The COVID-19 crisis is exposing the shortcomings of Canada’s economy, particularly when it comes to supply chains and the development of value-added products that would keep the country competitive, innovation experts say.
Dan Breznitz, the co-director of the innovation policy lab at the University of Toronto, said he expects global trade in raw commodities to decline as the novel coronavirus makes it more difficult to move people and goods around the world.
It’s a wake-up call for Canada’s resource-based industries, he said, noting Canada “will have a problem just selling wood and unprocessed oil.”
The country must rebuild its capacity to produce sophisticated goods through innovation in those sectors and beyond, said Breznitz, who is also the chair of innovation studies at the Munk School of Global Affairs.
“We no longer can actually produce the basic things we need in order to survive under (a) pandemic, and we cannot count on global production networks to do that in times of crisis.”
Story continues below advertisement
Alan Winter, British Columbia’s former innovation commissioner, agrees, saying COVID-19 has further exposed Canada’s dependence on purchasing goods and technology offshore with profits from primary resource industries.
1:24 Coronavirus outbreak: Trudeau says Canada supports WHO, but says there ‘needs to be improvements’
Coronavirus outbreak: Trudeau says Canada supports WHO, but says there ‘needs to be improvements’
“The issues that we see today around (personal protection equipment) and getting stuff out of China is all illustrative of the fact that our economy, to some extent, has been totally submerged into other countries in terms of supply chains,” he said.
“Our strategy of selling raw natural resources doesn’t make a lot of sense. We need to have the capability of developing more finished goods ourselves.”
Canada lags behind other members of the Organization for Economic Co-operation and Development for investing in research and development on new products and technology, said Winter.
In his final report to the B.C. government, released last week, Winter pointed out that about 1.4 per cent of the province’s GDP goes towards research and development, while the OECD average is about 2.4 per cent. Several of Canada’s competitors make investments in the 3.5 per cent range, he added.
Breznitz said Canada lacks policies aimed at creating more small- and medium-sized enterprises and then helping them grow, particularly when it comes to access to capital in the early stages before investments from venture capitalists.
Story continues below advertisement
“Right now in Canada, it will be almost impossible to get the finance, just the basic finance for you to be able to scale up,” he said, using an example of a family owned, medium-sized business with an idea for a new product or technology.
Canadian entrepreneurs also face regulatory red tape in selling newly developed products in Canada, said Breznitz.
1:54 Coronavirus outbreak: Trudeau urges companies restarting their business to ‘please, hire your workers back’
Coronavirus outbreak: Trudeau urges companies restarting their business to ‘please, hire your workers back’
“It expensive and each province has its own little quirks. So, it’s actually easier to sell to the whole United States.”
He said the federal government should provide targeted grants and loans directly to entrepreneurs and companies, rather than funnel money into more innovation “superclusters,” accelerators and incubators.
The “silver lining” is that Canada’s workforce is much more sophisticated than it was 15 years ago, with the proven potential for innovative ideas, Breznitz said.
Others are commercializing those ideas, said Breznitz, pointing to large multinationals that have ramped up operations in Canada including Facebook and Google.
“The question is what kind of policies would allow more Canadian entrepreneurs, small businesses and big businesses, old and new, to do exactly what the multinationals are doing.”
Private companies operating in Canada have also failed to invest in research and development because innovation is costly and risky, he said.
Story continues below advertisement
“You can make easy money with less risk by being less sophisticated.”
The need for economic support and opportunities is even more pronounced in rural communities, where Breznitz said the lack of investment has been “catastrophic.”
Ken Coates, Canada Research Chair in Regional Innovation, said many residents lack access to a reliable internet connection, let alone access to start-up capital and training opportunities in science and technology.
1:06 Coronavirus outbreak: U.S.-Canada border closure extended another 30 days
Coronavirus outbreak: U.S.-Canada border closure extended another 30 days
“We should be delivering basic services at a national level to all Canadians. And we’re not even close to there right now.”
The pandemic may mobilize rural residents to demand the same essential service standards available in urban areas, said Coates, who also teaches at the graduate school of public policy at the University of Saskatchewan.
He said Canada’s natural resources have made the country rich and complacent.
The irony is that much of Canada’s resource development happens in and around rural and remote communities that should have become prosperous as a result, Coates said.
Economic development in rural and remote areas should capitalize on local strengths, he said.
For example, the capital of Sweden’s northernmost county was well-suited to become the host of Facebook’s European data servers. The city of Lulea has cheap and abundant hydro electricity and cold temperatures for the hot servers, much like parts of B.C., said Coates.
Story continues below advertisement
But it takes a lot of nerve, enthusiasm, commitment and support for a rural or remote community to decide to stand up and fight for new jobs, investors and residents, he said.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.
Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.
Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”
The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.
Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.
“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”
Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.
Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.
Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.
B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.
The election is expected to be called on Sept. 21, with the vote set for Oct. 19.
“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”
Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.
Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.
The premier said that now is not the time to reduce supports and services for people.
Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.
Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.
This report by The Canadian Press was first published Sept. 10, 2024.
Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.
NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.
But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.
He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.
Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.
Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.
Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.
This report by The Canadian Press was first published Sept. 10, 2024.
