Business Leaders Launch Major Initiativeto Overcome Barriers to Innovation and Growth

April 15, 1999

The chief executives of 150 leading Canadian corporations have launched a major initiative aimed at identifying and overcoming the barriers that are holding back innovation and threaten Canada’s growth in the knowledge-based global economy of the 21st century.

The Canada Global Leadership Initiative was approved yesterday at the Annual General Meeting of the Business Council on National Issues (BCNI) in Toronto. To be completed over the next 12 months, the project will be directed by the BCNI, but involve a wide range of advisors and partners across Canada and around the world.

“Our goal goes beyond simply making Canada a better place to live, to work and to do business. We want to help create in this country a uniquely attractive home base for competitive and growing global enterprises,” said David P. O’Brien, Chairman, President and Chief Executive of Canadian Pacific Limited and the newly elected Chairman of the BCNI.

The BCNI’s last research project on this scale took place at the beginning of the 1990s, when it engaged Professor Michael Porter of Harvard University to assist the Council in carrying out a major study on Canadian competitivenes.

“Canada has made great strides since then. Inflation and interest rates are down. Most governments have balanced their budgets. Exports have moved to new highs. Companies have invested heavily and have emerged as winners in the era of free trade. The number of Canadians with jobs has grown dramatically,” said BCNI President and Chief Executive, Thomas d’Aquino.

“As a country, we have done well, but not well enough. Our pace of innovation has lagged. Our currency remains weak. Our share of foreign direct investment is falling. Unemployment is still too high. Personal taxes are too heavy, and real after-tax incomes have stagnated,” Mr. d’Aquino added.

“And while Canada is ranked as the best place in the world to live, too many of our experienced managers and professionals and too many of our talented sons and daughters are leaving to seek a better life somewhere else.”

The Canada Global Leadership Initiative will be broader in scope than the initiative involving Professor Porter. It will include five areas of enquiry, looking at what can be done to help Canada the most as it competes for financial capital; for human capital; for ideas; for global market share and influence; and for leading-edge governance.

The project also will mark a shift from traditional macroeconomic and public policy analysis toward a focus on business decision-making. It will begin by examining the factors that are influencing investment decisions at the company level and build from there toward recommendations affecting both government and corporate strategy.

“In order to fix the problems that still stand in the way of greater investment and growth in Canada, we need a better understanding of what really matters when it comes to creating more and better jobs and a higher standard of living for all Canadians,” Mr. d’Aquino said.

The Business Council on National Issues is a not-for-profit, non-partisan organization that is the vehicle for Canadian chief executive participation in national and global issues. The member companies of the BCNI administer close to $1.9 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.

CANADA GLOBAL LEADERSHIP INITIATIVE
BACKGROUND INFORMATION

The Canada Global Leadership Initiative is an undertaking by Canada’s business leaders, working with innovators throughout Canada and abroad, to enhance the country’s 21st century economic and social prospects within an integrated global society.

The initiative is directed by the Business Council on National Issues (BCNI), a not-for-profit, non-partisan organization that is the vehicle for Canadian chief executive participation in national and global issues. The member companies of the BCNI administer close to $1.9 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.

WHY THE INITIATIVE IS BEING LAUNCHED

Canada entered the 1990s struggling with stubborn inflation, high interest rates, soaring public deficits and debt, rising taxes and meager productivity gains. Free trade with the United States, the rapid advance of technology, and global trade and investment liberalization added to the challenge of adjustment.

In 1990, the BCNI engaged Professor Michael Porter to assist in an assessment of Canadian competitiveness, and the Council’s work played a decisive role in galvanizing both public policy debate and private sector action. By 1999, performance in the areas of exports, business investment, job creation, fiscal health, inflation and interest rates had improved impressively.

Despite the progress of the past decade, Canada is underperforming in a number of key areas. Gains in productivity and innovation are not keeping up with those of our major competitors. Our standard of living is in relative decline. The unemployment rate remains too high. Our currency continues to trend downward. Our global share of foreign direct investment keeps falling. Public debt is too high. Personal taxes are too heavy. The real after-tax incomes of Canadians have stagnated. And Canada’s ability to retain and build knowledge-intensive activities such as head office operations and research and development is being seriously challenged.

