Special Anniversary Focus June 2011 www.oecdobserver.org
Canada and the OECD 50 years of progress
MANY OF US BELIEVE THAT COOPERATION CAN REALLY CONTRIBUTE TO SUSTAINABLE PROSPERITY.
Special Anniversary Focus June 2011
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OECD and Canada : Celebrating 50 years of co-operation Judith A. LaRocque, Canadian Ambassador to the OECD
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For a better future Donald Johnston, Secretary-General of the OECD, 1996-2006
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Canada’s economy Interview with James M.Flaherty, Minister of Finance, Canada
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50 years of productive partnership William R. White, Chair, OECD Economic Development and Review Committee
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Innovation: Opportunities without frontiers
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Education: Bridging the classroom divide
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Fisheries: The lessons of the Grand Banks
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Bench strength: Winter Olympics 2010
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A labour market with few wrinkles
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50 years of trade and co-operation: Work in progress Ken Ash, Director, OECD Trade and Agriculture Directorate
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Oil sands: Full of energy?
Canada and the OECD 50 Years of Progress Cover by Design Factory
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Innovation, p.8
Education, p.12
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Canada and the OECD
Published in English and French by the OECD Published in English and French by the OECD EDITOR-IN-CHIEF: Rory J. Clarke EDITOR-IN-CHIEF: Rory J. Clarke ASSISTANT EDITOR: Marilyn Achiron SENIOR EDITOR: Ricardo Tejada WRITERS: Lyndon Thompson, Patrick Love WRITER: Lyndon Thompson EDITORIAL ASSISTANTS: Tatiana Novikova, Loïc Verdier, EDITORIAL ASSISTANTS: Alison Benney, Tatiana Karen Cronin Novikova, Loïc Verdier LAYOUT: Design Factory, Ireland LAYOUT: Design Factory, Ireland ILLUSTRATIONS: André Faber, David Rooney, Stik ILLUSTRATIONS: André Faber, David Rooney, Stik PHOTO RESEARCH: Rory Clarke PHOTO RESEARCH: Rory Clarke LOGISTICS: Jochen Picht LOGISTICS: Jochen Picht ADVERTISING MANAGER: Mediaside ADVERTISING MANAGER: François Barnaud
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OECD and Canada: Celebrating 50 years of co-operation
©DFAIT
Judith A. LaRocque, Canadian Ambassador to the OECD
The OECD allows policymakers to come together to identify best practices that shape our public policies. It allows us to compare and benchmark our performance, and learn from top performers. By participating in the OECD peer review process, we benefit from frank discussion among equals on our accomplishments and shortfalls in a variety of areas, from the economy to development policies. The objective and credible analysis provided by the OECD strengthens these discussions. Overall, Canada’s socio-economic performance is strong compared with the OECD. However, in order to improve further, we need to know where others are doing better and to learn how they are achieving these results.
On the occasion of the OECD’s 50th anniversary, Canada looks forward to playing an active role in shaping its next 50 years. As we go forward, the public policy challenges we face will increase in complexity, number and impact. The OECD can do much to continue to help us obtain better outcomes for all citizens of the world.
©OECD
As one of the 19 founding members of the OECD, Canada has greatly benefited from and contributed to the OECD over the past 50 years. For instance, Canada’s experience with sound fiscal management serves as an example for other OECD countries. Likewise, Canada’s success at maximising educational outcomes for students makes our country a leader in OECD work on education.
Canada’s contributions extend beyond sharing our policy experience. Several prominent Canadians have held leading roles at the OECD. Canadian Donald Johnston was the first non-European to serve as secretary-general. Canadians currently chair several important OECD committees and working parties, including the Economic Development and Review Committee. Canada has hosted many important OECD meetings, including the first-ever ministerial meeting on e-commerce and the launch of the revised Jobs Strategy in 2006. Canada has also played a prominent role in helping the OECD to strengthen its relations with global players.
Parliament Hill, Ottawa
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OECD Conference Centre, Chateau de la Muette, Paris
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Canada and the OECD
For a better future Two days later the US followed suit, and by 30 September when the OECD officially opened for business, 17 countries had officially ratified, with the European Commission participating as well. Three more countries, including Italy, officially joined in subsequent
The developed world, with Canada very much in the vanguard, recognised the unique value that an enlarged OEEC would offer to a larger constituency months, and Japan became a member in 1964. Today, the OECD has 34 member countries, and has strong relations with scores of other countries around the world, including major emerging markets. Donald Johnston, Secretary-General of the OECD, 1996-2006
This year we are celebrating the 50 anniversary of a remarkable organisation which has brought a huge and, in many ways, immeasurable impact to the economic and social development not only of its members, but of the world community of nations. th
The Organisation for Economic Co-operation and Development, better known as the OECD, was forged from the Organisation for European Economic Co-operation (OEEC) charged with the administration of the Marshall Plan. The Marshall Plan was a historic achievement, even today not sufficiently appreciated, in that it not only buried forever the brutal military record of western Europe, but replaced it with a common and mutually supportive economic space among former enemies. The OEEC was a limited forum for intergovernmental co-operation in all areas of public policy, supported by a skilled secretariat and committee network of unprecedented reach and quality. After 14 years of extraordinary accomplishment in a European context, the developed world, with Canada very much in the vanguard, recognised the unique value that an enlarged OEEC would offer to a larger constituency. There were some voices of resistance, notably among a few smaller countries, who wished to preserve the old European organisation. But others felt that the OEEC had to spread its wings, to become the OECD, with an ambitious, more global, reach. The OECD is the only living international legacy of the Marshall Plan, except of course for Europe itself. A paragraph in the preamble to the OECD Convention reads as follows: “Recognising that the economic recovery and progress of Europe to which their participation in the Organisation for European Economic Co-operation (the predecessor of the OECD) has made a major contribution, have opened new perspectives for strengthening that tradition and applying it to new tasks and broader objectives.” Thus was born the OECD, with Canada becoming the first country to deposit its ratified signature of the Convention on 10 April 1961.
It is timely to recall the aims of the organisation set forth in Article 1 of the Convention, and to do a stocktaking in general terms as to where we have met those aims and where we have fallen short. They were: (a) to achieve the highest sustainable economic growth and employment and a rising standard of living in member countries, while maintaining financial stability, and thus to contribute to the development of the world economy; (b) to contribute to sound economic expansion in member as well as non-member countries in the process of economic development; and (c) to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance with international obligations.” The OECD was seen as a government instrument for keeping an equilibrium between economic growth, social stability and political stability, all three of which must be achieved through good governance in order to deliver the economic and social progress for which the OECD was created. The Ottawa Conference celebrating the 50th anniversary of the OECD on 2 June 2011 offers participants the opportunity of doing what John Maynard Keynes counselled: “Examine the present in light of the past for the purposes of the future.” How well has the OECD fulfilled its role over this half-century and what does the future hold? We believe that conference participants and other observers will conclude that the role of the OECD, with its committee system, the creation of soft law enforced by peer review of performance among members and the comparison of best practices, which has served the membership so well in the past, will be the way of the future in this rapidly evolving global community. A challenge will be to manage these processes in a much enlarged international community and, quite probably, a growing OECD. References See www.oecd.org/about Clarke, Rory and Lyndon Thompson (2011), “A majestic start: How the OECD was won”, in OECD Yearbook 2011, Paris, available at www.oecdobserver.org/yearbook2011
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BETTER POLICIES FOR BETTER LIVES
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Canada and the OECD
Canada’s economy Interview with James M. Flaherty, Minister of Finance, Government of Canada
moderating somewhat over the medium term. The OECD’s latest Economic Outlook indicates that Canada will perform well compared with other G7 countries in 2011, and the IMF expects growth in Canada to be among the strongest in the G7 this year and next. Nevertheless, risks to the outlook remain, primarily related to issues originating outside Canada’s borders.
