Productivity with a purpose

Speech by the Honourable Maurizio Bevilacqua, M.P., P.C. Secretary of State (Science, Recherch & Development) Montreal Economic Institute, March 27 2002

I. Introduction of the guest speaker by Michel Kelly-Gagnon, Executive Director, Montreal Economic Institute

Madame la Consul générale de Grande-Bretagne, Messieurs les députés de l’Opposition officielle à l’Assemblée nationale, Monsieur Patrick Luciani de la Fondation Donner, Distingués invités d’honneur,

Merci d’être parmi nous aujourd’hui. Merci d’être avec nous en si grand nombre. Mon nom est Michel Kelly-Gagnon. Je suis le directeur exécutif de l’Institut économique de Montréal. Encore une fois bienvenue!

Depuis le début de ses opérations en juin 1999, l’Institut économique de Montréal est intervenu dans des sujets aussi variés que la liberté des échanges commerciaux, l’avenir des soins de santé, les fusions municipales, la péréquation, l’avenir des soins de santé et ainsi de suite.

Vous nous connaissez aussi sans doute par notre célèbre Bulletin des écoles secondaires du Québec publié chaque automne par le magazine L’actualité, bulletin qui selon un sondage effectué par la maison de sondage CROP est appuyé par 75 à 82 pour cent des Québécois selon le type de questions posées. Nous sommes particulièrement fiers de cette réalisation compte tenu des réactions très vigoureuses qu’il a suscité auprès de certains groupes organisés.

En très peu de temps, l’Institut économique de Montréal est devenu une tribune pour des conférenciers de renom. Par exemple, le 25 octobre dernier – qui était en fait notre dernière conférence importante – nous avons reçu le professeur James Buchanan, économiste de renommée mondiale dont les travaux ont d’ailleurs été couronnés par le Prix Nobel d’économie.

Aujourd’hui, dans le cadre de notre nouvelle série Décideur Politiques, l’IEDM reçoit l’honorable Maurizio Bevilacqua. Lorsque nous lui avons lancé l’invitation vers la fin de l’automne dernier, Monsieur Bevilacqua ne faisait pas encore partie du conseil des ministres. Il était alors président du Comité des Finances de la Chambre des communes et avait, à ce titre, pris des positions publiques pro création de richesses que nous avions remarquées, positions qui avaient malheureusement eu peu d’écho au Québec, à notre avis. Ce que nous comptons corriger par l’événement d’aujourd’hui autant que faire se peut.

Monsieur Bevilacqua est également très sensible à la recherche et aux étudiants et à l’excellence dans le domaine de l’éducation. Je tiendrais également à souligner la présence aujourd’hui d’étudiants distingués et pour lesquels il fera une annonce un peu plus tard qui, je crois, sera fort intéressante. Mais pour le moment, je demanderais aux étudiants des trois tables de se lever pour que nous puissions signaler et apprécier votre présence. Des gens, encore une fois, dont l’excellence en éducation et en recherche a été reconnue. Alors bravo!

Monsieur Bevilacqua a depuis été nommé Secrétaire d’État et il nous parlera aujourd’hui de productivité. J’admets que c’est un thème qui n’est pas particulièrement sexy. Mais il s’agit d’une question qui est néanmoins primordiale. Pourquoi? Parce que la productivité de nos entreprises est un facteur déterminant de notre niveau de vie.

C’est d’ailleurs pourquoi nous avons décidé d’en faire notre thème principal pour les prochains mois. En effet, outre la conférence d’aujourd’hui, nous tiendrons le 30 mai prochain un panel où divers experts dont l’ancien gouverneur de la Banque du Canada Gordon Thiessen ainsi que Paul-Arthur Huot de l’Alliance des manufacturiers et exportateurs du Québec présenteront leurs points de vue sur les défis que le Canada devra relever en matière de productivité. Car le Canada, et le Québec en particulier, ont connu un déclin relatif de leur productivité et nous pensons qu’il est temps d’alerter la population sur cette question. Ce panel sera suivi d’un déjeuner-causerie sur l’état de l’économie américaine en compagnie du président de la Federal Reserve Bank de Dallas, Monsieur Bobby McTeer. Monsieur McTeer siège aussi sur le prestigieux Conseil des gouverneurs de la Fed américaine avec Alan Greenspan, donc parmi les gens les plus influents du monde qui seront parmi nous le 30 mai prochain.

Je tiens aussi à souligner la collaboration de l’Alliance des manufacturiers et exportateurs du Québec et leur dynamique président Monsieur Paul-Arthur Huot qui ont accepté de se joindre à nous pour cet événement. Ce dernier vous adressera d’ailleurs quelques mots après le discours de Monsieur Bevilacqua.

Je tiens aussi à remercier Pratt & Whitney pour la commandite de cet événement.

