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Robert Asselin and Sean Speer: Five years later, we’re drifting away from our new North Star

Commentary

“A competitive economy is a productive one. More productivity leads to greater prosperity, opportunity and higher living standards. This point cannot be overstated. Competitiveness matters because it contributes to greater productivity, and greater productivity drives economic growth and rising incomes, which in turn allows for higher living standards, more sustainable social programs and greater social mobility.” – A New North Star, April 2019

Five years ago today, the Public Policy Forum released the first of three installments of A New North Star, an ambitious and comprehensive economic roadmap for Canada. 

As former economic advisors to Liberal and Conservative governments, we came together to write this series of policy papers because we were both worried about the lack of attention on both sides of the aisle to economic policy in general and major geopolitical and technological changes that were reshaping the dynamics and sources of economic growth in particular. We were pleased that the papers received considerable attention and reaction from columnists, economists, and policymakers. Yet five years later, there’s been little tangible progress towards a comprehensive economic agenda that’s responsive to the paradigmatic developments we documented. 

Our first installment sought to draw attention to the rise of intangible assets—including data, intellectual capital (R&D), and intellectual property (IP)—as a major, new driver of competitiveness. We argued that their unique particularities (such as zero marginal costs) relative to physical assets required rethinking various policy areas including R&D investments, IP protection, foreign direct investment, regulation, and procurement. Recent research has confirmed our key assumption: large firms with higher intangible intensity are more profitable in the global economy.

In our second installment, we argued that the “Washington Consensus” that emerged in the post-Cold War era was being challenged by the interplay between growing geopolitical rivalries and an economy increasingly driven by intangibles. The rise of “geoeconomics” required a more hard-headed economic strategy for Canada. The past half-decade has only reinforced this point: it is now widely accepted that technological innovation and national security are inextricably linked. 

The policy debate in most Western countries is now less about whether there’s a role for an industrial strategy—particularly for technologies that have dual economic and security implications—but rather how to design and implement such policies in a way that minimizes distortions and produces spillover benefits. 

In this vein, we urged policymakers to adopt a modern industrial policy based on industrial R&D challenges (such as decarbonization or a biomedical breakthrough) for our domestic firms—in contrast to the status quo of large corporate subsidies and branch-plant economics. 

In our third and final installment, we made the case for a Canadian Advanced Research Projects Agency to support the development of breakthrough ideas and technologies that could grant Canada a global advantage in “an economy fueled by invention, innovation, and intangibles.” The proposal (which was partly inspired by the highly successful DARPA model in the U.S.) was endorsed by both Liberals and Conservatives in the 2021 federal election but has yet to be implemented. 

The common insight across these papers is that Canada needs a renewed economic agenda that reflects these fast-evolving geopolitical and technological trends. Our analysis showed that we were eroding the country’s pre-existing advantage by failing to reckon with how the interaction of the intangibles economy and the so-called New Cold War was reshaping economic policy, global supply chains, and even the concept of comparative advantage itself elsewhere in the world. 

Many of these assumptions have not only proven correct, but they’ve been further reinforced since. Economic growth is stagnant, business investment and labour productivity are declining, and Canada’s GDP per capita growth is the lowest among the G-7 coming out of the pandemic (see chart below). In the race to gain a stronghold advance in the new intangibles-driven economy, Canada is at risk of falling permanently behind. 

Graphic credit: Janice Nelson

On industrial composition, 84 percent of Canada’s GDP is now represented by housing, consumer spending, and current government spending. That is a lot of capital and labour diverted away from more productive parts of the economy. An economy of our size that produces a small share of goods and services that can be exported into global markets will necessarily have a difficult time becoming more productive. 

As necessary as it may be, the current policy focus on boosting housing supply, including through more government spending, will only in the short term reinforce this diversion of attention and resources from productive to unproductive sectors. 

Productive investments are badly needed, both from the public and private sectors. But because both the federal and provincial governments have failed to show restraint on spending, fiscal capacity has been gravely handicapped going forward.

Furthermore, inflation is still not back at target, and interest rates are likely to remain elevated for longer as a “new normal.” As a result, many of the daily goods and services that Canadian consumers buy will similarly be subjected to higher prices. 

Against this economic and fiscal backdrop, the only way forward is to adopt a pro-growth agenda that aims to boost business investment and labour productivity. Evidence tells us that they are ultimately the best means to generate higher wages and higher living standards. 

Such an economic agenda, however, cannot take for granted that our past policy assumptions are fully responsive to today’s geopolitical and technological realities. It requires a careful balance between traditional competitiveness policies and new ones in light of emerging issues flowing from the intangibles paradigm in the form of a modern industrial strategy. 

As we did five years ago, we urge policymakers to resist short-termism. More than ever, we need to chart an ambitious path forward that will allow our country to prosper in the coming decades. We can’t borrow our way to prosperity and ask future generations to pick up the bill. 

