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Restart, recover, and reimagine prosperity for all Canadians

From: Innovation, Science and Economic Development Canada

An ambitious growth plan for building a digital, sustainable and innovative economy

A report from the Industry Strategy Council

Table of contents

A time for ambition and bold action

Message from the chair

The year 2020 will be a turning point in history. The COVID-19 crisis has hit hard. Our personal and professional lives have been shaken, as have our routines and our presumptions. To protect human life, governments have had to take exceptional measures, such as imposing lockdowns and closing borders, significantly impacting the economy. The downturn in the global economy has led to a sharp drop in GDP. In the early months of the pandemic, Canada's GDP fell by an unprecedented 18%.

Governments and central banks around the world took sweeping action to contain the devastating effects of the crisis. The Government of Canada acted, releasing record amounts of capital in a short period to limit the impacts on individuals, families and businesses. It was against this unprecedented backdrop that the Industry Strategy Council began its work in June 2020 with a mandate to identify the scope and depth of COVID-19's impact on industry, inform government's understanding of specific sectoral pressures, and serve as a means to receive the business communities' input on the impact of the pandemic.

I would like to thank the Minister of Innovation, Science and Industry and the Government of Canada for their confidence. I would also like to extend my warmest compliments to our nine members for their tremendous commitment and thank the Council's Secretariat in Innovation, Science and Economic Development Canada, and the public officials that we consulted for their dedicated cooperation and support. Our mandate is broad and demanding.

We began our work with a sense of urgency and an eagerness to consult Canadians from across the country and from all economic sectors to gain a clear understanding of the situation. I had the privilege of participating in nearly 100 meetings with a large number of leaders from businesses, academia, associations, regions, Indigenous communities, community organizations and youth groups. All were candid and generous in expressing their needs—and sometimes their distress—but also their determination to do their part to get Canada back on its feet.

You have inspired us. You have motivated us. Your hopes and concerns shaped our thinking and our recommendations; we have grasped the urgency of the situation. Beginning in July and on an ongoing basis, we shared the content of our exchanges with government decision-makers, and in the following weeks, we witnessed several announcements and commitments from the Government echoing your concerns.

We set clear objectives from the outset: we wanted to be ambitious, bold and action-oriented. This approach inspired a three-phase action plan— Restart, Recover, Reimagine—which includes five primary recommendations.

In the Restart phase, we respond directly to the concerns expressed during our consultations. The urgency of supporting families, protecting jobs and sustaining businesses is about safeguarding the economic and social fabric of the country, standing firm while future waves of the pandemic loom and restoring confidence among Canadians.

By protecting our economic and social fabric, we put ourselves in a position to help the economy Recover. The Council is putting forward a bold set of recommendations that, if accepted, will rebuild our strengths and address the gaps that we are facing and that have been exposed by the crisis. We recommend taking the most effective government programs and stepping up efforts to develop our workforce, improve our infrastructure, strengthen our innovation ecosystems and facilitate access to capital. These are the basic attributes of successful economies. At the same time, we have the opportunity to modernize burdensome regulations to make them more agile, and use the Government's procurement capabilities strategically to strengthen key sectors, provide opportunities for innovative SMEs, and showcase homegrown know-how.

With these structuring and cross-cutting actions, we will create momentum to Reimagine our economy and set new bold ambitions. The crisis is transforming the world. Trends such as the fight against climate change, digitization, and artificial intelligence (AI) are accelerating, while others will emerge from the new geopolitics of the post-COVID-19 world. There will be new challenges and opportunities. Canada must prepare, capitalize on its core strengths, and aim for the top of the podium in promising areas such as digital and data; resources, clean energy, and clean technology; innovative high-value manufacturing and agri-food. 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.

This investment and growth plan seeks to address our competitiveness, productivity and sustainability issues and to position ourselves as leaders for the world of tomorrow. The plan must be based on a solid and rigorous financial framework, with appropriate parameters to reassure Canadians and markets of the Government's plan for long-run fiscal discipline. This plan embodies an ambition—as well as an attitude. It's a way of acting. We want Canadian companies to be known for their ethical awareness and their values. They must embrace ESG principles and demonstrate their environmental, social, and governance responsibilities.

We will implement this plan by working together. The three phases— Restart, Recover, Reimagine— call for new public–private partnerships to pool resources and leverage investments between the various orders of government in Canada, while respecting each other's jurisdictions, to combine our efforts and maximize the impact.

"Working together in a renewed partnership across Canada" was the most frequently expressed goal among participants in our consultations. The situation is too serious for best intentions alone. The impact is too great not to take action together. This crisis calls for Canadians to stand together. Let's build a promising future for the prosperity of all.

Monique F. Leroux
Chair, Industry Strategy Council
October 2020

About the Industry Strategy Council (the Council)

Established on May 8, 2020, by the Minister of Innovation, Science and Industry, the Industry Strategy Council is a forum that brought together experienced business leaders to work in partnership with the Government of Canada. The Council endeavoured to deepen a collective understanding of the scope and depth of COVID-19's impact on industries and inform the Government's understanding of specific sectoral pressures.

The Council is built on the foundation established by the Economic Strategy Tables, supported by Innovation, Science and Economic Development Canada, a new model for collaboration between industry and government, launched in October 2017 to help turn Canadian economic strengths into global advantages. The Tables represented six sectors (Advanced Manufacturing, Agri-Food, Clean Technology, Digital Industries, Health/ Bio-sciences and Resources of the Future) identified by the Advisory Council on Economic Growth as having an outsized impact on Canada's economic growth potential. The report from the Economic Strategy Tables was published in September 2018, which included recommendations specific to tax competitiveness, regulatory reform, and export support. These were actioned in concrete policy announcements in the November 2018 Fall Economic Statement. Budget 2019 reinforced support for the Economic Strategy Tables and added a seventh table for Tourism and Hospitality.