©Government of Canada
What would you highlight as being Canada’s underlying economic strengths? Canada’s growth in real income per capita was one of the highest in the OECD over the last decade. Furthermore, Canada has one of the highest employment rates in the OECD. Strong economic growth reflects strong macroeconomic fundamentals, including sound fiscal and monetary policy, a prudent financial framework, trade openness, and a competitive tax system as well as a highly skilled and educated workforce, with Canada having the highest proportion of the adult population with post-secondary education in the OECD.
“A key challenge that remains is to improve productivity performance”
OECD Observer: As the world emerges from a protracted crisis, how would you characterise the current state of the Canadian economy? Mr Flaherty: The Canadian economy weathered the global recession better than most industrialised countries, and the economic recovery is well underway with six consecutive quarters of growth through the end of 2010. Growth over the recovery has been underpinned by a strong rebound in consumer and business expenditures, reflecting the significant stimulus provided by Canada’s Economic Action Plan. The improving global economic environment has also lifted commodity prices significantly since early 2009, boosting Canada’s terms of trade, incomes and investment. The rebound in real output in Canada has been mirrored by a solid recovery in the labour market. More Canadians are working today than before the recession began, and the unemployment rate has declined to 7.6% in April 2011 from a peak of 8.7% in August 2009. Moreover, almost 90% of these new jobs have been in relatively high-wage industries, with close to 85% being full-time jobs. The Canadian unemployment rate is currently more than 1 percentage point below that of the US, and has been below it since October 2008–the first time this has occurred since the early 1980s. Canada’s strong labour market performance is, in turn, translating into solid income growth, fuelling a self-sustaining recovery in private demand and allowing an orderly unwinding of stimulus measures. Looking ahead, the most recent survey of private sector economists showed they expect the recovery to continue in 2011 with growth
And its weaknesses? A key challenge that remains is to improve productivity performance. With population ageing, boosting productivity growth will be crucial to continue to increase living standards. Measures taken by the government of Canada since 2006 to promote long-term economic growth include lower taxes on business investment, the elimination of import tariffs on manufacturing inputs and machinery and equipment, historic investment in infrastructure, and increased support for research. Going forward, the first priority should be to return to balanced budgets, which is critical to prevent backsliding and will allow further progress on the government’s policy framework. The OECD’s 2010 Economic Survey of Canada highlighted healthcare costs as an issue of concern for long-term public finances. Canada also faces other cost pressures, not least from ageing societies. What do you think should be done to address these concerns? In Canada, the responsibility for funding, coverage and organisation of healthcare services largely rests with provincial governments. There will nevertheless be a need for the federal and provincial governments to work together to control healthcare costs and secure stable long-term funding arrangements that create the right incentives for cost-containment. In this context, the OECD will have a critical role to play in helping its members meet this important challenge through providing analysis on the international experience in this area. In addition to returning to balanced budgets over the medium term, the best way for Canada to address the economic and fiscal challenges posed by an ageing population is to focus on policies that foster productivity growth and promote the efficient allocation of resources. In this respect, significant progress has been made since 2006 which should help improve both Canada’s productivity and labour market performance in the future. Moreover, the next phase of Canada’s Economic Action Plan will continue to promote longOECD Observer Special Anniversary Focus June 2011
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50 years of productive partnership William R White, Chair, OECD Economic Development and Review Committee
How important is OECD membership to Canada? Canada views the OECD as an important source of ideas, standards and norms that shape policies and strengthen the functioning of the global economy, particularly their analysis of the impact and importance of structural reforms to enhance potential output. OECD instruments such as the Model Tax Convention, the Export Credit Arrangement and Freedom of Investment work have also helped create a level playing field. Canada appreciates the technical expertise and analytical work of the OECD. For 50 years the OECD has provided useful policy advice on how to sustain Canadian economic prosperity. Of particular interest to Canada is the OECD’s work on the development of statistical sources that allow for international comparisons. OECD benchmarking helps us rate our economic performance against our peers and learn from the experiences of others.
Visit www.fin.gc.ca
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©BIS
Canada is an active participant in forums that promote global economic co-operation, such as the OECD and G20. One of Canada’s top priorities is working with its international partners to find cooperative solutions to address large, persistent imbalances, which continue to threaten prospects for strong, sustainable and balanced global growth. Canada plays an important role in facilitating these discussions, particularly with its work on the G20 Framework for Strong, Sustainable and Balanced Growth, and the recent agreement on a series of indicative guidelines. Helping to foster a common understanding of the problems facing the global economy will provide more structure in global efforts to address these issues.
Why do some businesses, organisations, economies and even countries succeed in achieving their objectives while others do not? Important insights are provided if we treat each of these entities as a complex adaptive system, subject to the same processes as biological evolution. Recent literature suggests that the secret of success is a capacity to master the current operating environment while maintaining a capacity to adapt to changes in that environment. Both Canada and the OECD have been remarkably successful in both regards, due in part to the values they share. One fundamentally important shared belief is in the efficiency of competitive markets, not only to provide currently demanded goods and services but also to adapt to changing requirements. However, the OECD and Canada also share the view that markets must work within a framework of co-operatively determined rules and agreed norms about what constitutes “fair” behaviour. As the Canadian novelist, Margaret Atwood, recently pointed out in the CBC Massey Lectures, the need for “fairness” seems to have been hard-wired by evolution into our genetic material. It constitutes a necessary condition for trust and the ongoing co-operation needed if both individuals and countries are to adapt successfully to a fast-changing world.
