The fourth in an eight-part series of challenges facing Canada's foreign trade: Does Canada lack global ambition?
While Canada relies on its struggling neighbour to the south for most of its trade, economies are hurtling ahead in Asia, in South America, and closer by, in Mexico. Exports to the United States made up 75 per cent of all Canada's exports in 2009. That's down from a high of 87 per cent in 2002, but it still means heavy dependence. Canada has done well by its trade with the U.S., but a high dollar and a troubled U.S. economy could mean trouble ahead.
A challenge for Canadian business is to inspire its leaders and entrepreneurs to set their sights higher, and extend their reach on the world stage. "We have a burning platform under us," argues Frank McKenna, who goes on to explain why adversity can be bad news and good news at the same time.
Mr. McKenna, the deputy chair of TD Bank Financial Group, is passionate about Canada and its prospects. As New Brunswick premier from 1987 to 1997, he worked hard to lure business to his province; as Canada's ambassador to the United States from 2005 to 2006, he was steeped in trade issues. He has acted as counsel to law firms, served on several corporate boards, and chairs the board of governors at St. Francis Xavier University in Nova Scotia. He is known for being direct and forthright.
Canada has done reasonably well on the world stage. How should we adjust our sights to take the next step?
I think we're living in a bit of a fool's paradise. We have a country that's very wealthy, but to some extent that's a result of the accident of geography, living next to the United States and being resource rich. Sustainable growth will only come about from an extraordinarily entrepreneurial society producing value-added products. I don't think we can make that claim.
Fool's paradise? How so?
We're seeing other countries in the world moving at much more rapid rates. Countries like China have gone from low-cost labour environments to very sophisticated application environments. We just can't assume that if we add a bit of value to our products we can compete.
The Chinese are going to be producing as many PhDs over the next 10 years as our entire population. India will be adding 1,000 universities over the next 10 years. We're going to be confronting a highly educated, highly mobile work force that has a strong work ethic and is very entrepreneurial; meanwhile our neighbourhood, Europe and America, represent reasonably mature markets with reasonably poor demographics. So we're going to have to get off of our comfortable perch pretty quickly if we're going to maintain our quality of life.
What will it take to change that?
You often need adversity to compete at a higher level. We see it in countries around the world. Israel and Finland are good examples of that. Japan and Germany after the war are good examples. Adversity creates really strong entrepreneurial and survival skills.
How much adversity are we likely to face?
We're doing no more than a fair job of competing internationally and we have to get better. We're weak on productivity. We tend to be very weak in our share of world markets. We're very focused on the United States to the exclusion of other countries. Now we have a burning platform under us. Because of the dollar, and because the United States economy is much more fragile.
So where are the opportunities for us that are underdeveloped?
We have to learn to compete in the big world out there. The world is being pulled by the engine of developing countries. Our own marketplace is quite mature. A lot of Canadians are not aware of just how vital and vibrant are the economies of the developing world. A lot of Canadians don't know how Brazil is performing or what a huge market it is. Or Mexico or the Middle East.
Part of it is a mindset. You talk about adversity changing that. I don't know if there is a Canadian mentality but if there is, how do we change it?
I think there is a bit of a Canadian mentality. We sit in a comfortable pew. Our country is in pretty good shape as a result of our resource riches. Quite frankly we haven't had to work very hard. A lot of the jobs you'll see, real entrepreneurial jobs, are performed by immigrants.
How do we develop that confidence to take the risk?
History is a guide that tells us we've got some great examples of people who have done it. The province I'm from is the headquarters of McCain Foods. They've gone from a little village in New Brunswick to the entire world. We've seen it with companies like Magna that created a great footprint. Research in Motion -- we've got some sterling examples.
What's the common feature?
I think it's the risk readiness of the entrepreneurial leaders and the ambition of the leaders. It tends to be driven by very ambitious and aggressive executives.
Let's come back to this question of ambition and reach. We're not a country of big companies, by and large. So how high are the rest of us setting our sights?
A lot of our companies don't have the ambition to succeed beyond our Canadian borders. We've got a lot of work to do to create a more ambitious and aggressive class of entrepreneurs in Canada.
With more global competition on the way, our entrepreneurs may be on a burning platform themselves.
We will see more competition but sometimes adverse conditions do create a fertile environment and I think conditions are more adverse for us. Our entrepreneurs are going to have to look at a larger-scale platform.
To what extent is our education system producing what we need for the new economy?
I think we have some pretty significant deficits. Education funding is tending to be crowded out by health funding. Education tends to be dominated by unionized employees who I think make it far less responsive and effective than it should be. We tend not to be able to manage our education system. It tends to be managed by collective agreements, rather than by managers.
We don't have enough time on task, we don't have enough days in the year, we don't have enough hours in the day. We don't have enough emphasis on science and math. We don't have a high enough standard for literacy, an encouragement for people to be literate and numerate when they graduate. The people [teachers]who perform the most precious job in our society and economy are not rewarded for success nor punished for failure.
So mediocrity is protected and excellence is not rewarded. At the university level, I think we have high quality institutions but again I would say that we tend to be very constrained by collective agreements. Fewer and fewer days in the year are actually spent teaching.
For insights and perspectives on addressing this challenge, read the upcoming solutions article later this week.