In response to the challenges and particular pressures introduced by COVID-19, the Government launched the Industry Strategy Council with an additional two new tables representing the Retail and Transportation sectors in May 2020. Collectively, the nine economic sectors represented by the Industry Strategy Council account for about half of Canada's GDP.

The Council is chaired by Monique F. Leroux, former Chair, President and CEO of the Desjardins Group and Vice-Chair of Fiera Holdings Inc., and its membership is composed of the nine chairs of the Economic Strategy Tables—Advanced Manufacturing (Rhonda Barnet), Agri-Food (Murad Al-Katib), Clean Technologies (Karen Hamberg), Digital Industries (John Baker), Health/ Bio-sciences (Karimah Es Sabar), Resources of the Future (Mark Little), Retail (Paviter Binning), Tourism and Hospitality (Ben Cowan-Dewar), and Transportation (Sylvie Vachon). Ex-officio members include Dr. Mona Nemer, Chief Science Advisor, and Simon Kennedy, Deputy Minister of Innovation, Science and Economic Development Canada. A full list of Council members and their organizations is included in Annex E.

As Canadians and business leaders, it is an honour to have the opportunity to serve our country and represent our respective economic sectors. We have been inspired through our national consultations by the vision and thoughtful ideas that Canadians have offered to shape our economic recovery. It is a great privilege to share our insights and offer advice on how to best respond.

Our response to this historic pandemic requires immediate, targeted and risk-based actions and we firmly believe we have a unique opportunity to take urgent action to build back better. Each of us can unequivocally say that the private sector is eager to collaborate with government to execute on transformative initiatives that can position Canada for economic success and improve the long-term quality of life for all Canadians.

Quote from the Council

About our report

This report begins with the context for our work—our assessment of Canada's current economic landscape based on the events that unfolded throughout the pandemic. In the context of this current crisis, we challenged ourselves to think about the most important problems that we could solve in order to have the biggest impact on growing our economy and improving the lives of Canadians.

We spoke with hundreds of key industry leaders and thought leaders across sectors and regions of Canada, including leaders of businesses, academia, associations, Indigenous communities, community organizations, and youth groups, to help us understand the impacts of COVID-19. We were touched by how Canadians have been affected and have struggled amid this pandemic. Throughout our consultations, we heard some great ideas—big ideas with transformative potential—that warranted further discussion. We share those in this report.

We also developed scenarios for recovery and then from there, built a framework to impact and change the economic outcomes of our country with the right strategic investments and policy changes. We became convinced Canada needed a renewed industrial strategy. As we worked together, across sectors, to formulate our recommendations, it became clear that there are areas where each sector can leverage the work of others to recover faster (e.g., the cross-cutting impact of digital, skills and innovation). We have outlined those in this report as well.

The result of the challenge that we gave ourselves is a comprehensive plan with recommendations in five key areas for building a digital, sustainable and innovative economy for all Canadians. It is a bold and ambitious plan aimed at accelerating our recovery and growth. It is also a responsible plan that leverages both private and public sector partnership and investments. The plan seeks to bring together the actions we need to take as a country, not just in solidarity but cohesively, because we cannot afford to take a piecemeal approach.

The spirit of our recommendations is built on the conviction that this crisis is the opportunity for transformative change. While Canada was in a certain position of strength, we were already facing challenges, in areas as diverse as productivity, capital investments and R&D, commercialization, digitization and trade. The world around us is moving quickly and in so many different ways—geopolitical changes, technological advancements, shifting demographics and climate change. With these pressures, we need to act quickly and anchor ourselves in areas that position us for the future.

The Council believes that implementing these recommendations will transform the country, placing Canada in a position of leadership on the world stage. If we rally together with a relentless conviction to do greater things, we could supply the world with Canadian innovations, and build prosperity and wealth for all Canadians.

Industry Strategy Council Members

Murad Al-Katib
Agri-Food Sector

John Baker
Digital Industries Sector

Rhonda Barnet
Advanced Manufacturing Sector

Paviter Binning
Retail Sector

Ben Cowan-Dewar
Tourism & Hospitality Sector

Karimah Es Sabar
Health/Bio-sciences Sector

Karen Hamberg
Clean Technology Sector

Mark Little
Resources of the Future Sector

Sylvie Vachon
Transportation Sector

Acknowledgments

The Council would like to recognize Ex-Officio Members, Chief Science Advisor, Dr. Mona Nemer, and Deputy Minister, Simon Kennedy, for their valued contributions and insights throughout the span of the Council's work. We are also grateful for the tireless efforts of the Secretariat at Innovation, Science and Economic Development Canada.

Executive summary

The Council

The Industry Strategy Council was created to assess the impact of COVID-19 on Canada's economy and identify the scope and depth of its impact on industry, inform government's understanding of specific sectoral pressures, and serve as a means to receive the business communities' input on the pandemic's impact. We challenged ourselves to go beyond this mandate to examine ways to enhance wealth and prosperity for Canadians. The work was based on extensive consultations with stakeholders representing over a thousand businesses, academic institutions, associations, community organizations, Indigenous communities and youth groups across sectors and across Canada. Our report is filled with their suggestions, concerns and hopes. We would like to thank them for their valuable contributions.

The Council also worked to assess the economic situation around the world. We provide recommendations that are grounded in Canadian reality and that anticipate a new post-COVID-19 geopolitical landscape. Together, they propose an ambitious vision of the opportunities that Canada could pursue to become a leader in some of the world's most promising sectors.

The shock

In the decade following the last recession, Canada's economic growth was among the highest in the G7. Despite this enviable performance, the Canadian economy was operating below its real potential. Canada faced persistent historical challenges, particularly in terms of productivity, private investment, trade and physical and digital infrastructure.