Canada seems well adapted to the world in which it currently operates. In various polls, it consistently ranks at or near the top as “the best county in which to live”. Its long history of democracy, strong property rights, good governance and a reputation for fairness surely play a big role in this positive assessment. Furthermore, its economic performance has, in recent decades, allowed it to provide one of the world’s highest standards of living as well as employment opportunities sufficient to attract an unusually high number of immigrants from all over the world. Canada’s capacity to adapt to potential future changes is attested by its successful adaptations in the past. Whereas it was once almost entirely dependent on commodity production, not least farming, high-tech
The OECD and Canada share the view that markets must work within a framework of co-operatively determined rules and agreed norms about what constitutes “fair” behaviour manufacturing and services now constitute a much larger share of both production and exports. Whereas trade with the US was once totally dominant, new markets are being established in emerging market economies, not least in Asia. Whereas Canada’s financial markets were once very tightly controlled, they have now been largely deregulated, though subject to careful supervision. Looking forward, the generally high quality of Canada’s education system, and the variety and qualifications of its many skilled immigrants give further grounds to believe in Canada’s capacity to cope with changes arising from an uncertain and evolving world economy. For 50 years now, Canada and the OECD have interacted in ways that have supported Canada’s successful economic record. But it is important to note that, while Canada has benefitted from the help of the OECD, the OECD has also benefitted from the help of Canada. As to the flow of benefits to Canada, virtually all of the OECD’s work has been of material use to a wide variety of governmental and private agencies, as well as to NGOs. Perhaps highest on the list would be the OECD databases and statistical sources that allow cross-country comparisons. Next would be the research work that tries to establish “best practice” with respect to government and other policies, and the (process of) negotiations that take place at the OECD to set global norms and standards. Peer review, to share cross country experiences and to build trust in the negotiating process, is also a procedure from which Canada has benefited enormously over the years. As chair of the OECD Economic Development and Review Committee, which comments on the macroeconomic and structural policies of individual countries, I perhaps know more about this aspect of OECD peer review than any other. Generally speaking, the OECD’s recommendations with respect to macroeconomic policies have not
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Canada and the OECD
been much different from those which the Canadian authorities have chosen to implement. This is certainly true of the process of fiscal consolidation which began in the late 1980s and was intensified through the 1990s. Canada’s success in that regard is now being closely studied around the world by countries whose fiscal sustainability is increasingly threatened. As for structural policies, many of the liberalising reforms that have been carried out in Canada were consistent with OECD recommendations. That said, a number of suggested reforms having to do with labour markets, the environment, and other areas have not found total favour with the Canadian authorities. In this context, the need to find some accommodation with authorities in the US has often played a central role. At the very least, however, OECD initiatives continue to spark useful debate within Canada about important policy issues. As noted above, Canada has contributed as much to the OECD (and the global community it supports) as the OECD has contributed to Canada. This support has been provided in many ways. In addition to funding, where Canada is the seventh largest contributor to the organisation, Canada’s main support for the work of the OECD has come in the form of expertise. Over 200 committees assemble at the OECD, and Canada has provided knowledgeable (and sometimes outstanding) delegates to most, if not all of them. Indeed, at present, 17 of these committees (including my own) are chaired by Canadians. Since these committees are at the centre of negotiations concerning international standards of various sorts, and often the research underlying them, this contribution is not inconsequential. Finally, it must be noted that Canadians have been chosen to fill many more staff positions at the OECD than might have been expected, given the relative size of Canada’s population. This attests to their competence as well as the traditional interest of Canadians in playing the role of the “honest broker” in international affairs. The fact that Donald Johnston, the previous secretary general of the OECD, was Canadian is, of course, a bonus. The future holds many challenges: the need for a sustainable recovery from the recent financial and economic crisis; the need for institutional changes to reflect the growing relative importance of emerging market economies; and the need for increased attention to environmental degradation. The OECD will continue to be there to help Canada meet these challenges and Canada, hopefully, will continue to be there to support the OECD. See www.oecd.org/canada See other articles by William R White at www.oecdobserver.org
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Innovation: Opportunities without frontiers Waterloo, Ontario is the headquarters of Research in Motion (RIM), the manufacturer of the Blackberry smartphone. In just three years, the Canadian firm’s profits had grown by 84% and its revenues by 77%. The famous handset, which is used widely by OECD staff, is known not only for its versatility, but for its clever branding. Innovative thought went into both the technology and the marketing. “Some say that Canadians are not risk-takers,” says Ilse Treurnicht, CEO of MaRS, a Toronto-based innovation centre. “Frankly, I don’t buy it. We certainly do not see that at MaRS, not among younger entrepreneurs, many of whom are new Canadians.” MaRS (“Medical and Related Sciences”–the acronym stuck even after it ventured into other areas of innovation) is a public-private corporation offering advice, customer market intelligence and seed capital to entrepreneurs. Established in 2000, MaRS is a not-forprofit charity created to stimulate innovation in the life sciences, digital media and ICT, clean technology, healthcare and “socialpurpose” enterprises. To date, it has worked with more than 1,300 Canadian firms. But for many experts, Canada ought to be much more fertile ground for innovative businesses. After all, entrepreneurs face few hurdles in setting up a business, while bank credit is relatively easy to obtain. Overall tax rates are also among the lowest of the major OECD countries. “Canadian businesses have been very profitable, more so than their US counterparts,” says Ms Treurnicht, and cites a CCA (Council of Canadian Academies)/Nicholson report. “And our resources have been in strong demand.”
©REUTERS/Chris Wattie
Canada wants to position itself as a leader with fresh ideas, not least on the international policy front. During the 1990s, the Internet confounded policymakers, who were trying to decide how such matters as taxation should be treated in global online commercial transactions. In 1998, Canada hosted a major OECD conference at Ottawa. That meeting laid the groundwork for today’s policy consensus: remove the barriers to e-commerce to allow Internet to flourish internationally.
Canada is home to some well-known technology companies, but is the country innovative enough? The picture is mixed, with resisting complacency being among the challenges to face. When the business magazine Forbes cast off from US shores two years ago to seek out, for the first time, non-US firms to include in its list of the world’s 100 fastest growing companies, its first sighting was not the ports of Europe or Asia or South America, but the northern bank of the St Lawrence River.
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But at home, it must do more to live up to its innovative billing. There is certainly no dearth of intellectual resources in Canada, and its spending on higher education as a percentage of GDP surpasses that of France, Germany, Italy, Japan, the UK and the US. Businesses too are keen to reap the harvest; their investment in higher education is above the OECD average. In general, Canadians are highly educated. Over 55% of the population between the ages of 25 and 34 has attained a tertiary-level education, as has 45% between the ages of 35 and 45. Why then, with this low-hanging fruit in scientific competence, entrepreneurship and federal support, did the government, in its presentation of the 2010 budget, state that Canada lagged behind other advanced economies in terms of innovation?
“Our biggest barrier may be complacency,” says Ms Treurnicht. “National growth fuelled by an abundance of natural resource assets does not require us to be innovative leaders in a highly competitive global environment. Perhaps the need to innovate for survival and prosperity has not been a burning platform for Canadian businesses.” One thing that fledgling businesses lack, she says, is venture capital. “The limited availability of risk capital at all stages of the growth cycle often impedes our ability to grow global companies from Canada.” OECD figures support her. Among seven countries studied in 2008 “Some say that Canadians (Australia, Canada, Denmark, are not risk-takers. Frankly, I Finland, the Netherlands, Norway don’t buy it” – Ilse Treurnicht and the UK), venture capital for Canadian start-ups, 0.08% of GDP, was the lowest of the group. This may be part of the reason that, despite the ease of entry, new firms made up only 8% of all registered firms in Canada in 2007, compared to 18% in the UK. In research and development (R&D), which is a commonly used, though by no means complete, measure of innovation, Canada lags too. Spending by governments and businesses on R&D is known as BERD (“business expenditures on research and development”). In Canada, BERD accounted for just over 1% of GDP in 2008, below the OECD average of 1.6%. Productivity effect But does BERD impact on labour productivity? The OECD believes it does. “Productivity gains and GDP growth are strongly linked to new technologies and investment in a wide range of intellectual assets,” says Andrew Wyckoff, Director of the OECD Directorate for Science, Technology and Industry. “The advent of personal computers, the worldwide web and its offspring, and broadband communications networks, all play a key role driving efficiency gains, new business models and new firm creation.” The May 2010 ministerial report on the OECD Innovation Strategy found that investment in intangible assets, including BERD, raised labour productivity in Austria, Finland, Sweden, the UK and the US by as much as a full percentage point. The slump in productivity and the widening gap between US and Canadian performance prompted the Canadian government in its 2010 budget to undertake a review of federal support for R&D, to improve opportunities for new businesses and to stimulate innovation.
