Open Up Agricultural Trade and Lower Corporate Taxes

June 27, 2005

Article published in Diplomat magazine, July-August 2005
 
By Thomas d’Aquino
Chief Executive and President
Canadian Council of Chief Executives

As business leaders, we believe that a successful international policy must accomplish three goals: It must do what is right for Canada; it must do what is right for the world; and it must leverage our country’s strategic advantage as a member of the evolving North American community.

The International Policy Statement (IPS) stands up well against these three objectives. The strategic priorities the government has laid out are promising. The challenge now is to transform words into action. If Canada is to live up to the policy statement’s goal of truly making a difference in the world, plenty of hard work and hard choices lie ahead.

Canada, for example, has long been a champion of global trade liberalization. It is both a trading nation and a country with a strong multicultural character, and as such our natural impulse is to build bridges to the rest of the world. We also recognize that trade liberalization contributes to global prosperity and is the best way to advance the human condition around the world. As Martin Wolf, chief economics commentator of the Financial Times has pointed out, the world’s poorest countries are impoverished not because of globalization, but because they are largely excluded from the global trading system.

Given all that, one might assume Canada would be at the forefront of efforts to open up agricultural trade – an objective, after all, that is at the heart of the current Doha Development Agenda negotiations at the World Trade Organization. Unfortunately, the country’s record on agricultural trade has been mixed at best, and the IPS reflects that inconsistency.

On one hand, the government declares in the IPS that it is committed to expanding market opportunities for developing countries. Yet the statement also says that Canada will “continue to aggressively defend the ability of Canadians to choose how to market their products, including through orderly marketing structures such as supply management and the Canadian Wheat Board.” Frankly, I would have preferred a stronger, more ambitious commitment to agricultural trade liberalization.

I would also like to see a clearer recognition of the need to ensure that our domestic economic and fiscal policies are aligned with our international objectives. The IPS acknowledges that in the new international marketplace, “businesses scour the world for greater efficiencies, cost savings and competitive advantage, and nations compete against other nations to attract this business activity.” This is precisely why my Council has emphasized the need to reduce corporate taxes. According to the IMD World Competitiveness Yearbook, Canada currently has the fourth highest corporate tax rate of the 60 countries it measures.

The IPS, however, refers to corporate tax rates only in passing, saying that Canada should continue to “manage [the] tax burden on individuals and firms.” For a government that speaks so often about the importance of competitiveness and about the challenges facing Canadian companies from counterparts in, for example, Europe and Asia, that is disappointingly weak language. Simply put, lower corporate taxes are good for investment, good for job creation and good for economic growth. Just “managing” the tax burden is not enough. To achieve the goal of becoming a magnet for global talent and investment, articulated in the IPS, Canada must clearly commit itself to achieving a much lower corporate tax burden. Doing so will attract more companies that make more money and, at the end of the day, generate higher levels of government revenue.

To compete and win internationally, Canada also needs to move forward quickly with a comprehensive plan to improve Canada’s regulatory processes. In a report last fall, the government’s External Advisory Committee on Smart Regulation recommended that Canada encourage development of international standards and treat regulatory policy as a fundamental element of Canada’s foreign policy. The IPS, however, lists smart regulation as just one of many elements of the government’s international commerce strategy. Here again, we would welcome a stronger commitment. As the government itself has acknowledged, smart regulation is a significant competitive advantage and a key instrument for achieving Canada’s social, environmental and economic objectives.