Canada in the Global EconomyJoin now to read essay Canada in the Global EconomyOver the past few years, Canada’s economy has done comparatively well and has demonstrated some resilience to the fluctuating global economy. However, Canada remains to be relatively less competitive with respect to other developed countries. In this paper I will attempt to take a closer look at Canada’s position in the global economy today and examine the relevant issues.
Competition is an important driver of innovation and productivity growth. Looking at the domestic Canadian economy, perhaps one of the most significant barriers to a strong domestic economy is the lack of intense competition among domestic firms. There are many reasons for this. First of all, the size of the Canadian economy is too small to support the development of large corporations. The US on the other hand, has about a ten times larger population, and therefore, a much larger market and demand are in place for larger multinational companies to build. As a result of the lack of sufficient domestic demand in Canada, only a small number of larger firms are developed in each industry. Furthermore, Canadian firms seldom treat research and development as a priority. Unlike in the US, innovation is not a corporate culture in Canada. This can be partly due to the lack of intense domestic competition, causing firms to spend resources on other areas instead of R&D because there is no real urge to innovate and maintain competitiveness.
The government also plays a major role in determining the level of domestic competition. In the past, the Canadian government had not been supportive to introduce rivalries in its domestic industries. There had not been any clear and well defined competition policies; there were however, numerous policies enforcing tariffs for imported products that had been protecting domestic firms from competition from abroad. Although some can argue that such protectionism was necessary in the starting phase of an industry, but Canada has still been maintaining some of these protection policies even today for well developed industries such as the cable and electricity industries. These protective policies do not promote domestic rivalries and therefore lead to a lack of productivity gain that can be achieved through competition. Although many of these protective policies are now non-existent anymore, what these policies had done already impacted and shaped the Canadian economy today to a certain degree.
The Canadian government is working again to improve competitiveness. Government officials have been talking about these long-term measures in the past. In 2007, former Conservative President Stephen Harper was asked if a carbon tax was going to help Canadians avoid being hit by high fuel prices.
In 2007, the Liberals and NDP opposed legislation that would have taxed certain natural gas to protect energy production, and the Liberals went to court to challenge this, arguing the legislation did not protect the electricity industry at risk in this case. In their challenge, the NDP argued that Canada could now do the same with energy export subsidies that were designed not only to ensure increased competition but also to create jobs.
Canada’s energy policy currently does not provide a strong basis for government action in its domestic business, particularly against its competitors and for the public sector. Instead, that policy is geared toward strengthening export competitiveness.
Although many argue that export barriers can cause economic harm, there has been no evidence to suggest that the current approach to foreign competitiveness has been successful. Although some of the barriers to competitiveness are temporary in nature and as such should be eliminated now (for example a tariff on crude imports is not going down), they certainly pose risks for the economy under this government, which has been focusing its energy policy on improving economic conditions worldwide.
The government also continues to make clear these barriers will not be eased once the transition is complete. As the Liberals learned when they went to court to challenge this, it is not just the oil sands that are exporting the majority of their energy – it is also the other sectors too.
As the transition to a new Canadian government is progressing, energy policy should be aimed at increasing efficiency and reducing the costs associated with importing and exporting energy. In fact, I believe that reducing the cost of making and shipping energy products is actually a very important component of a growing Canadian energy system – something we need to keep up to date on with the growing number of new plants, new processors, new pipelines and new sources of energy.
Canadian companies have invested more than $300 million to add Canadian gas to their portfolio under the new government. Our main goal after 2014 is to do all of that by the fall of 2015. We have already been very vocal in our commitment to do all of these things, including by making it easier for Canadian workers to get their jobs back in Canada.
As a result of these investments, there has been a significant rise in the demand for Canadian energy. A number of Canadian companies that were the initial source of this increase, that went on to sell their gas products by the early part of this year, have now started exporting their gas to the U.S. The U.S. had also seen increased investment in gas in recent years, and as of 2013, there were around 30 Canadian gas exports totaling $1.9 billion.
It is worth noting that this shift in energy supply and the rising price of gas has actually led to a significant increase in job creation in Canada. In 2007, there were about 28,000 jobs. This growth has now reached 7,000,000 – this is more than the number of jobs currently needed by Alberta and Saskatchewan in recent years on average.
Alberta has made remarkable progress in cutting its reliance on oil and gas, and in fact has been able to increase its hydro-electricity generation capacity by 7 to 8 per cent.
To understand why this is important, we need to look at the relationship between Canada’s business climate and Canada’s energy mix. For the first time, Canada can see a shift in the country’s energy mix towards low-carbon energy, while also expanding its renewable energy portfolio.
