote speaker. The conference set the stage for the Institute’s research program on the conduct of Since the MPC’s inception the Bank’s regular interest rate announcements have coincided with the MPC’s recommendations monetary policy in the wake of Canada’s successful experience with inflation targeting. 70 percent of the time. On November 18, David Dodge, the former Governor of the Bank of Canada, gave the Institute’s annual Benefactors Lecture, “Central Banking at a Time of Crisis The members of the MPC are: and Beyond: A Practitioner’s Perspective.” He articulated the short- and long-term Jean Boivin Nicholas Rowe issues that confront the Bank of Canada, underscoring the limitations of the Bank’s HEC Montréal Carleton University central policy tool in the current crisis while recognizing the past success of Edward A. Carmichael Angela Redish Canada’s inflation targets in anchoring expectations. Ontario Municipal Employees’ University of British Columbia Retirement System PUBLICATIONS Pierre Siklos Thorsten Koeppl Wilfrid Laurier University Laidler, David. “Fixing the Exchange Rate: Still a Bad Idea” Queen’s University Andrew Spence e-brief (January). David Laidler Ontario Teachers’ Pension Plan University of Western Ontario Laidler, David. “Food and Energy Prices: Why the Bank of Canada Craig Wright Should Remain Focused on the CPI” e-brief (April). Michael Parkin RBC Financial Group University of Western Ontario Dodge, David. “Central Banking at a Time of Crisis and Beyond: David Wolf A Practitioner’s Perspective” Benefactors Lecture (November). Doug Porter Merrill Lynch Canada Inc. Laidler, David, and Robin Banerjee. “Unstable Foundations: Asset BMO Capital Markets Markets, Inflation Targets, and Canada’s 2011 Policy Choices” Commentary No. 278 (December).

6 C.D. HOWE INSTITUTE ANNUAL REPORT, 2008 WWW.CDHOWE.ORG Fiscal Policy winning 2001 study, “A New Option for Retirement Savings: Tax-Prepaid Savings Plans.” Arthur Cockfield of Queen’s University Law School wrote a careful analysis Tough fiscal policy questions faced governments on many fronts in 2008, and of Canada’s international corporation tax system, and his study, “Finding Silver kept Institute authors keenly engaged on emerging issues. Among pathbreaking Linings in the Storm: An Evaluation of Recent Canada - US Crossborder Develop- reports, “Sand in the Gears: Evaluating the Effects of ’s Land Transfer Tax” ments,” was a valuable resource for the Federal Advisory Panel on Canada’s by professors Gilles Duranton and Mathew Turner of the , System of International Taxation, which prepared its report in the fall of 2008. and Benjamin Dachis of the Institute, stands out for combining novel micro- The Institute’s Tax Competitiveness Council continued its important work, geographic analytical techniques and shrewd tax policy thinking, to produce and besides overseeing Professor Cockfield’s report, produced a detailed com- new and highly topical research that will prove a long-lived resource for parison and policy analysis of provincial tax competitiveness, and an updated scholars and policymakers. 80-country report, “Still a Wallflower: The 2008 Report on Canada’s International The Institute’s work figured prominently in the 2008 federal budget, which Tax Competitiveness,” each prepared by George Weston Tax Fellow Duanjie Chen launched the new Tax Free Savings Accounts, a policy proposal developed for Canada and Institute Fellow-in-Residence Jack Mintz. Sales tax reform in Ontario was by Professor Jonathan Kesselman and the Institute’s Finn Poschmann, in their award- another key thrust of the Council’s work.

PUBLICATIONS

Banerjee, Robin, Colin Busby, Benjamin Dachis, Finn Poschmann and William B.P. Chen, Duanjie, and Jack Mintz. “Limited Horizons: The 2008 Report on Robson. “Steering Through Turbulence: The Shadow Federal Budget for Federal and Provincial Budgetary Tax Policies” Commentary 2008” Backgrounder No. 111 (February). No. 270 (July). Busby, Colin. “After the Oil Rush: A Blueprint for Alberta’s Long-term Shillington, Richard, and John Stapleton. “No Strings Attached: How the Happiness” e-brief (February). Tax-Free Savings Account Can Help Lower-Income Canadians Get Busby, Colin, and William B.P. Robson. “Off the Mark: Canada’s 2008 Fiscal Ahead” e-brief (September). Accountability Ranking” Backgrounder No. 112 (February). Dungan, Peter, Jack Mintz, Finn Poschmann and Thomas Wilson. “Growth- Busby, Colin, and William B.P. Robson. “Objectifs Manqués: le Classement Oriented Sales Tax Reform for Ontario: Replacing the Retail Sales Tax 2008 de la Responsabilité Fiscale au Canada” Backgrounder No. 112 with a 7.5 Percent Value-Added Tax” Commentary 273 (September). (February). Cockfield, Arthur. “Finding Silver Linings in the Storm: An Evaluation of Dachis, Benjamin. “Slicing the Pie: Federal Assistance for Provincial Sales Recent Canada-US Crossborder Tax Developments” Commentary Tax Reform” e-brief (April). No. 272 (September). Busby, Colin, and Leslie Shiell. “Greater Savings Required: How Alberta can Chen, Duanjie, and Jack Mintz. “Still a Wallflower: The 2008 Report on Achieve Fiscal Sustainability from its Resource Revenues” Commentary Canada’s International Tax Competitiveness” e-brief (September). No. 263 (May).

Economic Growth and Innovation

The credit and financial crisis was surely the most significant economic issue of 2008, and FINANCIAL SERVICES RESEARCH in July, the Institute was delighted to publish Frank Milne’s remarkably prescient “Anatomy INITIATIVE (FSRI) of the Credit Crisis.” Professor Milne, subsequently appointed Special Adviser at the Bank of The C.D. Howe Institute FSRI reports and advises on financial Canada, reported that financial institution risk managers “made false assumptions about the sector policy. Its unique work program addresses the liquidity and transparency of a new generation of credit instruments… (Yet) the current crisis reflects not a liquidity problem, but a massive delevering … There has been what economic environment within which financial intermediation amounts to a massive run on an insolvent shadow banking system, whose reverberations takes place, the regulatory environment, and the future of are far from over.” financial intermediation. The FSRI convenes meetings of Long-term business policy, with a focus on productivity, remained at the forefront experts, policymakers and supporters engaged in the of the Institute’s agenda with studies on fostering investment and levelling the tax financial services sector, including financial intermediaries, playing field for businesses of all sizes. securities market participants and their regulators, among Building on previous environmental work, the Institute analyzed options for others. The Initiative is chaired by Edward P. Neufeld. Its work regulating carbon emissions, with an innovative legal analysis from Osgoode Hall Dean program is managed by Finn Poschmann, the Institute’s Vice Emeritus Peter Hogg, C.C., and definitively showed the economic and fiscal costs of President, Research, with the assistance of Fellow-in- ethanol subsidies. On energy policy, the Institute proposed concrete steps to move to a Residence and Professor Emeritus David E.W. Laidler. The more competitive electrical system. Initiative publishes research by prominent scholars from In one of the premiere events of the year, the Institute brought together four academia, associations, and the private and public sectors. leading economists – Craig Wright, Andrew Spence, Warren Jestin and Douglas Porter – to discuss how financial markets have responded to government intervention. The Institute also held a spirited debate on creating a single securities regulator and held two roundtables on the Competition Policy Review. The US Deputy Secretary of Energy spoke at an invitation-only dinner in Calgary and Leader of the Opposition Stéphane Dion held one of his first public consultations after the announcement of the Green Shift at the Institute in Toronto.

