The most controversial phrase Prime Minister Justin Trudeau
uttered
this week might have been this one: “We can choose to embrace bold new solutions to the challenges we face and refuse to be held back by old ways of thinking.”
We won’t know what that means until the throne speech next month, but Pierre Trudeau’s son looks like he’s gearing up to test a conservative nation’s tolerance for radical change. Canada’s attempts at “bold new solutions” in the past have tended to follow Royal Commissions or years of tedious debate. The prime minister seems like he’s just going to go for it.
“As much as this pandemic is an unexpected challenge, it is also an unprecedented opportunity,” Trudeau said. “This is our chance to build a more resilient Canada.”
Some “old ways of thinking,” such as fiscal prudence, aligned with a pretty good run of economic growth from the late 1990s through to the eve of the Great Recession.
Others, however, are clearly holding us back. For example, a weak commitment to anti-trust policy has resulted in unmovable oligopolies that stubbornly resist the sort of competition that supports innovation, higher wages and lower prices.
Trudeau has played chicken with the oligopolies, but he always blinks first. His government is slow-walking preparations for an open-banking regime, which would level the playing field between the Big Six and financial technology upstarts. And last weekend, Navdeep Bains, the innovation minister,
announced
he had sided with BCE Inc., Rogers Communications Inc. and Telus Corp. in their fight with the Canadian Radio-television and Telecommunications Commission over the regulator’s attempt to force them to lower the rates they charge upstart internet companies to use their networks. Prices will remain among the highest in the world as a result. For someone who dislikes business, Trudeau is quick to take the knee.
But he has no such aversion to spending money. Canada’s COVID-19 rescue efforts are among the world’s most generous and he appears willing to keep the taps open. He made a point of noting that the “cost of borrowing is very low,” which he said means one thing: “Now is the time to invest.”
The policy debate this autumn will be a dialogue — and let’s try to make it a dialogue, not a fight — over how to create wealth.
Redistribution appears to be the force that drives Trudeau, and he and his followers will justify it by arguing that a richer and healthier middle class will generate more demand, which entrepreneurs and executives will seek to satisfy. Innovation will follow, and Canada will become more competitive in the process.
That’s the approach Trudeau followed in his first mandate and it aligned with what was perhaps the strongest labour market in Canada’s history. Still, those low unemployment rates masked lacklustre business investment, which means executives haven’t been setting up for future growth. The COVID-19 crisis has exposed an economy that lacks the capacity to produce essential goods and services and pays its frontline workers lousy wages. People died because of it.
If Trudeau is unwilling to take on the oligopolies, then he should use his favourite policy tool — the federal government’s spending power — to make room in the economy for innovative firms.
A “Buy Canada” approach to procurement could be a launching pad for emerging companies in need of an anchor client. Rather than attempting to decide who deserves subsidies, the federal government could instead pick winners by giving them a fair shot to compete for government business. If Trudeau is serious about using the treasury to plug the holes exposed by the pandemic, there should be lots of work to go around.
For years, Canada has sent trade negotiators to Washington to fight “Buy America” policies, so adding a home bias to procurement would be hypocritical. But that fight is lost, at least for now. We know what President Donald Trump thinks about free trade, and former vice-president Joe Biden, the Democratic nominee, has
proposed
spending US$400 billion on products “made by American workers.” Canada’s free traders should concentrate on erasing barriers between provinces, as there will be no prizes for the virtuous in the international arena.
Some will decry the return of “industrial policy,” an old idea with a poor track record that nonetheless is guiding much of the thinking in China and Europe, where policy-makers realize that new corporate champions will emerge as commerce moves online and the world gets serious about climate change.
But a more aggressive use of procurement shouldn’t be viewed as a make-work scheme. Last month, NuEnergy.ai, an Ottawa-based developer of software that monitors the behaviour of algorithms powered by artificial intelligence, won a contract to educate Transport Canada on how to deploy AI ethically. It’s an emerging field, and one where Canada has a lead thanks to a clutch of companies such as NuEnergy. But to keep that lead, those firms will need some business so they can scale.
“We have no interest in becoming dependent on government,” said Niraj Bhargava, NuEnergy’s chief executive, who has taken advantage of the federal wage subsidy to help survive the recession. “We prefer to revenue-finance the company.”
An overhaul of procurement would be needed because the government’s current approach is about avoiding risk, which favours established firms that have the wherewithal to endure the bureaucracy. That means the government could jolt innovation without big new programs. Instead, it could simply reorient existing budgets to align with its broader economic policy.
Bureaucracy makes the government “really difficult to work with,” Bhargava said. If the goal is to use procurement as a policy hook, “we’re not there yet,” he added.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