When the health crisis erupted, the Government took the necessary steps to protect human life, bringing a significant portion of the economy to a halt. Known weaknesses in the economy contributed to the magnitude of the shock. But some of Canada's largest and best-managed companies were also hit hard by the outright collapse of their operations. In the early months of the pandemic, Canada's real GDP suffered its largest and sharpest contraction since data were first compiled in 1961, with a steep decline of 18%.

Key findings

The crisis has affected the economy unevenly. The hardest-hit sectors (tourism and hospitality, airlines, retail, aerospace, oil and gas) are also the most difficult to rebuild. Certain groups of businesses have been hit harder, women- and minority-owned businesses in particular. The recovery will also be uneven and will take time. GDP is not expected to return to its pre-pandemic level before 2022, or even 2024 in some sectors.

In the meantime, the recovery will depend on effectively managing public health risks and our ability to counter the next waves of the pandemic until a vaccine is developed and administered.

Several recent announcements align with the Council's vision, including changes in the Canada Emergency Wage Subsidy, the Canada Emergency Rent Subsidy (formerly the Canada Emergency Commercial Rent Assistance) and the Canadian Emergency Response Benefit (transitioned to Employment Insurance). The shock of the pandemic will bring new global priorities, and Canada must prepare for them.

Three-phase action plan and five recommendations

The Council is proposing an ambitious and transformative three-phase action plan: Restart, Recover, Reimagine. These phases are interconnected and are presented as a response continuum that enables us to deal with the emergency, rebuild our strengths and look to the future to bring long-term prosperity for all Canadians.

Given our current context these need to be implemented alongside other key areas of investment, namely in the Health/Bio-sciences sector.

Restart

  1. Restore confidence among Canadians by continuing employment and income assistance and managing health risks so that we can safely restart business to the greatest extent possible. Canadian business and consumer confidence remains lower than pre-COVID-19 levels, which is itself a barrier to the recovery. The pandemic has created a new normal that we must learn to live with until a vaccine is developed and administered. The Government must seek to bolster Canadian business and consumer confidence.
  2. Stabilize the hardest-hit sectors and provide assistance that meets the needs of the various sectors to preserve hundreds of thousands of jobs and thousands of businesses. The Council is convinced that the investment required to protect the hardest-hit sectors is considerably less than the financial and human costs impacting the economic and social fabric of entire regions and sectors in Canada.

Recover

By protecting the country's economic and social fabric, Canada is positioning itself for recovery. It will take some work, since every country in the world is preparing for what comes next. Canada's priorities are well known.

Invest in Canada's strengths to address the weaknesses in the economy that have been exacerbated by the crisis. Over the years, a number of reports have highlighted both opportunities and some structural weaknesses in Canada's economy.

  1. The Council is recommending that the Government streamline its programs, eliminate those that are ineffective and expand and bolster those that do work to strengthen four key factors of economic success. Canada must train and attract the best talent, strengthen its ecosystem, accelerate digitization and "de-risk" innovation projects. Gaps in the financing pipeline need to be addressed, while the roles of financial Crown corporations need to be adapted where necessary.

    Moreover, Canada must move quickly to address its physical and technological infrastructure deficit. At the same time, the Council recommends that the Government modernize regulations to make them more agile, leverage its purchasing power to strategically strengthen key sectors and provide opportunities for innovative Canadian companies, including small and medium-sized firms, to showcase homegrown know-how.

These suggestions are nothing new, but they are more relevant than ever.

Reimagine

By protecting its economic and social fabric and strengthening the foundations of its economy, Canada is building momentum to reimagine the way it creates wealth and the place it seeks to occupy in the world. The COVID-19 shock is accelerating certain trends and triggering new global geopolitics. Numerous opportunities will emerge, but competition will be fierce. Canada must build on its core strengths and set new ambitions.

  1. Develop a made-in-Canada industrial strategy to ensure that our leading industries will help Canadians prosper in the new post-COVID-19 world. The Council recommends that the Government develop an ambitious industrial strategy that brings together all of the country's leaders in new partnerships. The Council believes that the severity of the crisis, which has affected all regions, sectors and communities, calls for a multi-level, coordinated response.

    Around the world, many countries, including France, Germany, and South Korea, as well as the European Union are preparing large-scale strategies for how they will thrive in a new world. Canada cannot lag and tackle this unprecedented crisis with conventional approaches.

    An ambitious industrial strategy for Canada should include four main pillars:

    • Pillar 1: Become a digital and data-driven economy
    • Pillar 2: Be the environmental, social, and governance (ESG) world leader in resources, clean energy, and clean technology
    • Pillar 3: Build innovative and high-value manufacturing where we can lead globally
    • Pillar 4: Leverage our agri-food advantage to feed the planet

This industrial strategy would pull virtually all economic sectors into its orbit and could pave the way for a generation of prosperity across Canada in a renewed leadership position globally. The new industrial strategy should also establish renewed private sector partnerships and investments anchored in a sound and rigorous fiscal framework.

Implementing this action plan will require cooperation.

  1. Use the challenge posed by the COVID-19 crisis as an opportunity to build solidarity and create new partnerships between the public and private sectors (to leverage investments) and between governments within the federation to pool our strengths, while respecting the jurisdiction of all parties.

Promising economic impacts

This comprehensive action plan will have to be based on a solid and rigorous financial framework with appropriate parameters to reassure Canadians and markets of the Government's plan for long-run fiscal discipline. This plan embodies both an ambition and an attitude. In short, it is a way of acting.