INDEPENDENT REASONED RELEVANT C.D. HOWE INSTITUTE ANNUAL REPORT, 2008 7 The Institute’s 2008 RESEARCH AGENDA

PUBLICATIONS Auld, Douglas. “The Ethanol Trap: Why Policies to Promote Ethanol as Fuel Need Rethinking” Commentary No. 268 (July). Brennan, Timothy. “Generating the Benefits of Competition: Challenges and Opportunities in Opening Electricity Markets” Commentary No. 260 (April). Banerjee, Robin, and William B.P. Robson. “New Tools for a Richer, Greener Future: Why Canadian Workers Need More Robust Business Investment” Wyman, Michael. “Power Failure: Addressing the Causes of e-brief (July). Underinvestment, Inefficiency and Governance Problems in Ontario’s Electricity Sector” Commentary No. 261 (May). Hogg, Peter. “A Question of Parliamentary Power: Criminal Law and the Control of Greenhouse Gas Emissions” Backgrounder No. 114 (August). Tomlin, Ben. “Clearing Hurdles: Key Reforms to Make Small Business More Successful” Commentary No. 264 (May). Busby, Colin. “Fixing a Persistent Problem: Canada’s Regional Pockets of Unemployment” e-brief (October). Busby, Colin. “Richer Than We Think: Why Canadians’ Purchasing Power Is Up While Economic Growth Is Down” e-brief (July). Milne, Frank. “Anatomy of the Credit Crisis: The Role of Faulty Risk Management Systems” Commentary No. 269 (July).

INDEPENDENT REASONED RELEVANT

International Policy addressed the subprime crisis and former diplomat Allan Gotlieb discussed the results of the US election. On a different note, University of Toronto political scientist Stephen International policy, a core research area for the institute, was active in 2008. Notable Clarkson questioned the extent of North American integration. Roundtable speakers included: Jonathan Fried on the role of the IMF in turbulent times, International capital markets issues were central to a one-day conference on Peter Godsoe on international taxation, and Marie-Lucie Morin, Deputy Minister for Sovereign Wealth Funds, as well as to a publication outlining policy responses to the International Trade, on directions for trade policy. Directors Dinner speaker John financial crisis. A study of international openness to investment found much room for Manley addressed Canada’s future role in Afghanistan and beyond. improvement in Canada’s performance. This year’s Sylvia Ostry Lecture, the first hosted by the Institute, featured the Looking at Canadian trade policy, Bill Dymond and Michael Hart’s study outlined eminent trade economist Jagdish Bhagwati of Columbia University, who presented a the implications of global value chains for Canada. NAFTA, an issue of perennial passionate defence of the economic and ethical case for free trade. interest, was the subject of a publication by Alan Alexandroff, Gary Hufbauer and Krista The United States political and economic situation was a prominent theme in our Lucenti on potential improvements to the agreement that Ottawa might pursue. With Roundtables. The increasingly precarious fiscal situation was discussed by Robert the Doha Round of international trade negotiations in a precarious state, Matthew Hormats, of Goldman Sachs, and also by Laurence Kotlikoff, of Boston University, who Adler’s study of the costs of abandoning a multilateral approach for one based on delivered the annual Mintz Economic Policy Seminar. Robert Shiller of Yale University bilateral deals provides needed ammunition to supporters of free trade.

PUBLICATIONS

Adler, Matthew. “Stumbling Forward on Trade: The Doha Round, Free Trade Agreements, and Canada” e-brief (January). Dymond, Bill, and Michael Hart. “Navigating New Trade Routes: The Rise of Value Chains, and the Challenges for Canadian Trade Policy” Commentary No. 259 (March). Alexandroff, Alan, Gary Clyde Hufbauer and Krista Lucenti. “Still Amigos: A Fresh Canada-US Approach to Reviving NAFTA” Commentary No. 274 (September). Banerjee, Robin, Alexandre Laurin and Finn Poschmann. “International Policy Responses to the Financial Crisis: A Canadian Perspective” e-brief (November). Krzepkowski, Matt, and Jack Mintz. “Squeaky Hinges: Widening the Door to Canadian Cross-border Investment” e-brief (November). William Robson (left) in discussion with policy analyst Alexandre Laurin and Duncan Munn. Institute research has prefigured reform in policies ranging from lower corporate tax rates to the introduction of the Tax Free Savings Account.

8 C.D. HOWE INSTITUTE ANNUAL REPORT, 2008 WWW.CDHOWE.ORG less generous EI program and welfare reforms that discouraged uptake. Social Policy Also on welfare and well-being, Finn Poschmann, Vice-President, Research, The Institute’s social policy efforts featured 2008 Fellow-in-Residence John Richards’ work examined the impact of recent tax initiatives, from the federal and some provincial on school performance and educational attainment for the Aboriginal population. In line governments, on low-income families. He found that, while the benefits tend to with his previous pioneering work for the Institute, Education Scholar David Johnson, supply cash to needy households, the initiatives had a perverse effect for many low- examined student performance in British Columbia and across Ontario school boards. income families, as they raised rather than lowered the effective tax rate on their Meanwhile, research by Ross Finnie of the and Ian incremental income. Irvine of examined how social assistance participation in Focusing on an important labour market and social problem, policy analyst Canada has changed over the last decade. The authors found a decline in social Colin Busby examined Canada’s regionally persistent pockets of unemployment, and assistance take-up by Canadians, explained by declining unemployment rates, a offered advice on how EI program reforms could reduce this problem.

