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77th Annual Summer Conference, August 7–10, 2008

Globalization and Competitiveness

KEVIN LYNCH, Clerk of the Privy Council and Secretary to the Cabinet
Moderator: DON McCUTCHAN, Program Committee, CIPA

Summary by Andrew Ng

The scale, scope, and pace of change today is unprecedented with respect to the intersection of globalization, knowledge, and competition. The greatest challenge Canada faces today is adapting to and keeping pace with the political, economic, and social forces of globalization. Global competition has transformed global marketplaces, vastly increased efficiency and reduced costs, but has also exposed countries to risks from abroad. Globally integrated manufacturing chains, as one example, have lowered costs but also undermined quality control of products. Economic reforms in the 1980s and 1990s have propelled economic growth in developing countries, particularly India, China, and the “rise of the rest.”

In light of one initiative examining this challenge, “Canada at 150” – bringing together 150 of Canada’s best public servants under 35 to explore the nature of these challenges toward 2017 – how do we see the country at 150? While growth and progress are not pre-ordained, neither does the “rise of the rest” necessarily threaten the Canadian economy. Take for example the chain of value addition for making an iPod: only 10 cents per dollar goes into assembly, while 40 cents goes to innovation and 50 cents to distribution and retail sales. At the same time, China is rapidly increased its investment in research and development.

In 2017, our standard of living will depend on our productivity growth. Our productivity is significantly lower than U.S. productivity and our rate of growth lags among our peers. Canada ranks seventeenth among rich countries in productivity per hour worked. Thanks to eleven straight years of surpluses, a lower net debt among G7 nations, and a lower corporate tax rate than the United States, the fundamentals of the Canadian economy are sound. Moving forward, we need to think globally and competitively, boost interaction across sectors including between the private and public sectors, and exploit our agility as a medium-sized economy.

Our competitiveness also depends to a large extent on the quality of our public service. Today the Canadian public service is under constant pressure to adapt to new circumstances, but faces an urgent need for renewal due to demographic changes. Currently the average age of Canadian public servants is 44, while 50 percent of executives are eligible to retire by 2012 with non-reduced pensions. Moreover, today the labour market is highly competitive with many private sector options with whom the public service competes. Renewal of the public service can start with making recruiting for the public service less bureaucratic and more personal as well as updating the public service’s brand.

Looking ahead, for Canada to become more competitive, the macroeconomic framework must be sound, innovation must drive productivity growth, the private sector must invest in innovation while public policy enables, we must build on Canada’s comparative advantages, and we must expect excellence.

In the question and answer session, Lynch discussed the protection of intellectual property, the role of innovation in manufacturing, retention of high-quality public servants, Canadian economic policy since NAFTA, tax incentives for research and development, how knowledge is valued and measured, collaboration between the public, private, and third sectors, the Lebanon evacuation, and innovation for the next generation.