An implementation mechanism

This three-phase plan, which is focused on investment and growth, and defined by clear ambition, will bring about profound changes. Implementing it will require broad support and close cooperation. This work will have to be carried out within an implementation mechanism that will monitor the progress of the projects, follow up on the rollout of investments and adapt actions as necessary, based on feedback from the field. The Council and the Economic Strategy Tables could be the focal point for implementing the plan.

Inspiring ESG principles

Our plan embodies values and principles of action. We believe in the role of Government as a strategic economic player, and we believe in the role of business as an active and involved member of the community. This notion of shared responsibility is reflected in companies' commitment to ESG principles, which call for them to act ethically with regard to environmental, social and governance issues. We want Canadian companies to be known for their ethical awareness and their values. This ethical stance should inform the way we do business and create wealth in Canada for the benefit of all Canadians.

Accelerating digital transformation

The pandemic has accelerated a digital transformation that was already underway. We need to invest now to build world-leading companies and to inspire traditional sectors to become digitally transformed.

Building prosperity for all

Canada is an exceptional country. The members of the Council are convinced that Canada has the resources, talent, knowledge and ingenuity to succeed in the post-COVID-19 world. This crisis must bring us together and mobilize us so we can build prosperity and leadership in this new world.

1. An unprecedented time for Canada's economy

COVID-19 prompted a national response

The pandemic has had a devastating impact on our day-to-day life, our health and our communities. Canadians were asked to stay home, and many non-essential businesses were required to close. Governments at all levels implemented physical distancing measures which required many businesses to reduce operations, close, and/or transition their business online. It prompted a necessary, and costly, response. Industry and government responded together to the public health challenge in a wartime fashion. To cushion the blow for Canadians and industry, the Government of Canada rolled out essential financial aid programs and liquidity support at unprecedented speed.

However, these response measures, coupled with the severe deterioration in the economic outlook, have been costly. In the spring of 2020, Canada's real GDP faced the largest and most sudden economic contraction since quarterly data were first recorded in 1961—down by 18% compared to pre-COVID-19 levels. The country is projecting a deficit of $343.2B in 2020–2021, well above pre-pandemic projections of $34.4B. Total debt to GDP is forecasted to rise to 48% in 2021–2022, up from 31% in 2019–2020.Footnote 1

Canadians came home to confront the challenge together

Our airlines flew around the world to bring Canadians home. Our manufacturers pivoted with speed to retool production for medical supplies and personal protective equipment (PPE). Essential service workers across the economy showed up every day to serve their communities. In addition to support measures, governments continue to aggressively pursue the purchase and development of COVID-19 vaccines, treatments and related supplies to protect Canadians' health and safety and to build domestic capabilities to fight future pandemics.

There is widespread appreciation for the speed and breadth of government emergency relief measures—88% of Canadians approve of their country's response and support strong public health measures, recognizing that we must mitigate the health risk.Footnote 2

Pre-pandemic: Canada was in a position of strength but facing some challenges

We are an incredible country with exceptional strengths. Canada's economic prosperity is built on strong and active sectors, global connections, deep roots in research and cutting-edge technological capabilities and rich natural resource endowments.

Over the years, Canada's economy has proven its resilience in the face of uncertainty. Since the 2009 recession, Canada's economic growth rate was among the highest of G7 economiesFootnote 3 and had the lowest debt-to-GDP ratio. With almost a million new jobs created since 2015, the national unemployment rate fell to a record low of 5.5%.Footnote 4 This, combined with the highest wage growth in more than a decade (4.5%),Footnote 5 helped bring the poverty rate to its lowest level (9.5%) in 2019.Footnote 6

However, as a result of COVID-19 and the global response that it prompted, we find ourselves having to accept a new normal, both in Canada and abroad. The pandemic came at a time when change was already upon us: it changed geo-political dynamics, digitization, and climate change, and has accelerated socio-economic trends—a rising inequality, shifting consumer demands, and disruptions to our trade and supply. Even throughout the term of our discussions, our meetings took place against a backdrop of added societal upheaval and a revolutionary movement to combat systemic racism and inequality. This context demands deeper consideration and must influence our actions.

Canada's economic outlook remains uncertain

To better understand COVID-19's impact on our economy and our future, we conducted scenario-based modelling. This factored in potential public health and economic conditions, as well as deep sectoral analysis across the nine sectors represented by the Council. These include the six high-growth sectors covered by the original Economic Strategy Tables and the Tourism and Hospitality, Retail, and Transportation sectors, which have been hit particularly hard by the pandemic.

We considered nine different scenarios ranging from broad failure of public health interventions to rapid and effective control of the virus, as well as the knock-on effects and economic policy responses. The results show that our most likely economic outlook will entail localized virus resurgence and slow long-term growth. Until a safe and effective vaccine is broadly available to Canadians, there will be no return to what we once knew as normal. Globally, and in Canada, we are seeing unprecedented efforts and cooperation to develop a vaccine, though there is significant uncertainty about its timing and availability.

Figure 1: Modeling of economic scenarios

(2020, % shows scenario that executive believe are most likely)

Source: McKinsey survey of global executives; McKinsey analysis, in collaboration with Oxford Economics; Aug. 31 – Sept. 4, N=2,079, 481 in North America; June-July survey of small businesses, n=726; June 1-5, N=2,174, 525 in North America
Text version

Percentage (%) shows scenario that executives believe are the most likely

X1% - Result from North American Executive survey

X2% - Results from Canadian SME survey

- Knock-on effects and economic policy response
Ineffective interventions Partially effective interventions Highly effective interventions
Virus spread and public health response Rapid and effective control of virus spread

Scenario 3 (S3) – Rapid decline, followed by a slight resurgence

X1= 19%

X2= 4%

S4 – Rapid decline, followed by moderate resurgence

X1= 7%

X3= 11%

S5 – Rapid decline, followed by rapid resurgence

X1= 3%

X2= 16%

Effective response, but (regional) virus resurgence

S6 – Rapid decline, followed by several small resurgences on a slight trend upward