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“We need to recognise that young high-growth firms create the majority of new jobs in modern economies,” says Ms Treurnicht. “These firms also catalyse and spur the creation of future industries. Governments need to differentiate the needs of these gazelles within public policy frameworks designed to serve the general SME population, to ensure fertile conditions for their growth. Because these young firms also represent important sources of new ideas, entrepreneurial talent and future growth for more established firms, the private sector needs to invest in them and in the ecosystem that fosters their growth.” Most R&D is carried out by big companies; the OECD Innovation Strategy noted that some 700 firms account for almost half of all R&D expenditure in the world. Canada is no exception: just 10 companies conducted a third of all R&D over the last two decades, and yet 98% of Canadian firms are small and medium-size businesses (SMEs) which employ some 5 million people, about half of the private sector. Unleashing this potential is one of the government’s aims set out in the 2010 budget. To do this, it created the SME Innovation Commercialisation Program, which will allot CAN$40 million over two years to 20 projects and organise regional trade shows where SMEs can showcase their innovations. Canadian SMEs are eager. Compared to big Canadian firms, which earmark only 1% of their revenue to innovation, a limited number of innovative smaller firms may exceptionally invest far more than that. But for innovation to take off, this spending should not all be targeted at R&D, which is only one key part of the innovation equation.
Business enterprise expenditure on R&D (BERD) % of GDP 4
3
2
1
0 Israel
Germany France
UK
Canada
Italy
Poland
Source: OECD
OECD Observer Special Anniversary Focus June 2011
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FOCUS Indeed some innovative firms undertake no R&D at all. “R&D is a powerful driver of innovation,� says Mr Wyckoff, “but it’s not the only one. Globalisation has changed the way economies transform knowledge into market value–the definition of innovation. That process now takes place increasingly outside the lab. New approaches to design, marketing and organisations are “R&D is a powerful driver of powerful drivers of growth.� Mr Wyckoff underlines what for the innovation, but it’s not the OECD is a key point: innovation only one� – Andy Wyckoff is about implementing new and better ways of doing things, about how skills, ideas and technology are harnessed to raise productivity and potential. Such “intangible assets� account for between 5-12% of GDP in some OECD countries.
Ms Treurnicht is not surprised. “New models of innovation increasingly involve collaboration,� she says. “They involve collaboration across disciplines, geographic boundaries and even across the cultural divide between the public and private sector. “Because of our vast geography, modest population and middle power status in the world, Canadians have a cultural disposition towards collaborative approaches and some experience in building these types of knowledge networks.� That’s experience from which both Canada and its OECD partners will no doubt benefit.
References OECD (2010), The OECD Innovation Strategy: Getting a Head Start on Tomorrow. OECD (2010), Measuring Innovation: A New Perspective?, read at www.oecd.org/innovation/strategy/measuring Public Works and Government Services, Canada (2010), “Review of Federal Support to Research and Development, Expert Panel Consultation Paper,� see www.rdreview-examenrd.ca Wyckoff A.(2009), “Innovating a Recovery�, OECD Observer No. 273, June 2009.
Unfortunately the economic crisis forced many firms to postpone or cancel innovative spending, which risks holding back growth. The CEO of MaRs is nevertheless optimistic. “Canada has a small local market,� says Ms Treurnicht, “and we have benefitted tremendously from the insatiable US appetite for our new products and services. Given that this market has become sluggish in recent years, Canadians are increasingly looking at new partnerships and new opportunities in emerging, high-growth markets. This will drive more innovation in the future.� Innovation thrives in big spaces, and not only within wide geographical borders, but in the global forum of ideas. Companies with wider international contacts innovate more. “Skills, networks and trading knowledge,� says Mr Wyckoff, “are vital to competing efficiently in today’s economy where information travels in real time. Companies increasingly collaborate to reduce the cost and risk of bringing new ideas to market by tapping expertise around the globe.�
Council of Canadian Academies (2009), “Innovation and Business Strategy: Why Canada Falls Short, Expert Panel on Business Innovation�.
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Nor are Canadian firms jealous guardians of their innovations. A 2007 study by Statistics Canada revealed that 42% of manufacturers had developed their own technologies or had modified those purchased from other companies. These innovations were in their turn freely shared by 18% of companies, and often at no charge.
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INNOVATION
Business brief
Pierre Lapointe - President - FPInnovations
“Our aim is the optimisation and enhancement of the entire Canadian forestrysector value chain” Could you introduce FPInnovations to us? FPInnovations is an institute bringing together research and development centres from within the Canadian forestry industry (forest operations, wood products, pulp and paper and the Canadian Wood Fibre Centre of Natural Resources Canada). The organisation has some 400 members, employs almost 600 researchers and its Canadian offices are located in Montreal, Quebec and Vancouver. It is one of the world’s leading non-profit making forestry-research institutes. The considerable pool of know-how that the organisation has created enables it to act across four major areas of research: value chain optimisation; the development of solutions for construction
and for living; the creation of new-generation pulp and papers and the development of new energy and chemical products from forest biomass. FPInnovations works closely with more than 60 university laboratories. The research effort is oriented towards the needs of the industry professionals who are members of our institute. The forestry industry is viewed as a “traditional” sector. Could you give us some examples of research projects? The Canadian forestry industry is experiencing a deep-seated transformation with the development of new directions in biotechnology with high added value. Nanocrystalline cellulose (NCC) is a prime example. This is a renewable, recyclable and abundant nanomaterial extracted from wood fibre from the pulpmanufacturing process. Potential applications include optically reflective films, high-durability varnishes and bio-plastics: fresh opportunities for a wide variety of sectors (aeronautics, space, automotive, textile, etc.). The world’s first commercial-scale demonstration plant with a production capacity of 1 tonne per day of NCC is scheduled to be operational next September. Engineered wood products (cross-laminated panels), a European invention, are used in non-residential buildings on the western coasts of Canada and California (USA) on account of their high degree of earthquake resistance. We have recently developed a fibre which can be transformed into rayon, a potential replacement for cotton. This product is meeting with considerable success in Asia. FPInnovations is exploring solutions for the advancement of the bio-economy in connection with the forest resource. These solutions include the use of lignocellulosic biomass as a bioenergy source and in the production of chemicals. This is proving a very promising field of investigation. What is your strategy with respect to international co-operation? Historically, FPInnovations has worked closely with countries such as Sweden and Finland on account of the similarity of their forests. However, other European countries (France, Germany and Italy) are also special partners.
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Co-operation with Asia is increasing due to its economic dynamism and Canada’s presence in the Pacific zone. FPInnovations has offices in China; in Beijing and Shanghai. Latin America is of growing interest for us because the forestry industry there is developing at a tremendous rate. Canada and Chile have worked closely for some time on earthquake-resistant buildings. We are pursuing all avenues of innovation contributing to the transformation of the forestry sector whether from Canada or any other country.
