Economic Policies
#13Key Findings
Having been hard hit by the pandemic, Canada falls into the upper-middle ranks (rank 13) with regard to its economic policies. Its score in this area has declined by 0.3 points relative to its 2014 level.
The country entered the pandemic with a stable economy, low unemployment rates and inflation under control. It subsequently fell into the deepest recession since the 1930s, with GDP contracting by 17%. Three million people lost their jobs. Wage subsidies and other responses mitigated the damage, but the unemployment rate ultimately reached above 12%
By late 2021, a recovery was building, with GDP growth surpassing 5%, and unemployment back to pre-pandemic levels. Nonetheless, unemployment rates remain very high among Indigenous Canadians. Federal debt rose from about 31% of GDP in 2019 to 47.5% in 2021. Fiscal sustainability is a serious problem at the provincial government level.
Despite income-tax progressivity, inequality has risen in recent decades. A new digital services tax will impose levies on corporations whose digital services rely on Canadian users. A long-term slide in R&D expenditures has raised concern despite the sector’s comparatively good performance.
The country entered the pandemic with a stable economy, low unemployment rates and inflation under control. It subsequently fell into the deepest recession since the 1930s, with GDP contracting by 17%. Three million people lost their jobs. Wage subsidies and other responses mitigated the damage, but the unemployment rate ultimately reached above 12%
By late 2021, a recovery was building, with GDP growth surpassing 5%, and unemployment back to pre-pandemic levels. Nonetheless, unemployment rates remain very high among Indigenous Canadians. Federal debt rose from about 31% of GDP in 2019 to 47.5% in 2021. Fiscal sustainability is a serious problem at the provincial government level.
Despite income-tax progressivity, inequality has risen in recent decades. A new digital services tax will impose levies on corporations whose digital services rely on Canadian users. A long-term slide in R&D expenditures has raised concern despite the sector’s comparatively good performance.
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How successful has economic policy been in providing a reliable economic framework and in fostering international competitiveness?
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Economic policy fully succeeds in providing a coherent set-up of different institutional spheres and regimes, thus stabilizing the economic environment. It largely contributes to the objectives of fostering a country’s competitive capabilities and attractiveness as an economic location.
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Economic policy largely provides a reliable economic environment and supports the objectives of fostering a country’s competitive capabilities and attractiveness as an economic location.
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Economic policy somewhat contributes to providing a reliable economic environment and helps to a certain degree in fostering a country’s competitive capabilities and attractiveness as an economic location.
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1
Economic policy mainly acts in discretionary ways essentially destabilizing the economic environment. There is little coordination in the set-up of economic policy institutions. Economic policy generally fails in fostering a country’s competitive capabilities and attractiveness as an economic location.
Prior to March 2020, Canada’s economy was stable, with low unemployment and controlled inflation. The onset of the pandemic plunged Canada into the deepest recession since the thirties. At its peak, GDP contracted by 17% and 3 million Canadians lost their employment. Moreover, previously thriving sectors such as travel were essentially shut down.
An extensive array of fiscal and economic policy initiatives were introduced to gird against the worst impacts as lockdowns were introduced to control the spread of the virus. The Bank of Canada brought interest rates to 0.25% by 2020 year end and critical programming undertaken by the federal government included the Canada Emergency Response Benefit and the Canada Emergency Wage Subsidy. By December 2021, the government was reporting a budgetary deficit of CAD 327.7 billion for 2020-2021. While the full impact of economic measures taken has yet to be assessed, a report by the Parliamentary Budget Officer in May of 2021 estimated the impact of a select subgroup of budgetary measures (CAD $142.9 billion) would have increased real GDP growth by 0.6 percentage points in 2021. The emergency measures likely also alleviated a sustained unemployment rate above 12% into the end of 2021 (Canada 2020, 38).