X1= 18%

X2= 11%

S1 – Rapid decline, followed by several small resurgences on a moderate trend upward

X1= 36%

X2= 34%

S2 – Rapid decline, followed by several small resurgences with a large upward trend

X1= 2%

X2= 11%

Broad failure of public health interventions

S7 – Rapid decline, followed by flattening of the curve

X1= 2%

X2= 5%

S8 – Rapid decline, followed by a single small resurgence and a subsequently moderate trend upwards

X1= 12%

X2= 6%

S9 – Rapid decline, followed by a single small resurgence and a subsequently large trend upwards

X1= 1%

X2= 1%

Sector recovery will be uneven

Economic recovery is expected to be uneven across sectors and demographic groups, and it is expected to come in waves. If we look to GDP as an indicator, a return to pre-COVID-19 levels is unlikely before 2022. COVID-19 has had a disproportionate impact on sectors partly due to the impact of containment measures and the adaptability of their business operations.

As businesses started to reopen over the summer months, the economy showed some signs of recovery. Certain sectors started to bridge the gap, while others remained heavily impacted. The service industries have been among the most resilient during previous economic disruptions, but this pandemic has hit them the hardest. Sectors such as tourism and hospitality, aerospace and air transportation, and oil and gas have endured the most negative impacts from the COVID-19 crisis. Without a strong recovery in our resources sector, Canada's economic recovery will be impaired. In addition, while retail has shown signs of recovery, it was also heavily affected by containment measures and remains highly sensitive should there be further implementation of such measures.

The economic impact we have seen in these sectors has been—and remains—greater than that of the 2009 recession. People, investments, and technology have been critically affected. We are seeing knock-on effects across industries, with negative multiplier effects on GDP. Not all parts of the economy will re-emerge the same as they were before the pandemic and opinions about the pace of recovery vary across industries. The further out we look, the greater the uncertainty that lies ahead.

Figure 2: GDP impacts for hardest-hit sectors

(June 2020, year-over-year % change)

Source: Statistics Canada, Table: 36-10-0434-02 (Accessed July 2020)
Text version

The impacts by sector are the following:

  • Overall economy: -8
  • Tourism, hospitality and culture: -50
  • Air travel: -95
  • Aerospace: -13
  • Transit: -63
  • Oil and gas and support: -20

Canadian populations are being left behind

Women, youth, Indigenous peoples and new Canadians were disproportionately impacted by the pandemic. They are overrepresented in the retail and tourism sectors, which were among the most severely hit. Limited telework capacity and ability to work remotely in these sectors has restricted options for ongoing labour activity. School and daycare closures have also put increased childcare burdens on parents, but more so on women, negatively impacting their participation in the workforce. Indigenous-owned businesses have also been disproportionately affected. This reality reminds us that actions taken to Restart, Recover and Reimagine our economy must be inclusive, providing opportunities for all Canadians to thrive in this new normal.

We would love for Canada to accept this country isn't built yet and there is still structural infrastructure missing to ensure all Canadians have access to health care, education, air service, economic development opportunities and digital connectivity. Money always seems to be readily available, but we can't get the projects done.

President, National Indigenous Association

Figure 3: Impact of COVID-19 by demographic groups

(March – August 2020, % of individuals unemployed or working less than half of their usual hours, 2020, relative to same month in 2019)

Source: Statistics Canada, Table 14-10-0017-01 (Accessed July 2020)
Text version

The data in the bar graph is as follows:

-

March April May June July August
All ages

20%

30%

25%

17%

10%

9.5%%

Youth (ages 15-24)

32%

48%

42%

24%

17%

14%

Women

26%

32%

29%

20%

12%

10%

Men

15%

27%

23%

15%

10%

8%

To the right hand side of the graph, there is a text box, which reads:

Women and youth are overrepresented in sectors such as retail and tourism that were disproportionally impacted, partially driven by the lack of telework capacity in these sectors

  • Tourism and retail have the lowest telework capacity (~16% and ~20% respectively)
  • Tourism and retail are the largest employers of women, at ~50% each, and youth, at ~30% each

Figure 4: Self-reported employment and financial impact of COVID-19 on Indigenous and non-Indigenous participants

(May 26–June 8, 2020, % of respondents)

Source: Statistics Canada, Impacts of Covid-19 on Canadians – Trust in Others, 2020 (Accessed October 2020)
Text version
- Reporting a strong or moderate impact of COVID-19 on ability to meet financial obligations or essential needs Experienced job loss or reduced work hours among participants employed before COVID-19
Indigenous participants
All 36 37
Women 36 38
Men 36 36
Non-Indigenous participants
All 25 35
Women 25 37
Men 24 33

Gender impact of COVID-19: The "She-Cession"

COVID-19 has resulted in significant gendered impacts and threatens to wipe out decades of progress on gender equality. Women have lost their livelihoods at much higher rates, with 1.5 million women in Canada losing their jobs in the first two months of the pandemic.Footnote 7 Women are over-represented in the Tourism and Hospitality and Retail sectors, both among the hardest hit by closures and layoffs. The Tourism and Hospitality sector in particular will be among the slowest to recover.

The reliable opening of schools and daycares should allow for a return-to-work, but the high degree of uncertainty about the duration and severity of a second wave of COVID-19, coupled with the limitation of timely testing and results has put many working mothers in an untenable situation, particularly for employment that does not give the option for remote work.Footnote 8

The pandemic has highlighted structural weaknesses and persistent inequalities, and focused policy attention will be required to facilitate a full return to the labour market. Our goal of building a digital, sustainable and innovative economy founded on the principles of diversity and inclusivity depends on the full participation of all Canadians.

