MAKING CANADA A WINNER: PROGRESS AND CHALLENGES

November 1, 2000

Good morning and welcome to our Autumn General Meeting. The last time we all gathered together was in April, when we turned our Annual General Meeting into the CEO Summit 2000. At that time, we were joined by 150 other leaders from the private, public and non-profit sectors to discuss the work of our Canada Global Leadership Initiative.

A great deal has happened since, and Tom will talk about that in more detail in a few minutes. But first, I would just ask you to think back to our decision to launch the Leadership Initiative in early 1999. At that point, the Asian financial crisis was a very recent memory and the short-term economic prospects were far from certain. Federal surpluses were still a novelty. The first minor personal tax cuts had been dished out, but with little enthusiasm. Corporate tax cuts were not even on the radar screen. The prospects for a major reduction of the public debt were miniscule. And key economic indicators like productivity and real after-tax incomes were still stagnant.

A year later at the CEO Summit we could point to significant improvements. Productivity, employment and incomes were all rising. The pace of tax cuts was picking up. The federal government had actually moved on corporate income taxes, albeit only for some sectors and at a glacial pace. Our major concern had shifted from one of direction to one of speed.

We could see how fast the forces of global economic integration and technological change were moving. We could see other countries moving much faster to make the most of the resulting opportunities. We saw Canada moving too slowly, much too slowly, allowing our competitive advantages to be undermined and our relative standard of living to slide.

We issued a strong warning about the need for speed and the importance to achieving social goals of getting the economic environment right. We caused a lot of controversy. We took a lot of flak, individually and collectively. But we spoke out because we felt a real sense of urgency.

Look at what has happened since, in particular at the Economic Statement and Budget Update issued by federal Finance Minister Paul Martin two weeks ago. By January, it would put in place almost all of the personal income tax cuts we recommended two years ago as part of a seven-year strategy. On top of that, we have seen the capital gains inclusion rate drop from 75 percent to 67 percent to 50 percent in less than a year. Corporate income tax cuts will take longer and still affect only some industries, but will be entrenched in legislation. And we are seeing significant down payments on the federal debt.

The good news today is that political leaders of various stripes have begun to understand the realities of globalization. They are starting to realize that competitive taxation and a culture of risk-taking and innovation really do matter to the future of health care and social services. At the same time, they seem to be acting quickly on the economic front only because so much revenue is flowing in that they can cut taxes, pay down debt and still crank open the spending taps.

The challenge ahead therefore is two-fold. One is to maintain momentum. Once the federal election is over, the minimum that has been promised on the tax front could start looking like the maximum — especially if the economy slows and revenue growth begins to taper off. The message to the business community is likely to be that we’ve been given what we wanted, so please say thank you and go away. If we want to sustain today’s momentum on economic policies, we will have to show more effectively how our economic prescriptions will help to deliver the social outcomes that matter to Canadians.

Our second challenge is to prepare for the worst. The United States is enjoying the longest economic expansion in its history and dragging us along in its wake. But we all know that the business cycle is not dead. Even in good times, the backlash against globalization and free markets is visible and growing. There is real potential for a reversal of the policy pendulum, globally and within Canada, when surging prosperity suffers its next inevitable setback.

As Tom predicted at the CEO Summit, we have taken flak precisely because we were on target. We have accomplished a great deal in the past year and a half, and we can see the benefits beginning to flow. But like Canada, we cannot afford to be complacent.

However, as you all know, many disturbing signs have surfaced in recent years.

Before I hand the meeting over to Tom, I just want to say how important each of you has been to our success in building momentum for change within Canada. The recommendations and comments that the BCNI makes are not always loved. They are, however, respected because they are based not just on academic research, but on the front-line insights that each member brings to the table at our meetings. And their credibility is reinforced every time an individual chief executive stands up publicly and talks about what really matters to the growth of Canadian enterprises and Canadian incomes.

We are here together because we care about what happens to our country in the years ahead. We can take a lot of pride in what we have accomplished already, but as Tom is about to tell us, much remains to be done. I look forward to continuing to work closely with all of you in the months ahead. Thank you.