Monsieur Bevilacqua est né en Italie en 1960. Il a été élu pour la première fois à l’âge de 28 ans. Et ses électeurs continue de lui apporter leur appui depuis 1988. Avant d’entrer au cabinet en janvier dernier, il a été secrétaire parlementaire de la ministre du Travail et de la ministre du Développement des ressources humaines. Comme j’y ai fait référence plus tôt, il a aussi présidé pendant cinq ans le Comité des Finances de la Chambre des communes, qui est un des comités les plus important puisqu’il procède à des consultations avant la préparation de chaque budget fédéral.

Étoile montante de la scène politique fédérale, Monsieur Bevilacqua – so I’m saying Maurizio that you’re a rising star in federal politics – il est maintenant Secrétaire d’État aux Sciences, à la Recherche et au Développement.

So without further due, please give a very warm welcome to Mr. Bevilacqua!

II. Speech by the Honourable Maurizio Bevilacqua, Secretary of State (Science, Research and Development)

I am very happy to be here in Montreal. When you think of a great cosmopolitan city, you think of Montreal. When you think of a globally competitive city, you think of Montreal. And when you think of a city that has been able to adapt to the realities of the new economy, you of course think of Montreal. So I would like to express to you, once again, my gratitude for your invitation to appear in front of this city’s prestigious Economic Institute.

I simply want to take advantage of this gathering to really get to know each other a little bit better. I want you to leave this room today and get a sense of the sort of things I believe in. The type of challenges I feel that this province and indeed this country must face and how we together can bring about positive change to this province and indeed to our country.

I am also quite happy to have members of the National Assembly here because as you know our country is built through cooperation and one of the things that I have said as soon as I got into cabinet was that I planned to work hand in hand with provincial governments. And always remember that at the end of the day we represent the same electorate, the same aspirations for the future and we will work very hard to improve the standard of living for Canadians.

Today’s comments are really more of a frank discussion — a dialogue, a conversation with you. And I am going to be frank because I think that Canada’s political class simply can’t do it on its own. The challenges we face are serious challenges that require the cooperation of all of you, the business community specifically. And so if we are going to be frank with one another, we have to say that improving Canada’s standard of living must be our focus. Productivity is our challenge and obviously it is our responsibility to act.

Now you will remember not long ago, in the early 1990s, the Wall Street Journal referred to Canada as a Third World economy, as an economic basket-case. Our public debt reached 71% of the GDP. Taxes were high. Unemployment was on the rise. Consumer and business confidence was shaken. The IMF was at our doorstep.

Canadians faced a choice. It would have been very easy to give up back then. But instead, in a true Canadian fashion, we didn’t throw up our arms in despair, we rolled up our sleeves and brought about a great economic comeback known internationally as the “Canadian miracle”. Together we eliminated a $42 billion deficit. We paid down $36 billion worth of debt, and we reduced our debt to GDP ratio faster than any other major industrialized nation.

And we were rewarded. Both inflation and interest rates have been the lowest in a half century. We have begun to lower taxes both at the personal and corporate level by $100 billion, the largest cut in Canadian history. For hardworking families, that cut represents a 35% decrease. Corporate tax rates will fall to about 5 percentage points below the average U. S. rates. On capital gains, the inclusion rate has been reduced from ¾ to a half. All these, I must say are steps in the right direction. And we were recognized internationally by the Financial Times of London who finally called us the “top dog of the G7”.

At this point – and it’s a fair question – you may be asking: “Well with all this good news, where is the challenge?” Well, we do have a challenge. We all know that in a global economy you simply can’t win tomorrow’s game with yesterday’s home runs. It’s just the way it is and Canadians understand that. And that is why they want an agenda that will help them enjoy more opportunity, a higher standard of living and even a better quality of life in this new century. Canada’s future will depend upon the choices we make.

As North Americans our identity is intrinsically linked to our prosperity. Because at the end of the day prosperity determines our ability to provide a superior health care system, our ability to give our people the knowledge and skill and to compete for a world class education. Our ability to attract the foreign direct investment that brings with it technology, management expertise, international marketing and capital. Our ability to provide the kind of job opportunities that will allow our children to stay in Canada if that is what they choose to do.

But we need to develop that culture of opportunity. And, quite frankly, prosperity will also determine our ability to reverse the twenty year trend that has seen declining real incomes compared to the United States. And that is the challenge we face. Now the good news is that in the past couple of years, we have begun to turn the corner. Over the past two years that income gap has in fact narrowed. But we must sustain the momentum. So the question is: Where are we going?

In short, I believe that we need to aggressively pursue an agenda of wealth creation. We must make Canada the best place in the world to invest and do business. How are we going to do this? When you build a country, you need to anchor yourself to some beliefs, some principles, some values that make sense to the inner spirit of the people that you represent.