By the third quarter of 2021 both the economy and employment began to recover, with GDP growth reaching 5.4%. However, a new wave of the pandemic associated with Omicron has necessitated another round of lockdowns and limited business capacity at the beginning of 2022. The full implications of this for economic growth have yet to be evaluated but the economy is still in a very fragile state, and the federal government has promised continuing support for businesses and workers even though most of the emergency programming measures taken have now ended. The rate of inflation, especially driven by supply chain shortages and the cost of food, has put further pressure on household incomes. In November of 2021, the Consumer Price Index rose 4.7% over the previous year. Together with the burgeoning deficit, the government will need to steer a careful course of responsible fiscal management and targeted stimulus measures.
Generally speaking, both the federal and provincial governments have implemented market-oriented policies that have enhanced the country’s attractiveness to business. However, a continuing key challenge for Canada involves the coordination of regulatory policy across federal and provincial jurisdictions, exacerbated by the presence of interprovincial barriers to trade and labor mobility. Another factor is the country’s dependence on natural resources, which account for roughly 20% of GDP. Aside from the challenges posed by decarbonization and the risks associated with the high levels of price volatility in this sector, uncertainties regarding policies and regulations surrounding major projects (e.g., the duty to consult with Indigenous groups) have the potential to stall investment. This factor may be mitigated by the current Liberal government’s new Bill C-69 (the Environmental Assessment Act), which is aimed at reducing uncertainty in large-scale projects. The effectiveness of the bill has yet to be demonstrated, however.
A final concern focuses on the need for talent and innovative ability. In the World Economic Forum’s 2019 Global Competitiveness Report, Canada continued to receive low rankings with regard to technological readiness, business sophistication and the capacity to innovate. Previous federal budgets in 2017 and 2018 attempted to stimulate innovation through the development of “innovation superclusters,” but while focused on scaling and growth, these clusters have not yet made a major impact.
Citations:
Bank of Canada, Annual Report 2020, https://www.bankofcanada.ca/publications/annual-reports-quarterly-financial-repo rts/annual-report-2020/.
Government of Canada, Economic and Fiscal Update 2021, https://budget.gc.ca/efu-meb/2021/home-accueil-en.html
Office of the Parliamentary Budget Officer, Impact Assessment of Budget 2021 Measures, 27 May 2021, https://www.pbo-dpb.gc.ca/en/blog/news/RP-2122-007-S–impact-assessment-budget-2021-measures–evaluation-incidence-mesures-budget-2021.
Statistics Canada, “Consumer Price Index, November 2021,” 15 December 2021, https://www150.statcan.gc.ca/n1/daily-quotidien/211215/dq211215a-eng.htm
World Economic Forum, The Global Competitiveness Report 2019.
An extensive array of fiscal and economic policy initiatives were introduced to gird against the worst impacts as lockdowns were introduced to control the spread of the virus. The Bank of Canada brought interest rates to 0.25% by 2020 year end and critical programming undertaken by the federal government included the Canada Emergency Response Benefit and the Canada Emergency Wage Subsidy. By December 2021, the government was reporting a budgetary deficit of CAD 327.7 billion for 2020-2021. While the full impact of economic measures taken has yet to be assessed, a report by the Parliamentary Budget Officer in May of 2021 estimated the impact of a select subgroup of budgetary measures (CAD $142.9 billion) would have increased real GDP growth by 0.6 percentage points in 2021. The emergency measures likely also alleviated a sustained unemployment rate above 12% into the end of 2021 (Canada 2020, 38).
By the third quarter of 2021 both the economy and employment began to recover, with GDP growth reaching 5.4%. However, a new wave of the pandemic associated with Omicron has necessitated another round of lockdowns and limited business capacity at the beginning of 2022. The full implications of this for economic growth have yet to be evaluated but the economy is still in a very fragile state, and the federal government has promised continuing support for businesses and workers even though most of the emergency programming measures taken have now ended. The rate of inflation, especially driven by supply chain shortages and the cost of food, has put further pressure on household incomes. In November of 2021, the Consumer Price Index rose 4.7% over the previous year. Together with the burgeoning deficit, the government will need to steer a careful course of responsible fiscal management and targeted stimulus measures.