2. Reimagining Canada's future

A vision for a digital, sustainable and innovative economy

Canada has the opportunity to build back better with a stronger economy and a faster rate of growth than we saw before the onset of COVID-19. We see this crisis as an opportunity to reimagine our position on the global stage as an innovation leader, but we need to move quickly. Both the private sector and governments are ready to act. Our recovery will require a concerted action in building toward a shared vision for Canada. Together, as members of the Industry Strategy Council, we drew heavily on the experience and insights of a broad range of stakeholders to shape this vision.

The Council undertook a rigorous consultation process, engaging stakeholders from across Canada. We sought perspectives about national and regional impacts of COVID-19 on individual sectors; the impact of government support programs (what has worked, what has not, and where the unfulfilled gaps are); and forward-looking plans for resuming commercial operations in the short and medium term.

We heard that Canadian businesses have each experienced this pandemic differently. However, regardless of the impact, there is strong consensus that now is the time to recover from setbacks, limit the further deterioration of our hardest-hit sectors and boost investment in areas where we can benefit from accelerated growth.

More precisely, our efforts need to focus, not just on recovering from the devastating economic impact of the pandemic, but on a future for Canada where we are Building a Digital, Sustainable and Innovative Economy for all Canadians. In particular, one that is stronger than our pre-COVID-19 economy.

It is time to increase our competitiveness, innovation and productivity by investing in foundational areas that will build synergies across economic sectors. Take our digital footprint and investments in e-commerce and information and communications technology (ICT), for example. We need to be further ahead than we are now. We believe that investments in value-added manufacturing and processing, sustainable clean technologies, and digital connectivity are key to ensuring prosperity and jobs, all while enhancing the overall performance of the Canadian economy. Our rich natural resource endowments allow us to be the global ESG leader in resources, while exploring new opportunities for cleaner products (e.g., raw materials to support electric propulsion) with new clean technologies.

Across our sectors, we need to attract and incentivize investment, to equip people with the knowledge they need for new and value-added jobs, to leverage our trade relationships in newly reshaped supply chains, and to ensure an enabling environment for action and innovation. Our success will result in a Canada that is more resilient and self-sufficient, creating more domestic and global champions, and increased wealth for Canadians.

We cannot do this without working with the public sector on policies that maximize the benefits for the economy, and without a robust industrial strategy with a long-term action plan for the country. Our economic game plan charts a path for how to accomplish this— one that is bold, ambitious and actionable.

As we worked to set out a new future for Canada, we developed a set of key principles to guide our work. Our recommendations set a foundation for Canadian leadership, but there is more work we can do to pivot Canadian strengths into economic engines for growth. (See next page for principles, strengths, challenges and key global trends).

The Council recognizes that these principles are not all-encompassing. There are other areas of important work.

Given our current context, these actions need to be implemented alongside other key areas of investment, namely in health care and the related bio-sciences sector. The importance of these sectors has never been more critical as we continue to prioritize the health and safety of Canadians in confronting the pandemic. Intrinsic to these sectors are innovation activities, which are key to growing the intangibles economy (e.g., discoveries and related patents). We can pivot health care, our single biggest investment, and the strengths of Canadian bio-sciences into an economic engine.

If we nurture a "Team Canada" mindset and apply our strengths to the world's challenges, we will create a larger global footprint for Canadian ingenuity and increase our prosperity in the process.

Consultations, dialogue and surveys

Our engagement process included nearly 100 consultations, representing more than 1,000 businesses, business associations, academic institutions, labour groups, Indigenous organizations, community organizations and youth groups. We held continuous discussions with thought leaders who are deeply engaged in Canada's economy; one-on-one discussions with leaders from Canada's banks, financial institutions, academia and industry; and extensive engagement with industry groups and associations (national and regional/sector specific) representing the broader economic interests of Canadians. We also received more than 100 written submissions to the Chair directly or via Departmental channels, including the Council's website; and we conducted a survey with around 700 SMEs across sectors, provinces and territories.

The Council's recommendations are guided by key global trends, strengths and challenges unique to Canada and guiding principles

Key themes and recommendations

Key trends

Changing global dynamics: growing divergence in interests between key economies (e.g. China and USA) and rising protectionism due to COVID

Technology accelerating industry disruption: increasing importance of the intangible economy (e.g. data, software)

Rising income inequality, workforce vulnerability, and social unrest: >70% of the global population is facing growing income inequality and public awareness of systemic racism is on the rise

Climate change is a global challenge: Capital markets, investment, and consumer preference have shifted to decarbonisation and the need for an economy that is resilient to climate shocks

Major disruptions to trade & supply chains: COVID has highlighted a need for increased resiliency, efficiency, & diversification of supply chains

Strengths

Rich natural resource endowment (water, agriculture, energy, forestry, mining)

World leading post-secondary education, with highest proportion of working-age adults (59%) having completed tertiary education (compared to OECD average of 38%)

World-class financial ecosystem: with a stable banking system and some of the largest pension funds

Trading nation with open borders and leading market access, including 60% of the world's GDP and 1.5 billion consumers

Robust R&D capabilities, including in high-tech and bio-tech sectors, with world's top minds and inventors of AI

High quality of life: Strong social safety net and tradition of multiculturalism allow us to attract top international talent

Challenges

Insufficient investment in trade, innovation & digital infrastructure

Fragmented domestic market & inefficient regulations: lack of agility and interprovincial barriers to the movement of people, goods, and investment

Low trade diversification: over-reliance on US trade despite agreements with many other countries

Lack of value-added processing: reliance on exports of commodities with insufficient high-value transformation

Challenges to scaling and commercializing IP prevent Canadian firms from growing into large, global-leading organizations

Fragmented health care system lacks interoperability & adds complexity to crisis management and rising mental health concerns exacerbated by COVID-19

Insufficient wealth creation: limited leading global Canadian firms and businesses to support the economy and nurture domestic talent

Principles

Two-for-one approach: Prioritize actions across the different phases of Restart and Recover that will also produce a dividend in terms of the Reimagine phase of the strategy. Done right, investments now can help get the economy back on its feet and also make a contribution to long-term success.