PUBLICATIONS Finnie, Ross, and Ian Irvine. “The Welfare Enigma: Explaining the Dramatic Decline in Canadians’ Use of Social Assistance, 1993-2005” Commentary Johnson, David. “School Grades: Identifying British Columbia’s Best No. 267 (June). Schools” Commentary No. 258 (February). Johnson, David. “Heads of Class: A Comparison of Ontario School Boards Poschmann, Finn. “Still High: Marginal Effective Tax Rates on Low-Income by Student Achievement” e-brief (August). Families” Backgrounder No. 113 (February). Card, David, Martin Dooley and A. Abigail Payne. “School Choice and the Richards, John, Jennifer Hove and Kemi Afolabi. “Understanding the Benefits of Competition: Evidence from Ontario” Backgrounder No. 115 Aboriginal/Non-Aboriginal Gap in Student Performance: Lessons From (October). British Columbia” Commentary No. 276 (December). Richards, John. “Closing the Aboriginal/non-Aboriginal Education Gaps” Backgrounder No. 116 (October).

Governance and Public Institutions Institute President William Robson advocated safe-harbour protections for sponsors and a modernized withdrawal rate to improve the environment for participants The need for change in Canada’s pension arrangements dominated research in capital accumulation plans. on public institutions in Canada, with pension issues accounting for about three- The Institute’s Robin Banerjee and William Robson highlighted the need for quarters of Institute publications in the field. Careful studies of the evolving troubles new tax rules to better encourage proper pension funding in “Lifting the Lid on in the pensions arena included Professor James Pesando’s “Risky Assumptions: A Pension Funding: Why Income-Tax-Act Limits on Contributions Should Rise,” and Closer Look at the Bearing of Investment Risk in Defined-Benefit Pension Plans,” the Institute was also delighted to publish professors Mark Kamstra of York and Professor Tammy Schirle’s “Greener Pastures: Understanding the Impact of University and Robert Shiller of Yale University on “The Case for Trills: Giving Retirement Incentives.” Canadians and their Pension Funds a Stake in the Wealth of the Nation.”

PUBLICATIONS Better alternatives to conventional pension plans are also needed. How to deliver on this was the focus of two widely discussed reports, James Pierlot’s “A Pension in Every Robson, William B.P. “Safe Harbours: Providing Protection for Canada’s Pot: Better Pensions for More Canadians,” and Keith Ambachtsheer’s “The Canada Money-Purchase Plan Sponsors” Backgrounder No. 110 (January). Supplementary Pension Plan (CSPP): Towards an Adequate, Affordable Pension for All Banerjee, Robin, and William B.P. Robson. “Lifting the Lid on Pension Funding: Canadians.” Works such as these will form the basis for major pension reform in Why Income-Tax-Act Limits on Contributions Should Rise” e-brief (April). Canada, something the Institute and federal and provincial governments will be working Schirle, Tammy. “Greener Pastures: Understanding the Impact of Retirement Incentives in Defined-benefit Pension Plans” Commentary No. 262 (May). on in the course of 2009 and 2010. Ambachtsheer, Keith. “The Canada Supplementary Pension Plan (CSPP): Towards an Adequate, Affordable Pension for All Canadians” Commentary No. 265 (May). PENSION PROGRAM Ambachtsheer, Keith. “Le Régime Supplémentaire de Retraite du Canada The C.D. Howe Institute launched the Pension Papers in May 2007 to address (RSRC) : Vers un Régime de Retraite Adéquat et Abordable pour Tous Les key challenges facing Canada’s system of retirement saving, assess current developments, identify regulatory strengths and shortfalls, and make Canadiens” Commentary No. 265 (May). recommendations to ensure the integrity of pension earnings for the growing Pesando, James. “Risky Assumptions: A Closer Look at the Bearing of number of Canadians approaching retirement. Investment Risk in Defined-Benefit Pension Plans” Commentary No. 266 (June). Advisory Panel: C.D. Howe Institute Pension Papers Program Robson, William B.P. “A Better Riff on Retirement: The Case for Lower CO-CHAIRS: Steve Bonnar, Towers Perrin Jack Selody, Bank of Canada Claude Lamoureux, former Minimum Withdrawals from Registered Retirement Income Funds” President and CEO, Ontario Jim Pesando, University of Malcolm Hamilton, Mercer e-brief (July). Teachers’ Pension Plan Toronto Human Resource Consulting Limited Kamstra, Mark, and Robert Shiller. “The Case for Trills: Giving Canadians and Nick Le Pan, former Frank Fedyk, Human Resources their Pension Funds a Stake in the Wealth of the Nation” Commentary No. 271 Superintendent of and Social Development Terri Troy, Pension Investment (August). Financial Institutions, Canada Canada Association of Canada MEMBERS: John Por, Cortex Bryan Hocking/Scott Perkin, Dachis, Benjamin. “No Free Ride: The Cost of Essential Services Designation” Association of Canadian Keith Ambachtsheer, e-brief (September). Peter Drake, Fidelity Pension Management Rotman International Centre Investments Charlebois, Sylvain, and Richard Pedde. “A Bushel Half Full: Reforming the for Pension Management, Fred Vettese, Morneau Sobeco Canadian Wheat Board” e-brief (November). University of Toronto Tammy Schirle, Wilfrid Laurier University John Ilkiw, Canada Pension Pierlot, James. “A Pension in Every Pot: Better Pensions for More Canadians” Michael Nobrega, Ontario Plan Investment Board Municipal Employees’ Bruce Gordon, Manulife Commentary No. 275 (November) Retirement System Financial Canada Barbara Zvan, Ontario Teachers’ Pension Plan Dachis, Benjamin, Gilles Duranton and Matthew A. Turner. “Sand in the Gears: Bob Baldwin Evaluating the Effects of Toronto’s Land Transfer Tax” Commentary No. 277 (December). Ellen Nygaard, Alberta Finance

