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Notes for Remarks by the Honourable Ralph Goodale, P.C., M.P., Minister of Finance, to the Canadian Manufacturers and Exporters

Toronto, Ontario

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Good morning, everyone. Greetings and good wishes from the Government of Canada. It’s my pleasure to be with you today.

I want to begin with strong words of praise for Canadian manufacturers and exporters. In this era of inexorable and often turbulent globalization, the enterprises you represent have been confronted with some extraordinary changes and challenges over the past several years. And your members have responded with remarkable skill, resilience and agility—producing remarkable results.

As a relatively small and open economy, Canada does not have the option of throwing its weight around like a schoolyard bully. Neither can we just throw up our hands and say "stop the world, we want to get off"!

We have to be faster and stronger, more nimble and creative, smarter and more strategic than our competition. And because your members have demonstrated these abilities, Canada’s trade numbers have remained impressive:

• A current account surplus last year of nearly $29 billion.

• A $10-billion improvement over 2003.

• And again this year, second-quarter results show our performance has improved yet some more.

And while there have been some tough adjustments and job losses in some sectors, overall Canadian employment levels are at an all-time high and our national unemployment rate is near a 30-year low.

As Canadians look to the years ahead and plan their futures—as you are doing at this conference—our country occupies a position of considerable strength.

To start with, we will be building on more than 12 consecutive years of steady economic expansion in Canada since the early 1990s—one of the best periods of sustained economic growth in the nation’s history.

We also have the advantage of having the best fiscal performance of any country in the G7 group of world-leading economies and the best fiscal record of any Canadian government since 1867.

Thus Canadians have cause to be confident. But we dare not take anything for granted. We have been chalking up some impressive economic and fiscal results, but at the same time the world around us has been changing in some dramatic ways.

For one thing, the price of energy. I can recall, during that period from 1997 to 2002 (when I was Minister of Natural Resources), the world price of oil ranged from as low as $11 per barrel to as high as $37 per barrel. Recently, it has been almost twice that high. As a major producer and net exporter of energy, Canada earns a big upside from this situation in the global marketplace. But as energy-intensive consumers here at home, Canadians also feel the sting of price spikes and worry about the larger impact on inflation.

Another change is the value of the Canadian dollar—as you know only too well! It has jumped by about one-third in just the past couple of years. Its higher value reflects Canada’s underlying fiscal and economic strengths, but it also makes export markets that much tougher to penetrate and necessitates some big adjustments.

The situation in the United States has also changed. Their deep angst after 9/11 has now been compounded by the devastation of Katrina and then Rita and then Wilma. Protectionism is strong. Interest rates are rising. Their trade and budgetary deficits are enormous. How long can such deficits just keep getting deeper? When and how will they get resolved? The spillover implications for Canada could be very significant.

Another big change is the emergence of new international giants like China, India and Brazil—representing fully 40 per cent of humanity. Increasingly well-educated and determined, with full access to the most innovative technologies, these countries are massive consumers and low-cost producers with a powerful impact on worldwide supply and demand.

China and India also represent the realities of a new, smaller and "flatter" world—a world in which supply chains are not just local or regional or even national anymore, but truly global in their reach and specialization.

How do we ensure that Canada is sufficiently innovative and well positioned in the high value-added part of these global supply chains—performing the most complex processes here, creating the most demanding (and therefore the most rewarding) jobs here?

And finally, in terms of change, let me mention one of the biggest yet to come—Canada’s impending demographic "time bomb" just around the corner, as our big baby boomer generation begins to retire in large numbers over the coming 5 to 10 years. At least two consequences are immediately obvious.

There will be growing demand for health care services, pensions, retirement facilities and other age-related social programs. And the generation coming along behind "the boomers" will be smaller, meaning fewer people in the active workforce than before—fewer taxpayers to pay the nation’s bills and maintain Canada’s rate of economic success.

That’s why it is so significant that we have made good use of these past years of progress to, among other things, pay down debt, refinance medicare, and render the Canada Pension Plan actuarially sound for at least the next 75 years.

I believe our goal for the future must be an increasingly smart and sophisticated economy with the wherewithal to compete at the high end of markets (reaching for the top, not the bottom) with the means to keep growing, notwithstanding a relatively smaller workforce.