Urgent, risk-based and data-driven: Take tailored interventions that recognize the inherent and different risks.

Quality of life: Focus on initiatives that are likely to have an outsized impact on Canadians' quality of life and longer-term prosperity.

Sustainability: Act with the conviction that economic growth will be further enabled by sustainability.

Inclusive growth: Support an enhanced portfolio of initiatives with impact that can be felt by all Canadians (e.g., across regions, demographic groups).

Partnership approach: Renew collaboration between the public and private sectors, as well between provinces and the federal government—something needed now more than ever.

Expand on what is working: Leverage and adjust existing government programs where possible for speed, versus creating new ones, including the Advisory Council on Economic Growth and the Economic Strategy Tables.

3. An economic game plan for Canadians to rise together

Stemming from our consultations and our own deliberations over the past four months, the Council has identified five key areas for action to guide Canada in building a digital, sustainable and innovative economy. To guide our recommendations, we developed a framework to help Restart, Recover and Reimagine Canada's economy for long-term success.

A framework for action and guiding principles

In Restart, we must be mindful of safely restoring Canadian confidence and commerce by increasing predictability and stability as we navigate through this pandemic. As we Recover, we can set a trajectory of inclusive growth by doubling down on a future-oriented investment plan. With those actions taken, we will be well positioned to head to a Reimagined future economy that catalyzes GDP growth, even beyond pre-COVID-19 levels, through an industrial strategy that supports innovation and sustainability. Along the way, the basis for successful implementation of this ambitious plan will be modernizing our public–private sector partnerships and maximizing our investments.

The Council has identified two key recommendation areas that it believes will be central to supporting our Restart phase. These recommendations seek to address the immediate and pressing issues resulting from COVID-19.

Figure 5: Summary of recommendations

Text version

This image illustrates the Council's framework for action. The framework includes recommendations to help restart, recover and reimagine Canada's economy for long-term success.

The recommendations under restart are aimed at safely restoring confidence and commerce. This includes boosting the confidence of Canadian businesses and consumers to navigate the new normal and adjust the economic response plan to better support a safe reopening of the economy and secure the hardest-hit sectors through targeted measures for airlines, airports and aerospace, resources of the future and tourism, hospitality and culture.

The recommendations under recover are aimed at setting a trajectory for inclusive growth. These recommendations will reignite growth by doubling down on a future-oriented investment plan. Specifically, these recommendations address diversity, talent and workforce innovation; the innovation ecosystem and R&D funding; access to capital to accelerate growth of Canadian firms; strategic infrastructure (digital and physical); agile regulation; and, strategic use of procurement.

The recommendations under reimagine Canada needs an industrial strategy with four key pillars for a digital, sustainable, and innovative economy for all Canadians. The recommendations focus on becoming a digital and data-driven economy; being the ESG world leader in resources, clean energy, and clean technology; building innovative and high-value manufacturing where we can lead globally; and, leveraging our agri-food advantage to feed the planet.

Across the three pillars of restart, recover and reimagine, the Council recommends establishing renewed public-private sector partnerships and investments anchored in a sound and rigorous fiscal framework.

These recommendations are supported by deep sectoral insights and recommendations, informed by data-driven analysis, as given in the Feature section of this report. In turn, these sector-specific insights help inform the overall recommendations around economic restart, recovery and reimagining and the over-arching recommendations.

The recommendations and sector-specific insights and detailed recommendations are informed by the foundational insights from industry consultations and broad stakeholder engagement. These can be found in the Annex B, C, and D.

Restart: Safely restore confidence and commerce

As part of the path to Restart the economy, the Council proposes a two-tiered approach to address immediate and pressing challenges arising from COVID-19: restoring Canadian confidence and stabilizing the hardest-hit sectors. We begin by addressing the first.

Recommendation A: Boost the confidence of Canadian businesses and consumers to navigate the new normal and adjust the economic response plan to better support a safe reopening of the economy

Canada must be relentless and aggressive in combatting a resurgence of COVID-19, and equally driven in our collective efforts to Restart and Reimagine our economy. A key component to restarting economic activity is building up Canadian consumer confidence. Canadians must feel confident in the effectiveness of public health measures as they look to return to the workplace and to the activities that help drive the consumer economy. Leading economists have identified prolonged uncertainty as one of the most dangerous impediments to economic recovery. Measures that can increase predictability are among the most powerful policy tools to enable stable recovery with no setbacks.

Canadian consumers have made it clear that the types of safety precautions and protective measures in place are critical to their willingness to resume pre-COVID-19 consumer behaviour. The messaging on safe consumer activities becomes less clear with each rollback of economic reopening. Getting this right early matters.

By adopting a clear risk-based framework across Canada, Canadians can feel better equipped with the information to understand the risks. We must lean in on education and help Canadian business and communities put in place safe protocols to tackle COVID-19 in our workplaces and regions.

Consumer confidence fell dramatically in April following the COVID-19 shutdowns. While July saw a significant increase, which has been maintained in recent months, indicators are still below pre-COVID-19 levels and concerns are increasing about a resurgence now and into the winter. The effort to rebuild Canadians' confidence can be enhanced and accelerated if industry and government move in lockstep to carefully manage risk.

