Canada stands today at an extremely important moment in its history. Globalization is both providing new opportunities and intensifying competition. The nature of the economy itself is being transformed as technology accelerates change and revolutionizes how we communicate, how we work and how we live. In the face of this, Canada needs a dynamic response, one that positions us not just to succeed, but to lead the world.

As you heard during yesterday's opening session, the choice facing us today is between mediocrity and excellence; between seizing the opportunities before us or watching them go to others; between adjusting to the new realities or trying to win tomorrow's contests with yesterday's rules.

This Forum challenges us not only to think through these issues, but to act on them. I know that all of us in this room share a determination to succeed, and that we will want to share thoughts on how to ensure that we remain internationally competitive in this era of increased globalization.

Trade and Competitiveness are Inextricably Connected

Now, at first blush, some of you may be wondering what a trade minister is doing at a forum on competitiveness. Surely that's more a topic for the Industry or Finance Minister to address, you say!

Well, the fact is that trade and competitiveness are inextricably connected. Our companies must be competitive in order to succeed on the world stage. Indeed, they need to be competitive to succeed in our own domestic market, because the openness of our economy means that they face competing goods and services from around the world.

There is simply no doubt that the competitiveness of our companies has a direct impact on our success abroad and our prosperity at home. But the connection between trade and competitiveness doesn't end there. Not only does our competitiveness make us more successful traders; trading makes us more competitive.

As we trade around the world, our companies are exposed to new technologies and best practices. They see the latest products and the finest business models. And as we learn from others, we sharpen our skills, raise our standards and position our companies on the very cutting edge of productivity.

In a very real sense then, our competitiveness enhances our trade and our trade enhances our competitiveness.

Today, I will discuss some of the things that Canada must do to remain competitive as a major trading power in the global economy.

Canada's Unique Advantage: Our Diversity

I want to begin by saying that I believe that Canada is well-positioned -- far better than most, in fact -- to compete in the new economy. And, I'll admit that my basis for saying this is not what most people in this room would generally think of when they're discussing competitiveness.

What am I talking about? Well, as Canadians, we have enjoyed a long and successful existence as a truly multicultural society. The reason for this is that we have always embraced diversity. We were unique in the world in that we opted for a political citizenship when so many other countries had based their citizenship, their identity, upon homogenous characteristics such as religion, language or race.

By contrast, Canada's openness from its earliest days has led to the creation of a society that is a microcosm of the world. We have, as a result, a great wealth of experience in dealing with different cultures, approaches and business practices. It is this diversity, I think, that has been and will continue to be one of our greatest assets when it comes to competing in this era of globalization.

Canada: An Internationally Competitive and Successful Trading Powerhouse

In fact, over the past decade, Canada has emerged as an international trading powerhouse. Every year seems to bring new records. For example, we now export an astounding 43% of our GDP. This is up from just 28% a decade ago.

Indeed, trade has become such a significant part of our economy that one out of every three jobs in this country is now tied to our ability to sell abroad. One in three! Surely we are doing something right.

But, I have often said that there is nothing harder on your laurels than resting on them. If we are to continue to provide opportunities for our people, if we are to continue to lead and not simply watch the new economy, then we must aim higher and push ourselves further than ever before.

Economic development does not take place in a vacuum. The framework that is already in place to promote continued growth and prosperity must constantly be monitored for its effectiveness and updated to reflect changes in international markets and emerging technologies.

For that reason, it is important to recognize that there are a number of factors -- beyond our diversity and openness, that is -- that contribute to our competitiveness. These are the factors with which I am sure you are all familiar.

Our economic house is in order. Inflation remains in check. The deficit has been replaced with a surplus and disposable incomes are on the rise.

Our technical infrastructure is sound. We have the most advanced fibre-optic network in the world. We were the first country to connect all of our schools and libraries to the Internet. We have the highest penetration of home computers and the widest access to cable systems in the world.

Indeed, Canadian firms have been quick to adopt information technology. Investments in computers and other office equipment have increased nearly fivefold since 1993, increasing our capacity and spurring future growth in productivity.

The result is that, over the past 12 months, output in high tech industries has grown by 21%, compared to 3.8% for the rest of the economy.

This is not only fuelling our economic growth, it is also boosting our productivity. Labour productivity in the computer sector, for example, has grown by an annual rate of nearly 24% every year since 1993. By comparison, the annual increase in productivity in the economy as a whole has been just over 1% during the same period.

More and more of our trade is in higher tech, higher value-added areas. Resources used to account for 60% of our trade. Now they are only 35%, mostly due to the fact that exports of Canadian telecommunications equipment, auto parts, and services are skyrocketing.

Even in our traditional industries, we are seeing an increasing emphasis on new technology. And, Canada today is a major exporter of expertise in forestry management, oil and gas production and digital mapping of resources.

