9, November 2022

 Is Canadian industry taking the lead in advocating coherent industrial policy for Canada?

Not for several decades has a Canadian federal government shown any coherent and sustained interest in policy at the industry level: in cultivating what today we more commonly refer to as “ecosystems” – sustainable industrial environments that can nurture and expand high-growth enterprise at all scales over the long-term.

Such ecosystems are essential for anchoring and maximizing returns from public and private investments in research and innovation. Canada is unique in the G7 in its reticence to embrace contemporary models of industrial policy, which are simply about organizing and coordinating public and private sector actions and investments as targeted to towards mutually defined societal needs – like the environment, energy,
health, education, housing and transportation.

But significant signs are emerging that our major established and emerging industries are not at all reticent about renewing our commitment to industrial policy, and that they understand the stakes of not doing so very well. This is indicated strongly in three recent reports.

Industrial policy is most commonly motivated by some combination of crisis and opportunity. In Canada’s New Economic Engine2 from the Trillium Network for Advanced Manufacturing and Clean Energy Canada, we see an industrial development strategy motivated by the climate crisis and targeting existing and emerging Canadian strengths in electronic vehicle (EV) batteries.

Starting out with an assessment of the nature, scale and urgency of the opportunity, the strategy builds out from an assessment of the existing Canadian capacity to respond – focusing on the competitive advantages Canada could deploy right now in this emerging industry. The strategy leverages Canada’s existing highly skilled workforce in automotive component manufacture and assembly by integrating it with emerging
knowledge-intensive strengths in areas like critical minerals and recycling, all underpinned by abundant clean energy and access to the US market.

Most significantly from an “eco-system” perspective, the strategy encompasses every stage of the EV battery supply and production chain, from mineral exploration, extraction and processing, to cell and module manufacturing, EV assembly and recycling. Thus it encompass the vast bulk of quickly productive knowledge transfer and R&D opportunities. And most significant overall, the main goal of the strategy is to
develop a sustainable high value presence in global markets for Canadian designed and manufactured EV battery systems and services. All facilitated and supported by coordinated actions at the industrial, legislative, regulatory, financial and trade levels. This is “textbook” industrial policy as it pertains to one emerging product group.

At a regional level, Define the Decade”1″ from the Business Council of Alberta, while not oriented to laying out a coherent industrial strategy as such, nevertheless incorporates many of the same ideas. This time motivated by the need to transition a highly skilled and educated workforce from an oil and gas sector orientation towards new industrial opportunities. A centerpiece of the approach is an industrial development agency
modelled explicitly on AOSTRA, the 1990s agency that, ironically, opened up the potential of the oil sands. But this is a good example of how effective policy models can be repurposed.

Restart, Recover and Imagine Prosperity for All Canadians “4”  from Canada’s Industry Strategy Council (an ISED advisory group) is far more ambitious; proposing a strategy for developing a comprehensive national industrial policy. The motivation is post covid
economic recovery, but the strategy is to use this as a lever not only to restart the national economy, but to fix many chronic deficiencies that inhibit Canada’s ability to more fully embrace emerging economic opportunities. To this end, a challenge is issued:

“Canada must develop a true post‑pandemic industrial strategy and this strategy has to be implemented through an ambitious growth investment plan. This would set a precedent. But given the magnitude of the crisis, we strongly believe that this is the appropriate response. We need Canadian companies to be global leaders where we can succeed.”

Beyond these few highlights, the detail in these and other reports tells us a great deal more about how Canadian business and industry is envisaging the public and private sector relationship in restoring and energizing our economy. Together, they contain many of the acknowledged key elements of effective industrial policy as pursued by our competitors:

  • They are all fundamentally grounded in establishing advanced new domestically anchored production capabilities in both manufacturing and services.
  • They all start with what can be accomplished already with existing or near horizon technologies and industrial capabilities.
  • R&D is situated as an essential ongoing function within the production chain, not as some external force.
  • Basic research is seen to be driven forward by how knowledge is applied.
  • Intellectual property is treated as investment capital, not as a rent producing asset.
  • All stress price-making over price-taking as a fundamental investment criterion.
  • All conceptualize successful new company formation and growth primarily as the product of new industry formation.
  • All see the public sector role as an active collaborator; a rule maker and market facilitator, rather than as a passive provider of non-targeted “conditions for growth”.

Canadian business and industry seem to be getting the message. It is high time governments started listening to them.

References:
1. Define the Decade www.businesscouncilab.com/definethedecade
2. Canada’s new Economic Engine

Canada’s New Economic Engine

3. THECIS Blog 31 https://thecis.ca/new-economic-development-strategy￾for-alberta-blog-31/
4. https://ised-isde.canada.ca/site/innovation-better-canada/en/industry￾strategy-council/restart-recover-and-reimagine-prosperity-all-canadians
Peter Josty & Richard Hawkins.