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Archived - Executive Summary

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The summary version of Compete to Win, is available at Executive Summary   (PDF - 413.51 KB - 28 pages)

“Competition matters. It brings dynamism to our economy. It means good jobs for our citizens. It is not merely an economic concept. Being open to competition serves Canada’s national interest. This is the principle that anchors our report and informs our recommendations to the government.”
— From the Preface to Compete to Win

The Competition Policy Review Panel

  • The Competition Policy Review Panel was created by the Government of Canada on July 12, 2007, and was mandated to review Canada’s competition and foreign investment policies.
  • The Panel is chaired by L. R. Wilson, and includes N. Murray Edwards, Isabelle Hudon, P. Thomas Jenkins and Brian Levitt.
  • The Panel was tasked with conducting research, holding consultations and producing a report by June 2008.

Compete to Win

  • The report is about one simple proposition: raising Canada’s overall economic performance through greater competition will provide Canadians with a higher standard of living.
  • Strong economic performance means more and better jobs and higher earnings, which in turn generate more government revenues to support the services and programs that Canadians have come to expect.
  • At the centre of the Panel’s report are the concepts of competitiveness and productivity. Competitiveness refers to the outcomes of economic competition, between firms and between countries.
  • The key determinant of competitiveness is productivity, a measure of the efficiency with which economic resources such as labour, capital and business expertise are used to produce goods and services.
  • Compete to Win provides the Panel’s recommendations on how to strengthen Canada’s competitiveness and promote the two-way flow of talent, capital and innovation between Canadian markets and world markets.

Our Findings

  • While Canadians can take pride in our economic performance over the past decade, the Panel heard that Canadians are worried about the current economic outlook and are less confident about the future.
  • Canadians spoke of risks and uncertainties arising from the acquisition of large Canadian firms by foreign firms, plant closures and job losses, little growth in earnings, an eroding cost advantage relative to the United States, and the threat of new global rivals.
  • Canada’s primary economic advantages lie in location, natural resources, a diverse economy, high-quality education, and institutional and political stability.
  • Canada’s economic weaknesses include low population density in a vast geographic area, small scale, jurisdictional fragmentation and regulatory burden, relative high levels of taxation and the associated high cost of capital, and insufficient entrepreneurial ambition. There is also room for Canada to improve how we collaborate.

A Competitiveness Agenda for Canada

  • The Panel believes that Canada must improve its productivity by increasing competitive intensity.
  • A precursor to success internationally is to ensure that domestic markets are healthy and that unnecessary barriers to entry are reduced or eliminated. The freer flow of goods and services will import greater competition into our domestic markets.
  • Canadian firms will have to become more innovative and entrepreneurial to take on increased foreign competition.
  • Greater competitive intensity at home will translate into more success in world markets.
  • Adapting to increased competitive intensity will not be easy. It will take time to realize the benefits that will be spurred by increased competition.
  • The global factors at work in the economy are unavoidable and irreversible. The longer Canada waits to address these issues, the greater will be the difficulty in resolving them.
  • Compete to Win puts forward a Competitiveness Agenda for Canada.

The Legal Foundations

As part of its mandate, the Panel was asked to examine the Investment Canada Act, restrictions on ownership in a number of key sectors of the Canadian economy and the Competition Act.

The Investment Canada Act

  • The Investment Canada Act provides for federal government review of foreign investment to assess whether it is of net benefit to Canada.
  • Canada is one of the few industrialized countries to have foreign investment rules requiring the review of proposed foreign investment proposals based on monetary thresholds.
  • Canada’s reputation for welcoming foreign investment is challenged by the perception that the Investment Canada Act impedes foreign investment. In fact, only one non-cultural foreign investment proposal has been disallowed under the Investment Canada Act.
  • The Panel has addressed this misperception by making a number of recommendations to narrow the scope of the legislation, primarily by increasing the financial threshold triggering review under the Investment Canada Act to $1 billion, by eliminating all but one of the sector-specific low review thresholds, by transferring the onus from the investor to the minister and by proposing a national interest test that the Minister must satisfy before disallowing a foreign investment proposal.
  • There is a need to update the administration of the Investment Canada Act to ensure that current standards for transparency and predictability are satisfied by issuing additional guidelines and by amending the legislation to provide for public reporting on the operation of the Act.
  • Greater clarity and transparency are needed with respect to the application of the Investment Canada Act to cultural businesses. The Panel is recommending the creation of an exemption from the review process where cultural business activities are of a de minimis size in the context of the overall Canadian business being acquired.
  • The Panel believes that it remains appropriate to preserve a distinct approach for cultural businesses, and is not recommending an increase in the current review threshold that applies under the Act for cultural businesses. Nevertheless, existing cultural policies, including those affecting foreign investment in cultural businesses, should be reviewed by the Minister of Canadian Heritage on a priority basis.