Continuing technological change and global economic integration also are unleashing new challenges for Canadian companies. Electronic commerce and the Internet are profoundly changing economic fundamentals and the nature of competition between firms and between countries. Global competition and the need for improved financial accountability are demanding more effective governance practices worldwide. Global integration of commerce means that countries must develop strong “country brands” to attract investment. And rapid industrialization in emerging markets is creating ever stronger pressure for sustainable development worldwide.

GOALS OF THE INITIATIVE

The Canada Global Leadership Initiative will attempt in part to build a stronger across Canada consensus in favour of correcting problems where solutions are known, such as the need to reduce public debt and the burden of personal income taxes.

Its major purpose, however, is to offer fresh insights into persistent problems that are not well understood. This includes Canada’s weak productivity performance, poor record of innovation, relatively high unemployment, currency and stock market underperformance, and its declining global share of foreign direct investment.

The overall goal of the initiative is to develop a list of actions and policy directions that would create in Canada a uniquely attractive home base for competitive global enterprises, ensuring healthy economic growth and a rising standard of living for all Canadians within a global, knowledge-based economy.

SCOPE OF THE INITIATIVE

The Canada Global Leadership Initiative will examine what can be done to help Canada compete in five areas: financial capital; human capital; ideas; global market share and influence; and leading-edge governance.

Some of the key questions that have been identified for investigation include:

Competing for financial capital

• Equity markets. Why do Canadian stocks and multiples lag?

• Currency risk. How much of a penalty do Canadian companies pay for operating with a depreciating dollar?

• Corporate taxation. What aspects are most damaging to investment and job growth?

• Foreign direct investment. What can be done to reverse the deterioration in Canada’s share of inward-bound investment?

Competing for human capital

• Education and training. What can be done to improve the quality of education and access to lifelong learning?

• Personal taxation. What tax changes would be most effective in improving incentives for work and investment?

• Leading lights. What measures would help make Canada the home of choice for leading-edge work and the brightest minds in any field of endeavour?

• Social infrastructure. What changes to social programs and policies would be most effective in improving Canada’s ability to attract and retain skilled workers?

Competing for ideas

• Research and development. Why is Canada’s tax treatment of R&D not having more impact, and how else can we improve the odds of attracting more such work to Canadian locations?

• Innovation. What are the barriers to the more rapid adoption and diffusion of new technologies by Canadian companies, and how can we improve Canada’s low rate of patent applications?

• Electronic commerce. How rapidly are Canadian companies and institutions embracing the key technologies of the 21st century, and how can we ensure that they stay on the leading edge of new developments?

Competing for global market share and influence

• The Canada-United States border. What further barriers to transborder commerce can realistically be removed

• World trade rules. How can government and business maximize Canada’s influence in shaping the next round of global trade negotiations?

• Priority markets. How can Canada concentrate its efforts more effectively in the development of key markets for Canadian goods and services?

• Outward orientation. What can be done to encourage more effectively the outward orientation of small and medium-sized businesses in Canada?

Competing for leading-edge political governance

• The economic union. Which barriers to interprovincial mobility of people, capital goods and services need to be removed without further delay?

• The social union. How can federal-provincial co-operation be improved to improve the efficiency and impact of Canada’s social programs?

• Co-operative federalism. How can federal and provincial governments work together more effectively to improve Canadian competitiveness?

ORGANIZATION AND TIMELINE

The Canada Global Leadership Initiative is a project of the Business Council on National Issues and will be directed by the Executive Committee of the Council’s Board of Directors. A wide variety of experts, relevant institutions and research organizations from across Canada and around the world will be consulted on all aspects of the initiative. The Chair and Project Leader of the initiative is Council President and Chief Executive, Thomas d’Aquino.

The initiative was launched on April 14, 1999. Research work and consultations will be carried out over the next year, leading to publication of a final report and a National Economic Summit in June, 2000.