Generally speaking, both the federal and provincial governments have implemented market-oriented policies that have enhanced the country’s attractiveness to business. However, a continuing key challenge for Canada involves the coordination of regulatory policy across federal and provincial jurisdictions, exacerbated by the presence of interprovincial barriers to trade and labor mobility. Another factor is the country’s dependence on natural resources, which account for roughly 20% of GDP. Aside from the challenges posed by decarbonization and the risks associated with the high levels of price volatility in this sector, uncertainties regarding policies and regulations surrounding major projects (e.g., the duty to consult with Indigenous groups) have the potential to stall investment. This factor may be mitigated by the current Liberal government’s new Bill C-69 (the Environmental Assessment Act), which is aimed at reducing uncertainty in large-scale projects. The effectiveness of the bill has yet to be demonstrated, however.
A final concern focuses on the need for talent and innovative ability. In the World Economic Forum’s 2019 Global Competitiveness Report, Canada continued to receive low rankings with regard to technological readiness, business sophistication and the capacity to innovate. Previous federal budgets in 2017 and 2018 attempted to stimulate innovation through the development of “innovation superclusters,” but while focused on scaling and growth, these clusters have not yet made a major impact.
Citations:
Bank of Canada, Annual Report 2020, https://www.bankofcanada.ca/publications/annual-reports-quarterly-financial-repo rts/annual-report-2020/.
Government of Canada, Economic and Fiscal Update 2021, https://budget.gc.ca/efu-meb/2021/home-accueil-en.html
Office of the Parliamentary Budget Officer, Impact Assessment of Budget 2021 Measures, 27 May 2021, https://www.pbo-dpb.gc.ca/en/blog/news/RP-2122-007-S–impact-assessment-budget-2021-measures–evaluation-incidence-mesures-budget-2021.
Statistics Canada, “Consumer Price Index, November 2021,” 15 December 2021, https://www150.statcan.gc.ca/n1/daily-quotidien/211215/dq211215a-eng.htm
World Economic Forum, The Global Competitiveness Report 2019.
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How effectively does labor market policy address unemployment?
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Successful strategies ensure unemployment is not a serious threat.
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Labor market policies have been more or less successful.
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Strategies against unemployment have shown little or no significant success.
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Labor market policies have been unsuccessful and rather effected a rise in unemployment.
The unemployment rate in Canada is primarily driven by the business cycle, which reflects aggregate demand conditions. Labor market policies and programs such as unemployment insurance and training programs are important for income support and the upgrading of skills.
Pre-pandemic, the national labor market continued its strong performance, with Canada’s unemployment rate reaching a 40-year low of 5.9% in 2019. However, as economic output tumbled in response to lockdowns and the pandemic, the rate of unemployment surged. Indeed, among OECD countries, Canada along with the United States, experienced some of the largest increases in temporary unemployment. However, with economic recovery and measures such as the Canada Emergency Wage Subsidy and Canada Emergency Response Benefit to help buffer the most severe impacts of the recession, Canada’s unemployment rate has now fallen back down, almost to pre-pandemic levels at 6.0%. Among G-7 countries, Canada has been one of the leading countries in jobs recovery (Canada 2021, 20).
Nevertheless, the labor-force participation rates of women, young Canadians, racialized Canadians and Indigenous peoples were especially negatively impacted by the pandemic and rates are lower than they could be, with these groups representing a significant untapped source of potential economic growth. Unemployment rates among Indigenous Canadians, particularly those of Inuit and First Nations members living on reserves, remain very high, suggesting that existing employment-support programs are insufficient. Indeed while non-Indigenous employment has rebounded to levels just slightly below those of 2019, employment rates for Indigenous peoples have remained stuck essentially at 2019 levels. Non-indigenous employment specifically rebounded for men just 0.8 percentage points off 2019 and for women just 0.9 percentage points off 2019 (not seasonally adjusted).