Sponsored by FPInnovations OECD Observer Special Anniversary Focus June 2011
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FOCUS ©REUTERS/Mark Blinch
Education: Bridging the classroom divide
School students with Canada’s prime minister, Stephen Harper
Canadian education enjoys an excellent reputation at home and abroad, thanks to strong performances in such renowned surveys as OECD PISA, which focuses on 15-year-olds. There are several reasons for this success, and as experts from the OECD and Canada explain, reforms that focus on equity and integration all help. But there are challenges too. Social policymakers worry about gaps. Gaps in income distribution, job opportunities and education are warning signs of a fissure opening up in society. One would think that with one of the highest immigrant populations in OECD countries Canadians would be worried about such gaps, especially in education, where immigrant children in many countries struggle, often in vain, to get a foothold. Not a bit. In the 2009 OECD Programme of International Student Assessment (PISA), an evaluation of 15-year-old pupils in 65 countries, including the OECD countries, Canada ranked among the top ten performers in reading, mathematics and science. If such results could be attributed to a high number of academic overachievers, they would still be remarkable, but the fact that all pupils–from the highest to the lowest scorers–contributed to the results highlights the equity of the Canadian educational system, where the gap between the highest and lowest scores was one of the narrowest in any OECD country. Andreas Schleicher, who is special advisor on education policy to the OECD Secretary General and one of the driving forces behind PISA, attributes part of this success to the way Canada handled educational reforms. “The interesting story is how the successful provinces were able to get the main stakeholders on board, teachers and their unions included, and how they got professionals, not bureaucrats, to implement the reforms on the frontline. Significant efforts were devoted to winning over teachers, schools and unions to its vision of reform.”Canada got top marks not only in equity, but
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integration as well. Immigrant children in Canada, as elsewhere, tend to struggle during the first five years of their arrival. This is unsurprising, as children have to adapt to a new environment and master new languages. But in Canada, after five years, they shed their chrysalis. Results from the first PISA survey, administered in 2000, show that children who had lived in Canada for less than five years scored 20 points below the OECD average of 478, whereas those who had lived there for more than five years, scored 521. In light of PISA 2000, it was found that a gain or loss of 34 reading points by Canadian pupils was the equivalent of a gain or loss of one year of education. Why the top marks? According to Andrew Parkin, Director General of the Council of Ministers of Education, Canada (CMEC), the Canadian educational system (or rather, systems) “makes it easier for immigrants to find their place” in society. Many schools offer adaptation classes, where immigrant children are introduced to French and English, and provinces and territories vigorously encourage immigration. In 2010, Canada welcomed the highest number of immigrants since it became a founding member of the OECD 50 years ago: over 280,000. It also threw open the gates to temporary residents, including some 182,000 foreign students, 28,000 more than five years ago. They now make up 8% of the student body, compared to 4% in 1992. This is no accident. Unlike some countries, Canada is unabashedly wooing foreign students, to stimulate innovation and bolster the economy. According to a government-commissioned study, foreign students enrich the Canadian economy by CAN$6.5 billion. The government is keen to make the prospect of studying in Canada inviting, and so has created the Canadian Experience Class, in which eligible foreign students can apply for permanent residence. Mr Parkin also notes that, in 2010, premiers from all of Canada’s provinces and territories called for renewed action to attract greater numbers of international students.
Immigration can be a prickly subject for politicians in some countries, who either offer a blustery populist rhetoric, blaming high unemployment on immigrants, or, more reasonably, invoke the opportunities for growth its provides. Immigrants may indeed be seeking jobs, or fleeing political instability, or simply trying to rejoin their families. Mr Parkin notes that the profiles of immigrants in Canada differ from those in the US, for example. Whereas most immigrants to the US are economic immigrants from Latin America,
We need to redouble our efforts to ensure that our students remain in the top tier immigrants to Canada are generally well-educated and skilled. The majority (52.7% in 2010) come from Asian countries such as China and Korea, where hard work and academic excellence are strongly encouraged by parents and educators: pupils from both countries topped the OECD PISA poll, for instance. Socio-economic background can be a major determinant to academic success. Pupils from poor families or single-parent households tend to perform less well in school. The ability of a child to overcome these barriers is known as “resilience.” Canadian children are particularly tough, ranking 9th with 40% of pupils considered “resilient” compared to the OECD average of 31%. Success is not due solely to pupils’ determination or parental support. Mr Parkin credits Canada’s success in part to the professionalism of Canadian teachers. And government works to be sure that teachers can fulfill their vocation. The freedom granted to teachers extends to pupils. Unlike some OECD countries, Canada has no policy of “streaming,” by which a child is shepherded down a particular academic track early on, sometimes as early as the age of 11. Academic flexibility continues into tertiary education, what Mr Parkin calls Canada’s “second chance” system. Unlike countries such as the UK, where pupils who drop out of school may languish in unemployment for years, many Canadian drop-outs find jobs. After a few years of working, they decide to study again. Many opt for a local college, which does not require relocating to a big city, and where they can learn a particular skill in a shorter period of time. This brief pause between secondary and post-secondary education may be one reason why foreign undergraduates are generally younger than their Canadian cohorts.
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Canada and the OECD
“If you take Ontario,” says Mr Schleicher, “the province that advanced most, you see how they pursued strategies directly focused on improving the act of teaching. They paid careful and detailed attention to implementation, and gave teachers the opportunity to practice new ideas and learn from their colleagues.” But the findings were not all good news. According to Mr. Parkin, one out of ten Canadian pupils falls below the acceptable reading standard, and girls do significantly better than boys in reading (though the gap is narrowing). Canadian pupils taught in settings where English or French predominated as a minority language fared less well than those where English or French was the dominant language, the PISA surveys showed. Aboriginal Canadians, who Mr Parkin says account for up to 15% of the population in some provinces such as Manitoba and Saskatchewan, lag behind and are more likely to quit school before graduating. This wide-ranging PISA assessment will help the government to target policies aimed at improving the performance of these pupils. Even in those areas where Canada tops the class, Mr Parkin warns against complacency. “While Canada continues to demonstrate strong performance in PISA, many other countries have made significant gains. Canada’s education ministers know that we cannot rest on our laurels. We need to redouble our efforts to ensure that our students remain in the top tier.” Immigrant students may give Canada that edge. It is a truly multicultural country, with one of the highest foreign-born populations in the OECD area. There is less a sense of being an outsider when close to 20% of Canadians are foreign born. “Canadian identity,” says Mr Parkin, “is an identity built on diversity.”
References Visit www.oecd.org/edu OECD Programme for International Student Assessment (PISA): www.pisa.oecd.org OECD (2010), Pathways to Success: How knowledge and skills at age 15 help shape future lives in Canada, in collaboration with Human Resources and Skills Development Canada. See news releases at www.cic.gc.ca See Statistics Canada at www.statcan.gc.ca
The 2009 OECD PISA survey was administered to between 5,000 and 10,000 pupils aged 15, from an average of 150 schools from each country. Wanting a more precise assessment of pupils in each of its ten provinces, Canada extended the PISA study to 23,000 students from 10,000 schools.