An economy that is generating not just more jobs, but better jobs. Well-paying jobs. Jobs of the future. Jobs with a future.

Higher incomes broadly based. More purchasing power. Greater economic security. A better standard of living. A stronger Canadian quality of life.

These goals, I’m sure, we share in common with your organization. We also share many similar ideas for how to achieve them.

To begin with, an agenda for growth and prosperity must be rooted in basic "framework" policies that ensure a climate in which enterprise will flourish—in which you will flourish.

Among other things, that means ongoing fiscal discipline and prudence. Balanced budgets. Surpluses. And debt reduction.

I won’t belabour the point, but let me be crystal clear—our government and all Canadians have worked too hard and come too far over this past decade, sowing and harvesting the fruits of fiscal responsibility, to risk having that success frittered away. We won’t let it happen!

A second key framework issue is taxation—competitive taxation.

Since balancing the nation’s books in 1997, we have in fact reduced the tax burden on Canadians (both personal and corporate) each and every year. The cumulative tally is now well over $100 billion in federal tax relief already implemented.

My budget in February proposed another $13 billion in tax reductions over the next five years. Some of these were legislated in the spring. Others are still to come and we have some further proposals yet to add. Our intention is to proceed with a common-sense tax reduction plan to be implemented in a timely manner over the coming five years.

Overall, we will improve disposable incomes and take close to 1 million low-income taxpayers off the tax rolls altogether. We will also maintain, for Canadian businesses, our strategic tax rate advantage over the United States—to keep investment and employment in Canada, and to stimulate more. In reality it’s all about jobs, jobs, jobs!

Also on the topic of getting the basic framework right for growth and prosperity, the Government of Canada needs to work harder on timely, more efficient regulatory regimes. We need international borders that are firmly closed to terrorists and criminals, but open efficiently for business, trade, investment and immigration. And we need smoothly flowing internal trade with as few barriers as possible to the mobility of people, capital, goods and services—including a coherent, world-class securities regulatory system.

Beyond framework issues, an agenda for Canadian growth and prosperity must also include investments in those key fields that propel a modern economy into the future. I’ll mention three—public infrastructure, our own homegrown brainpower and innovation (that is, the creation of new ideas and their commercialization into new products and services).

Let me touch briefly on each of these.

Top-notch physical infrastructure is essential to a successful economy and a rising quality of life. It facilitates commerce, trade and tourism. It lowers the cost of doing business. It serves as a magnet to draw investment and people. It makes our communities attractive places in which to live and work.

Over the past decade, the Government of Canada has invested more than $12 billion in a dozen different infrastructure initiatives across the country, building roads, streets, bridges and highways, water and sewer systems, waste disposal facilities, energy and environmental projects, urban transit, parks, recreation and cultural centres, more affordable housing, and much more. The leveraged value of all this activity totals more than $30 billion nationally.

We will continue our three current national infrastructure programs—one for regular municipal and rural projects, a second one for bigger-ticket strategic works, and a third for border issues. We are also providing two new federal sources of infrastructure funding to local governments:

• A full rebate of the GST on all municipal purchasing. That’s worth close to $700 million per year across the country.

• And a one-half share of the federal excise tax on gasoline. That’s worth another $5 billion for cities and communities, as it ramps up over the coming five years, and then $2 billion per year ongoing thereafter.

In addition, another prime field of infrastructure investment must be Canada’s global "gateways" to the world—especially our Windsor portal to the United States and our west coast portal to Asia-Pacific. Both need to be national priorities.

Let me move on to innovation—that is, the creation of our own bright new ideas, the successful transformation of those ideas from the drawing board to the marketplace, and the adoption and adaptation in Canada of the best new technologies from around the world.

Since Canada began posting balanced budgets, the Government of Canada has invested more than $11 billion in new funding for research and development in Canadian universities, teaching hospitals and research centres.

Our federal science investments have moved Canada up from sixth place among G7 countries for publicly funded R&D to first place overall. And we are determined not to lose that hard-won edge. We will maintain our leadership. But publicly funded research—all by itself—is not sufficient.

The achievement of world-calibre sophistication in science and technology needs the indispensable push-and-pull of private investment too. In some important sectors, this is where Canada lags behind the United States. We’re ahead in government-sponsored activity, but behind in the private sector.

