C HAPTER 7: C REATING I NVESTMENT O PPORTUNITIES T HROUGH T HE SDTC
• Reliance on a Low Dollar: Canada continues to rely on a devalued dollar and low labour and raw material costs to remain competitive, rather than on unique and high value products and processes. According to a 2001 Industry Canada study, 91 per cent of the increase in trade with the United States in the 1990s was the result of the low dollar and the U.S. economic boom. Relying on a devalued dollar dulls the incentive for innovation. It also increases the cost of upgrading our outdated equipment, as approximately 70 per cent of Canada’s installed machinery is imported, and most of that is from the United States (Ref 2 ). • Reliance on Base Commodities: The Commodity Price Index has been steadily declining at about 0.6 per cent per year for the past 200 years and the developing countries are beginning to dominate base commodities through ultra-low pricing structures. The developed world, on the other hand, is moving away from price-based commodities and toward value-based goods and services in order to remain competitive. Finland, for example, is ranked the number one competitive country in the world. It exports more consumer electronics (e.g. Nokia) than wood products, which was the traditional mainstay of its economy (Ref 3 ). The Canadian government has responded to these international realities by launching the Innovation Agenda (Ref 4 ), which is designed to strengthen technology development. It underscores the need for large and deliberate investments to support research infrastructure and new and developing technologies. While this is a positive step forward, there are many barriers that must be overcome before Canada can secure strong future growth. CANADA AND THE ENVIRONMENT The second major challenge facing Canadians is the environment. There are a number of important issues that need to be addressed, but the largest one – and the one that affects our economy the most – is climate change. In December 2002, the federal government ratified the Kyoto Protocol, which commits Canada to reducing its greenhouse gases to 6 per cent below 1990 levels by 2012. The national debate over whether or not to ratify the agreement put the issue of climate change into stark relief for many Canadians and prompted some industry observers to come to three main conclusions:
• The economic impact of climate change is significant. • Canada needs technological innovation. • If Canada doesn’t meet the innovation challenge, others will.
The economic impacts of climate change are significant. Estimates for meeting Kyoto range from $3.3 billion (federal government) to $23-$40 billion (government of Alberta). The final amount, while still far from certain, will undoubtedly be considerable.
2 Canadian Competitiveness: A Decade After the Crossroads . Roger L. Martin and Michael E. Porter. C.D. Howe Institute. Working Paper 2001-1. 3 OECD in Figures . 2001 Edition. Statistics on the Member Countries. OECD Observer. May 2001. 4 Canada’s Innovation Strategy : http://www.innovationstrategy.gc.ca/cmb/innovation.nsf/pages/Menu-e
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