Remarks for Wayne G. Wouters for Alberta Connects 2010
May 13, 2010
Thanks for inviting me here today, I am pleased to have the opportunity to speak to you about the opportunities and challenges that face our country and Canada’s public policy environment.
I understand that you’ve had a busy few days and have been meeting with a cross-section of the federal cabinet and people of influence while here in Ottawa.
I always find these exchanges valuable and I am looking forward to opening this up and taking a few questions at the end.
I would like to leave you with a message of cautious optimism today and as you wrap up the Alberta Connects 2010 conference, I ask for your continued engagement.
I want to focus on three areas:
- Canada’s position in 2010 and beyond
- Maintaining our momentum
- Stakeholder engagement
(I) Canada is well positioned
In comparison to many other nations, we are managing the financial crisis and the recession admirably. Overall, Canada is well positioned.
In light of the sobering events in Europe over the past three weeks, we can and should be proud of our record.
As you are aware, officials from the European Union including representatives from Belgium, Portugal and Germany, worked around the clock this past weekend.
The end produce to their efforts was a package designed to bring stability to the common EU currency and European markets.
This package of measures comes in addition to one developed to alleviate pressures in Greece which was announced last week.
We are frequently reminded at how complex and interconnected our world has become and that we must maintain our momentum in order to ensure prosperity for future generations.
In order to achieve this goal, we will need to:
- Stay on the path of recovery;
- Expand our trade markets; and
- Pursue a collaborative approach to finding solutions.
The Financial Crisis
Evidence of serious strains in U.S. financial markets first began to emerge in the summer of 2007.
As you know, the collapse of the U.S. sub-prime mortgage market led to the bursting of credit bubbles both in the U.S. and in several European countries.
As the financial crisis intensified and access to credit dried up, global economic growth slowed sharply and suffered its most severe downturn since the 1930s.
The downturn had a significant impact on the Canadian economy. Business investment slowed in response to a weaker economic outlook and tighter credit conditions.
A significant reduction in global demand and in particular, U.S. demand, led to a sharp decrease in Canadian exports.
Rising unemployment and declines in household net worth led to a slowdown in consumer spending.
Yet, despite the fact that Canada’s economy is very open, and is highly exposed to that of the U.S., the deterioration of our economy has actually been less severe than in other major industrialized countries.
In particular, the loss of jobs in Canada has been considerably less pronounced than in the United States.
Why? I would argue that we are benefitting from a combination of:
- A rapid, consistent, and even response to the downturn from Canadian business, and
- The dividends of solid fiscal and monetary fundamentals, as well as sound regulation and supervision of the financial sector.
Canada entered the recession from a position of strength as shown by our well-diversified economy, low unemployment, low inflation, and strong corporate and household balance sheets.
Strong Fiscal Policy
The crisis highlighted the importance of prudent fiscal management during good times to ensure fiscal flexibility during downturns.
Prior to the recession, we recorded more than 10 years of consecutive surpluses and took action to put our debt burden on a firm downward track.
These measures gave us the latitude necessary to enact a stimulus package to support our economy through this delicate period.
Despite our struggles, Canada’s fiscal position is now the strongest among G-7 countries. Even through this crisis, our debt-to-GDP ratio is expected to remain well below the G-7 average.
Strong Financial Sector Policy
The financial crisis has also clearly demonstrated why judicious and responsible regulation and supervision are so important.
Our tight controls and oversight, e.g. in terms of capital requirements for financial institutions and firm regulation of our mortgage sector, ensured the Canada experienced no sub-prime disaster.
Unlike many other countries, the government did not have to bail out a single bank.
Although credit growth in Canada slowed during the crisis, it did not slow to the same degree as in the United States.
The strength of our fiscal capacity and financial sector alone would not likely have been enough to protect the Canadian economy and jobs.
We would not have managed as ably if our business sector had not met the challenge by working with the economy through midst of a downturn and had the government not stepped in with the stimulus package.
The Economic Action Plan
The implementation of Canada’s Economic Action Plan was necessary for economic and even ethical reasons.