INDEPENDENT REASONED RELEVANT C.D. HOWE INSTITUTE ANNUAL REPORT, 2008 9 2008 EVENTS At a Glance

JAN 10: ROUNDTABLE FEB 28: ROUNDTABLE Recent Financial Market Budget 2008, Tiff Macklem, Assistant Turbulence: Policy Issues, David Deputy Minister, Finance Canada. Longworth, Deputy Governor, Bank of Canada. MAR 5: ROUNDTABLE Missed Targets: Unveiling Canada’s JAN 22: ROUNDTABLE 2007 Fiscal Accountability Ranking, APR 16: ROUNDTABLE Global Economic Governance – the William Robson, President & CEO, The Crisis of American Teamwork: from left, Kristine Gray, Executive IMF in Turbulent Times, Jonathan T. C.D. Howe Institute. Conservatism, David Frum, Assistant and Event Financial Coordinator; Julie Fried, Executive Director, Canadian, Resident Fellow, American Kelsey, Senior Event Planner; Jessica Millar, Irish & Caribbean Constituency, MAR 18: ROUNDTABLE Enterprise Institute. Development and Public Affairs Officer; and Emily International Monetary Fund. How Infrastructure Gets Built, Moore, Conference Coordinator. David Livingston, President, APR 23: ROUNDTABLE JAN 28: ROUNDTABLE Infrastructure Ontario. Research and Innovation: Investment and Trade: New Measuring and Delivering, Howard Strategies for Foreign Affairs and MAR 20: ROUNDTABLE Alper, Chair, Science, Technology & JUNE 17: ROUNDTABLE International Trade Canada, Marie- The Road to Zero, Steve Mahoney, Innovation Council. ABCP – Do We Need Law Reform? Lucie Morin, Deputy Minister Chair, Workplace Safety and Insurance Purdy Crawford, Counsel, Osler, Hoskin International Trade, Foreign Affairs & Board. APR 30: ROUNDTABLE & Harcourt LLP. International Trade Canada. Market Turmoil: For Long-Term MAR 26: ROUNDTABLE Investors, Everything Old Is New JUNE 24: ROUNDTABLE FEB 4: MINTZ SEMINAR Nova Scotia Health Care Reform, Again, Jim Leech, President & CEO, Alberta Land-use Framework, Ted America’s Impending Bankruptcy Chris d’Entremont, Minister of Health, Ontario Teachers’ Pension Plan. Morton, Minister of Sustainable Resource and its International Implications, Government of Nova Scotia. Development, Government of Alberta. MAY 2: ROUNDTABLE Laurence Kotlikoff, Professor of APR 2: ROUNDTABLE JUNE 26: ROUNDTABLE Economics, Boston University. Canada’s Strength Amid Global Ontario 2008 Budget, Colin Anderson, Turbulence: Challenges and The Liberal Party’s Green Shift FEB 13: ROUNDTABLE Deputy Minister of Finance, Opportunities Ahead, Jim Flaherty, Plan, Stéphane Dion, Leader, Liberal British Columbia School Government of Ontario. Minister, Finance Canada. Party of Canada. Performance Indicators, David R. APR 10: CONFERENCE MAY 6: ROUNDTABLE JULY 17: ROUNDTABLE Johnson, Professor, Wilfrid Laurier Business Tax Reform in Canada: Competition Policy Review Panel, University. Tax Free Savings Accounts: Good The Unfinished Agenda, Jim Policy and Good Business? Finn Lynton R. Wilson, Chairman, CAE Inc. FEB 21: ROUNDTABLE Flaherty, Minister of Finance, Canada Poschmann, Vice President, Research; and Bob Hamilton, Senior Assistant SEPT 9: ROUNDTABLE The Needed Reforms of Quebec Michael Walker, Vice President, Head Paying for America’s Wars, Robert Labour Markets, Michel Kelly- Deputy Minister, Finance Canada: of Branch Investments, RBC Royal Bank. Michael Smart, University of Toronto; D. Hormats, Vice Chairman, Goldman Gagnon, President, Conseil du Patronat Sachs (International). du Québec. Kevin Dancey, Pres & CEO Can. Institute MAY 9: ROUNDTABLE of Chartered Accountants; Arthur Revitalizing Our Waterfront – SEPT 12: ROUNDTABLE FEB 21: POWER CORP DINNER Cockfield, Associate Dean, Faculty of Towards Greater Economic Integration and Efficiency Gains Report of the Task Force on Health Law, Queen's University; Nancy Competitiveness for Toronto, John in GTA Public Transportation, Funding to Ensure Sustainability of Olewiler, Simon Fraser University; Don Campbell, President & CEO, Rob MacIsaac, Chair, Metrolinx. the Quebec Health Care System, Drummond, Sr. VP & Chief Economist, WATERFRONT Toronto. Claude Castonguay, CIRANO. TD Bank; Jack Mintz, University of SEPT 12: ROUNDTABLE Calgary; John Whalley, University of MAY 26: DIRECTORS DINNER Financial Outlook in Western Ontario. Directors Dinner: Canada’s Role in Saskatchewan, Rod Gantefoer, Afghanistan and Beyond, The Minister of Finance, Saskatchewan. Honourable John Manley, Senior Counsel, McCarthy Tétrault. SEPT 23: ROUNDTABLE National Securities Regulation MAY 28: ROUNDTABLE and Enforcement, Douglas M. Making Partnerships Work, Larry Hyndman, Chair, British Columbia Blain, CEO, Partnerships British Securities Commission; Ian Russell, Columbia. President & CEO, Investment JUNE 6: ROUNDTABLE Industry Association of Canada. Discussing Aboriginal Education, SEPT 25: ROUNDTABLE The Right Honourable Paul E. Martin, Policing in the New Age of House of Commons. Accountability, William J. Elliott, JUNE 6: CONFERENCE Commissioner, RCMP. Monetary Policy Council in special session: from left, Council member Canadian Economics Association Andrew Spence, Ontario Teachers' Pension Plan; Council Chairman William Annual Conference. Robson; Prime Minster Stephen Harper; and Council member Craig Wright, JUNE 10: ROUNDTABLE RBC Financial Group. Financial Services: Status and Prospects, H.S. Riley, President & CEO, Richardson Financial Group Ltd.