The federal government has recognized both the need to improve the economic environment (for instance, by encouraging businesses to hire new workers) and the need for more effective workplace training, but many of its measures in this area have not had the desired effect. Labor shortages are a growing problem and the situation is particularly acute among nurses and personal care attendants.
Citations:
Government of Canada, Economic and Fiscal Update 2021, 2021, https://budget.gc.ca/efu-meb/2021/home-accueil-en.html.
OECD, Employment Outlook: 2021, 2021, Paris: OECD Publishing.
OECD, Employment Outlook: 2020, 2020, Paris: OECD Publishing.
Statistics Canada, Labour Force Survey, November 2021, 3 December 2021, https://www150.statcan.gc.ca/n1/daily-quotidien/211203/dq211203a-cansim-eng.htm.
Pre-pandemic, the national labor market continued its strong performance, with Canada’s unemployment rate reaching a 40-year low of 5.9% in 2019. However, as economic output tumbled in response to lockdowns and the pandemic, the rate of unemployment surged. Indeed, among OECD countries, Canada along with the United States, experienced some of the largest increases in temporary unemployment. However, with economic recovery and measures such as the Canada Emergency Wage Subsidy and Canada Emergency Response Benefit to help buffer the most severe impacts of the recession, Canada’s unemployment rate has now fallen back down, almost to pre-pandemic levels at 6.0%. Among G-7 countries, Canada has been one of the leading countries in jobs recovery (Canada 2021, 20).
Nevertheless, the labor-force participation rates of women, young Canadians, racialized Canadians and Indigenous peoples were especially negatively impacted by the pandemic and rates are lower than they could be, with these groups representing a significant untapped source of potential economic growth. Unemployment rates among Indigenous Canadians, particularly those of Inuit and First Nations members living on reserves, remain very high, suggesting that existing employment-support programs are insufficient. Indeed while non-Indigenous employment has rebounded to levels just slightly below those of 2019, employment rates for Indigenous peoples have remained stuck essentially at 2019 levels. Non-indigenous employment specifically rebounded for men just 0.8 percentage points off 2019 and for women just 0.9 percentage points off 2019 (not seasonally adjusted).
The federal government has recognized both the need to improve the economic environment (for instance, by encouraging businesses to hire new workers) and the need for more effective workplace training, but many of its measures in this area have not had the desired effect. Labor shortages are a growing problem and the situation is particularly acute among nurses and personal care attendants.
Citations:
Government of Canada, Economic and Fiscal Update 2021, 2021, https://budget.gc.ca/efu-meb/2021/home-accueil-en.html.
OECD, Employment Outlook: 2021, 2021, Paris: OECD Publishing.
OECD, Employment Outlook: 2020, 2020, Paris: OECD Publishing.
Statistics Canada, Labour Force Survey, November 2021, 3 December 2021, https://www150.statcan.gc.ca/n1/daily-quotidien/211203/dq211203a-cansim-eng.htm.
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How effective is a country’s tax policy in realizing goals of revenue generation, equity, growth promotion and ecological sustainability?
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Taxation policy fully achieves the objectives.
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Taxation policy largely achieves the objectives.
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Taxation policy partially achieves the objectives.
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Taxation policy does not achieve the objectives at all.
Like other Western economies, Canada has seen the share of total income going to the top 1% of earners increase dramatically since 1980. Moreover, the earnings of male workers have stagnated as labor demand has polarized due to changes in technology and trade.
The income tax system is reasonably progressive and continues to be useful in equalizing after-tax incomes for lower income brackets. According to the Conference Board of Canada, there are now almost 200 tax breaks for federal income-taxpayers, resulting in an estimated CAD 100 billion of foregone tax revenue annually. Some experts have argued that the multitude of overlapping tax expenditures benefit high-income individuals at the expense of low-income households. The 2019 budget introduced a $200,000 cap on stock-option exemptions, a policy move that aligned Canada’s treatment of stock options with that of the United States. The 2018 budget introduced the Canada Workers Benefit (CWB) as a refundable tax credit intended to supplement the earnings of low-income workers and improve work incentives for low-income Canadians. The move was welcomed by experts, as the CWB has higher benefits and is more easily accessible than its predecessor, the Working Income Tax Benefit, which was widely considered ineffective.
