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Archived - 1. Introduction

Archived Content

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In its long-term economic plan, Advantage Canada, the Government of Canada committed to create the conditions for Canadians to succeed in the new global economy. Recognizing that a new international competitive environment has changed the ground rules, Advantage Canada focuses on five economic advantages, all aimed at establishing a policy framework and competitive playing field on which Canadians can continue to succeed in creating growth, opportunity and good jobs.

With Budget 2007, the government pledged to undertake a review of Canada's competition policies and its framework for foreign investment policy, to enhance Canada's economic performance and to ensure that Canada's markets remain competitive. To that end, on July 12, 2007 the Ministers of Industry and Finance announced the creation of the Competition Policy Review Panel. The Panel is chaired by L. R. Wilson, who is joined by N. Murray Edwards, Isabelle Hudon, Thomas Jenkins and Brian Levitt.

The Panel is mandated to review key elements of Canada's competition and investment policies to ensure that they are working effectively. It will receive submissions from interested parties, consult widely, listen and learn, and commission focussed research to support its work. The Panel is supported by a secretariat and is targeting to report back to the Minister of Industry on behalf of the government by June 30, 2008.

Our Mandate: Productivity and Competitiveness

The fundamental task of the Panel's review is to provide recommendations to the government on how to enhance Canadian productivity and competitiveness, as these are keys to generating wealth and creating jobs and opportunity in a fast-changing global economic environment. The Panel will examine a range of issues with an eye to ensuring that Canada's policies are modern and effective, and reflect a competitive environment that is global in scope and typified by fierce competition between national jurisdictions seeking to attract investment, people and economic opportunities. Following the Industry Minister's statement on October 9, 2007, issues related to state-owned enterprises and implications for national security will not be subject to review by the Panel, as the government has signalled its intention to provide more immediate attention to these issues in the period prior to the Panel's report.1

The Panel does not seek to insulate Canadians from international competition. Indeed, Canada's record of economic success has been predicated on the ability of Canadian firms to access foreign markets, and on openness to foreign investment and immigration. In the twenty-first century, economic success will not be achieved by being backward or inward looking. The goal is to foster the development of Canadian businesses and to maximize the opportunity for Canadians to capitalize on global trade, investment and competition. The Panel's mandate is therefore to make recommendations to the government on ways to establish the domestic conditions that both encourage Canadian firms to be active and aggressive investors at home and abroad, and maximize Canada's attractiveness as a destination for new investment and talent.

The Panel will orient its work under four broad themes:

Investment Policies

It has long been recognized that foreign direct investment (FDI) brings benefits to Canada through new sources of capital, ideas and know-how. As well, direct investment by Canadian firms in foreign markets enables them to be more productive and competitive and, ultimately, to create more and better jobs in Canada.

Both Canadian and international experience strongly suggest that the free flow of capital is something to be encouraged. At the same time, FDI has raised concerns among many Canadians about excessive foreign control of Canadian industry. The Panel therefore will review the Investment Canada Act, the government's principal instrument for reviewing foreign investment in Canada. In particular, the Panel will examine the Investment Canada Act's "net benefit" test, with an eye to ensuring that it effectively delivers economic benefits to Canadians without discouraging investment.

The Panel has also been asked to review the restrictions that are currently in place on foreign and domestic ownership of firms in specific industry sectors.

Competition Policies

Fair and transparent competition policies are a key building block in the foundation of modern commerce. However, the establishment of these policies is more complex in a global economy where the marketplace extends beyond Canada's borders. The Panel will therefore review Canadian policies affecting competition, including an examination of the Competition Act, to ensure that they foster competition in the Canadian market.

As part of this review, the Panel will look to international best practices and see how they may be adapted to fit the Canadian context. In undertaking its review, the Panel's principal focus will be whether Canada's competition policies enhance our ability to both serve the interests of domestic consumers and enable our most successful enterprises to grow beyond Canada.

Outward Investment by Canadians

A fundamental element of economic competitiveness is the ability of a nation's firms to capitalize on economic opportunities that arise outside its national borders. With our small domestic market, Canada must look outward. To that end, the Panel has been mandated to investigate how best to encourage outward investment by Canadian firms. The aim is to examine what policies would enhance Canada as an environment from which Canadian enterprises would emerge and prosper globally. Of importance in the Canadian economic context is facilitating the participation of small and medium-sized enterprises (SMEs) in global commerce.

Canada as a Destination for Investment and Opportunity

A key aim for any country in the global era is to be a preferred location for the capital, talent and innovative activity that drive the modern economy. Canada is no different. A country's markets and overall economic environment are crucial in attracting the innovative and ambitious individuals and firms that shape a country's economy. Whether through the removal of barriers that inhibit aspiring firms, or through the refinement of policies that are the foundation of economic activity, the government has a significant role to play in establishing the conditions that will assure Canada's position as an attractive destination for investment, both by Canadians and those from abroad. Robust investment drives economic development, and underpins Canada's prosperity and quality of life.

Challenges and Opportunities

If Canada is to continue to be successful and if Canadians are to continue to enjoy the prosperity to which we have become accustomed, choices will have to be made, and decisions taken.

Canadian policies affecting competition and investment have served the country well. However, the global business environment that has evolved over the past 20 years has ushered in a new era, one where governments must formulate policy that reflects a competitive dynamic that has changed fundamentally. The balance to be struck in policy formation for open economies like Canada's is to capitalize on the opportunities that globalization provides while ensuring that the national interest is accorded appropriate weight.

Our global competitors are growing in number and are becoming more competitive. Unless we adapt and change, Canada and its enterprises risk falling behind others in the global economy, eroding our quality of life. Our sound economic fundamentals and recent performance place us in a strong position from which to respond to new global pressures, but this should not give us cause to be complacent.

The objective should not be to insulate Canada from global competition. Rather, the goal is to ensure that the Canadian economic policy framework positions Canada and Canadian enterprises to compete globally. The public policy objective is to maximize opportunity for our domestic firms to grow into global champions and for our existing champions to further expand their reach.

The potential benefits are substantial. Opportunities abound in the globalizing economy. The developing economies of China and India alone represent a market of more than two billion people. Free trade and open international markets provide ambitious firms having global aspirations the opportunity to become more productive and to deliver their products and services to the world. Many Canadian firms already do just that. The question is: How can we update our public policy framework to enable more to do so?

The answers will not come from the Panel or the government alone. The Panel recognizes the primary role to be played by the management and boards of Canada's private sector companies. While the focus of the Panel's work is on public policy, Canadian success will depend on the commitment and abilities of Canada's private sector.

Consultations

A central concern of the Panel is for its recommendations to the government to reflect Canadian interests. This paper will guide the consultation process, establish the context in which the Panel is conducting its review, and frame the issues under consideration. This paper also presents both the overarching questions and specific areas of policy on which the Panel is seeking input. The Panel therefore invites written submissions on the policy issues and questions presented in this paper.