10 C.D. HOWE INSTITUTE ANNUAL REPORT, 2008 WWW.CDHOWE.ORG SEPT 26: CONFERENCE OCT 21: SPECIAL EVENT Sovereign Wealth Funds: Challenges Common Grounds: Energy Needs & and Responses, Luncheon speaker, Todd Environmental Pressure in the Buchholz, Global Economic Commentator United States & Canada, Jeffrey and Policymaker; Brad Setser, Council on Kupfer, Deputy Secretary of Energy, Foreign Relations; John Calverley, US Department of Energy. Standard Chartered Bank; David Denison, CPP Investment Board; Faryar Shirzad, OCT 29: ROUNDTABLE Goldman Sachs; Udaibir Das, IMF; Aaron Does North America Exist? Brown, Alberta Finance; Robert Palter, Continental Governance After McKinsey and Company; John Whalley, NAFTA and 9/11, Stephen Clarkson, University of Western Ontario. Professor, University of Toronto. OCT 29: SYLVIA OSTRY LECTURE Dining and discussing at the Roundtable featuring Finance Minister Jim Flaherty. Why the Critics of Free Trade are Mistaken, Jagdish Bhagwati, Professor, Columbia University. NOV 28: CONFERENCE Strengthening Canada’s Charities: OCT 30: ROUNDTABLE Examining Challenges to Canada’s Crisis and Response: The Regulator’s Third Sector, Michael Hall, Vice- Role in Market Turmoil, David Wilson, President Research, Imagine Canada; Don Chair & CEO; James Turner, Vice-Chair; Johnson, Senior Advisor, BMO Capital and Lawrence Ritchie, Vice-Chair, Ontario Markets; Keith Ambachtsheer, Chair, Securities Commission. Princess Margaret Hospital Foundation; Paul Reed, Director, Centre for Applied NOV 4: CONFERENCE Social Research, Department of Sociology Canada’s Monetary Policy Regime and Anthropology, Carleton University; After 2011, Mark Carney, Governor, Bank Hilary Pearson, President, Philanthropic of Canada and leading economists. Foundations Canada; Teri Kirk, Vice Jeffrey Kupfer, US Deputy President of Government Relations and Secretary of Energy, (left), and Regulatory Affairs, Imagine Canada. William Robson in Calgary. John McCallum, federal DEC 1: ROUNDTABLE Follow the Money: Enhancing MP and Liberal Party OCT 1: ROUNDTABLE Alberta’s Fiscal Framework, Jack economic critic. Subprime Solution: How the Global Mintz, Palmer Chair in Public Policy, Financial Crisis Happened and What . to Do about It, Robert Shiller, Arthur M. DEC 17: ROUNDTABLE Okun Professor of Economics, and DEC 2: CONFERENCE Crisis Averted? How Financial Cowles Foundation for Research in Demographic Change in Alberta: Markets Have Responded to Economics, and Professor of Finance and Challenges and Responses, Government Intervention, Warren J. Fellow at the International Center for Hector Goudreau, Minister, Alberta Jestin, Senior Vice President and Chief Finance, Yale University. Employment and Immigration; , Economist, Scotiabank; Douglas Porter, Minister, Alberta Finance and Enterprise; Department Chief Economist, BMO OCT 1: ROUNDTABLE and leading experts in the field. Capital Markets; Craig Wright, Chief Agricultural Products – Challenges Economist, RBC Financial Group; Andrew & Opportunities, Michael Wilson, DEC 4: ROUNDTABLE Spence, Chief Economist and Advisor, President & CEO, Agrium Inc. Coalition Government: Economic Investment Planning, Ontario Teachers’ and Political Implications, The Pension Plan. OCT 9: ROUNDTABLE Prime Minister Stephen Harper: at the Prime Honourable John McCallum, Chair, Renewing Ontario’s Electricity Liberal Leaders Economic Advisory DEC 18: ROUNDTABLE Sector: A CEO’s Strategic Minister's request, the Committee, Liberal Party of Canada. Smarter, Better, Fairer: Enhancing Imperative, Laura Formusa, President Institute's Monetary Policy Canada’s International Tax & CEO, Hydro One Inc. Council convened a special Advantage, Peter C. Godsoe, Chair, OCT 14: ROUNDTABLE session in November to Advisory Panel on Canada’s System of Report: Competition Policy Review discuss policy options in the International Taxation. Panel, Tom Jenkins; President & CEO, face of the financial crisis. Open Text Corporation. OCT 15: ROUNDTABLE Getting it Done: Implementing NOV 12: ROUNDTABLE Electronic Health Records in Reflections on the Results of the US Canada, Richard Alvarez, President & Election, Allan Gotlieb, Senior Advisor, CEO, Canada Health Infoway. Bennett Jones LLP.

OCT 16: ROUNDTABLE NOV 18: BENEFACTORS LECTURE Autopsy of an Election, Andrew Central Banking at a Time of Crisis Coyne, National Editor, Maclean’s. and Beyond: A Practitioner’s Perspective, David Dodge, Senior OCT 21: ROUNDTABLE Advisor, Bennett Jones LLP and former Constitutional Authority Over Governor, Bank of Canada. Greenhouse Gas Emissions, Peter Barb Kerman, Karen Alexander and William Robson, with Laura Formusa, Hogg, C.C., Q.C., Scholar in Residence, President and CEO, Hydro One Inc. Blake, Cassels & Graydon LLP.

INDEPENDENT REASONED RELEVANT C.D. HOWE INSTITUTE ANNUAL REPORT, 2008 11 DEVELOPMENT and Giving

Membership

Conveying the Institute’s appeal and relevance to existing and new members is a key goal of the Institute’s funding program. The annual membership campaign is the foundation of the Institute budget, supporting core operations and ensuring the Institute remains relevant. The Institute invites support from individuals and organizations and has membership from every region of the country.

Legacy and Major Giving William Robson (left), Sylvia Ostry, and distinguished speaker Jagdish Bhagwati, Major support allows patrons to bolster the Institute's research and Professor, Columbia University, at the Institute's inaugural Sylvia Ostry Lecture. dissemination capacities in specific areas. It helps provide sufficient funds for the Institute to second scholars and attract speakers to address worthy subjects and/or specialized audiences. Major giving success will supplement, not replace, Types of planned giving include: Bequests, Charitable Gift Annuities, Life the annual membership campaign, which will continue as the mainstay of the Insurance, Charitable Remainder Trust and Gifts of Residual Interest. Institute's budget. We invite long-time members and friends to make impact gifts that will benefit all Canadians by strengthening the Institute's ability to develop Conference and Event Sponsorship innovative solutions to policy challenges. The Institute has several endowment The C.D. Howe Institute experienced significant growth in the area of event funds that continue to support critical initiatives and funding priorities in sponsorship during the 2008 year. These sponsorships are crucially important perpetuity. These include: in promoting discussion of relevant policy issues that often leads to published THE ENDOWMENT FOR SPECIAL STUDIES, stimulated by Founding research. Event sponsors allow the Institute to strengthen its voice and raise the Patron Alfred Wirth. profile of the issues that have a direct impact on Canadian public policy. As a privately funded public good, the C.D. Howe Institute would not be able to THE ROGER PHILLIPS CHAIR IN SOCIAL POLICY, funded by Roger Phillips. Boosts output and quality in tackling critical social policy concerns such undertake important projects without the support of our dedicated stakeholders. as education, Aboriginal issues, and healthcare. The C.D. Howe Institute would like to thank all of the organizations that have provided sponsorship for our 2008 events. Our success in this area has JACK MINTZ ENDOWMENT, supported by friends and colleagues to honour been due in part to the generosity of the following organizations. former Institute President and CEO Jack Mintz. Provides for the annual Mintz Seminar on public finance.