There appears to be growing competition among small and medium-sized businesses, particularly in the Canadian energy sector. Some companies are now switching to high-carbon energy because of competition with lower-carbon and higher-cost technologies. While there are still good reasons why high-carbon
[Footnote 1: See “Finance, Trade, Employment, and Pensions”, The Globe and Mail, August 23, 2003, p. B4][End Page 467]
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Canada is Canada’s only major trading partner in the United States, Canada exports 6.8 percent of its gross domestic product and is the world’s third-largest economy. Canada is also Canada’s only partner in the U.S., it offers direct trade to U.S. and Asia Pacific countries by way of its oil exports (U.S., Canada), the export of Canadian electricity equipment and a number of other items of strategic importance to the world economy. Although Canada had to pay some tariffs on steel in 1989 and 1991, the United States, Canada, and other nations in the South Pacific, including the Dominican Republic and Colombia, did not issue a tariff on steel exports (U.S., Canada). The U.S. did not issue rules prohibiting the export of steel in the case of steel, but it has generally prohibited the export of other products, such as fiberglass, plastic, aluminum. The U.S. was willing to pay Canadian taxes to the tune of up to $1 million and also agreed that it would not import any Canadian lumber products into the United States. Canada is Canada’s only trading partner in the U.S., it offers direct trade to U.S. and Asia Pacific countries by way of its oil exports (U.S., Canada), its electricity equipment-and-parts exports, and a significant portion of its production of other products (U.S. and Japanese). Canada is Canada’s only trading partner in the U.S., it offers direct trade to U.S. and Asia Pacific countries by way of its oil exports (U.S., Canada), its electricity equipment-and-parts exports, and a significant portion of its production of other products (U.S. and Japanese).
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The American Federation of Labor, with one of Canada’s largest unions, represents 20,000 workers in industrial, manufacturing and service occupations and receives payments from Canadian suppliers. In addition, the union provides some of the best education for workers, and is recognized as one of Canada’s most generous labor organizations.
On one hand, Canada’s employment policies for international trade are strong. In 1996 Canadians were able to join the International Trade Commission (ITC) and become a full member as part of a multistakeholder international trade partnership. This enabled the Canadian government to compete effectively with the EU in the construction of international trade agreements such as the TPP. Since the WTO was started in 1996 more than 40 countries have joined the Confederation of Canadian Industry (CICI), the Canadian Confederation of Trade Unions (CCTU), CEDEA and the Confederation of Canadian Financial Services in the form of associations of public sector workers of Canadian employers. Although it has made no commitments to join the CICI in its current form, it is an important link in the ongoing negotiation process (see Figure 1 for a comparison of Canadian trade relationships). While the CICI does participate in many bilateral WTO agreements, they are not considered by the U.S. as a full U.S.-CICI member. Although its size in Europe has certainly allowed it to lobby for trade deals, Canadian trade relationships with EU member countries are comparatively small. The fact that most Canadian countries are part of the European Union means that the only way for the Canadian government to be considered a full member will be if the United States and Canada share the following common approach:
[Footnote 2: See “Canadian Trade Relations”, The Globe and Mail, August 27, 2003, p. B2]
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Canadian citizens of Canada, both permanent residents and those who are newly residents of the United States, pay an extra 2.78 percent premium to Canadian dollars for every dollar that an American citizen paid in wages abroad. By contrast, Canadian nationals from non-Canadian territory pay $3.39. Canadian citizens of a U.S. territory pay $27.
[Footnote 1: See “Finance, Trade, Employment, and Pensions”, The Globe and Mail, August 23, 2003, p. B4][End Page 467]
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Canada is Canada’s only major trading partner in the United States, Canada exports 6.8 percent of its gross domestic product and is the world’s third-largest economy. Canada is also Canada’s only partner in the U.S., it offers direct trade to U.S. and Asia Pacific countries by way of its oil exports (U.S., Canada), the export of Canadian electricity equipment and a number of other items of strategic importance to the world economy. Although Canada had to pay some tariffs on steel in 1989 and 1991, the United States, Canada, and other nations in the South Pacific, including the Dominican Republic and Colombia, did not issue a tariff on steel exports (U.S., Canada). The U.S. did not issue rules prohibiting the export of steel in the case of steel, but it has generally prohibited the export of other products, such as fiberglass, plastic, aluminum. The U.S. was willing to pay Canadian taxes to the tune of up to $1 million and also agreed that it would not import any Canadian lumber products into the United States. Canada is Canada’s only trading partner in the U.S., it offers direct trade to U.S. and Asia Pacific countries by way of its oil exports (U.S., Canada), its electricity equipment-and-parts exports, and a significant portion of its production of other products (U.S. and Japanese). Canada is Canada’s only trading partner in the U.S., it offers direct trade to U.S. and Asia Pacific countries by way of its oil exports (U.S., Canada), its electricity equipment-and-parts exports, and a significant portion of its production of other products (U.S. and Japanese).
[/Page 468]
The American Federation of Labor, with one of Canada’s largest unions, represents 20,000 workers in industrial, manufacturing and service occupations and receives payments from Canadian suppliers. In addition, the union provides some of the best education for workers, and is recognized as one of Canada’s most generous labor organizations.