More recently, in 2019, the Multilateral Instrument was introduced through Bill C-82. This instrument, developed by the OECD, is designed to prevent tax-base erosion and profit-shifting by multinational corporations’ use of tax havens. In Budget 2021, the government has also committed to introducing a new Digital Services Tax of 3% on revenue from digital services that rely on Canadian users. The tax will apply to large corporations with gross revenues of CAD 750 million or more.
Canada fares well in terms of tax competitiveness. There is no double taxation at the corporate or individual level. Statutory corporate-tax rates at the federal level and within the provinces have been reduced significantly in recent years. The marginal effective tax rate on investment has fallen, and is now the lowest among G-7 countries, and is below the OECD average. Capital taxes have been largely eliminated. The Trudeau administration has also created a new External Advisory Committee on Regulatory Competitiveness in order to reduce the red tape that many businesses claim slows down investment.
Citations:
Government of Canada, A Recovery Plan for Jobs, Growth, and Resilience, 2021, https://www.budget.gc.ca/2021/home-accueil-en.html.
The Conference Board of Canada, “Reinventing the Canadian Tax System: The Case for Comprehensive Tax Reform.” March 23, 2012.
Department of Finance, Government of Canada, “Introducing the Canada Workers Benefit,” https://www.fin.gc.ca/n18/docs/18-008_5-eng.pdf.
The income tax system is reasonably progressive and continues to be useful in equalizing after-tax incomes for lower income brackets. According to the Conference Board of Canada, there are now almost 200 tax breaks for federal income-taxpayers, resulting in an estimated CAD 100 billion of foregone tax revenue annually. Some experts have argued that the multitude of overlapping tax expenditures benefit high-income individuals at the expense of low-income households. The 2019 budget introduced a $200,000 cap on stock-option exemptions, a policy move that aligned Canada’s treatment of stock options with that of the United States. The 2018 budget introduced the Canada Workers Benefit (CWB) as a refundable tax credit intended to supplement the earnings of low-income workers and improve work incentives for low-income Canadians. The move was welcomed by experts, as the CWB has higher benefits and is more easily accessible than its predecessor, the Working Income Tax Benefit, which was widely considered ineffective.
More recently, in 2019, the Multilateral Instrument was introduced through Bill C-82. This instrument, developed by the OECD, is designed to prevent tax-base erosion and profit-shifting by multinational corporations’ use of tax havens. In Budget 2021, the government has also committed to introducing a new Digital Services Tax of 3% on revenue from digital services that rely on Canadian users. The tax will apply to large corporations with gross revenues of CAD 750 million or more.
Canada fares well in terms of tax competitiveness. There is no double taxation at the corporate or individual level. Statutory corporate-tax rates at the federal level and within the provinces have been reduced significantly in recent years. The marginal effective tax rate on investment has fallen, and is now the lowest among G-7 countries, and is below the OECD average. Capital taxes have been largely eliminated. The Trudeau administration has also created a new External Advisory Committee on Regulatory Competitiveness in order to reduce the red tape that many businesses claim slows down investment.
Citations:
Government of Canada, A Recovery Plan for Jobs, Growth, and Resilience, 2021, https://www.budget.gc.ca/2021/home-accueil-en.html.
The Conference Board of Canada, “Reinventing the Canadian Tax System: The Case for Comprehensive Tax Reform.” March 23, 2012.
Department of Finance, Government of Canada, “Introducing the Canada Workers Benefit,” https://www.fin.gc.ca/n18/docs/18-008_5-eng.pdf.
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To what extent does budgetary policy realize the goal of fiscal sustainability?
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Budgetary policy is fiscally sustainable.
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Budgetary policy achieves most standards of fiscal sustainability.
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Budgetary policy achieves some standards of fiscal sustainability.
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Budgetary policy is fiscally unsustainable.