SYLVIA OSTRY ENDOWMENT, supported by friends and colleagues to 2008 CONFERENCE SPONSORS: honour Dr. Sylvia Ostry. Provides for the annual Sylvia Ostry Lecture in honor of Alberta Finance and Enterprise Nexen Inc. Dr. Ostry's leading role in international economic policy. BURNCO Ontario Teachers' Pension Plan Gifts of Stock and Appreciated Securities Cassels Brock & Blackwell LLP PricewaterhouseCoopers LLP Canadian Western Bank RBC Taxation Group Donating publicly traded stock and securities provides a tax-efficient way of Deloitte & Touche LLP TAQA North supporting the C.D. Howe Institute. Donors will receive a tax receipt for the Department of Finance Canada TD Bank Financial Group appreciated value of their gift, without generating a taxable capital gain. Industry Canada The Government of Alberta Insurance Bureau of Canada Planned Giving

Planned giving allows you to provide future support for the organizations that are of 2008 DIRECTORS DINNER SPONSOR: CN the greatest importance to you – and can often allow you to make a larger 2008 SPECIAL EVENT SPONSORS: contribution than you might have thought possible. These gifts ultimately provide a meaningful legacy in your name at the C.D. Howe Institute. North American Collaboration on Enbridge While the various planned gift vehicles provide the donor with definite tax Energy Supply, Access and Infrastructure Imperial Oil Limited advantages, it is the philanthropic commitment of the donor and his/her relationship Featuring Keynote Speaker Jeffrey with the C.D. Howe Institute that leads to a planned gift. Consistent with other forms Kupfer, Deputy Secretary of Energy. of fundraising, planned giving can only be successful if the organization has a focus on building strong, engaging relationships with our donors and prospects. 2008 BENEFACTORS LECTURE SPONSOR: ScotiaBank Significant gifts, such as bequests, require considered planning. Timing and tax considerations are crucial. We will work with you, your family and advisers on a confidential basis to ensure your philanthropic goals are met.

12 C.D. HOWE INSTITUTE ANNUAL REPORT, 2008 WWW.CDHOWE.ORG The Institute’s PEOPLE

Robin Banerjee Sandra Gambóias Rowena Jeffers Warren Mahomed Joan Price Policy Analyst Development and Public Senior Coordinator, System and Database Corporate Secretary and Affairs Officer Member and Financial Colin Busby Administrator Executive Assistant to the Services Policy Analyst Madelaine Gileadi Emily Moore President and CEO Reception and Office Julie Kelsey Conference Development William B.P. Robson Monique Cormier Coordinator Vice President, Senior Event Planner Officer President and CEO Administration Kristine Gray David Laidler Duncan Munn Heather Vilistus Executive Assistant and Fellow-in-Residence Senior Vice President and Graphic Designer Benjamin Dachis Event Financial Coordinator Policy Analyst Alexandre Laurin Chief Operating Officer Meaghan Willis Alyson Henry Senior Policy Analyst Intern Nairy Emirzian Librarian and Information Claire de Oliveira Development and Services Coordinator Jessica Millar C.D. Howe Fellow Membership Coordinator Development and Public Finn Poschmann James Fleming Affairs Officer Vice President, Research Editor and Director of Communications

The Funded Scholars Program The Funded Scholars Program enables the C.D. Howe Institute to engage leading scholars, for a portion of their time, to participate actively in its research program. Chairs are selected on the basis of their record of scholarship and supported by the generous donations of several organizations. We would like to acknowledge the following organizations and individuals who participated in the Program during 2008. George Weston Ltd. for its support of Duanjie Chen, George Weston Analyst in Tax Policy; David R. Johnson, Education Policy Scholar; Jean-Yves Duclos, Quebec Scholar in Economic Policy; Roger Phillips for his support of John Richards, Phillips Scholar in Social Policy.

2008 Scholars Fellows-in-Residence Frederick W. Gorbet Ross Finnie William Watson Duanjie Chen Stanley Hartt Pierre Fortin Thomas A. Wilson Bev Dalhby Peter Meekison Charles Freedman Robert Young Jean-Yves Duclos Al O’Brien Michael Hart Richard G. Harris Sylvia Ostry John Helliwell International Fellows Richard Blundell Mark Jaccard Grant L. Reuber Ian Irvine Willem H. Buiter David R. Johnson Gordon G. Thiessen Jon Kesselman Jonathan Gruber David Laidler Paul R. Masson Robert Haveman Jack Mintz Research Fellows Kevin Milligan Peter Howitt A. Abigail Payne Alan Alexandroff Patrick J. Monahan Neil Quigley John Richards Charles Beach Alice Nakamura Hans-Werner Sinn Richard Bird Nancy Olewiler Top: Monique Cormier, Vice President Administration (left) Senior Fellows Marcel Boyer Christopher Ragan and Alyson Henry, Librarian. Middle: Robert Shiller, Professor, Yvan Allaire C.D. Howe Fellow Miles Corak William Scarth Yale University (left) with Finn Poschmann, Vice President John W. Crow Claire De Oliveira James Davies Michael Smart Don Drummond Research. Bottom: Shauneed Bruder and Donald Reimer. W. Erwin Diewert Mark Stabile Claude Forget Wendy Dobson Arthur Sweetman

