Failure to Plan is Planning to Fail: The Reason to Build Canada’s Industrial Policy

Industrial policy has become crucial for nations aiming to foster economic growth, innovation, and competitiveness in today's global economy. Considering the worldwide insecurity sparked by Russia's illegal invasion of Ukraine, the COVID-19 pandemic fallout, and the impacts of climate change, Canada must craft a proactive and robust industrial strategy across key sectors vital to our national interest.

We need to respond effectively to the policies and strategies of the United States (Buy America, the CHIPS and Science Act, and the IRA), China (the Belt and Road Initiative and Made in China 2025), and the European Union (the Green Deal Industrial Plan). Canada's current approach of providing resources and funding on an ad-hoc basis in reaction to global crises is profoundly inefficient and costly, especially when every dollar counts.

While we may not be able to match the financial investments of the United States, China, or the European Union, we can leverage our competitive advantages in research and development, talent, and natural resources. Positioned geographically and economically for success in the 21st century, Canada must prioritize and refine its industrial policy to stay competitive globally. Rather than picking winners and losers, we should support industries and people in sectors critical to our economic and national interests. Forward thinking policies that will coordinate domestic and foreign investment within a new pan-Canadian economic strategy is essential for economic growth in all of Canada’s regions.

Economic Imperatives

Strengthening Domestic Industries

Canada's economic landscape is heavily influenced by key industries such as natural resources, manufacturing, and technology. A well-crafted industrial policy can provide targeted support to these sectors, boosting their productivity and global competitiveness. Significant investment in research and development (R&D) is crucial; and it is high time that Canada ramps up its R&D spending to drive innovation. We need to commercialize good research and review the ways we are hindering economic growth within our own country. By encouraging private sector investment and fostering public-private partnerships, Canada can lead in technological advancements to create high-value jobs.

Strategic diversification of Canada's economy, particularly through the development of emerging industries like artificial intelligence, renewable energy, and advanced manufacturing, can pave the way for a more resilient economy. This diversification is essential for mitigating risks associated with global market fluctuations and ensuring sustainable economic growth.

To achieve this, we must implement a policy that leverages our strengths and provides economic and social value to Canadians. For example, a clear, coherent, and long-term defense strategy is needed, unlike the recent Liberal government's "Our North, Strong and Free: A Renewed Vision for Canada's Defence," which only outlines "considerations" and "options we will explore." When addressing critical issues within the federal government's purview, it is paramount to use committed, long-term language in communicating objectives. Casual and aimless documents from the federal government, in place of concrete industrial policies and national strategies, do more harm to Canada’s global standing than not producing any document at all. Future investment and procurement require stability and reliability. The government changing course repeatedly directly impedes our growth and negatively impacts our economic and national security.

Strategic Considerations

Enhancing Global Competitiveness

As economic powerhouses and strategic competitors, the United States, China, and the European Union have swiftly implemented aggressive industrial policies to dominate critical global markets. In this context, Canada must adopt strategies to enhance its international competitiveness promptly. This includes investing in critical infrastructure, improving education and skills training, and fostering a business environment conducive to innovation and entrepreneurship. By taking these steps, Canada can attract the international investment it has lost under the current government, retain talent, and expand its global market share.

Responding to SOEs

In the context of China, it is critical that Canada develops a strategy to address the heavy subsidization and participation of its state-owned enterprises (SOEs) in the global economy. Unfair market practices by a strategic competitor pose a significant threat to Canadian workers and producers. We must acknowledge this reality when constructing our industrial policy and develop tools to respond effectively. By implementing measures to counteract the advantages enjoyed by SOEs, Canada can protect its industries, ensure fair competition, and safeguard the interests of its workforce.

National Security and Supply Chain Resilience

Industrial policy also plays a crucial role in national security. The COVID-19 pandemic exposed vulnerabilities in global supply chains, prompting nations to reassess their dependencies. The Russian invasion of Ukraine further highlighted deficiencies in the arsenal of democracy. Canada must develop policies to secure its supply chains, particularly for essential goods such as medical supplies, semiconductors, and critical minerals. By building domestic capabilities and diversifying supply sources, Canada can enhance its economic sovereignty and reduce reliance on foreign entities.

Currently, the United States Senate is considering the Promoting Resilient Supply Chains Act, which previously passed the House of Representatives by an overwhelming margin. This legislation proposes a comprehensive review of the U.S. supply chain ecosystem by the Department of Commerce to ensure national and economic security. By examining secondary and tertiary levels, the Department aims to identify gaps or vulnerabilities for critical goods, including those in manufacturing, warehousing, transportation, and distribution.

Canada must adopt a similar forward-thinking approach. We need to proactively recognize and address our nation's supply chain shortfalls. Future challenges such as recessions, debt crises, disease outbreaks, or conflicts are inevitable, and Canada must be prepared to manage these events effectively.

Socio-Political Implications

Job Creation and Social Equity

A well-crafted industrial policy can drive job creation and promote social equity. By focusing on high-growth sectors and investing in education and training programs, Canada can ensure its workforce is equipped with the skills needed for the jobs of the future. This not only reduces unemployment but also addresses income inequality by providing opportunities for upward mobility. Moreover, policies that support small and medium-sized enterprises can stimulate local economies and foster inclusive growth.

A national industrial policy can help address geographic inequities in Canada by encouraging population growth and job creation outside a handful of major cities. By investing in other provinces and rural areas, the Government of Canada can actively diversify our economy beyond the 401 corridor.

Conclusion

In conclusion, developing a comprehensive industrial policy is essential for Canada to navigate the complexities of the modern global economy. By responding to the aggressive industrial strategies of the United States, China, and the European Union, Canada can strengthen its domestic industries, promote innovation, and enhance its international competitiveness.

A well-designed industrial policy can address strategic considerations such as national security and supply chain resilience while promoting job creation, social equity, and environmental sustainability. As Canada moves forward, it is imperative to prioritize and refine its industrial policy to secure a prosperous and sustainable future.