Going into the pandemic, Canada was in a relatively strong fiscal position. While the federal government had incurred a deficit of CAD 14.9 billion in 2018-2019, the federal net debt was 30.8% of GDP, and the country as a whole still registered the lowest net debt-to GDP ratio among G-7 countries. However, as the government rolled out extensive programming to support businesses and workers as they sustained extensive financial losses and loss of employment, federal expenditures soared. Indeed, federal measures accounted for the majority of spending during the pandemic. As a result, the last federal Fiscal and Economic Update of 2021 indicates that the federal deficit for 2020-2021 stood at CAD 327.7 billion and federal debt at 47.5% of GDP.
The OECD in their recent country survey notes that “prudent” fiscal management previous to COVID-19 did provide the country with needed room in undertaking such expansionary measures – for the short term. However, the country also needs to set in place a clear “fiscal roadmap” regarding plans for recovery. This is of course all the more daunting as Canada enters another severe wave of Omicron transmission – and associated economic shutdowns and overload on the health system. Moreover, recent Finance Canada estimates for closing in on the federal deficit by 2026-2027 are premised on economic recovery and a reduction in pandemic spending. Clearly budgetary policy is still in a fragile situation given the uncertainties ahead.
In its most recent 2021 fiscal sustainability report, the Parliamentary Budget Office (PBO) estimates that the federal government could permanently increase spending or reduce taxes by 0.8% of GDP (CAD 18 billion in current dollars) while maintaining net debt at a level of 37.7% of GDP over the long term – a figure which remains higher than those seen before the pandemic. The same cannot be said for long-run provincial fiscal sustainability where, with the exception of Quebec, Ontario and Nova Scotia, PBO considers current fiscal policy to be unsustainable, primarily due to rising healthcare costs. However, it is worth noting that the rebound in oil and gas prices (and related commodities such as potash) will have a positive impact going forward.
Citations:
Government of Canada, Economic and Fiscal Update 2021, https://budget.gc.ca/efu-meb/2021/home-accueil-en.html
Government of Canada, Investing in the Middle Class: Budget 2019, https://www.budget.
gc.ca/2019/docs/plan/budget-2019-en.pdf.
OECD, Economic Surveys: Canada 2021, 2021, Paris: OECD Publishing.
Parliamentary Budget Officer, Fiscal Sustainability Report 2021, 30 June 2021,
https://www.pbo-dpb.gc.ca/en/blog/news/RP-2122-010-S–fiscal-sustainability-report-2021–rapport-viabilite-financiere-2021.
The OECD in their recent country survey notes that “prudent” fiscal management previous to COVID-19 did provide the country with needed room in undertaking such expansionary measures – for the short term. However, the country also needs to set in place a clear “fiscal roadmap” regarding plans for recovery. This is of course all the more daunting as Canada enters another severe wave of Omicron transmission – and associated economic shutdowns and overload on the health system. Moreover, recent Finance Canada estimates for closing in on the federal deficit by 2026-2027 are premised on economic recovery and a reduction in pandemic spending. Clearly budgetary policy is still in a fragile situation given the uncertainties ahead.
In its most recent 2021 fiscal sustainability report, the Parliamentary Budget Office (PBO) estimates that the federal government could permanently increase spending or reduce taxes by 0.8% of GDP (CAD 18 billion in current dollars) while maintaining net debt at a level of 37.7% of GDP over the long term – a figure which remains higher than those seen before the pandemic. The same cannot be said for long-run provincial fiscal sustainability where, with the exception of Quebec, Ontario and Nova Scotia, PBO considers current fiscal policy to be unsustainable, primarily due to rising healthcare costs. However, it is worth noting that the rebound in oil and gas prices (and related commodities such as potash) will have a positive impact going forward.
Citations:
Government of Canada, Economic and Fiscal Update 2021, https://budget.gc.ca/efu-meb/2021/home-accueil-en.html
Government of Canada, Investing in the Middle Class: Budget 2019, https://www.budget.
gc.ca/2019/docs/plan/budget-2019-en.pdf.
