VERBATIM Derek H. Burney Meeting the challenge of globalization: sharpening the Canadian focus In a keynote address Canada’s former ambassador to Washington suggests “embracing globalization means giving Canadians the best chance to prosper in a globalized world.” But he says Canada needs a sharper policy focus and a greater commitment to public policy by the private sector as well as government. « Profiter de la mondialisation, c’est donner aux Canadiens toutes les chances de réussir dans une économie mondialisée », affirme l’ancien ambassadeur du Canada à Washington dans ce discours. Pour ce faire, le Canada doit mieux cibler ses orientations et obtenir du secteur privé tout comme du gouvernement même un engagement plus ferme en faveur des politiques publiques. n addressing globalization, I’m investment or other barriers (or leav- export-driven, import-averse economy mindful of the Will Rogers quip: ing current ones in place). where the government picks the win- I “Even if you are on the right track, if What does the Canadian record on ners, looks after the losers and subsi- you just sit there, you will get run over.” globalization show? A mixed picture. dizes both with large dollops of the In a rapidly flattening global vil- Externally, Canada embraced glob- taxpayers’ money. That has been tried lage, that is precisely our challenge — alization with the Canada-US Free Trade many times — and not only in Canada resisting the temptation to rest on our Agreement and then, subsequently, — and the predictable result has been sterling economic performance under NAFTA. Remember the great free trade low growth and high unemployment. the false assumption that nothing debate of 20 years ago when Canadians But the allure of “preservation” is more needs to be done. from all walks of life anguished over powerful for politicians and the appetite The question we should be asking whether Canada should protect its bor- for policy change is rarely ravenous. is whether we have the capacity and the ders from imports or open them up? Canada needs more open global will — politically, socially and econom- Ironically, today, the government is markets yet small, but influential, protec- ically — to turn the challenge of global- more often criticized for lagging behind tionist interests can succeed in blocking ization into opportunity. That will be others in signing new free trade deals. free trade deals for years. The recently the litmus test, I believe, for political Internally, we transformed the announced agreement with the EFTA leadership in the years ahead. And that restrictive Foreign Investment Review Act (European Free Trade Assocaition) coun- is what I want to speak to you about. into Investment Canada and declared tries — not yet sanctioned by Parliament Globalization arouses a debate, to the world that Canada was open for — took almost 10 years to conclude. often more delusional than profound. business. Compare that with the 12 months it took It is not a theory to support or con- But there remains stubborn resist- to negotiate NAFTA (in 1991-92.) demn. It is a reality you either turn to ance in Canada to globalization. Pop In the World Trade Organization’s your advantage or you “get run over.” fiction (masquerading as analysis) offers Doha round of multilateral negotia- Governments and parliamentarians, in conspiracy theories about secret cabals tions, which potentially affect the my view, need to decide whether to plotting to rob us of our sovereignty whole of the Canadian economy, embrace globalization or resist it. and identity, hoodwinking politicians Parliament’s highest priority seems to Ignoring globalization is not an and voters, and handing over our be to protect our antiquated system of option. There is nothing less stable in birthright to faceless forces that mean supply management. Why not take a the modern world than the status quo. us harm. In a word, this is “globaloney” lesson from the Australians, who have Embracing globalization means giving or, if you prefer, global baloney! shown how to achieve a world-compet- Canadians the best chance to prosper There remains a belief in some itive dairy industry — one that is now in a globalized world. Resistance quarters that Canada can have a exporting to China — by gradually means creating tax, trade, foreign dynamic, high-growth, risk-free, removing import protection rather 6 OPTIONS POLITIQUES DÉCEMBRE 2007-JANVIER 2008 Meeting the challenge of globalization: sharpening the Canadian focus VERBATIM than defending supply management to only 50 companies are responsible for Canada a better destination for domestic the last cow (or chicken)? half our trade. and foreign investors. Internally, the Canadian common We have coasted for years with a But more is needed, particularly at the market remains far from common. relatively weak dollar — a crutch of con- provincial level and, most notably, in