Complacency is a Luxury We Cannot Afford

All of this has put us in a position to succeed, but it has not guaranteed it. In a world where borders are collapsing and competition is becoming keener, complacency is a luxury we simply cannot afford.

And so, as impressive as our trade performance has been, there are also warning signs that we would do well to heed. While our trade with the U.S. continues to grow, we are losing ground -- and market share -- in other key high-growth countries. Our share of the Chinese market, for example, fell from 2.8% in 1990 to 1.3% in 1998.

Canada's Priority: Growth Through Diversification

As you know, some have recently been calling for deeper ties and enhanced integration with our biggest trading partner, the United States, even to the extent of calling for the creation of a customs union.

I want you to know that from my earliest days in the private sector, I have consistently supported as a policy the notion of negotiating balanced trade agreements either on a multilateral or bilateral basis. Indeed, my 10 years as an international business consultant served only to deepen my conviction in that regard.

So, I understand the value of pursuing deeper, more integrated economic links with key partners. And yet, while I would say the idea of deeper integration with the United States, of the creation of a customs union, should not be dismissed out of hand, I think it really becomes a question of priorities. At present, we have an impressive $50 billion annual trade surplus with the United States. While some say this makes us too dependent on one economy, my view is that we are blessed to be such close neighbours to the greatest nation of consumers and that we should continue to build on our already strong relationship.

And so, while I would not describe our impressive performance in the U.S. market as an excessive dependency, I am a strong advocate of focussing more, at this point, on individual Canadian companies and their needs. In my experience, this means diversifying our exports beyond North America -- and particularly beyond the United States -- rather than pursuing deeper integration with our biggest partner. If we are to really tap into the explosive growth in international trade, we must identify the growth markets of tomorrow and begin to pursue them today.

We need to focus on expanding our share in foreign markets where we are already active and pursue new opportunities in some areas where Canadians rarely do business. Latin America is a good case in point. We must look to deepen our penetration there and elsewhere, rather than restrict our focus on the privileged few wealthier nations.

And, it is not just for our own economic self-interest that we should be pursuing opportunities in these markets. We must also recognize that, in this globalized world, we are increasingly interdependent. The future of Canada's economy and of our society cannot be viewed as entirely disconnected from those of other countries; as such, we are well-advised to help these economies, these societies, as they seek to stabilize and secure the future of their sometimes fragile new democracies.

So, there are plenty of reasons to focus on other priorities beyond greater integration with the U.S. That is why we are working so hard to expand our access to markets around the globe; why we have signed free trade agreements with Chile and Israel; why we are pursuing discussions with Costa Rica and Singapore; and why I am such a strong proponent of a Free Trade Area of the Americas and of China's accession to the WTO [World Trade Organization].

That is also why I have been working toward the launch of a new round of WTO negotiations by trying to bridge the gap between key players on substantive issues and by looking for ways to reduce public concerns over the relationship between trade and other issues.

The need to develop new markets is another reason that we have recently expanded our already impressive network of professional Trade Commissioners and that we launched the successful Team Canada trade missions, which have introduced more than 1800 Canadian businesses and organizations to opportunities around the globe and directly resulted in contracts worth more than $24 billion.

All of these efforts are aimed at opening markets, expanding horizons and providing Canadians with options and choices that they have never had before. And so, while I feel that we are blessed to live next to the biggest market in the world and while I certainly do not advocate becoming neglectful of our valuable political relationship and our immensely beneficial economic relationship, I would put the pursuit of a customs union quite a way down the list of priorities for action by the government.

One of my objectives, for instance, is to get more of our companies, especially small and medium-sized companies, to start exporting. At the moment, just 50 companies account for roughly 33% of our exports.

At the same time, there are tens of thousands of Canadian companies that export, more than 70% of which are genuinely small companies with less than $1 million in sales. Trade is not just for the big companies you hear of everyday. Thousands of Canadians in communities across Canada are bursting with entrepreneurial energy that is driving them into global markets. They're taking risks, investing their time and their resources in ideas that they quickly bring beyond our borders. So trade and new markets are a powerful incubator for Canadian ingenuity and hunger to explore new opportunities. This is a hotbed of innovation and invention. Small companies, risk-takers, innovators and explorers -- they are the underlying energy of our economy.

We know what a powerful contributor to economic growth our exporters have been over the past few years. But we also know that a large proportion of small companies don't succeed in export markets. Over half appear to fail within three years. The law of the jungle you might say. Let only the strong survive. I agree. The market will determine winners and losers, not governments. But I believe strongly that as a country, we can invest in some key strategic tools to help our entrepreneurs make that first critical leap into global markets.