OECD, Economic Surveys: Canada 2021, 2021, Paris: OECD Publishing.
Parliamentary Budget Officer, Fiscal Sustainability Report 2021, 30 June 2021,
https://www.pbo-dpb.gc.ca/en/blog/news/RP-2122-010-S–fiscal-sustainability-report-2021–rapport-viabilite-financiere-2021.
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To what extent does research and innovation policy support technological innovations that foster the creation and introduction of new products?
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Research and innovation policy effectively supports innovations that foster the creation of new products and enhance productivity.
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Research and innovation policy largely supports innovations that foster the creation of new products and enhance productivity.
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Research and innovation policy partly supports innovations that foster the creation of new products and enhance productivity.
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Research and innovation policy has largely failed to support innovations that foster the creation of new products and enhance productivity.
Canada’s economic and policy environment is conducive to innovation and investment in productivity growth. Moreover, the country benefits from a large talent pool; its population has the OECD’s highest level of educational attainment with regard to the proportion of the population with a post-secondary education. The number of researchers per capita in Canada is on a par with that of other developed countries.
Despite this, a 2015 report from the federal government’s Science, Technology and Innovation Council found that the country continues to lag behind other countries when it comes to key innovation measures such as patent filings and corporate R&D spending. Similarly, a recent report from the Council of Canadian academics warns that although Canada remains a leading global contributor to research, its standing is at risk due to a sustained slide in private and public R&D investment. Indeed, as a share of gross domestic product, R&D expenditures have steadily declined in Canada since 2001, with the ratio now standing at 1.7%, well below the OECD average. The same report indicated that there are significant barriers between innovation and wealth creation in Canada, resulting in a deficit of technology startups growing to scale in Canada and a consequent loss of economic benefits. However, with respect to Higher Education R&D expenditures as a percentage of GDP, Canada has in the past ranked – and continues to rank – above the OECD average.
In 2017, the government announced an innovation and skills agenda, providing CAD 950 million funding in support for “innovation superclusters,” with the goal of encouraging innovation, R&D and economic growth. In addition, a Strategic Innovation Fund with a budget of CAD 1.26 billion over five years was created, with the funding to be allocated to firms across Canada’s industrial and technological sectors. This was followed in Budget 2021 with an additional CAD 7.2 billion over seven years to support innovation in strategic economic sectors and particularly in life sciences and bio-manufacturing given the country’s lack of domestic vaccine supply. Nonetheless, the question of how effective government policy is in encouraging R&D investment and productivity gains remains a contentious one, particularly in light of the pandemic and scaling of Canadian firms to global scale remains a challenge.
Citations:
Council of Canadian Academies, Expert Panel on the State of Science and Technology and Industrial Research and Development in Canada, Competing in a Global Innovation Economy: The Current State of R&D in Canada, 2018, Ottawa (ON), http://new-report.
scienceadvice.ca/assets/report/Competing_in_a_Global_Innovation_Economy_FullReport_EN.pdf.
Government of Canada, Budget 2021: A Recovery Plan for Jobs, Growth, and Resilience, 2021, https://www.budget.gc.ca/2021/home-accueil-en.html
Greenspon, Jacob and Erika Rodriques (2017) “Are Trends in Patenting Reflective of Innovative Activity in Canada?” CSLS Research Report 2017-01, January http://www.csls.ca/reports/csls2017-01.pdf.
Science, Technology and Innovation Council, Canada’s Innovation Challenges and Opportunities, State of the Nation: 2014, 2015, http://www.stic-csti.ca/eic/site/stic-csti.nsf/
vwapj/STIC_1500_SON_Report_e_proof4.pdf/$FILE/STIC_1500_SON_Report_e_proof4.pdf.