INDEPENDENT REASONED RELEVANT C.D. HOWE INSTITUTE ANNUAL REPORT, 2008 13 The Institute’s MEMBERS

UNIVERSITIES AND COLLEGES Peter Buzzi Julien Hutchinson ATCO Ltd. & Canadian Utilities Limited Athabasca University Robert C. Caldwell Richard W. Ivey Balancing Pool Cape Breton University Ken Chapman W. Edwin Jarmain Barrick Gold Corporation Carleton University Kenneth Christoffel Jon R. Johnson Bell Aliant Laval University Jack Cockwell Robert Johnstone Bell Canada McGill University Marshall A. Cohen Dr. Daniel A. Kaute Bennett Jones LLP McMaster University E. Kendall Cork John A. Kazanjian bfinance Canada Inc. Queen’s University Marcel Côté Peter Keyser Consulting Blake Cassels & Graydon LLP Ryerson University Glen Cronkwright Thomas E. Kierans BMO Financial Group Simon Fraser University Thomas P. d’Aquino James T. Kiernan Bombardier Inc. The University of Calgary Bryan and Malkin Dare, MKS Inc. Frank F. Kolb Borden Ladner Gervais LLP The University of Lethbridge Catherine A. Delaney Keith Ambachtsheer, KPA Advisory BP Canada Energy Company The University of Western Ontario Laurent Desbois Services Ltd. Brookfield Asset Management Inc. Université de Montréal Jim Dinning Joseph Kruger II Brookfield Properties Corp. University of Alberta Rod Dobson R. John Lawrence Bruce Power University of British Columbia Wendy Dobson David A. Leslie Burgundy Asset Management University of Robert C. Douglas J.W. (Wes) MacAleer BURNCO Group of Companies University of New Brunswick Janet Ecker William A. Macdonald, Q.C. Business Council of British Columbia University of Ottawa William F. Empey John MacNaughton Business Development Bank of Canada University of Regina John T. Ferguson R.B. (Biff) Matthews Cadillac Fairview Corp. Ltd. University of Saskatchewan James D. Fleck James W. McCutcheon Caisse de dépôt et placement du University of Toronto Briar Foster James P. McIlroy Québec Robert and Julia Foster John D. McNeil Cameco Corporation Wilfrid Laurier University Peter Goring Jack Mintz Campbell Strategies John A.G. Grant William Molson Canada Deposit Insurance Corporation INDIVIDUALS James K. Gray Sarah Morgan-Silvester Canada Overseas Investments Limited Andrew Abouchar John Haag Russell J. Morrison Canada Post Corporation E. James Arnett, Q. C. Geoffrey Hale F.W. Orde Morton Canadian Association of Petroleum Harry G. Baumann Mary and Graham Hallward John P. Mulvihill Producers John Bell Victor Harding Edward P. Neufeld Canadian Bankers Association Michel Benoit Gerald Hatch William Orovan Canadian Chamber of Commerce William Black Mark Hawman James S. Palmer, C.M., AOE, Q.C. Canadian Chemical Producers’ David E. Bond G.R. Heffernan Andy Perry Association R.A.N. Bonnycastle Lawrence Herman Robert B. Pletch Canadian Energy Pipeline Association Jack Brodsky Jim Hinds Anne Poschmann Canadian Federation of Independent Gordon Bruce H. Douglas Hunter Donald S. Reimer Business Craig Reynolds Canadian Finance & Leasing Guylaine Saucier Association Brian Shaw Canadian Imperial Bank of Commerce Mary-Anne Sillamaa Canadian Life and Health Insurance The Benefactors Lecture and Dinner Leslie A. Sinclair Association Inc. Sponsored by ScotiaBank Philip Spencer, Q.C. Canadian Oil Sands Limited Wayne Steadman Canadian Pacific Railway The annual Benefactors Lecture is a premier event in the Institute’s calendar, Jim Stewart Canadian Real Estate Association Harry Swain Canadian Tax Foundation attended by leaders from business, academe and government. The 2008 Christopher Sweeney Canadian Western Bank event, generously sponsored by Scotiabank Group, featured David Dodge, Thomas H.B. Symons Canam Group Inc. O.C., former governor of the Bank of Canada. Entitled Central Banking at a Frederick H. Telmer Candor Investments Ltd. Time of Crisis and Beyond, his Lecture praised long-term inflation-targeting John D. Tennant CanWest Global Communications Corp. Craig C. Thorburn Cara Operations Limited and recommended policy responses to the on-going credit crisis. His Warren Viegas Cargill Limited recommendations for reform included: David J.S. Winfield Canadian Association for the Fifty Plus Alfred G. Wirth Catalyst Paper Corporation – Prudential regulators need better tools for tuning financial institutions’ George J. Young CCL Group Inc. regulatory capital requirements, as market conditions change. They need to Adam H. Zimmerman Certified General Accountants of be able to increase required capital when spreads narrow and leverage Luke Zygalko Ontario Charlwood Pacific Group increases, and to reduce required capital when spreads widen and ASSOCIATIONS, FOUNDATIONS Chubb Insurance Company of Canada leverage contracts. AND CORPORATIONS Clairvest Group Inc. Acklands-Grainger Inc. CMA Holdings Incorporated – Financial institutions should have some ability to smooth profits, by setting Advocis CN aside reserves during good times when market prices are likely to exceed AGF Management Limited Cogeco Inc. Agnico-Eagle Mines Ltd. ConocoPhillips Canada the long-run value of assets, and vice versa in bad times. AIG Life Insurance Company of Canada Costco Wholesale – Securities regulators will need to establish rules for structured products Alberta Urban Municipalities Covarity Inc. Association Deloitte & Touche LLP and derivatives, to bring about much greater transparency with respect to Algoma Central Corporation Desjardins Group the underlying risks. AltaGas Deutsche Bank AG, Canada Branch Altus Group Devon Canada Corporation – Central banks should better monitor financial market developments, AON Consulting Dofasco Inc. including market and institutional liquidity issues, and review ARC Financial Corp. Donner Canadian Foundation developments with relevant agencies. Association of Canadian Pension DynaLIFEDx Management Economap Inc. The 2008 Benefactors Lecture was published by the Institute and is Assuris Edco Financial Holdings Ltd. Astral Media Inc. Economic Development available at our website www.cdhowe.org. ATB Financial Corporation