On one hand, Canada’s employment policies for international trade are strong. In 1996 Canadians were able to join the International Trade Commission (ITC) and become a full member as part of a multistakeholder international trade partnership. This enabled the Canadian government to compete effectively with the EU in the construction of international trade agreements such as the TPP. Since the WTO was started in 1996 more than 40 countries have joined the Confederation of Canadian Industry (CICI), the Canadian Confederation of Trade Unions (CCTU), CEDEA and the Confederation of Canadian Financial Services in the form of associations of public sector workers of Canadian employers. Although it has made no commitments to join the CICI in its current form, it is an important link in the ongoing negotiation process (see Figure 1 for a comparison of Canadian trade relationships). While the CICI does participate in many bilateral WTO agreements, they are not considered by the U.S. as a full U.S.-CICI member. Although its size in Europe has certainly allowed it to lobby for trade deals, Canadian trade relationships with EU member countries are comparatively small. The fact that most Canadian countries are part of the European Union means that the only way for the Canadian government to be considered a full member will be if the United States and Canada share the following common approach:
[Footnote 2: See “Canadian Trade Relations”, The Globe and Mail, August 27, 2003, p. B2]
]
Canadian citizens of Canada, both permanent residents and those who are newly residents of the United States, pay an extra 2.78 percent premium to Canadian dollars for every dollar that an American citizen paid in wages abroad. By contrast, Canadian nationals from non-Canadian territory pay $3.39. Canadian citizens of a U.S. territory pay $27.
An interesting observation from the absence of strong domestic economies is that most of Canada’s corporations are in fact merely branch plant operations of multinational companies with headquarters based in the US or in other countries. This is in part due to the fact that the Canadian economy fails to support the development of domestic giants because of the reasons discussed above. As a result, value-added activities, for example R&D, are not performed in Canada. The branch plant operations simply carry out non-strategic and non-value-added operations that do not give the county any competitive advantages or innovative drives. Furthermore, re-investment is limited in the Canadian operations because the majority of the resources are allocated to build the companies’ competitiveness, which is often done elsewhere.
Besides a relatively non-competitive business environment, Canada’s labour force also lacks the competitive mindset. Structural employment remains high, which is partly due to the existence of social assistance and unemployment insurance systems. Work incentives are low under the protection of the employment insurance program, which indirectly contributes in a higher than the desirable unemployment rate. Furthermore, unions and other similar groups do not promote many incentives for workers to stay competitive in the workplace by continuously learning and improving productivity. Countries that have been most successful in cutting unemployment are those that have improved incentives to work.
The OECD’s World Employment Organization shows that nearly two-thirds of all job losses in 2012 are due to the labor market conditions prevailing in the developing world. Despite the labour market, high levels of underemployment and low wages tend to leave young people looking for a job, while the average rate of deindustrialization among African and Pacific Islander workers from 1970 to 2000 was just below that of OECD members Sweden and the U.S.: World Economic Outlook. 2015.
But in addition to the benefits of economic growth, there are other things that drive people to work than a lower rate of return. The economic growth that results in an elevated demand for skills, resources, and capital, often associated with higher standard of living, raises wages, drives more investment and investment in skills and creates increased demand and investment in capital for all kinds of services, so it is likely that these are also the reasons why skilled, well-educated workers tend to make more money and take more risks in the labour market (and hence are more competitive in jobs that demand the kind of labour-market reforms implemented in other OECD countries). As for job losses, higher levels of unemployment, low wages, and underemployment also tend to drive higher participation rates relative to the population rather than lower jobless rates.
Even if the numbers on this count are true, it is not clear that there are major reasons why people stay in full-time work. In fact, despite the low levels of unemployment and underemployment in the developing world, some of the most highly desirable jobs remain, such as the highly visible and highly successful construction trades, manufacturing, and construction industry. Still, the economic growth caused by increasing productivity and more labour-intensive economic activity may also have important political effects on that high levels of unemployment, if not overall, than on lower levels.
The other reason economists call for more rigorous political and business policies to curb underemployment and improve the status quo is also an important one. If more flexibility is being given to business owners by governments to offer benefits for working part-time that are not given to jobseekers, more incentives will be given to those businesses wanting to offer these benefits. Furthermore, it should be kept in mind that there is a strong belief in economic theory and evidence that the social environment favors those who are looking to get ahead. There are, of course, differences in their motivations and motivations within the different countries and levels of economic development at play, which affect how they think about their own prospects.
Canadian’s immigration policies are one of the country’s strategies to boost its human capital. The potential economic benefits include the filling of domestic skill shortages and bringing in foreign competition from foreign labour market. However, recently the economic performance of immigrants has deteriorated, largely due to the ineffective integration of these immigrants into the domestic labour force. This is in turn because of the immigrants’ credentials are not fully recognized, as well as because of their lower proficiency in English and French.
The Canadian working environment, when compared to that in the US, may not be attractive enough to highly skilled workers. This is primarily because of the large income gap between the Canadian and US labour market. Workers with the skills and competitiveness are better off working in the US because they are able to earn a better income and have more opportunities for career development with larger and