Despite this, a 2015 report from the federal government’s Science, Technology and Innovation Council found that the country continues to lag behind other countries when it comes to key innovation measures such as patent filings and corporate R&D spending. Similarly, a recent report from the Council of Canadian academics warns that although Canada remains a leading global contributor to research, its standing is at risk due to a sustained slide in private and public R&D investment. Indeed, as a share of gross domestic product, R&D expenditures have steadily declined in Canada since 2001, with the ratio now standing at 1.7%, well below the OECD average. The same report indicated that there are significant barriers between innovation and wealth creation in Canada, resulting in a deficit of technology startups growing to scale in Canada and a consequent loss of economic benefits. However, with respect to Higher Education R&D expenditures as a percentage of GDP, Canada has in the past ranked – and continues to rank – above the OECD average.
In 2017, the government announced an innovation and skills agenda, providing CAD 950 million funding in support for “innovation superclusters,” with the goal of encouraging innovation, R&D and economic growth. In addition, a Strategic Innovation Fund with a budget of CAD 1.26 billion over five years was created, with the funding to be allocated to firms across Canada’s industrial and technological sectors. This was followed in Budget 2021 with an additional CAD 7.2 billion over seven years to support innovation in strategic economic sectors and particularly in life sciences and bio-manufacturing given the country’s lack of domestic vaccine supply. Nonetheless, the question of how effective government policy is in encouraging R&D investment and productivity gains remains a contentious one, particularly in light of the pandemic and scaling of Canadian firms to global scale remains a challenge.
Citations:
Council of Canadian Academies, Expert Panel on the State of Science and Technology and Industrial Research and Development in Canada, Competing in a Global Innovation Economy: The Current State of R&D in Canada, 2018, Ottawa (ON), http://new-report.
scienceadvice.ca/assets/report/Competing_in_a_Global_Innovation_Economy_FullReport_EN.pdf.
Government of Canada, Budget 2021: A Recovery Plan for Jobs, Growth, and Resilience, 2021, https://www.budget.gc.ca/2021/home-accueil-en.html
Greenspon, Jacob and Erika Rodriques (2017) “Are Trends in Patenting Reflective of Innovative Activity in Canada?” CSLS Research Report 2017-01, January http://www.csls.ca/reports/csls2017-01.pdf.
Science, Technology and Innovation Council, Canada’s Innovation Challenges and Opportunities, State of the Nation: 2014, 2015, http://www.stic-csti.ca/eic/site/stic-csti.nsf/
vwapj/STIC_1500_SON_Report_e_proof4.pdf/$FILE/STIC_1500_SON_Report_e_proof4.pdf.
Graph View
To what extent does the government actively contribute to the effective regulation and supervision of the international financial architecture?
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The government (pro-)actively promotes the regulation and supervision of financial markets. It demonstrates initiative and responsibility in such endeavors and often acts as an international agenda-setter.
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The government contributes to improving the regulation and supervision of financial markets. In some cases, it demonstrates initiative and responsibility in such endeavors.
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The government rarely contributes to improving the regulation and supervision of financial markets. It seldom demonstrates initiative or responsibility in such endeavors.
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The government does not contribute to improving the regulation and supervision of financial markets.
The Canadian government, through various departments and agencies, contributes actively to the effective regulation and supervision of the international financial architecture. The Bank of Canada has been particularly prominent in the international arena, with Mark Carney, the former Governor of the Bank of Canada previously serving as the Governor of the Bank of England as well as former chair of the G-20 Financial Stability Board (FSB). As well, the current Governor of the Bank of Canada, Tiff Macklem, has previously chaired the FSB’s Standing Committee on Standards Implementation. The Office of the Superintendent of Financial Institutions (OSFI) has also been very active internationally.
Citations:
Eric Helleiner, The Financial Stability Board and International Standards, The Centre for International Governance Innovation, G20 Papers, No. 1, June 2010, https://
www.cigionline.org/static/documents/g20_no_1_2.pdf
Citations:
Eric Helleiner, The Financial Stability Board and International Standards, The Centre for International Governance Innovation, G20 Papers, No. 1, June 2010, https://
www.cigionline.org/static/documents/g20_no_1_2.pdf