Sectoral Regimes

Canada maintains ownership restrictions in a number of specific sectors of the economy. Most of these restrict the degree of foreign ownership in these sectors and, in some cases, have implications for the degree of competitive intensity, access to new capital, technology or talent.

  • Overall, the Panel believes that the federal government should strive to reduce foreign ownership restrictions in a manner that is consistent with maximizing Canada’s competitive advantage.
  • Other than the Bank Act, there is no requirement for reviewing sectoral framework policies on a regular basis.
  • The Panel believes that regular, periodic reviews of sectoral framework policies should be implemented with a view to minimizing impediments to competition and to updating and adapting regulatory regimes to reflect the changing circumstances, needs and goals of Canada.
  • The Panel examined specific ownership restrictions in air transport, uranium mining, telecommunications and broadcasting as well as financial services.

Air Transport

  • The Panel believes that more foreign participation in the air transport sector is likely both inevitable, provided that “Open Skies” treaties can be negotiated between Canada and other nations, and desirable in terms of increased competitive intensity, which will benefit the travelling public.
  • Unilateral removal of foreign ownership restrictions on Canada’s international air carriers is not recommended, given that international air travel is governed by bilateral treaties.
  • Accordingly, Panel recommendations in the air transport sector focus on allowing greater foreign ownership on a reciprocal basis with other countries and the completion of “Open Skies” negotiations with the European Union.

Uranium Mining

  • Uranium mining raises unique concerns regarding security and nuclear non-proliferation as well as the role of state-owned enterprises in the industry and at other stages of the nuclear fuel cycle.
  • The Panel’s recommendation to liberalize foreign ownership in the uranium mining sector is tied to the objective of Canada moving up the value chain from mining and first-stage processing by securing greater rights in nuclear fuel production through international negotiation.
  • Additionally, the Panel recognizes that, to give effect to this recommendation, new investment review legislation dealing with national security concerns will have to come into force.

Telecommunications and Broadcasting

  • For several years, Canada has been reorienting its telecommunication policies to place greater reliance on market forces in recognition that competitive access to information and communications technology facilitates business productivity throughout the economy.
  • Canada’s telecommunications policy was subject to an extensive review in 2005–2006 by the Telecommunications Policy Review Panel, which concluded that reducing restrictions on foreign ownership would increase competitive intensity, improve industry productivity, and be more consistent with Canada’s open trade and investment policies.
  • Accordingly, the Panel recommends the adoption of a two-phased liberalization of foreign ownership rules pertaining to the telecommunications and broadcasting sectors. In the first phase, foreign telecommunications companies would be permitted to establish a new Canadian business or acquire an existing Canadian telecommunications company with a market share of up to 10 percent. In the second phase, liberalization of foreign ownership would be undertaken for both telecommunications and broadcasting in a way that would be competitively neutral.

Financial Services

  • Canada has eliminated foreign ownership controls in the financial sector. Entry of foreign institutions is subject only to prudential regulation.
  • Canada maintains a “widely held” rule with respect to large banks and demutualized insurance companies for prudential reasons. The Panel sees no compelling reason to change this requirement.
  • The Panel recommends ending the de facto ban on mergers between large Canadian financial institutions, as appropriate regulatory safeguards are already in place to protect prudential soundness, competition and the public interest.

The Competition Act

  • Effective competition laws and policies are key elements in ensuring the competitiveness and efficiency of the Canadian economy.
  • The Competition Act is recognized internationally as both modern and flexible, and it does not, in the Panel’s view, constitute an impediment to Canada’s overall competitiveness. However, the Panel concludes that long-term improvements to Canada’s productivity could be achieved by updating certain provisions of Canada’s competition laws.
  • In particular, the Panel believes that it is desirable to harmonize Canadian legal requirements with those of the US, to the extent feasible, with a view to minimizing unnecessary differences, given the high level of business integration between the two economies.
  • The Panel is satisfied that there is no need to amend the substantive merger law in the Competition Act. However, procedural aspects of the merger review process should be amended to more closely conform with the US process by increasing the initial period for reviewing a proposed merger to 30 days and empowering the Commissioner of Competition to initiate “second stage” review, which would extend the review period by an additional 30 days.
  • The time period within which the Commissioner may challenge a merger should be reduced to one year.
  • The thresholds that trigger an obligation to notify a merger transaction as well as the creation of additional exemptions from merger notification should be examined.
  • The Panel recommends amendments to repeal certain criminal provisions that are either obsolete or ineffective as criminal offences. Amendments should be introduced creating new criminal and civil provisions to address both agreements between competitors to lessen competition and resale price maintenance.
  • The Panel is also recommending changes to the powers of the Competition Tribunal to order administrative monetary penalties of a limited amount for violations of the abuse of dominant position provisions.
  • Many stakeholders noted the importance of competition advocacy. The Panel agrees that this aspect of competition policy in Canada needs to be strengthened.
  • The Panel believes, however, that the Competition Bureau should continue to focus on its core mandate to enforce and promote compliance with the Competition Act.