By getting the Innovation, Science and Economic Development portfolio right, the government can set Canada on course for a more prosperous future.
By Benjamin Dachis and Grant Bishop
The main elixir the incoming government promised for Canada’s slow economy was infrastructure spending. Smart investments in infrastructure can help long-term growth, but the roots of Canada’s growth challenges go deeper than poor transit and crumbling bridges.
Navdeep Bains, the incoming Minister of Innovation, Science and Economic Development, will play an essential role in addressing those challenges. There is no magic potion for lacklustre economic performance, but we offer four things the minister can do to spur the Canadian economy.
First, he should make Canada’s Competition Bureau a world-leading competition enforcement agency. The bureau is the referee of the rough and tumble of competition, but companies need to know that the referee will enforce the rules rigorously and transparently.
Predictable competition enforcement promotes economic dynamism through creative destruction. Strong companies outplay weak ones, improving productivity overall. But, like a referee having its rulings overturned on video review, the bureau has suffered a recent string of losses. As a result, some in the business and legal community wonder whether it’s picking the right battles.
As the C.D. Howe Institute’s Competition Policy Council will recommend in a report to be released Thursday, Mr. Bains should appoint an independent oversight body that would scrutinize bureau decision-making. This oversight body can offer strategic planning and demand performance reporting by the bureau.
Second, the minister should rethink the previous government’s regulation of telecommunications and broadcasting. Telecommunications is the linchpin of Canada’s digital economy. It shapes Canadians’ uptake of new ideas and technologies. Rapid technological progress has made a technology-specific regulator like the Canadian Radio-television and Telecommunications Commission an anachronism. The CRTC regulates the likes of Rogers and Bell, but not Netflix. The Minister should appoint an independent review panel to bring Canadian telecommunications regulation into the 21st century.
The Harper government committed in 2006 to defer to market forces in regulating the telecom sector. But it soon reverted to heavy regulation, including mandating pick-and-pay of television channels and limiting spectrum transfers. Those rules resulted in less competition between incumbents. The government was too focused on promoting new competitors rather than enhancing competition.
Mr. Bains should defer to market forces and competition within the sector. Where there are concerns about anti-competitive conduct, the minister should have the CRTC should step aside and let the Competition Bureau take the lead.
Third, the minister should reform Canada’s rules reviewing foreign investments. In particular, he should take a close look at the “net benefit” test of the Investment Canada Act. That arbitrary test inappropriately places the burden on a would-be foreign acquirer to show why it should be welcome. The current test politicizes what should be an impartial economic analysis.
There is evidence that investors are staying away from Canada because of uncertainty created by the Act. It deprives Canadian businesses of foreign capital and it insulates underperforming Canadian companies from foreign competition, which inhibits the creative destruction that propels the Canadian economy.
The minister should instead put the burden of proof on the government to show that a purchase would harm the economy. Several reports, including the 2008 “Red” Wilson report on Competition Policy, have recommended that the minister reverse the onus to require the government to demonstrate that a transaction is a “net detriment.”
Fourth, the minister should reinvest in Statistics Canada. Businesses need sound statistics. The minister should quickly restore the mandatory long-form census and reinvigorate Statistics Canada’s other programs. In particular, Mr. Bains should devote more resources to surveys of wealth and financial security. These are essential to understanding saving behaviour and inequality trends.
Statistics Canada can better leverage the efforts of external researchers. Researchers from across Canada now must travel to Ottawa to access protected data. The minister should have Statistics Canada place more data in its research data centres at universities across the country.
Infrastructure spending is not the only arrow in the government’s economic quiver. By getting the Innovation, Science and Economic Development portfolio right, the government can set Canada on course for a more prosperous future.
Benjamin Dachis is a Senior Policy Analyst at the C.D. Howe Institute, Grant Bishop is a Fellow-in-Residence at the C.D. Howe Institute
Published in the Globe and Mail.