Internal barriers to trade, anachronis- venience that shielded us from the Ontario, which, as economist Jack Mintz tic impediments to labour mobility investments and innovation needed to has pointed out, imposes the highest effec- among our provinces, obsolete or over- keep pace. (We are a bit like the fellow tive corporate tax burden in the country. lapping regulations — the “iron rice who finds himself on third base and This should be a no-brainer. Rather than bowls” of politicians and bureaucrats thinks he hit a triple!) That crutch has calling on the federal government to bring — cost us dearly. British Columbia’s gone and dramatically so. Our manufac- the loonie down by lowering interest rates Gordon Campbell, one premier at least turing sector is beset now by the twin — a sure recipe for inflation — Ontario who thinks more than provincially, pressures of a huge increase in the value should be urgently lowering corporate observed recently that it was “time for of our dollar and diminishing demand taxes to provide the kind of business and us to decide if we are a country”! for some of its traditional products. investment climate that will enable its (Shades of Lucien Bouchard.) We have little choice but to economy to weather the storm and look We talk endlessly about the need improve all facets of our economic per- confidently to the future. Ontario should for internal free trade but little happens. formance through a combined effort by also lead efforts toward a harmonized sales When I am asked whether a customs governments, the private sector and tax across all of Canada, and the Economic union with the US should be part of our labour in Canada. Many seem to think Statement sets out a path to get there. future, my answer is, Let’s first complete that better productivity means working the customs union here at home. And harder. It really means working smarter. e need to take a hard look, too, yes, with a national securities regulator. As globalization and integration W at our policies on inward for- I was encouraged by the statement accelerate, parliamentarians should, I eign investment. Foreign investment in the Speech from the Throne that the believe, debate the growing productivity brings Canadian firms access to mar- government intends to use its trade and gap between Canada and our major com- kets for exports, access to valuable commerce power to strengthen our eco- petitors, offering not what voters want to sources of imports, access to technolo- nomic union. Now that would be bold! hear but what they need to hear. Above gy and, most critically, participation in As Andrew Coyne commented in the all, we need to foster an economy that global value chains. National Post, “No other provision of the embraces risk by hacking away at policies Yet Canada has the highest level Speech is so freighted with potential; and attitudes that are holding us back. of explicit restrictions on foreign not only to improve the free There is nothing less stable in the modern world than the flow of goods and services within our economy but also status quo. Embracing globalization means giving Canadians to alter the constitutional the best chance to prosper in a globalized world. Resistance balance of powers.” means creating tax, trade, foreign investment or other barriers (or leaving current ones in place). he problem is that all T the good economic news these days It is really a matter of leadership equity ownership in the G7, primari- — robust growth, low unemployment and partnership. Where to start? ly in the financial and telecommuni- and our solid fiscal position — masks the Well, as Roger Martin of the cations sectors, the growth engines of reality that Canada has a serious produc- Rotman Business School observed suc- today and tomorrow. tivity problem. We lag well behind our cinctly, we need to be more intelligent Restrictions on foreign investment competitors — 1 percent improvement about taxation. “Currently,” he added, in Canada are essentially the product per year between 2001 and 2005 com- “our taxation IQ is double digit — in a of a bygone age. They reflect the out- pared to with 3 percent annually over word, pathetic.” dated view that the nationality of a the same period in the US. This year’s Halloween message from corporation is more important than its I know the term “productivity” is our finance minister is a welcome step contribution to economic growth. likely to prompt heavy yawns with toward a more competitive business tax As Industry Minister Jim Prentice any audience but the reality is that regime in Canada, especially versus that pointed out recently, the issue is not so our ability to compete in a dynamic of the US. Not with more tweaks or gim- much the ownership of the foreign capi- global economy is waning. And that micks, so popular at budget time, but tal in Canada, but rather the behaviour of is a serious problem.