14 C.D. HOWE INSTITUTE ANNUAL REPORT, 2008 WWW.CDHOWE.ORG E.H. Price Limited Ontario Hospital Association E.I. du Pont Canada Company Ontario Municipal Employees E-L Financial Corporation Limited Retirement System (OMERS) Enbridge Ontario Power Generation Inc. EnCana Corporation Ontario Teachers’ Pension Plan Energy Council of Canada Ontario Trillium Foundation Ensign Energy Services Inc. Open Text Corporation Ernst & Young LLP O’Regan’s Automotive Group Export Development Canada Osler, Hoskin & Harcourt LLP Fednav Limited Petro-Canada Fidelity Investments Pirie Foundation Financial Executives International Canada PMI Mortgage Insurance Company of Canada Finning International Inc. Power Corporation of Canada First National Financial LP Pratt & Whitney Canada Flint Energy Services Ltd. PricewaterhouseCoopers LLP Ford Motor Company of Canada, Limited Prism Partners Inc. Forest Products Association of Canada Procom Consultants Group Ltd. Four Halls Inc. Procter & Gamble Inc. Fraser Milner Casgrain LLP Public Policy Forum Gallagher Lambert Group Raymond James Ltd. GE Canada RBC Capital Markets General Motors of Canada Limited RBC Financial Group Gibson Energy Ltd. Rio Tinto Alcan Gluskin Sheff + Associates Inc. Inc. Goal Group of Companies Rosseau Asset Management Ltd. Goldberg Group Royal Canadian Mint Goodmans LLP Samuel Son and Co. Limited Grant Thornton LLP SaskTel Greater Saskatoon Chamber of Commerce Sceptre Investment Counsel Groupe Aeroplan Scotiabank Harvard Developments Inc., A Hill Company SGI HSBC Bank Canada Shell Canada Limited Hydro One Inc. SNC Lavalin Group Inc. Hydro-Québec Société générale de financement du IBM Canada Ltd. Québec Imperial Oil Limited Stewart McKelvey Imperial Tobacco Canada Limited Sun Life Financial Inc. Independent Electricity System Operator Suncor Energy Inc. Information Services Corporation of Tax Executives Institute, Inc. Saskatchewan TD Bank Financial Group Institute for Catastrophic Loss Reduction Teck Cominco Limited Insurance Bureau of Canada Telus Investment Industry Association of Canada The Birks Family Foundation Investment Dealers Association of Canada The Canadian Institute of Chartered Accountants Investors Group The Great-West Life Assurance Company, Ipsco Canada Inc. London Life Insurance Company and J.P. Morgan Securities Canada Inc. Canada Life Jackman Foundation The Institute for Competitiveness Jarislowsky, Fraser Limited and Prosperity John Dobson Foundation The Investment Funds Institute of Canada Kal Tire Ltd. The Railway Association of Canada Kinross Gold Corporation Standard Life KPMG LLP The Toronto Board of Trade La Jolla Resources International Ltd. ThyssenKrupp Canada, Inc. Lazard Toronto Real Estate Board Lehigh Inland Cement Limited Torstar Corporation Lockerbie & Hole Inc. Torys LLP Maclab Enterprises TransAlta Corporation Manulife Financial Transat A.T. Inc. Max Bell Foundation TransCanada Corporation MBNA Canada Bank Transcontinental Inc. McCarthy Tétrault LLP True Energy Inc. McMillan LLP UPS Canada Medisys Health Group Vale Inco Limited Mercer Via Rail Canada Inc. Merrill Lynch Canada Inc. Viterra Minto Group Inc. Watson Wyatt Monarch Corporation Wawanesa Insurance Monitor Group WestJet Moosehead Breweries Limited Weston Forest Group Morgan Meighen & Associates Workplace Safety & Insurance Board Morneau Sobeco Views expressed by the Mullen Group Income Fund C.D. Howe Institute N M Rothschild & Sons Canada Limited From top: media commentators Martin Knelman (left) National Bank of Canada do not necessarily reflect National Leasing those of its members. and Richard Gwyn; festivities at the Benefactors Lecture NAV CANADA dinner; David Dodge, former Bank of Canada governor, New Brunswick Power Corporation delivers the 2008 Benefactors Lecture; Amy Buskirk, Nexen Inc. Stephanie Hanson and Garfield Mitchell. Northern Alberta Institute of Technology Ontario Centres of Excellence Inc.

INDEPENDENT REASONED RELEVANT C.D. HOWE INSTITUTE ANNUAL REPORT, 2008 15 To the Members of C.D. Howe Institute

The accompanying summarized balance sheet and statements of revenue and expenses and changes in fund balances are derived from the complete financial statements of C.D. Howe Institute as at December 31, 2008 and for the year then ended on which we expressed an opinion without reservation in our report dated February 23, 2009. The fair summarization of the complete financial statements is the responsibility of management. Our responsibility, in accordance with the applicable Assurance Guidelines of The Canadian Institute of Chartered Accountants, is to report on the summarized financial statements.

In our opinion, the accompanying financial statements fairly summarize, in all material respects, the related complete financial statements in accordance with the criteria described in the Guideline referred to above.

These summarized financial statements do not contain all the disclosures required by Canadian generally accepted accounting principles. Readers are cautioned that these statements may not be appropriate for their purposes. For more information on the Institute’s financial position, results of operations and cash flows, reference should be made to the related complete financial statements.

Chartered Accountants Licensed Public Accountants Toronto, Ontario February 23, 2009

16 C.D. HOWE INSTITUTE ANNUAL REPORT, 2008 WWW.CDHOWE.ORG AUDITOR’S REPORT ON SUMMARIZED FINANCIAL STATEMENTS

SUMMARIZED BALANCE SHEET December 31, 2008 2008 2007 ASSETS $ $ CURRENT Cash 281,078 243,306 Short-term investments 4,489,073 3,666,208 Accounts receivable 180,533 151,942 Prepaid expenses 45,160 62,712 4,995,844 4,124,168 CAPITAL ASSETS 544,193 542,005 5,540,037 4,666,173 LIABILITIES CURRENT Accounts payable and accrued liabilities 163,809 180,442 Deferred revenue 963,647 898,625 1,127,456 1,079,067 LONG TERM Deferred capital contributions 349,754 308,290 Deferred rent 226,366 222,286 576,120 530,576 1,703,576 1,609,643 FUND BALANCES Invested in capital assets 194,439 233,715 Operating 1,214,313 1,162,437 Endowment funds 2,427,709 1,660,378 3,836,461 3,056,530 5,540,037 4,666,173

SUMMARIZED STATEMENT OF REVENUE AND EXPENSES Year ended December 31, 2008 2008 2007 REVENUE $ $ Contributions and subscriptions 3,019,772 2,820,900 Meetings revenue 458,376 285,322 Sales of publications and sponsorships 29,843 49,591 Interest income 74,564 95,530 Endowment revenue 53,224 30,682 Contract revenue 19,284 653 3,655,063 3,282,678 EXPENSES Research, administrative and project expenses 3,548,199 2,932,560 Amortization 104,935 65,921 3,653,134 2,998,481 EXCESS OF REVENUE OVER EXPENSES FROM OPERATIONS 1,929 284,197

INDEPENDENT REASONED RELEVANT C.D. HOWE INSTITUTE ANNUAL REPORT, 2008 17 AUDITOR’S REPORT ON SUMMARIZED FINANCIAL STATEMENTS

SUMMARIZED STATEMENT OF CHANGES IN FUND BALANCES Year ended December 31, 2008 2008 2007

Invested in Capital Operating Endowment Assets Fund Fund Funds Total Total

$ $ $ $ $

Balances, beginning of year 233,715 1,162,437 1,660,378 3,056,530 2,334,157

Excess of revenue over expenses for the year (86,399) 88,328 — 1,929 284,197

Unrealized gain on short-term investments — 10,671 — 10,671 —

Contributions during the year — — 752,339 752,339 415,183

Excess of endowment revenue over expenses — — 14,992 14,992 22,993

Purchases of capital assets 107,123 (107,123) — — —

Deferred capital contributions received (60,000) 60,000 — — —

Balances, end of year 194,439 1,214,313 2,427,709 3,836,461 3,056,530

During the year, the endowments earned investment income of $68,216 (2007–$53,675). Of this amount, $28,224 (2007–$5,682) was spent on events and $25,000 (2007–$25,000) on a Scholar. The $53,224 (2007–$30,682) is included in the Statement of revenues and expenses as endowment revenue and research, administrative and project expenses, respectively. The unspent amount for the year of $14,992 (2007–$22,993) is included in the Endowment Fund balance.

18 C.D. HOWE INSTITUTE ANNUAL REPORT, 2008 WWW.CDHOWE.ORG