Canadians Must Look Outward with Confidence, not Inward with Fear, CCCE says in Submission to the Federal Competition Policy Review Panel

January 16, 2008

Canada suffers from a culture of complacency and must revamp its public policies and intensify its corporate ambitions to be a leading global player, said Thomas d’Aquino, Chief Executive and President of the Canadian Council of Chief Executives (CCCE).

“In a world in which people, ideas and money move with incredible speed, Canadians must look outward with confidence rather than inward with fear,” Mr. d’Aquino said in a speech to the Economic Club of Canada. His remarks coincided with the release of the CCCE’s submission to the federal Competition Policy Review Panel, which is considering Canada’s foreign investment and competition policies in light of several recent foreign takeovers of major Canadian companies.

Mr. d’Aquino noted that the recent wave of international mergers and acquisitions had stoked fears about the potential “hollowing out” of corporate Canada, including a loss of head offices and an erosion of economic sovereignty. Those concerns are understandable, yet the most effective way to handle the challenges of globalization is not to hide behind national borders but to seize the opportunities created by an open global economy. “Put simply,” Mr. d’Aquino said, “the best defence against any potential loss of economic sovereignty is a strong competitive offence.”

“Canada is home to successful enterprises in many sectors — companies that have seized global opportunities and have driven the growth of high-quality jobs in Canadian communities,” he said. “But too many business leaders, like too many Canadians in all walks of life, have been captured by a culture of complacency, by a sense that good is good enough.”

In its submission to the Panel, the CCCE argues that Canada faces a threefold challenge in improving its ability to compete for investment and jobs. First, it must develop and attract people with the motivation and skills to perform high-value work. Second, it must provide a superb environment in which to conduct research, adopt new productivity-enhancing technologies and move ideas from laboratories into the market. Third, Canada must be a compellingly attractive place in which to build and run global enterprises.

The CCCE says Canada should project a welcoming attitude to foreign investment, and governments should not impose new measures on investors from other countries that we are not prepared to see imposed on Canadian investors abroad. At the same time, Canada should strengthen the ability of homegrown companies to expand abroad by updating Canada’s competition framework, which was designed at a time when the country’s economy was far less open to international trade and investment. The current application of competition policy, the CCCE says, gives a significant advantage to foreign bidders over potential domestic partners when large Canadian enterprises are put into play.

“Canadian companies that aspire to be global leaders must achieve scale far beyond what is possible within the Canadian marketplace,” the submission notes. “As long as Canadian customers have full and open access to global suppliers, Canadian competition policy should not discourage or be seen as discouraging Canadian companies from seeking greater scale through domestic combinations.”

Founded in 1976, the CCCE is the senior voice of Canada’s business leadership, representing 150 chief executives and leading entrepreneurs from all major sectors and regions of the country. CCCE members lead companies that collectively administer $3.5 trillion in assets, have annual revenues of more than $800 billion, and are responsible for the vast majority of Canada’s exports, investment, research and development, and training.

In preparation for its submission to the Panel, the CCCE carried out intensive internal deliberations buttressed by two surveys of its CEO members. The first, on issues related to mergers and acquisitions, showed clearly that tax rates, both corporate and personal, play a central role in companies’ decisions about where to locate head-office activities. Two other key determinants of head-office location are proximity to corporate operations and proximity to customers. This underscores the need for improved transportation links and a more efficient Canada-United States border.

The second survey, conducted jointly with Industry Canada, focused on Canada’s strengths and weaknesses as a location for research and innovation. The overwhelming strength cited by CEOs was the quality of Canadian talent, followed by Canada’s high quality of life and the overall strength of the Canadian economy. Canada’s greatest weaknesses were seen as its intellectual property regime and its regulatory environment — the two factors that were also rated as most important in influencing company decisions about where to carry out research and development activities.

The CCCE’s submission puts forward 12 recommendations that would help make Canada a more attractive location for companies that aspire to serve the global market, including enhanced access to high-quality education, improved urban and border infrastructure, more aggressive efforts to target key sources of potential immigrants and stronger protection for intellectual property rights. None of these recommendations is new, the submission says, but all matter. “We know broadly what needs to be done. Our challenge as a country is to get on with the job.”

In addition to those “common sense” suggestions, the CCCE urges the Panel to think boldly about what Canadians and their governments must do to move forward decisively. On the tax front, for instance, Canada needs a comprehensive reform of the way governments raise revenue, “and we need to integrate the reform of both corporate and personal taxes with our efforts as a country to address the crucial issue of climate change and ensure the environmentally sustainable growth of our economy.”

“Economic competitiveness is linked inextricably with other issues including social justice and the environment,” the submission says. “The Panel should not hesitate to frame recommendations that bring together our great economic, social and environmental aspirations as a country.”

In addition to Mr. d’Aquino, the members of the CCCE’s Executive Committee are:  Chair, Gordon M. Nixon, President and Chief Executive Officer, Royal Bank of Canada; Honorary Chair Richard L. George, President and Chief Executive Officer of Suncor Energy Inc.; and Vice Chairs Dominic D’Alessandro, Paul Desmarais, Jr., Jacques Lamarre, Hartley T. Richardson and Annette Verschuren, the chief executives respectively of Manulife Financial, Power Corporation of Canada, SNC-Lavalin Group Inc., James Richardson & Sons, Limited and The Home Depot Canada.