Innovation: The Path to Inclusive Growth
The Honourable Navdeep Bains, PC, MP
Minister of Innovation, Science and Economic Development
Canadian American Business Council
May 24, 2016
Check Against Delivery
Good morning. Thank you for that warm welcome and inviting me to join you here today.
And, of course, thank you to the Canadian American Business Council and The Hill for putting together such a great event this morning.
I know very well the great events that the CABC can organize.
Back in March, I had the privilege of joining Prime Minister Trudeau for the state dinner at the White House. That was an amazing experience, made even better by the fantastic after-party organized by the CABC!
Needless to say, after the reception we received last time, it's a pleasure to be back here in Washington, D.C.
Ladies and gentlemen, since the election, Prime Minister Trudeau has been taking our message everywhere he goes: the Government of Canada has fundamentally changed its outlook on the world.
In our view, a global outlook is key. We need to position ourselves as a North American economic force in the context of a re-emerging Asia, the European Union and other parts of the world like Latin America where countries are looking to assert greater economic influence at a regional level.
Economies, societies and politics are more interconnected around the world than ever before—part of what's making it possible for regional economic power plays. The sharing economy is one manifestation of the opportunities presented by global interconnections.
But with opportunities come risks that parts of our economy and society could be left behind. Today, I'll be talking to you about what we in Canada see as the path to inclusive growth through innovation.
As I just mentioned, the sharing economy is emerging out of some fundamental socio-economic and political shifts taking place around us. As you will have discussed this morning, it's exciting, but it's also important to understand the economic and social impacts that are unfolding.
These tensions present public policy challenges for governments here in North America and around the world.
While Canada and the U.S. have always been important to each other, we are at a moment in time when I think uniting as a North American economic force to compete globally is key to our long-term growth.
Global forces: impacts and responses
Though Canada came through the Great Recession faring better than most and the United States has had impressive job and economic growth numbers during the recovery, there are still major forces at play that require all of us to embrace a new way of doing things.
First, there's climate change. Last year in Paris and again just last month in New York, the world committed to taking stronger, more meaningful action on climate change.
Our government believes that Canada can and must take a meaningful global leadership role. But that means we must act now to accelerate the transition to a low-carbon future.
This transition is about ensuring that the environmental costs of carbon are fully appreciated by the market. This is also about positioning our firms to capitalize on new opportunities in the rapidly growing market for innovative clean technologies.
We're betting big on clean tech—just as you are here in the U.S. We committed to doubling clean tech research and development under the Mission Innovation initiative that came out of Paris, and our last federal budget included over $1 billion to encourage investments in clean tech. This kind of alignment means that we are working from a position of strength in growing our North American influence.
There are equally compelling arguments for alignment as a response to the convergence of slower economic growth and an aging population in North America and around the world.
This is a powerful train we can see coming, which ultimately means more economic pressure on fewer available workers to carry the load.
This trend has the potential to disrupt our entire social contract, which turns on work and the ability to earn a living and retire with dignity.
In the next 35 years, experts project that there will be more people over the age of 65 than under the age of 14—and this for the first time in history. We will need conscious social policy choices to respond to this fundamental shift.
Technology is an accelerator and multiplier in this mix of an aging population and slow growth. As we all know, technology is fundamentally changing how we live and do business every day and in every way.
You serial entrepreneurs in the room are living the speed and scale of change in business these days. According to McKinsey & Company, since 1935, the average life cycle of a firm has gone from 90 years to 18.
Firms come and go more quickly, and the business model of today's firm is fundamentally different than our past experience of big firms as big employers.
Today, Silicon Valley's Google, Facebook and Apple have a market capitalization of almost 30 times that of Detroit's Big Three automakers in 1990—but with 10 percent of the employees.
There are fewer jobs out there, and they require new digital skills that are different than what much of our labour force has known.
Whenever I speak to audiences—in Canada and around the world—I mention my two young daughters. Since becoming a dad, I see the world through their eyes and think about what lies ahead of them.
We are living longer, healthier lives. We have access to a world of knowledge at our fingertips. And success is determined more by what you know than where you were born.
That's why I'm talking to my daughters about skills they'll need—like coding—to succeed in a digital world.
Take any sharing economy example and you will find that one company's innovation is another company's disruption—and sometimes at the level of entire industrial sectors.
These dynamics have an immediate and dramatic impact on jobs and people.
As a result, experts are drawing our attention to greater wealth concentration and concerns about social inequality as this economic transformation unfolds.
Taken together, slow growth, an aging population and technological change will require coherent government responses.
It's this convergence that presents such a great opportunity for us to act in concert as like-minded economic neighbours and friends to position North America for global success.
Global innovation race
With all this in mind, Canada is focused on an agenda of inclusive growth.
We are focused on the real and immediate job needs of middle-class families and those working to join the middle class as these global trends play out all around them.
We in North America are facing an incredibly competitive global playing field—most notably in how we support innovation.
We are in an innovation race, and the stakes are high.
China is investing billions of dollars in new technologies. And it's where our biggest and most influential middle-class markets will come from for the foreseeable future.
Germany, the largest economy in the EU, is an innovation superpower.
And if you look at smaller jurisdictions, they're also moving the yardstick by being very strategic in their investments.
Israel is a great example. It's a hotbed of innovative start-ups, and it makes bets on them. And those bets are paying off.