Progress is a choice. We must agree on it moving forward.  

Heather Exner-Pirot and Jesse McCormick: How Indigenous participation can help drive the new nuclear age

Commentary

The need to decarbonize energy generation while maintaining reliability and dispatchability has positioned the nuclear sector for significant growth in Canada. The size and modularity of small modular reactors (SMRs, or nuclear reactors of between 5-300MW), promise to expand nuclear energy’s applicability and siting potential, while addressing the risk of cost overruns.

Canada stands to benefit from its over 70 years of technological leadership, well-developed regulatory system, robust domestic supply chains, and globally significant uranium production. Despite these advantages, the potential for deployment of SMRs in regions of Canada where nuclear energy has not previously been generated poses new challenges for industry, government, and regulators.

The majority, if not all, of the existing nuclear generation facilitates in Canada were developed without adequate consideration of the rights and interests of First Nations. The introduction of new nuclear energy and nuclear waste management facilities in territories where relationships with First Nations have not yet been established presents a significant risk to project costs and timelines. A legacy of exclusion from decision making in relation to major projects combined with a high degree of culturally grounded concern about the potentially negative long-term effects of spent nuclear fuel on the environment, leave some First Nations wary of new deployments in their territories.   

Deputy grand chief Glen Hare of the Anishinabek Nation speaks as representatives for First Nations and environmental groups hold a press conference on Parliament Hill in Ottawa on Monday, April 23, 2018., asking the International Atomic Energy Agency to investigate radioactive waste management in Canada. Sean Kilpatrick/The Canadian Press.

Those concerns will be expressed through active participation in regulatory processes, public dialogues, and added scrutiny of the actions of proponents and government, particularly for first-of-a-kind technologies that are new and poorly understood. First Nations have demonstrated the power to exert significance influence over projects through regulatory participation, litigation, and by harnessing the power of public opinion. That influence can be used to speed up project development or bring a project to its knees. Developers will have to decide how to build the confidence of the nations and communities that will host their projects. Those that choose consent over imposition will be best positioned to accelerate their projects and ensure economic viability.   

Rather than being a deal breaker for new nuclear, consent provides lots of reason for optimism. The same elements of nuclear that appeal to industry and government are attracting leaders and businesses from Indigenous communities: the ability to produce clean, baseload, electricity and heat in rural, remote and industrial settings. Small modular reactors and their little cousin, the microreactor, not only offer tremendous opportunity for decarbonization, but for energy security in rural and remote areas of Canada that today rely on diesel. 

We are already seeing new kinds of business partnerships and relationships being advanced across the country. In New Brunswick, the North Shore Mi’kmaq Tribal Council and its seven First Nations announced significant equity agreements with SMR developers Moltex and ARC Resources, who are advancing the ARC-100s in New Brunswick, in September 2023. 

In Ontario, the Saugeen Ojibway Nation announced a partnership with Bruce Power in June 2023 to jointly produce, advance, and market new medical isotopes, which will be essential to support the global fight against cancer.

In Saskatchewan Kitsaki Management, Athabasca Basin Development, and Des Nedhe Group—all Indigenous-owned businesses with experience in the uranium supply chain—signed an MOU in May 2021 to jointly pursue SMR investments. 

The First Nations Power Authority (FNPA) received funding last Fall to establish a National Indigenous Nuclear Supplier Database to track Indigenous suppliers who are working towards or have already achieved nuclear certification across the country.

Natural Resource Canada has provided funding for an Indigenous Advisory Council to Canada’s SMR Action Plan, and both the Canadian Nuclear Association and the Canadian Nuclear Safety Commission have Indigenous advisory mechanisms. 

And later this year the Nuclear Waste Management Organization, a consortium of nuclear energy producers in Canada, is expected to announce the site of its deep geological repository, for long term management of spent nuclear fuel, in Ontario. They have narrowed the list down to two areas in Ontario—Wabigoon Lake Ojibway Nation-Ignace and Saugeen Ojibway Nation-South Bruce—and have adopted a consent-based approach to site selection.

In many ways, the nuclear sector has been able to learn from the mistakes, but also the successes, of other resource and energy industries over the past two decades. Industry isn’t the only actor to have gotten more sophisticated; Indigenous nations and businesses have too. Many are now proactively seeking partnerships, developing capacity in the supply chain, and proposing opportunities for nuclear development.    

The recipe is clear: if you can provide meaningful economic benefits and consider Indigenous perspectives in project design, consent can be earned. By embracing this philosophy, industry is learning that Indigenous partnerships are not hurdles to moving projects forward, but an asset. 

There are many paths to partnerships with First Nations, Métis, and Inuit, but they are all built on a foundation of rights, respect and recognition. Effective relationship building and efficient regulatory processes needs to start from a position of rights implementation. A new nuclear age is providing the opportunity to get this right from the beginning and our ability to meet the energy needs of a decarbonized future depends on it.