OECD Observer Special Anniversary Focus June 2011
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FOCUS ©REUTERS/Lucas Jackson
Fisheries: The lessons of the Grand Banks
After environmental and economic turbulence, Canada’s fisheries are being reformed. The sector is now undergoing a renaissance, though challenges remain. The Grand Banks of Newfoundland provided a stable livelihood to island residents for five centuries, making Canada one of the world’s leading fishing economies. By the end of the 20th century, however, the great shoals of cod, which had enriched fishers from round the world, all but vanished from the Grand Banks. As stocks dwindled across the North Atlantic, there were fears that overfishing might drive cod to extinction. On 2 July 1992, the Canadian federal government took action by imposing a moratorium on cod fishing. This led to the singlelargest mass layoff in Canadian history, affecting not only fishers, but employees in processing plants, the wholesale and retail trades and boat construction. Over the next decade, some Newfoundland communities shrank considerably as residents left to seek work in other provinces. Atlantic Canada’s fishing industry was shaken, as were the fishing sectors in other OECD countries. But overfishing of cod had to be stopped. And although a recreational and artisanal fishery now exists on the Grand Banks, with stocks of about 5,500 tonnes, the moratorium on commercial cod fishing remains. But as the cod declined, shrimp and crab flourished, and cod fishers have turned to exploit these species. The OECD estimated that, between 1989 and 1992, the total value of fish landings, including cod, in Newfoundland was about CAN$275 million per year. Fifteen years later, it climbed to CAN$470 million. After adjusting for changes in Canada’s consumer price index, which rose about 40% from 1990
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to 2006, the value of fish landings was 20% higher than when cod was king. Atlantic shrimp, crab and lobster belong to the “luxury” category of seafood, the main buyers of which are restaurants, hotels, vacation resorts and casinos around the world. Shellfish alone accounted for over 63% of the value of the Canadian commercial fishery in 2009. Unfortunately, the latest economic crisis did not spare shellfish. From 2007 to 2009, the retail price for lobster fell 50% and snow crab 20%. Prices for other species fared no better; for example, cod harvests lost 47% of their value. The situation was aggravated by the stronger Canadian dollar which lowered margins of exports priced in US dollars (the US is the largest importer of Canadian seafood). The low cost of production from competitors, notably in Asia, helped to keep prices flat. As part of a broader economic stimulus package, the federal government responded with CAN$75 million worth of direct measures, of which CAN$50 million went to developing means to assure the sustainability of lobster production, Canada’s highest value fishery. Provincial governments also came to the rescue, injecting over CAN$4 million in sustainability and aquaculture projects. Yet even before the crisis, the government was intent on rejuvenating the industry. In 2006, Canada’s Department of Fisheries and Oceans (DFO) began updating its Fisheries Act, which first came into force over a century ago. Renewal initiatives are now in place to update fisheries management policies, and to give fishers greater freedom and management responsibilities. Along with the updated law, the government created the Sustainable Fisheries Framework, a body of precautionary measures to protect
ecosystems in the management of Canadian fisheries. The framework comprises reference points and stock status zones (“healthy”, “cautious” and “critical”), harvest strategies and procedures for decision making, while taking uncertainty and risk into account. “Canada’s Sustainable Fisheries Framework provides the basis for ensuring Canadian fisheries are conducted in a manner that supports conservation and sustainable use,” says Nadia Bouffard, Director
Renewal initiatives are now in place to update fisheries management policies, and to give fishers greater freedom and management responsibilities General for Fisheries and Aboriginal Policy in the DFO. “Combined with reforms to socio-economic policies and initiatives, the Sustainable Fisheries Framework is a key instrument in developing environmentally sustainable fisheries that also support economic prosperity in the industry and fishing communities.” The awareness that marine habitats and biodiversity are critical to sustainable fisheries prompted the federal government to designate seven Marine Protected Areas (MPAs), including the Bowie Seamount, an undersea volcano in the northwest Pacific described by the DFO as an “oasis” of biological diversity. Under the recent Health of the Oceans agenda, a battery of 22 environmental and scientific initiatives will add nine more MPAs by 2015, and strengthen international cooperation in the Gulf of Maine and the Arctic. Fisheries and Oceans Canada is also developing a national policy on the management of fish caught unintentionally while trawling other species, known as bycatch, and discards, which include bycatch and targeted species caught in excess of quotas. This policy is in line with the codes of conduct and guidelines set down by the Food and Agriculture Organization, and builds on practices already established under the National Plan of Action for Reducing Incidental Catch of Seabirds in Longline Fisheries (NPOA-Seabirds) and the NPOA-Sharks. International co-operation through organisations such as the OECD is becoming crucial. Seafood products are highly traded, with some 40% worldwide entering international markets. In 2010 Canada exported more than CAN$3.4 billion worth of fish and seafood products, and imported CAN$2.2 billion. Canada has also signed memorandums of understanding with China, Greenland, Norway, Portugal, the Russian Federation and Spain to forge stronger ties in research and economic development, and in the monitoring, control and surveillance of fishing activities.
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Canada and the OECD
has almost tripled to close to CAN$1 billion a year.” The industry supports some 14,000 jobs. “It is an increasingly important part of the Canadian economy, providing valuable employment opportunities in coastal and rural communities, and contributing to the world’s food supply.” What about climate change? According to the OECD Fisheries Review, warmer waters in the Arctic are likely to result in a decline of northerly species such as capelin and Greenland halibut. The loss of Arctic cold water species would be a blow to Canadian and global biodiversity, and to the communities that rely on those species. Warmer temperatures, less sea ice cover and more sunlight as a result could boost stocks of cod, pollock, herring and flatfish. Such regime shifts have occurred in the past and can be long-lasting. With foresight, ecofriendly management policies and international co-operation, Canada has cause to be optimistic. The lessons of the Grand Banks will not be forgotten.
References See Fisheries and Oceans Canada website at www.dfo-mpo.gc.ca/index-eng.htm Ma, Paul (2009), “Canada’s Fishing Communities: An Overview of Current Challenges and Opportunities”, presentation made at the OECD Rural Policy Conference, Quebec City, Canada, 13-15 October 2009. See Newfoundland and Labrador Heritage website at www.heritage.nf.ca/home.html OECD (2010), Review of Fisheries in OECD Countries 2009: Polices and Summary Statistics. OECD (2010), “Net losses”, in OECD Observer No. 279, May 2010.
Order this now! ISBN 978-92-64-07974-8 Order this book at www.oecd.org/ bookshop
Canada’s aquaculture industry is also thriving. “Aquaculture production in Canada has more than doubled since 1996,” says Guy Beaupré, Director General for Aquaculture at DFO, “and its value
OECD Observer Special Anniversary Focus June 2011
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Bench strength: Winter Olympics 2010
Gold-medalist Sidney Crosby celebrates success
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Canada and the OECD
Major sporting events can boost economies, while giving people a boost too. The Winter Olympics in Vancouver in 2010, which were pulled off to great applause despite the odds, were no exception. How was it done, and what lessons did the organisers learn? We spoke with John Furlong, who headed up the organising committee responsible for the games. “We were not given a get-out-of-jail card by governments,” says John Furlong. “A one-dollar deficit would have been unforgivable.” The CEO of the Vancouver Organizing Committee (VANOC) was referring to the CAN$1.75 million operating budget for the 2010 Winter Olympics and Paralympics held in Vancouver, British Columbia. Mr Furlong dismisses the notion that he was creative in getting the Olympics under way in the midst of the economic crisis. “It wasn’t creativity,” he says. “We were fighting for our lives.” It was a good fight, better than anyone had imagined, and not just economically. Canada won 14 gold medals, the highest number of medals won by a country in a single Olympic year. Not only that, it took the gold in the sport that for many defines the nation: ice hockey. Canada was jubilant. “Canada did not have an Olympic experience of its own,” says Mr Furlong. “It had a profound effect on the country.” How did he navigate the slalom of the economic crisis? The answer was to pull in the crowds, not least because if Canadians were spared the demoralising sight of vacant stands, they were more likely to cheer for their athletes. “I remember that when I was in Beijing, at some events over half the seats were empty. So what we did was set up a bartering system. People who couldn’t or didn’t want to attend one event could exchange their tickets with someone who did. That way, we always had a full house.” Confidence was vital to the success of the games. The economic crisis had left financial partners grimacing. “There were dire predictions that General Motors would fail. We decided to believe they would not fail. And they came through. No one wanted to let us down because of what it meant to the country. None of our partners failed us.” Hosting global events such as the Olympics can be harrowing, as OECD studies have shown. Organisation, budgeting and the economic aftermath of an event can burnish or tarnish a host country’s image. The OECD notes that the scope and sustainability of the post-Games legacy is a major factor in the evaluation of Olympic bids. Mr Furlong chose to make confidence and trust a point of policy. Organisers had worried that the 45,000-kilometer torch run, the longest in any host country, which would pass through more than 1,000 cities and towns, might meet resistance from some aboriginal communities. Mr Furlong invited them to participate. “We tried to
John Furlong
build a relationship with every community in the country,” he says. This led to a CAN$15 million contract with aboriginal firms to do some preliminary construction. “We bet the farm on these relationships,” he says, “and we were so pleased by the result that we upped that to CAN$50-million dollar contract.” In 2010 Mr Furlong was nominated one of 25 “Transformational Canadians”, who immeasurably improved the lives of others. And today he is much sought after as a speaker at public policy forums and business conferences. Although the full weight of the economic and social impact of the 2010 Winter Olympic Games is still not in, a study by PricewaterhouseCoopers estimates that in the first three months of 2010, they generated CAN$862 million in real GDP and created or supported 17,000 jobs. The economic benefits, Mr Furlong admits, were not the first thing on his mind. “Our priority was to leave Canadians with a profound
How did Vancouver navigate the economic crisis? The answer was by pulling in the crowds human experience.” Few would doubt that his organising team accomplished that goal. The success of the Winter Olympics has been credited to Mr Furlong’s managerial talents, frugality and policy of inclusiveness. But the real reason, he says, was the public. “The public was the bench strength of the games.” When Sidney Crosby netted that puck for the gold in hockey, “every Canadian was on the ice. The games were seen as a metaphor of what was possible.”