Government can Play Constructive Role in Assisting Exporters

For our part, to make it easier for Canadian companies to start exporting, the government now provides a single point of access for all trade services: Team Canada Inc. No more running from place to place. No more shuffling from desk to desk. Just one click or one call and businesses have access to a vast range of information and services.

As yet another way to encourage export activity by Canadian businesses, I have devoted considerable time to what I call "domestic trade outreach" activities. As much as it makes for an interesting life, I believe a trade minister has a responsibility to do more than just travel abroad to promote trade opportunities. And so, over the past six months, I have visited many Canadian cities, where I attended export seminars and spoke to Canadian businesspeople about growth opportunities abroad and the services that government can provide to help companies get started.

I want you to know, as well, that I also used these outreach trips to fight public prejudices about the WTO, NAFTA, and trade, in general. While you can always count on me to defend trade against its critics, I urge you to not leave your Minister standing alone on this. Things are going well for you now, but there is always the possibility that critics will succeed in their efforts to restrict the access you currently enjoy under today's international trade regime. What you can do to counter the critics is spend a little time letting the public know about how trade benefits not just Canada's economy but also our society. Be proud! Your success in international markets is largely responsible for the social progress we have achieved.

The Internet and E-Commerce

I was very interested to hear Mr. Wetmore's [President and Chief Executive Officer, IBM Canada Limited] presentation on the opportunities afforded by e-commerce. Clearly, the Internet has touched off a revolution in the way people and businesses communicate and interact. It is enriching the exchange of information, extending the reach of businesses and enhancing our potential to make real gains in productivity.

No industry is likely to escape its influence. No economy can afford to miss its opportunities. And, for many thousands of small Canadian businesses, it means the possibility of competing in ways that they never could before; to serve customers in far-off lands; to operate in places that once required a physical presence; to expand their reach and reputation beyond anything that was possible in the past.

The Maple Leaf Must Become a Symbol of Innovation and Excellence

If Canada is to continue to increase its exports, we need to do something else as well -- and that's imprint the Maple Leaf on the consciousness of the world as a symbol of leadership in the new economy.

The word "Canada" must become synonymous with innovation, dynamism and excellence. Time and time again, as I travel around the world, I am struck by how other nations view Canada. We are still seen as a "nice" country, with Mounties, maple syrup and hockey. We are not yet recognized as an economy fired by information technology, fuelled by telecommunications and fortified by the fifth-largest aerospace industry in the world.

This outdated view of Canada has to change, because investment dollars will flow to where they will produce the greatest return. We simply cannot afford to forgo opportunities based on false impressions.

Our message must be clear: take another look at Canada; at the expertise we offer, the resources we bring and the products we supply. When you do, you'll see a Canada you may not know, leading the world in areas you might not expect.

Part of this, I say quite frankly, means changing our own attitudes as Canadians. A recent poll by Ekos Research Associates found that 46% of Canadians identified wood pulp products as our main export. The next most popular choice was agriculture at 25%. In fact, pulp products account for only 5.3% of our exports and agriculture is only slightly higher at 7.1%. So, while important, there are many products and services that rank higher on our list of exports.

Clearly, if we are to develop a solid "brand" on the world stage, we must start with a better understanding of our strengths here at home. We need to make sure that Canadians understand what we have to offer the world, that they can tell the Canadian story to anyone who will listen.

1999 KPMG Study Highlighted Canada's Competitive Advantages

And what a story it is! A 1999 study by KPMG showed that Canada's overall business production costs are 8% lower than those in the United States. Significantly, in the high tech sector, the difference is even greater, with costs a full 15% lower.

We have one of the most highly skilled and educated work forces in the world, and yet KPMG found that Canadian labour costs are 20% to 40% lower than in the U.S., depending on the city. Public health care in Canada was specifically mentioned as an advantage, with health-care insurance premiums being 1% of gross pay versus 8.2% in the United States.

Our telecom costs are the lowest in the G-7. And the World Economic Forum ranks Canada first in the world in telecom infrastructure.

According to the KPMG study, our effective corporate taxes are the third lowest in the G-7, lower -- yes lower -- than the U.S. And, our R & D tax treatments are the very best among all G-7 countries.

The bottom line is that Canada is a low-cost place to invest, with strong economic fundamentals, a highly educated work force and an abundance of valuable natural resources. That is a message worth knowing! That is a message worth sharing!

Creating a Dynamic Domestic Economy; Lowering Taxes

Opening new markets, encouraging more of our businesses to begin exporting, establishing a reputation for excellence in the new economy and telling the Canadian story around the world are important, but we must also ensure that we create a dynamic, welcoming economy right here at home.

In a world where money, resources and opportunities move at the speed of light, at the click of a mouse, we need to ensure that Canada offers an economic environment second to none -- one that attracts the greatest investment and retains the very best talent.