The government could not simply stand by and watch only the very fittest survive.
Including the provincial stimulus packages, the EAP is among the largest fiscal stimulus packages in the world.
The EAP is estimated at more than four per cent of GDP.
Not simply a temporary job creation program, the action plan is an investment in the economy.
It focused on repairing and building needed infrastructure, and improving access to financing for householders.
The plan is reducing the tax burden, helping the unemployed, building infrastructure, and supporting industries and communities.
Our stimulus package received recognition from respected international organizations.
For example, the OECD and the IMF have stated that Canada’s recession would have been much worse in the absence of the measures I have cited.
In sum, as we emerge from the deepest global recession since the Second World War, there are good reasons to be cautiously optimistic:
- The Canadian economy is expected to strengthen into 2010;
- Private spending on consumer and investment goods has rebounded strongly in recent months; and
- Residential investment has also bounced back, led by increases in renovation activity.
(II) Looking Ahead Key-Challenges
As I noted, significant challenges lie ahead of us and therefore, I must temper slightly my optimism.
Over the past two years, policy makers have, understandably, been firmly focussed on managing the crisis.
However, as the recovery takes hold, we will need to turn our attention to a number of critical longer-term challenges facing this country.
To sustain Canada’s economic and fiscal advantage, the government will need to bring Canada’s finances back into balance over the medium term.
Future policy directions will also need to set the stage for Canada to meet successfully the challenges of a globalizing world.
Despite fluctuations in world markets and the slowing of economies of late, new and existing players continue to make their mark as major economic powers.
Competition in world markets is fierce.
Canada’s Baby Boomers, in fact Baby Boomers everywhere, are set to retire in record numbers.
The contest for a shrinking labour pool will become even more intense and this will test our capacity to continue to raise the standard of living of Canadians.
(III) Trade and Investment
The economic downturn re-emphasized our need to reduce our dependence on any one economy and why it is critical that we diversify.
It has become clear that Canada’s future and long-term prosperity depends on working with a greater number of partners and development of broader markets.
This is critical not only to mitigate the risks associated with putting too many eggs in one or two baskets, but also to minimize the costs associated with lost opportunities.
Additionally, the likelihood of a persistently strong dollar makes it incumbent on Canada to continue to improve its competitive position.
Securing new trading partners will require the aggressive pursuit of free trade.
While the government remains committed to the W.T.O. Doha round; it will continue to pursue bilateral free trade agreements with many partners.
Although there has been a particular focus on the Americas in recent years and completing agreements with:
- Colombia; and
Our most significant current initiative is our negotiations with the EU.
As the U.S. economy may take some time to recover, and the Canadian dollar may remain high relative to the euro, expanding and strengthening existing markets in this region makes sense.
2009 saw the Prime Minister’s first visit to Mumbai, Beijing and Seoul and the opening of several new trade offices in both India and China.
During his visit to India last December, the P.M. and his counterpart, P.M. Singh of India, announced a joint study on the parameters of an economic partnership agreement.
This is the first step toward negotiating a trade deal with India.
Business investment is critical to long-term prosperity.
It cultivates innovation and growth, contributing in turn to more jobs and higher wages for Canadian workers.
The appreciation of the Canadian dollar is making investments in imported machinery and equipment more affordable.
This consequently, is providing Canadian companies with greater opportunities and incentives to acquire such equipment in order to spur greater innovation and productivity.
Additionally, we removed all tariffs on manufacturing equipment in budget 2010 thereby further facilitating investment and lowering costs for Canadian companies.
Other actions undertaken by the government to foster business investment include:
- Reducing business taxes and working to improve Canada’s regulatory framework; and
- Facilitating venture capital and foreign investment in key sectors, including the satellite and telecommunications industries.
- Working to establish a Canadian securities regulator, which will reduce the cost of financing and enhance the attractiveness of Canada as a place to invest.
Labour Market Policy
Another area of public policy that I believe will be key over the medium term is the labour market.
The competition for skilled labour will be an international phenomenon. Canada, the EU, and other global economies will be battling for the same contracting labour pool.