Some Canadian firms don’t do as much of their own R&D. Some are slower at commercializing their ideas. And some are not adopting the world’s best new technology. Generally speaking, as a proportion of GDP, Canadian firms invest less in new machinery and equipment than their counterparts in any other G7 country.

And it’s perplexing that this should be the case, despite one of the world’s most favourable tax regimes for research and development, and despite strong corporate profit levels in recent years. We need to work closely with business leaders to identify the roadblocks and fix them. And I know you have some specific suggestions.

Finally, I want to mention education, skills and lifelong learning—perhaps the most important elements in any agenda for new growth and prosperity.

It should be our constant ambition that every Canadian should have an opportunity to experience the fulfillment...the freedom...the empowerment that flow from greater knowledge and understanding.

And it’s not just a matter of personal success and satisfaction. In this knowledge-based, technology-driven, highly skilled and intensely competitive world, our whole country’s success will hinge on the quality of Canadian brainpower.

In fact, Canada does have one of the best learning records of any major economy. Among the G7, we have the highest proportion of people with some form of post-secondary education. Canadian high school students have, on average, the best scores in reading and the second-best in math and science.

That’s good, but such skills are still confined to a minority of our population. We must do better. Canada’s future depends upon it.

To this end, while education is a jealously guarded provincial prerogative, the Government of Canada invests more than $10 billion every year to support the nation’s learning system, both indirectly through transfer payments to provinces and territories and directly through our support for student scholarships, grants, bursaries and loans; funding for university research "chairs," graduate studies, indirect costs, and other R&D initiatives; and tax breaks for students, learning and innovation.

Plus, as provided in the budget this spring, there is additional federal funding for better student access, early learning and child care, basic literacy, workplace training, immigrant settlement, foreign credentials and Aboriginal education.

Our country will need to keep sharply focused on issues like these.

And one other, too.

It’s the imperative of trust and integrity in the administration of government.

When I mentioned to a reporter in Ottawa last week that I would be in Toronto today to give this speech, he responded that I could probably deliver it naked and no one would really notice—because Mr. Justice John Gomery will be releasing his long-awaited report at about 10 o’clock this morning.

The country will be very interested in what the Gomery Report will say about ethics and honesty. And rightly so.

You may recall that for about 18 months (before becoming Minister of Finance) it was my role in government to work closely with the Auditor General, the RCMP and various senior officials to begin ventilating and cleaning up the troubled departments and programs that Judge Gomery has since examined.

I had a few basic rules that kept me focused during that difficult period:

• Don’t defend the indefensible!

• Don’t try to spin the message—Canadians want the straight goods!

• Canadians also have every right to expect transparency, accountability and "value for money" in government operations.

• And most of all, the public’s trust is the single most precious asset in a free and democratic society—don’t take it for granted! You have to earn it and re-earn it every single day!

To safeguard these principles is exactly why Judge Gomery was commissioned to produce his report. All very publicly!

And to the same end, the Government has already moved:

• To institute open, transparent competitions for all of its contracting.

• To re-establish the Office of the Comptroller General of Canada and to appoint qualified comptrollers in all departments.

• To bolster the internal audit functions across government.

• To cause the automatic public disclosure of contracts, grants and contributions and expense accounts in all departments.

• To toughen governance requirements in Crown corporations.

We await Judge Gomery’s further analysis and advice, which the Government must treat with the utmost seriousness.

Higher education. A culture of innovation. Strong public infrastructure. Clear framework principles, including competitive taxes, fiscal prudence and the highest integrity in handling the public’s trust. All to what end? To keep Canada successful!

A confident Canada that stands as a beacon of tolerance and cohesion amidst great diversity—a rare achievement in this rancorous world.

An inclusive and caring Canada in which fairness and equality of opportunity are the measures of our progress.

A clean and green Canada that safeguards its rich natural heritage.

A respected Canada with a clear sense of our global responsibilities—diplomacy and peacekeeping, defence and security, foreign aid, the advancement of human rights and freedoms.

And all of this underpinned—enabled and paid for—by a truly excellent Canadian economy, and ethical standards of the first order.

That is our 21st century agenda!