But there are some fundamental principles that you simply can’t move away from. You must maintain a stable macroeconomic environment. There’s no question about that. Low inflation brings lower interest rate and boost confidence, encouraging investment which in turn enhances productivity growth and boost employment. And we must be focussed like a laser beam on making sure that we continue to reduce our national debt. We must embrace the global economy. I personally believe in free trade. Not just with the Americans and the Mexicans and other countries but also between provinces here in Canada.

A strong nation must be rooted in a strong economy. The stronger the economy, the more flexibility you have to create effective policies that bind us together as Canadians. The stronger the economy, the stronger we can assert Canada’s perspective within our global economic reality.

Another issue that is extremely important is that we anchor ourselves to some fundamental beliefs, the belief that you must let the market work. You must liberate the marketplace because this is where wealth and jobs are created. Through regulation and subsidies government influences business decisions. For the most part I believe that it should be the consumers who decide the goods and services to be purchased and the manner in which they are delivered.

We want to increase the rewards for those who take risks and succeed. And the most effective way to do this is to recognize their efforts through the tax system, a tax system that enhances productivity, supports innovation, reward risk taking, celebrates success. And when we are looking at the tax system today, we should put things like the capital taxes on the table. We need to debate those issues. We need to tell Canadians and we need to tell foreigners that foreign capital is important, that if you want to bring about productivity growth in Canada that we are open for business, that you are going to be rewarded. If you work hard, if you work smart, if you bring about economic growth in our country, you will be rewarded, that we are not going to shy away from celebrating success in this country. We need to do more of that.

We have many success stories here in Canada that very few people around the world know about. I think time has come in this country where we have to be a little bit bolder. We have to talk proudly about our achievements. And if we want to be the best place in the world to invest and to do business in the 21st century, that means fostering innovation.

There are many factors when you are dealing with innovation that you must take into account. But since we are having a very frank discussion today, whichever indicator you choose to look at we will find some strengths and we will find some weaknesses. Canada’s research and development expenditures as a percentage of GDP is the fastest growing among the G7. And we have the highest growth rate of application for external patents amongst the G7. But when you look at R & D spending or patent applications, Canada remains well behind our competitors. Canada still invests 1.83% of GDP in research and development, and the United States 2.65%. We must keep increasing R & D spending faster just to catch up. Canada also has the fastest growth rate in workers devoted to research and development. We have one of the top rates of university students per capita in the industrialized world, and they are attending universities that are ranked among the best on the continent. But nevertheless, we don’t have enough highly qualified people to meet the demand. We must continue to focus on education, skills development and lifelong learning.

The business community is becoming more attuned to innovation. In recent years at least 80% of Canadian manufacturing companies successfully introduced a new or significantly improved product or process. But the real test of innovation is whether it has value in the marketplace. And Canadian firms trail in their capacity to capture an increased share of sales from new or improved products.

We of course need to build on our strengths but we also need to address the weaknesses. Our government has taken a number of measures to promote innovation and I sincerely would like your organization to help us define the next steps. The government understands that our primary responsibility is the protection and promotion of the public interest and help to ensure an environment where the private sector can prosper. That is why we invest in science and technology, in such things as food inspection and earth observation, to remain an effective steward of the public good. We have responsibilities as well to help fund research in universities. The Canada Foundation for Innovation will result in $9 billion in new research capital investment in universities and research hospitals by the year 2010. We have committed $300 million to Genome Canada. We are creating 2000 new Research Chairs in our universities and we support, of course, individual researchers through granting councils.

Now we have in fact issued a paper, as you know, on innovation excellence and we are going to be seeking public input across the country. We set some goals that go to the year 2010 and I am a big promoter of that. And the reason why I promote that idea of going to 2010 — rather than going to 2004 or 2005 when the next federal election is going to occur — is because we understand that the challenges we face are generational challenges, are challenges that require a long term view, that we must stop promising just things that happen during the electoral cycle. I think we need to look beyond and I am very glad that the government has decided to take that route because some of the issues that we wanted to do, like doubling R & D, is going to take a lot of time and it is going to require a lot of effort. Not just from the government. We need to build the type of critical mass with the people of Canada to bring about this positive change.

So we are helping R & D in many ways. We do it through R & D tax credits. We do it by making federal research facilities available to business. I think that together we can do more to encourage small business to innovate at these facilities. We do it through working with communities to create high tech clusters but we need to remove regulatory red tape that inhibits innovation. We should be taking the research done at our federal research facilities and do an even better job at ensuring it is transferred to small business. We should be creating more partnerships between small firms and multinationals and encouraging foreign firms to invest in Canada. We are doing most of that now. But we need to do more of it and we need to pick up the pace because essentially we want Canada to rank among the top 5 R & D nations by 2010.