As I've mentioned, part of that means getting the economic fundamentals right. I am talking about not spending beyond our means; creating the right incentives for business; reducing debt; building a tax system that rewards risk, encourages research and development and allows people to keep more of what they earn.

I want to be clear. I see taxes as a crucial part of the equation. High taxes are a burden on households and on business, and often serve to impede economic growth and innovation. And that's why we are committed to moving as quickly as possible to reduce taxes while continuing to provide vital services like health care and education.

In recent years, we have made significant progress on the tax front. For example, to make the tax system fairer, we restored indexation. But, like everyone in this room, I believe that we must go further and faster. In my view, this is particularly true in the area of personal taxes, though I favour an approach that would secure reductions in both areas.

We also have to reduce our debt, both in absolute terms and as a percentage of our GDP. In today's competitive environment, no government will have the flexibility it needs if its single largest expenditure is to pay interest on its debt. Debt brings rigidity -- and rigidity, in today's world, is fatal. We have come a long way in bringing down the debt as a percentage of GDP and must continue to drive it down. In fact, this week my colleague Paul Martin announced that we have knocked it down another $12 billion this year alone with a better than expected surplus.

The Need to Revisit the 50-50 Formula

For that reason, we must, as the Prime Minister recently said, revisit the 50-50 formula that this government has used as a guide to how to manage surplus funds. Under this formula, we have divided the annual surplus roughly evenly between debt repayment and tax reduction on the one hand, and investments in new social and economic programs on the other.

This approach was entirely practical when we had smaller surpluses and when we were justifiably preoccupied with restoring funds to those programs that had to be scaled back to fight the deficit. Now, however, we have much larger surpluses, and I believe that we have an obligation, a responsibility, to review our approach. A surplus is not just a coupon entitling the government to go on a spending spree, it is an opportunity to improve the financial position of the country.

While well-founded and relevant social and economic programs can undoubtedly contribute to a stronger society and to greater competitiveness, strict adherence to a 50-50 formula without a sound rationale for each expenditure can often be counterproductive, leading to wasted tax dollars, increased dependence and reduced competitiveness.

Importance of Strategic Investments: Infrastructure, R&D, Education

Similarly, lowering taxes and reducing debt are vital, but let's be clear, they are not enough. They are points of departure, not the whole journey. If Canada is to remain competitive in the global economy, we also need to look at research and innovation, infrastructure, education and training. Such expenditures constitute real investments, with the return being greater competitiveness.

Research, for example, is the lifeblood of an innovative economy, allowing us to take ideas from the blackboard to the marketplace.

Our strong infrastructure, from the transit systems in our cities to the connectedness of our remote areas, enables Canadians to take advantage of the opportunities before them.

And investing in our greatest resource -- our people -- through education and training, will be the foundation upon which our collective future will be built.

In a knowledge-based economy, this is more true than ever before. After all, it is our people -- their brains, their drive and their ideas -- who will energize this country and lift it higher.

Our challenge is to ensure that they have the skills they need to seize the opportunities that our economic strength creates.

Finally, we must recognize the importance of our health-care system in creating a competitive advantage for Canadians. For make no mistake, citizens that don't enjoy access to quality health care will be citizens who cannot properly seize the opportunities offered by the new economy.

I was delighted to see that the BCNI [Business Council of National Issues], in its report, Global Champion or Falling Star? The Choice Canada Must Make, said, and I quote, "...the debate ahead...should not pit an economic agenda against social goals. Rather, this is a debate about how to make economic means serve social ends...". I agree. Canada's social system is our competitive advantage, and our ultimate objective should be social progress.

I share the view that prosperity must be our goal, so that our people can be its beneficiaries. In that effort, strong social programs provide a foundation upon which individual effort can build.

Conclusion

These then, are the challenges we face in preparing our society and our economy for the challenges and opportunities of the new economy.

We must expand both the markets we pursue and the number of Canadians pursuing them; we must develop a strong, identifiable "brand" on world markets -- one that establishes the Maple Leaf as a symbol of not only what is good in the world, but what is best in the world.

We must create the right economic climate here in Canada, building on our present strength and planning for future growth. We must ensure that our infrastructure, both physical and technical, remains among the best in the world.

We must view innovation and dynamism as more than just words to fill our speeches; they must become our guiding principles to animate our economy.

And, above all, we must invest in our people, for in this day and age, the real engine of growth, the real generator of opportunity, is human creativity.

If we do all of these things, and do them well, our competitiveness will be secured, our international trade will be enhanced, and the lives of our people will be enriched.

That is the challenge we face. That is the future we must build together.

I am confident that we will succeed.

Thank you.

2006 - 2005 - 2004 - 2003 - 2002 - 2001 - 2000 - 1999 - 1998 - 1997 - 1996

Print friendly version - Printing Tips



Last Updated: 2006-10-30	Top of Page	Important Notices