The events of recent weeks may have finally broken our state of complacency. The impending presidency of Donald Trump, accompanied by his disruptive trade agenda, has sent shockwaves through our political class, fueling deep anxiety across the country.
Posted yesterday at 4:00 p.m.
Robert Asselin
Senior Vice-President at the Business Council of Canada and Fellow at the Munk School of Global Affairs & Public Policy at the University of Toronto. He served as advisor to two prime ministers of Canada.
This external threat ultimately forced a rethinking of Canada’s internal and self-inflicted economic vulnerabilities. The crisis we are facing is not just about customs tariffs; it highlights the fragility of our economic foundations and the imperative to act decisively to rebuild them.
Geopolitical realignments and demographic pressures are all ruthless realities that we must face. Our persistent challenges – low innovation, stagnant productivity and declining competitiveness – have left Canada ill-equipped to face this critical moment.
Real GDP per capita has declined in eight of the past nine quarters, returning to levels last seen in 2017. To return to its pre-pandemic trajectory over the next decade, GDP per capita would need to grow at an average annual rate of 1.7%, a notable departure from current trends. Productivity growth, the cornerstone of economic health, has averaged just 0.8% per year over the past two decades, compared to 2% in the United States. Furthermore, investments in intellectual property products per Canadian worker represent only 30 cents for every dollar invested per American worker.
We are in a moment of economic emergency. Instead of being paralyzed by external pressures, we must focus our efforts on what we can control: a long-term economic growth agenda that will strengthen our resilience from within.
Lessons from history
History offers powerful lessons about how existential threats can catalyze transformations. In 1957, the launch of the satellite Sputnik by the Soviet Union exposed the technological vulnerabilities of the United States, triggering a rapid and decisive response. The creation of the Defense Advanced Research Projects Agency (DARPA), coupled with massive investments in science and technology, repositioned the United States as a global leader in aerospace, computing, and communications.
The Netherlands experienced a similar challenge after the Second World War. The winter of hunger exposed the fragility of food systems, prompting a decisive response. Strategic investments in agricultural research, sustainable practices and public-private partnerships have enabled the Netherlands to become a global leader in agricultural innovation. Today, despite its small size, the Netherlands exports more than 100 billion euros of agricultural products each year.
Israel provides another example of innovation born of necessity. Surrounded by hostile neighbors and with limited natural resources, Israel has embraced a culture of ingenuity, investing strategically in defense, water management and cybersecurity. Israel’s technology industry now accounts for nearly 15% of GDP and more than 40% of exports, demonstrating how existential threats can inspire world-class innovation.
Canada now finds itself at a crossroads. This moment of crisis must be used to refocus the country on its growth engines.
-Interprovincial trade barriers, regulatory blockages and an uncompetitive tax system – policymakers have been repeatedly warned of these structural problems – take their toll. Yet little progress has been made.
Promote technological progress
PHOTO EDOUARD PLANTE-FRÉCHETTE, LA PRESSE ARCHIVES
Inspection of silicon chips using a microscope made in Quebec
Investing in advanced industries – such as biotechnology, aerospace, energy and energy technologies, and advanced manufacturing – is essential for modern economies. These sectors are key drivers of innovation and productivity, driving economic growth and creating well-paid jobs. Yet Canada’s science and technology (S&T) ecosystem is not generating innovation at the same rate as its global peers.
Countries such as the United States, Germany, South Korea, Israel and the Netherlands have long understood the central role of public research and development institutions and the importance of a well-coordinated ecosystem to foster technological progress. These nations have implemented effective mechanisms to connect public research with private sector investments, ensuring that innovation drives economic growth and competitiveness.
To catch up, Canada must focus on creating mechanisms that translate intellectual capital – public research and development – into private innovation.
This requires building strong institutions between the public and private sectors to bridge the gap between discovery and commercialization.
As history shows, resilience and innovation often emerge not from comfort, but from necessity and urgency. It’s time Sputnik of Canada – its test of ingenuity and determination.
If we do not take responsibility for correcting our structural economic weaknesses, who will? And if we don’t act decisively in this moment of economic emergency, when will we?
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