References PricewaterhouseCoopers (2010], “The Games Effect: Report No. 6: Preliminary Economic Impact of the 2010 Winter Olympics on British Columbia and Canada”. OECD (2010), Local Development Benefits from Staging Global Events. See www.JohnFurlong.ca
OECD Observer Special Anniversary Focus June 2011
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A labour market with few wrinkles Canada’s labour market was spared some of the more dramatic peaks and troughs of the economic crisis. Why? At the height of the crisis in 2009, unemployment in Canada was at the OECD average of 8.3%. This was well above pre-crisis levels. But recovery has been strong, especially in relation to its closest neighbour. “There has even been a reversal in the historic fortunes between Canada and the United States,” says John Martin, Director for Employment, Labour and Social Affairs at the OECD. “Until recently Canada had a higher unemployment rate than the US. Unemployment rates in April 2011 were 9% in the US, compared to 7.6% in Canada.” In the gentler climes of 2007, unemployment was 4.6% in the US and 6% in Canada. On the other hand, the share of the long-term unemployed (those out of work for more than 12 months) in total unemployment was only 12% compared with 29% in the US and an OECD average of over 32%. This determination to avoid long-term unemployment is one reason for the change of fortune. Work-sharing agreements, in which employees forsake some of their hours rather than be laid off, were extended from the initial 14 weeks to 78. It also successfully extended employment insurance to protect workers who had lost their jobs from becoming discouraged and abandoning their efforts to find a new one. Young people were the biggest casualties of the crisis. But again, Canadian youth took less of a bruising. The unemployment rate for young people in 2010 was 14.8%, 2 points below the OECD average, and almost 4 points below the US. Education has helped. “Canada has an extremely well-educated youth population compared to virtually any other OECD country,” says Mr Martin. Students also face fewer hardships in finding a job and keeping it once they leave school. In 2008, over 75% of first jobs were permanent and full-time. Admittedly the crisis sapped some of that vitality, but even so, long-term unemployment is rare. In 2009, it was 16.9% among 16 to 24-year-olds in OECD countries; in Canada it was a mere 2.6%. The frontier between education and work is blurrier in Canada than in other OECD countries. This may not always be a good thing. Canadians enter the workplace quite young. The minimum working age in the province of Alberta is 12, compared to 14 for the rest of the country. Since work is limited to two hours per day, it seems harmless. But the OECD warns that young people may be tempted to abandon school for employment, compromising future opportunities. One way to keep them in school is to start them earlier. The OECD found that enrolment in pre-school, especially of children from low income or otherwise disadvantaged families, provided valuable socialisation and kept them from dropping out of school later on. With one in five Canadians foreign-born, almost double the OECD average, one might think that unemployment among immigrants
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would be higher. But the OECD found little difference. Part of this is due to Canada’s “skilled worker class” programme, which selects immigrants based on a points system. Nearly half of Canadian immigrants enter under this system. But immigrants still have a tougher time finding jobs, as do aboriginal Canadians. For their
“Canada’s labour market has ridden out the crisis well.” – John Martin children, it’s a different story: no less than 30% of immigrant children between the ages of 25 and 54 are in professional occupations, compared to 26% of Canadian-born parents. Yet is Canada squandering this wealth? “There are persistent earnings gaps between immigrants and native-born Canadians in the same occupations,” admits Mr Martin. “And one of the reasons is that employers attach virtually no value to qualifications acquired abroad. Canada is wasting some of the potential of these immigrants.” Canada should also reform its Employment Insurance system, under which a seasonal employer (say, the captain of a fishing trawler) or other business that lays off employees on a cyclical basis, pays less tax than a non-seasonal employer. What happens is that the non-seasonal employer effectively subsidises the seasonal one. The OECD has long recommended the use of employer experience rating, so that seasonal employers pay their share. “Canada’s labour market has ridden out the crisis well,” says Mr Martin. “The main challenge now is to continue.” References OECD (2010), “Seeking Success in Canada and the United States: Labour Market Outcomes among the Children of Immigrants,” from Equal Opportunities? The Labour Market Integration of the Children of Immigrants. OECD (2010), “Employment Outlook 2010–How does Canada compare?” See www.oecd.org/canada OECD (2008), Jobs for Youth: Canada. OECD (2010), OECD Economic Surveys: Canada. OECD (2011), Society at a Glance 2011–OECD Social Indicators.
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50 years of trade and co-operation: Work in progress Ken Ash, Director, OECD Trade and Agriculture Directorate
these are used as inputs to produce other products–now dominate trade flows, representing 56% of trade in goods and 73% of trade in services across the OECD area. The implications are enormous. Import barriers designed to protect domestic jobs deny firms access to the goods, services and know-how they need to compete internationally; trade barriers don’t protect, they cost jobs. Policy needs to recognise the benefits from imports as well as those from exports. Canada’s overall tariff profile for agriculture and industrial goods does so, with the simple average tariff generally below 3% and over two-thirds of all tariff lines at zero. But there are exceptions that warrant attention, notably for supply-managed agricultural commodities, where tariffs can exceed 100%, and for some agricultural and industrial products, whose tariffs increase with higher degrees of processing. Canada has always been actively involved in OECD work on trade and agriculture, and these issues have been closely examined. A considerable body of research is already available to inform the development of alternative farm policies that would address Canada’s domestic interests, while at the same time not restricting trade.
“Canada has always been actively involved in OECD work on trade and agriculture” Canada is a trading nation. As a geographically large country, rich in natural resources and with a relatively small population, trade was a natural starting point. But Canada has built on this foundation and today boasts a highly skilled and educated work force, a well-developed physical and financial infrastructure, a transparent and predictable regulatory environment, and a high degree of openness to trade and investment. As a result, Canada enjoys growing trade flows, with both exports and imports in excess of half a trillion Canadian dollars annually. Foreign direct investment stock in Canada is growing even faster than trade and now totals more than CAN$500 billion, while Canadian direct investment abroad is slightly higher. Per capita GDP in Canada now stands at close to US$40,000, higher than the OECD average of US$34,000; unemployment peaked in 2010 and is now below 8% (see article by John Martin, page 20). Canada’s recent economic performance is all the more impressive in light of the global economic crisis. But past success is no guarantee for future success, and the global landscape is changing rapidly. Brazil, China, India and Russia are perhaps better described as emerged, rather than emerging, economies; and a number of other developing countries, particularly in Asia, are themselves beginning to emerge. Moreover, developed countries–including those in the EU, Japan and the US, as well as Canada–are adjusting to the resulting shift in global economic activity. Globalisation brings with it international fragmentation of production and global value chains. Today’s firms are outsourcing and offshoring in order to acquire higher quality inputs, lower costs, and generally improve their competitiveness. Intermediate goods and services–
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Canada is also involved in OECD work on trade in services. As in many developed economies, Canadian services sectors have grown over the past five decades, and now account for almost three-quarters of economic activity and close to half of employment. Yet, globally, the share of services in international trade has remained stagnant at relatively low levels. Unlike tariffs applied at the border, the policies that impact services sectors are “behind the border” and not easily measured. These include such measures as barriers to commercial establishment, for example foreign ownership caps and joint venture obligations, or discriminatory registration requirements and licensing procedures. As a result, little is known about the impacts of different policies across services sectors and countries. Canada is a strong supporter of work recently launched at the OECD to address this information gap. Our aim is to develop a “services trade restrictiveness index”, underpinned by a regulatory policy database. It would provide policymakers with the information they need to identify barriers, improve their domestic policy environment and negotiate multilaterally to open up trade in services. This work is only possible with the full and active participation of the world’s major service providers. These are just two areas where Canada and the OECD have worked closely together over the years, for the mutual benefit of Canada and the global economy. With trade set to be an ever more important driver of global progress in the years ahead, even closer international co-operation offers the potential for even greater mutual benefits.
