How to Build Canada’s Competitiveness Amidst the Rise of an Intangibles Economy and Greater Geopolitical Complexity

Public Policy Forum | Forward by Edward Greenspon | Jun 2020

New North Star II - How to Build Canada's Competitiveness Amidst the Rise of an Intangibles Economy and Greater Geopolitical ComplexityThe two questions on the minds of economists as governments intervened in March 2020 to dial back commercial activities were how to reignite the economy and would it look significantly different than before. Given that economies are dynamic creatures in a constant state of flux, it is actually hard to imagine them re-emerging in some static holding pattern. The better question is do we want them to differ and in what ways.

Profound and rapid economic change, akin to the 1800s Industrial Revolution, was already generating pent-up policy pressures in the years preceding the COVID-19 pandemic. The rise of the Internet (and a host of other science and technology breakthroughs) tossed many of the old assumptions, as did the stunning rise of China and the relative disengagement of an ever-more insular United States. Analysts increasingly warned of a decoupling of the global commons into rival camps struggling for economic and strategic superiority by gaining advantage for their own technological standards and platforms. When the COVID-19 crisis came along, it merely served as an accelerant to a process pushing and pulling at globalization.

See:  [Report] A New North Star: Canadian Competitiveness in an Intangibles Economy

It is in this context that the Public Policy Forum releases New North Star II: A Challenge-Driven Industrial Strategy for Canada. It provides a well-timed dissertation on how Canada can build up its competitiveness amidst the rise of an intangibles economy and greater geopolitical complexity.

It would be nice to think that world leaders will reflect on the health and economic calamities from COVID-19 and give greater weight, as after the Second World War, to strengthening global collaboration. The pandemic could be like a science fiction story of old, rallying nations against the alien invaders. Rather, it appears more likely to aggravate the weakening of the institutions of an inclusive international order in favour of a U.S.-led sphere and a Chinese-led one - each vying for strategic advantage while sowing uncertainty and mistrust among nations. (Perhaps there will be a middling European model in the mix, although lacking in the muscularity of the other two.)

Either way, Canada needs to contend with the attenuation of its long-standing strategic anchors: a United States committed to our welfare and the counter-balance of a high-functioning multilateral system. Pathways to the elusive Third Option have been obstructed by the U.S.-China chasm. While our interests, as always, cry out for more friendships, not fewer, within the family of nations, the desire for greater diversification runs headlong into geographic realism in a world of choosing sides.

New North Star 1 was notable for the ground it broke on how public policy was falling behind the surge of the intangibles economy that touched everything from tech to resources. Authors Robert Asselin and Sean Speer argued that new imperatives required Canada to forge a new policy consensus in such areas as intellectual property, foreign investment, data sovereignty and the development of a talent and skills-laden workforce.

See:  Monopoly-Friendly Canada ‘Does Not Treat Competition Policy Seriously’

In this second volume, the authors, joined this time by CIBC economist Royce Mendes, continue down the intangibles path while turning their gaze more squarely on the implications for Canada of the forces of geopolitical change. They portray the tense, technology-driven dynamic between today’s two Great Powers as having forced a shotgun marriage between national security and competitiveness, blurring the lines between the political and economic and the domestic and foreign. Canada’s agonizing over 5G policy provides a case in point.
What’s certainly clear is we need not just to recover but to rebuild. Simply pulling out the old blueprints for an economy that was already under stress would be to waste an occasion to rethink necessary policy challenges, such as:
  1. how to effect a decarbonized oil and gas sector while adding higher value supply chains at home;
  2. how to leverage our clean electricity and find global niches in clean tech;
  3. how to develop digital infrastructure that enhances our competitiveness in the digital economy, enabling Canadians wherever they live to participate in the digital economy;
  4. how to promote digital services that can be sold across borders with less friction than hard goods;
  5. how to design intellectual property and data regimes that foster domestic growth without shutting out global know-how;
  6. how to diversify our export risks in the shadow of the new geopolitical rivalry and strengthen our position vis a vis a more arbitrary United States.

Download the PDF Report: New North Star II - A Challenge Driven Industrial Strategy for Canada -> Now

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