Time is Running Short for Canada to Prevent Drain of Key People, Jobs and Assets, Business Leaders Warn Prime Minister

September 24, 1999

Canada is likely to suffer a growing loss of key skills, jobs and strategic corporate assets unless it dramatically changes its ways within the next one or two years, the Business Council on National Issues (BCNI) says in a memorandum to Prime Minister Jean ChrǸtien.

The BCNI, comprised of the chief executive officers of 150 leading Canadian corporations, says Canadian companies face severe disadvantages within the process of restructuring, reinvention and consolidation sweeping the global economy.

“The combination of a weak currency, high corporate and personal taxation and policies and regulations that restrict growth and diminish the value of Canadian equities are leaving many major Canadian enterprises highly vulnerable to foreign takeovers. A low Canadian dollar does help exports, but it also cripples the ability of Canadian companies to recruit top talent and makes it more difficult for them to grow through acquisition rather than being acquired.”

The chief executives said a continuation of current policies would not necessarily lead to an abrupt exodus. “There will be no convoy of Brink’s trucks heading over the Peace Bridge. But Canada does face an accelerating loss of key head office functions and the high-paying jobs that go with them.”

In April of this year, the BCNI launched the Canada Global Leadership Initiative to study the challenges facing Canada in the global market and to develop recommendations for policies that would make Canada the best place in the world to live, to work, to invest and to grow.

The early work under this 12 month initiative suggests that recently announced acquisitions, mergers and strategic decisions involving major Canadian corporations may be the beginning of a significant trend. “We believe that many more such moves are possible in the months and years ahead.”

The business leaders note that in the past decade, Canada has made enormous progress. Governments have restored order to their finances, inflation and interest rates are down, exports have grown dramatically and there has been a surge in jobs and confidence. But by too many other measures, such as real after-tax incomes, innovation, productivity, investment flows and currency value, Canada is falling short.

The memorandum says that tax cuts are an essential first step in addressing these weaknesses. It repeats the BCNI’s call last year for a commitment to a multi-year framework for tax reduction, saying the federal government should be able to cut personal taxes by 20 percent within five years in addition to reducing Employment Insurance premiums and providing corporate tax relief.

It says there should be room for $5 billion in tax reductions in the next federal budget. The recommendations would cut the middle income tax rate, raise the thresholds for tax brackets and the Canada Child Tax Benefit, eliminate the high-income surtax, reduce the capital gains tax rate, slice EI premiums and begin to bring down corporate income taxes.

The business leaders note that while tax cuts are needed urgently, “lower taxes must be part of a broader strategy to stimulate innovation, productivity, competitiveness, employment and incomes. The challenges ahead demand collaboration and creative thinking, and it is unfortunate that so much of the policy debate has been oversimplified into a confrontation between tax-cutters and big spenders.”

Even more threatening than any given policy is Canada’s ambivalent attitude toward success, the chief executives suggest. “The future of our economy and the quality social programs that it supports depend on changing that attitude. If we want to offer our citizens first-class education, top-notch health care and an effective safety net, we have to recognize the critical role played by successful individuals and their enterprises.”

The chief executives say they are determined to see Canada succeed. “We want Canada to be the home of choice for world-beating enterprises. We want to help Canada grow, to contribute to our communities and to give our children access to global opportunities without forcing them to leave home for good. But there are powerful and growing forces at work today that are affecting career decisions and corporate strategy alike. If Canada wants to reverse these trends, it has very little time left to act. By the time the costs become obvious, it will be too late.”

The sometimes painful policy medicine Canadians have taken over the past decade has paid off. It is now possible to seek solutions that will build a higher standard of living and a better quality of life for all Canadians, says the memorandum. “But the choices Canada makes within the next one or two years will determine whether we slide irrevocably toward mediocrity or succeed in building a truly excellent future together.”

The memorandum represents the first fruits of the Canada Global Leadership Initiative. Other findings and research will be released as the initiative proceeds, with the final report and recommendations due to be completed early next year. This report will in turn provide the base for discussion at a national Economic Summit in April, 2000.

The memorandum is signed on behalf of the BCNI’s Board of Directors by the members of its Executive Committee: Chairman David P. O’Brien, Chairman, President and Chief Executive Officer of Canadian Pacific Limited; Honorary Chairman A. L. Flood; Vice-Chairmen Jacques Bougie, President and Chief Executive Officer, Alcan Aluminium Limited; John E. Cleghorn, Chairman and Chief Executive Officer, Royal Bank of Canada; Jean C. Monty, President and Chief Executive Officer, BCE Inc.; James F. Shepard, Chairman and Chief Executive Officer, Finning International Inc.; and BCNI President and Chief Executive Thomas P. d’Aquino.

The BCNI is a not-for-profit, non-partisan organization that is the vehicle for Canadian chief executive participation in national and global issues. Its member companies administer more than $2 trillion in assets, have a yearly turnover of more than $500 billion, employ about one in ten working Canadians and are responsible for a majority of Canadian private sector investment, exports, research and development and training.