We will have a number of regional and sectoral meetings, and of course, all of you are invited to attend because the challenge is great. But, ladies and gentlemen, while we look for input and advice, we can’t stop at simply being a government dedicated to building an innovation based society. We must act in the meantime.

And today, here in Montreal, at this lunch, at the very prestigious Montreal Economic Institute, I am pleased to take action by announcing that the Government of Canada through the Natural Science and Engineering Research Council, under the very capable leadership of Dr. Tom Brzustowski, is investing $84 million providing scholarships and fellowships to 2000 young researchers at the post-graduate and post-doctoral levels. This is an investment in talented people with great potential. This is an investment in our R & D capacity. This is an investment in Canada’s future.

By making this investment, we do more than just help aspiring students. We contribute significantly to our intellectual, educational and material prosperity, not just today, but tomorrow. Most of all, we accelerate the pace of innovation and the impact it has on our lives.

I am very happy that we are joined here today by 6 recipients of the scholarships. They are students from Concordia University, École de Technologie Supérieure, École Polytechnique, McGill University, Université de Montréal, and Université du Québec à Montréal. I thank them for joining us and I want to take a moment here to introduce them. So, I am going to ask each recipient to stand and be recognized and also want to really wish them continued success: Miss Yi Lu, Olivier Riffon, Narahari Narasiah Kramadhati, Jacinthe Granger-Piché, François Duchaine, Jean-François Brazeau. I want to wish each of you the very best and tell you that the future is in your hands… no pressure!

Ladies and gentlemen, ultimately great societies are built on a strong set of values and beliefs that provide anchor for positive change in people’s lives. What we believe determines what we can achieve. I believe in a nation where prosperity has a purpose — the reason to build competitive economies is to build strong societies. I believe in a nation of self-reliance and fiscal responsibility. I believe in a society where the individual is free to achieve his or her potential, and where success and risk-taking are rewarded and celebrated. I believe in a society where the government help people help themselves. To create this kind of nation, we must be always looking ahead, thinking of ways to do things better, inventing ways to do things smarter.

We must never be afraid of the global marketplace because our prosperity pours in from the global marketplace. I believe in a Canada that will be known around the world as a source of innovation and ingenuity. A Canada that can hold its head high among the nations of the world and protect and promote the values that make Canada different. That is the Canada I see for the 21st century. And each of us can play a part in making it happen. We have the strength, the wisdom and the determination to achieve greater heights than ever before. Thank you.

II. Concluding remarks by Paul-Arthur Huot, CEO, Québec Manufacturers & Exporters

On behalf of the representatives of Montreal’s business community, on behalf of the manufacturers and exporters from Québec, on behalf also of our students and researchers, I would like to present you with a small token of appreciation.

We will remember your good words: “Work hard, bring economic growth in Canada and you will be rewarded!”. That’s very important. We hope that you’ll come more often to Montreal and – and I’m sure that the students here will agree with me – come with other good news to raise the scholarships for our researchers.

You’ve brought excellent news for thousands of manufacturers all across Canada, good news in that we have an additional supporter in Ottawa, a supporter that will help us winning the worldwide battle for productivity. So, we thank you very much for that. As you know, the productivity challenge is the number one challenge that we are facing in Canada.

Et nous allons avoir besoin de tous les alliés pour à la fois nous supporter et à la fois trouver des actions concrètes et efficaces pour nous aider à relever ce défi. Et nos membres, manufacturiers et exportateurs du Québec et du Canada, nous ont demandé de mettre tous nos efforts sur ce défi. Comme regroupement d’affaires, nous avons décidé de passer résolument à l’action en lançant entre autre une initiative structurante pour la petite entreprise manufacturière: le Programme des tremplins formation productivité. Ce programme va toucher plus de 1000 PME manufacturières au Québec au cours des trois prochaines années. Il touchera plus de 25 000 employés de ces entreprises à travers toutes les régions du Québec. Comme vous le voyez nous voulons faire partie de la solution et nous sommes convaincu que le programme aura un impact significatif sur nos PME. Encore une fois merci de votre soutien!

Permettez-moi de remercier à nouveau Pratt & Whitney Canada pour la commandite de ce déjeuner-conférence. De même également que l’Institut économique de Montréal pour nous avoir invité à travailler avec eux à l’organisation de cet événement. C’est une première collaboration entre nos deux organismes et j’espère que nous allons continuer à travailler ensemble. L’Institut, c’est du sérieux! Nous avons besoin de cette tribune et elle est dirigée de façon professionnelle par un rassembleur, Michel Kelly-Gagnon, et nous lui devons tous une chaude main d’applaudissement. Alors à tous et à toutes, je vous souhaite un bon après-midi!