See www.oecd.org/tad
Business brief The Québec Autorité des marchés financiers A strong integrated regulator for Québec’s financial sector On February 1, 2004, the Autorité des marchés financiers (AMF) was mandated by the Government of Québec, Canada, to regulate the province’s financial markets and provide assistance to consumers of financial products and services.
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T ro ev g t t he ts su er- lato e th h b h an n n e A us me ch r, e n um eQ t i d o t M a i n u r More information about the Québec AMF and its activities are available on its i nt s. ng t s r ué mb ber F t h e ing ol be is at er an th r ven co website of d e ec e e x e ww c AMat www.lautorite.qc.ca. m t ref io on ten inv ffe p n o om d lem e s ct i re , b w. F an s tig ic int ut be en lau d c ayo Observer Special als ts2011 en Anniversary on OECD Focus June 23 tor its a n th si f o o te x d ew y in n ite cti t b t he or g i edu etw en .qc viti k ts c
FOCUS
Oil sands: Full of energy? oil sands production are 5-15% higher than those of conventional oil on a “well-to-wheels basis” (an assessment of total energy consumption, including emissions). However, Alberta is fairly active on this account, being the first jurisdiction in North America to legislate greenhouse
The IEA projects that by 2035 “unconventional oil”, including Canada’s oil sands, will meet about 10% of global oil demand gas reductions on large industrial facilities. Since 2007, the province has cut emissions by over 17 million tonnes, although part of this was due to the 2008-2009 economic crisis.
The Cree Indians around Lake Athabasca used the gobs of tar they found there to waterproof their canoes. The potential of this mundane stuff to yield oil was gleaned early in the 20th century, and Athabasca in Alberta, Canada sits on the world’s richest petroleum resource: more than 2 trillion barrels, as much as all the remaining recoverable conventional oil in the world. Of those 2 trillion barrels, however, only 170 billion are technically and economically recoverable. And of these, only 35 billion are near enough to the surface to be recovered through mining. Deposits deeper than 75 metres pose different problems and require different solutions. One method is “cold flow”, in which oil and sand are brought to the surface together and the oil is filtered out afterwards. Another is to inject steam into a network of wells. The steam heats the bitumen, which in its more fluid state can then be extracted. This method is the most widely applicable, but alternative ways of heating bitumen are being tested. In its raw state, bitumen is hard to transport to refineries. Since most buyers are only equipped to refine traditional crude, the bitumen must be upgraded. Upgrading plants apply intense heat to the bitumen to turn it into lighter “synthetic” crude. But the process is expensive, requiring tens of thousands of dollars of investment for every barrel per day of capacity. Reducing these costs is essential to make synthetic crude more attractive to buyers. Oil sands production has raised concerns about the environment. Alberta’s oil sands underlie some 140,000 km2 within Alberta’s 381,000 km2 of boreal forest. So far, only about 600 km2 have been exploited. Some of those areas have been reclaimed and reforested. As of 2009, 67 km2 had been reclaimed and more than 7.5 million tree seedlings planted. Carbon dioxide is another worry. Emissions from 24
Canada began to exploit oil sands in the late 1960s. But it was not until reserves were quantified in the 1990s and the government provided incentives that oil sands development took off. By 2010, Alberta was exporting 1.4 million barrels per day (mb/d) of crude to the United States–15% of its crude imports–and reaping CAN$3 billion in royalties from oil sands projects. More than 80 oil-sands projects were operating in Canada in early 2010, with a raw bitumen capacity of 1.9 mb/d. The International Energy Agency (IEA), a sister organisation of the OECD, predicts that current construction projects will increase capacity by another 0.9 mb/d by 2015. If all projects proposed were to get underway, it would add another 4.5 mb/d. This would certainly help to quench the thirst for crude in a world slow to adopt more sustainable energy systems. The IEA projects that by 2035 “unconventional oil”, including Canada’s oil sands, will meet about 10% of global oil demand. “Regardless of what governments do,” says Christian Besson, energy analyst at the IEA, “unconventional oil is set to play an increasingly important role in world oil supply in 2035”. With accessible reserves dwindling and the costs of exploring remote ones, like deep offshore drilling, rising, Canada’s oil sands may lack refinement, but they look more dependable than their crude cousin.
References IEA (2010), World Energy Outlook, see www.worldenergyoutlook.org See Government of Alberta: Energy at www.energy.alberta.ca/OilSands/793.asp
INTERVIEW
“A leader in training for experts on international issues” Denis Brière Rector, Univer sité L aval COULD YOU TELL US ALL ABOUT THE CLUSTER OF INTERNATIONAL EXCELLENCE AT UNIVERSITÉ LAVAL? Université Laval has developed significant savoir-faire in the field of training for experts on international issues. The High International Studies (HEI) spearhead this initiative and intend to continue to do so. Their training courses cover several disciplines (political science, law, economics and management), for students to each gain expert knowledge in a wide range of international issues. HEI programmes focus on transnational topics (masters in international relations and international development, as well as a doctorate in international studies). The HEI scheme draws support from the skills of the various faculties: administrative science, law, social sciences, literature, forestry, geography and geomatics as well as agriculture and food. We have thus created a “Cluster of International Excellence” label for which the HEI are a driving force. WHAT “ADDED VALUE” DO EXPERTS TRAINED AT UNIVERSITÉ LAVAL GAIN? The “Cluster of International Excellence” boasts a rich and varied syllabus. For example, the Faculty of Business Administration offers a Master’s programme in international development and humanitarian law as well as an international MBA. The Law Faculty offers a specialised higher education diploma and a master with a dissertation on international and transnational law.
Extra-curricular activities contribute to training on international issues: simulations of international institutions, commercial missions, contests in which students put forward arguments as in a court of international law, NGOs established on the campus; student medias on international themes. The HEI have signed agreements with several European universities: the Institute of Political Studies in Bordeaux (France), Linköping University (Sweden) and the Faculty of Political Science at the University of Oslo (Norway) and across the Atlantic in both North and South America. Furthermore, Université Laval is fostering other international partnerships, in research and mobility, on top of those with the “Cluster of International Excellence”.
Inspiring international mobility Whatever their fields of study, wherever their paths may take them, Université Laval students and faculty are encouraged to spread knowledge by engaging in dialog with the world. We offer programs in all disciplines, at all levels—from undergraduate to Ph.D.—capitalizing on the close relationships we’ve nurtured with over 500 prestigious partners in every corner of the globe. Let’s work together to raise the bar higher—everywhere.
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