Canada shoots itself in the foot

Self-inflicted wounds

In commenting on the previous posting (October 9th, 2012), Don McFetridge pointed out that many of our growth and innovation problems are handicaps we have imposed on ourselves, which because of political pressures are difficult to resolve. Here I comment on three such areas, the cultural industries, education and healthcare.

It is argued here that Canadian policies have caused self inflicted wounds and have retarded development of industries which today have significant growth possibilities, and can be considered emerging industries with export potential. Instead of focusing on emerging markets in geographic terms the focus here is on emerging markets in economic terms. Which then are the growth industries of tomorrow?

Industrialised countries now have a large proportion of their work force in the service sector, around 80% in the case of Canada and the U.S. rising from around 50% in 1960 and 60% in 1990. Only some services can be traded internationally but recent developments have increased these opportunities. Traditionally it has been thought that goods were more tradeable over a distance (domestically and internationally) than services. Thus wheat could be grown on the Prairies and shipped to Ontario, BC and to Europe and Asia. Non-tradeable services occur when the buyer and seller have to be in the same or nearby location. Thus a restaurant meal, haircut and medical operation have this feature. If Canadians wants a French meal, they have to travel to France, go to a French restaurant in Canada or buy the ingredients with which to cook a French dish; a French haircut or funeral requires the Canadian being transported to France; and a medical operation by French surgeons means the patient has to travel to France or the surgeon has to come to Canada. The GATS recognizes these forms of service delivery, which have all been affected by falling transportation and communication costs.

More services can and are now traded internationally. Even medical operations are undertaken with the surgeon and patient in different locations by using television screens and robotic arms, known as telesurgery – I  might be a little nervous if there was a power failure or communications were interrupted.  Dr. Anvari, a laparoscopic surgeon in Hamilton, Ontario, has conducted numerous remote surgeries on patients in North Bay, a city 400 kilometres away. Other examples of trade in services at a distance are teleconferences, and universities offering online courses which do not require instructor and student to be in the same location.

The three wounds

Three growing service related industries are culture, health and education where Canada has expertise which could be more export oriented, but whose performance has been retarded by self-inflicted policy wounds.   The cultural industries are protected by measures such as a tax on foreign advertising, Canadian content rules for music and television distribution, limits on foreign ownership and public ownership of certain broadcast undertakings. These industries are encouraged to be inward looking in the name of Canadian cultural sovereignty rather than seek out international markets. Even with these policies, Canadian artists (authors, actors and actresses, directors, producers and artists) have achieved success internationally in their respective fields. There are too many examples to cite here to show the global success of certain Canadian artists which Keith Acheson and I have written about over the past twenty years, with strong criticism from Canadian cultural nationalists.

A second area is education, a growth industry at all levels, primary, secondary and post secondary. Canada prides itself on the its universities and colleges which attract some foreign students to Canada, but has been slow to establish campuses abroad like Australia and the US. The Canadian approach is to fund publicly all levels of education, although university fees are beginning to rise slightly as a percentage of college funding in most places except Quebec. If there had been greater emphasis and encouragement on private educational institutions, with tax deductibility of some student expenses, more Canadian universities and colleges would have looked to attract foreign students or sell their services abroad. Now most have probably missed the boat with MOOCs, multiple open online courses offered to students at low cost in their own countries or abroad. Athabasca University is an exception in Canada.

The third area, healthcare is a service which is government funded about 70% and is causing fiscal headaches due to an ageing population and advances in medical technology. In the future, for fiscal reasons, it may be necessary for governments to abolish payment for certain procedures such as knee and hip replacements to people above a certain age, perhaps 80 (I am in my 79th year). The individual could have the operation if it is paid for privately. Canada has expertise in this sector. It could be expanded with medical education and services sold to foreigners either in Canada or abroad. The emphasis on public provision of healthcare, whatever its other effects, has retarded taking economic advantage of this expertise.

At a broader level, the postwar liberalization of trade policy in the GATT, NAFTA and WTO has eliminated handicaps in other areas.

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