We are already seeing this with respect to the recruitment of nurses in the Philippines and doctors in South Africa.
These professionals seek a better standard of living and quality of life, and their governments unfortunately can’t match the salary offers being made by foreign hospitals.
Some may call this poaching but it is a hard fact that highly qualified people (HQP) will go where there is opportunity.
Canada’s continued prosperity, competitiveness, and reputation as a leader depend on our ability to create a more inclusive society.
A society in which all Canadians are able to fulfill their potential.
In creating this society we must continue to invest in education and training.
It is vital that we ensure that all Canadians, including immigrants, aboriginal Canadians and Canadians with disabilities, develop the skills and have the support they need to participate fully in the labour market.
Should we fail to do so, we will inadvertently create conditions in which our best and brightest choose to take their expertise and skills elsewhere.
While immigration cannot offset our declining birth rate, Canada must remain a destination of choice for foreign talent.
Newcomers must be able to find jobs that maximize their skills and talents, be fully employed and be able to make a meaningful contribution in the Canadian labour market.
The work underway with provinces, accreditation bodies and employers on foreign qualification recognition is critical in this regard.
One of the fastest growing groups in our society is Aboriginal Canadians.
It will be critical from both an economic and social perspective to ensure that aboriginal Canadians develop the skills they will need to take an active part in the labour force.
The status quo comes at a great cost to Canada and marginalizes everyone. We need to look at some creative and innovative ways to meet this challenge.
(IV) Natural Resources and the Environment
Of particular interest perhaps to all of you, is the issue of natural resources and economic development.
We need to optimize our natural resource advantage without compromising the still very pristine quality and condition of our environment.
Canada can do much better in balancing environmental concerns and natural resource development both of which are key to long-term sustainable growth.
Like our competitors we need to continue to invest in research and development, green technologies and economically viable small and medium sized enterprises so that Canada’s tomorrow is greener than today.
- The preservation and protection of our natural resources;
- Sustainable development; and
- Economic prosperity.
We must replace existing regulations with simpler and clearer processes that offer improved environmental protection will provide greater certainty to industry.
This initiative is one of the most important that the government is undertaking to strengthen the current economic recovery and ensure the country’s long-term economic growth.
The government strongly supports the Copenhagen accord as the new international framework for addressing the problem of climate change.
We are working closely with our key partners, including the U.S., to ensure the treaty for the accord is successfully negotiated over the coming months and that the accord is fully implemented.
We have also made clear our intent to harmonize our climate change measures with those of the United States to ensure the competitiveness of the Canadian economy.
The oil sands are a perfect illustration of the opportunities and challenges of resource development.
Some of these challenges manifest on a global scale.
For example, carbon dioxide emissions and environmental degradation.
Others are more localized in nature such as water scarcity on the Athabasca River.
At present the industry is very greenhouse gas intensive and its already significant emissions are expected to grow rapidly under a business-as-usual scenario.
While we must do everything reasonably feasible to ensure that economic prosperity doesn’t come at the expense of our environment, this must be done in tandem with better messaging and strategy on the communications front.
I am concerned that industry is not getting our message out with respect to the good work being done and the measures it is taking to address these environmental challenges.
Governments and the industry need to continue to work together and set the record straight in Canada but more importantly with other parts of the world where opposition is growing.
Economic prosperity and the protection of the environment are not mutually exclusive. This is not a zero sum game.
I believe that Canadians are very fortunate, we have more blessings than we can count.
Strategically speaking, we are positioned very successfully for the years that lie ahead.
This does not mean however that we can afford to be complacent or rest on our laurels now that our hard work has yielded some rewards.
As Canada and the world around us changes, we must keep pace and design solutions for the new challenges that we face.
Government simply cannot have all the answers. In meeting these challenges we must continue to consult with the private sector, academia, citizen groups and non-governmental organizations.
The best public policy is developed in concert with a spectrum of stakeholders as it requires input, discussion and debate from many different perspectives.
I thank you for your interest and participation.