Thank you, Madam Chair.
I congratulate committee members and staff for their excellent report on the Investment Canada Act and its recommendations for a needed reorientation of Canada's economic strategies.
My remarks today will build on that direction to improve Canada's competitiveness. I will comment on three issues: the meaning of competitiveness in the intangibles economy; measuring our economy in a way that captures prosperity to promote better management; and developing institutional capacity in our public sector to support policy development.
In the traditional economy, competitive was synonymous with low cost. To attract multinational investors, companies cut red tape, offered land at concessional rates, provided tax benefits, etc., knowing this economic activity would generate a fair return to the host. However, as economic returns increasingly shifted to owners of IP, and more recently data, this strategy amounted to capturing the low-rent district in the global economy—equivalent to competitively priced low-income jobs in an Amazon fulfillment centre, while the highly profitable data-driven rents accrued to Jeff Bezos.
Competitiveness in the intangibles economy means the ability to capture economic rents that flow to IP owners and to those who control data assets that also power rent capture. Canada only had policies for the traditional production-based economy, which is shrinking in importance as the digital transformation continues to transform all industries. For Canada to compete in the 21st century global economy, we need to develop policy frameworks that enable our companies to capture their fair share of economic rents in the intangibles economy.
According to the IMF, Canada's pre-pandemic GDP per capita was 3% lower than 2010 levels, while the U.S. experienced a 35% increase over the same period due to the alignment of its economic policy strategies with contemporary economic realities. GDP per capita is no longer a sufficient metric for prosperity, because it fails to capture earnings on assets abroad and the accrual of value in asset holdings. This gap would certainly be even wider if we included these wealth effects.
Canada's deficit on IP payments and receipts is widening at an alarming rate. This deficit would be larger if the value of net flows of data were included.
I offer one recommendation that can foundationally help improve Canada's competitiveness. Rebuild the Economic Council of Canada to create in-house capacity for the analysis of the contemporary economy. The nature of today's global economy requires an unprecedented amount of horizontal integration, analytical depth and rapid response to deal with the accelerated pace of innovation and the powerful feedback and spillovers that emerge in our network society. This is particularly critical for the data-driven marketplace which features economies of scope and scale alongside information asymmetries that together give rise to monopolies which are reducing the rate of entrepreneurship, innovation and business dynamism.
Proper regulation of the IP and data-driven economy can restore competitive market dynamism, which is why IP and data giants are under investigation for antitrust behaviour by U.S. federal and state authorities, the EU and others.
A revived economic council would have several core functions: develop the expertise to measure and manage the intangibles economy, including the capacity to develop both intellectual property and data governance strategies; serve as a centralized resource to support line department and expertly assess policy decision spillovers on Canada's intangible assets; provide strategic focus for Canadian researchers who have deep expertise on many of these issues, but whose work may not necessarily reflect governance priorities.
With the federal government budget released yesterday, I submit that redistribution of a fixed economic pie or prudent fiscal anchors are insufficient without a strategy to generate new wealth. Canada urgently needs growth strategies attuned to contemporary realities.
The charts and statistics included in my presentation are irrefutable. As successful innovation companies and countries turn their focus to strategically generating valuable IP and, in the last decade, to controlling valuable data to accrue wealth, Canada missed these shifts and as a result became a large IP and data services importer.
IP and data have different features than tangible goods. They behave differently in a marketplace and therefore require different tool kits for both companies and policy-makers. A properly built economic council would lead in the necessary intellectual revival of our policy community and help government rebuild critical capacity that favours national interests, including advancing our competitiveness.
I thank you for your time today.