Sweden, despite its small population, is consistently able to drive higher rates of R&D in government, in business and in the private sector.
Role of government
So what do we do in the face of such realities?
For Prime Minister Trudeau and the Government of Canada, we act swiftly and strategically. We campaigned on this commitment and our work has already begun.
We are getting ready to roll out the Innovation Agenda, which will be our government-wide plan to promote innovation across the economy.
Already, as seen in our last budget, we are making significant down payments.
Starting this year, we will invest $2 billion in new research infrastructure at our post-secondary institutions to give researchers the tools they need to push the boundaries of science.
And we will invest $800 million to support innovation networks and clusters. This will help Canadian firms with ambitions to grow beyond our borders.
Chances are, though, when a Canadian firm succeeds, there is an American connection in some way.
Many Canadian and American companies are part of the same supply chain or work within greater regional clusters—the Windsor–Detroit auto supply chain, the Ontario–Ohio manufacturing belt or the Vancouver–Seattle clean tech sector.
Perhaps the best example is the Toronto–Waterloo high-tech corridor, which has very strong ties with Silicon Valley.
I'm looking forward to seeing those strong ties up close in a couple of weeks when I visit the Valley.
And while our countries' firms may find themselves competing in certain markets, we believe that there are huge opportunities for cooperation as we look beyond North America.
To be able to take advantage of those opportunities, we need to ensure that the rules we have on the books aren't a drag on the efforts of the sharing economy and other innovators.
We need an agile and responsive approach to our marketplace frameworks to help speed innovation to market—from autonomous vehicles to drones to the deployment of new services like Uber and Airbnb.
As you discussed, these technologies have already begun to challenge traditional markets, and consumers are not waiting for governments to catch up. In many cases, they are the ones driving governments to turn their attention to these markets.
In other words, we need to embrace the sharing economy—and technology overall—because it's a hotbed of innovation and new services for consumers.
At the same time, we must work to strike the right balance of social and economic good and coordinate more effectively within and across our borders.
As we strive to create the right regulatory conditions, we need to encourage experimentation and testing in real-world scenarios.
Whether within or across our borders, I think we have to be willing to take more risks sometimes and rock the boat together. We need to accept a certain amount of failure to be ready for changes that we don't yet know are coming.
The imperative for collaboration
Now earlier in my remarks, I referred to our great, long-standing friendship.
We share the longest undefended border in the world, are two of the oldest democracies in the world, and are two leading economies in the world. Yours, of course, being a pretty scaled up version of ours!
Though this phrase is often repeated, it's also a fact: There is much more that unites us than divides us. And for more than 20 years now, our two countries have had the most successful trading relationship in the world. This was made possible by NAFTA.
Commentators will likely never stop debating the merits of NAFTA, but there is no disputing the fact that trade and investment between Canada and the United States represent 9 million American jobs.
I am an accountant by training, so I like numbers. And here's a fact about the effect of NAFTA: In 1993, trilateral trade within North America totalled US$288 billion; in 2014, our total trilateral merchandise trade exceeded US$1.12 trillion. That's a nearly fourfold increase.
Beyond that, we all know the facts and figures about the Canada–U.S. trade relationship. It's the biggest in the world. More than $2 billion in two-way trade crosses the border each day.
That's why our government's commitment to building the Gordie Howe International Bridge is unwavering. And that's why we are committed to continuing efforts to facilitate that $2 billion in cross-border commerce through a new comprehensive framework for pre-clearance.
The past 20 years have brought tremendous growth and opportunity to our economies. For us to carry this success forward, we must continue to work as part of a connected North American economy to increase the North American share of global markets.
You now have an open and collaborative partner in Canada. In today's interconnected world, open and collaborative government equals innovative government.
We have a lot to offer, whether it's our skilled and educated workforce, which Silicon Valley has been tapping into for the last 20 years; our world-leading investment climate and low taxes; the high number of start-ups attracting record amounts of venture capital from both domestic and American sources; or our cold weather. I'm only half-joking. Did you know cold weather is actually good for housing computer servers cheaply?
The bottom line is that innovation knows no borders, and Canada is an able and essential partner for the United States as we both look to succeed globally.
Call to action
Naturally, governments have to accept that they cannot do this alone. Government is but one voice in this effort.
To be successful, this will be a whole-of-society initiative, requiring a fundamental shift in thinking.
In Canada, we are working with the public, academia, other governments, the private sector and advocacy groups to define our country as an innovation nation and instill innovation as a core Canadian value.
In the modern economy, innovation and hard work will be essential to ensuring our continued growth, not only across North America but also beyond our borders.
Though we face what is sure to be a complex and complicated future, we in Canada believe innovation is the path to the kind of low-carbon and socially inclusive growth we aspire to.
If there's one place in the world where I'm certain there's the talent, the drive, the dedication and the opportunity to succeed, it's here in North America.
As I wrap up, I want to give you a bit of my personal story. When I stop and think about it, it's pretty amazing. My father came to Canada with just $5 in his pocket and a lot of ambition. One generation later, I'm speaking to you as a minister for the Government of Canada. That's the kind of opportunity our societies offer to people who are willing to work hard.
As we look to the future, I don't want my daughters' generation to work harder for less; I want them to work smarter for more.
Though it won't be easy, we're working from a position of tremendous strength, and I'm excited to take on the challenge.
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