Our consultations with business leaders have emphasized the need for a cohesive action plan that provides a safe path forward into the next stage of recovery. There is widespread appreciation among stakeholders for how quickly the government responded. We have seen that there are ways to adapt to the new reality, working closely with the provinces and territories in getting Canadians back to work and allowing Canadian business activity to safely resume with appropriate public health measures in place to ensure that virus transmission remains manageable.

Health messaging often blames restaurants; however, this is unwarranted. Restaurants have some of the strictest health measures in place (contact tracing, distancing, etc.— more than other sectors of the economy), and there is very little data to suggest people are being exposed to danger at restaurants.

Association of Hospitality Sector Leaders

Testing and contact tracing capacity need to be increased to contain localized resurgences of the virus. To date, most of the testing has been coordinated and carried out through health care systems and points-of-care. Engaging with the private sector can expand the opportunities for test deployment and increase capacity. Doing so will allow us to increase our efforts to reduce the risk of transmission while accelerating economic activity. This can be done through increased and coordinated testing between the health system and industry to reduce the risk to workers.

Businesses can support a risk management framework and directly contribute to confidence-building. For example, rapid testing by airlines could reduce our reliance on quarantining as the predominant method of limiting contagion. Governments should also continue to focus on rolling out the national COVID-19 Alert app to ensure that Canadians' can get the information they need to make better decisions and protect themselves. As of October 14, 2020, over 4.38 million Canadians had downloaded the app;Footnote 9 we need to strive for millions more and ensure it is available in all provinces and territories.

As consumer confidence improves with containment measures and better communications, boosting the business confidence of firms is also important. Businesses need to see a positive outlook that will influence their desire to invest. Ensuring that businesses have the right kind of support and at the right stages is crucial to emerging from this pandemic in a strong position. This is about more than financial support; it is also about strengthening the sense of engagement Canadians have already displayed to support local businesses.

A final component of boosting confidence is a focus on workers. Canadians will find themselves having to seek new work, change jobs or adapt to new workplace operations. To adapt, they will need different forms of supports, including upskilling and access to training that will better position them in the job market and/or in their jobs. There is more on this in Recommendation C.

Accordingly, we have identified specific actions to increase confidence and set the stage for a strong, foundational restart, some of which the Government has already committed to in its Speech from the Throne.

Figure 6: Canada Consumer Confidence Index

(August 2019–September 2020, Index = 0-100)

Source: IPSOS, Consolidated Economic Indicators, 2020 (Accessed June 2020)
Text version

This graph shows the Canada consumer confidence index by month from August 2019 to September 2020. The graph depicts the lowest Consumer Confidence ratings during the month of April and May, gradually increasing but remaining below pre-COVID levels.

The indices are the following:

  • Aug 2019: 56
  • Sep 2019:  53
  • Oct 2019: 53
  • Nov 2019: 53
  • Dec 2019: 53
  • Jan 2020: 52
  • Feb 2020: 54
  • Mar 2020: 53
  • Apr 2020: 36
  • May 2020: 38
  • Jun 2020: 42
  • July 2020: 44
  • Aug 2020: 44
  • Sep 2020: 45

To the right hand side of the graph, there is a text box, which reads:

Canadians' confidence is recovering but remains far below pre-COVID levels.

Declines have been particularly acute in sectors with high human interaction and traditionally close proximity, notably in the retail, tourism and hospitality, and transportation sectors.

Taking action:
  1. Further strengthen coordination and best practices with the provinces and territories and advance a risk management approach, recognizing that COVID-19 will be with us for some time (e.g., a coordinated approach to reopen borders based on sound risk management principles, launching pilot projects to test innovative approaches to risk management).
  2. Fully engage the private sector to ensure public health measures and innovation are in place to support a safe restart (e.g., partner with industry consortia to increase viral testing capacity and decrease time to results, expand contact tracing to accelerate economic activity and eventually roll out vaccination at scale).
  3. Develop, in collaboration with Canadian financial institutions and federal financial Crown corporations, mechanisms to facilitate restructuring and refinancing for otherwise profitable firms that face extended recovery periods, allowing business to emerge with more sustainable business models.
  4. Further encourage workforce participation and smarter reskilling as emergency programs are phased out, building on recently announced changes (e.g., complement the transition from CERB to EI with innovation skills programming to reskill disrupted workers—women and racialized Canadians in particular—and revisit structure of EI training model).
  5. Leverage and promote the "Canada" brand domestically and internationally, emphasizing value addition and innovation (e.g., encourage local spending and support for local businesses, launch public health messaging campaigns abroad to instill confidence in potential international students).
Case studies: What global comparators are doing to support reopening
What we heard
COVID-19's impact on Canadian firms: And the survey says...

A survey of 726 small- and medium-sized businesses was conducted from June 25 to July 14 across Canada to inform analysis for the Council's workshops and discussions and to provide timely insight on sector-specific dynamics arising from COVID-19. The survey included representation from all 13 provinces and territories, spanned a wide distribution of industrial sectors.

The survey covered key areas such as confidence in the economy and business survival; COVID-19 impact on businesses; uptake in government programs; and business challenges and support needs.

Survey results showed that:

In terms of government and other forms of support, businesses indicated that:

Source: McKinsey Survey, June 25 to July 14, 2020

Recommendation B: Stabilize and secure the hardest-hit sectors through targeted measures

The broad-based measures rolled out by Government early in the pandemic were instrumental in restarting key sectors across the economy. Although the pandemic affected the Canadian economy in its entirety, certain industry sectors were particularly disrupted. Detailed sectoral analysis of COVID-19's impact in all nine sectors represented by the Industry Strategy Council is included in our Feature Section: Deep Sector Insights. Going forward, targeted action is urgently needed to support the hardest hit sectors of the Canadian economy— airlines, airports and aerospace, resources of the future (particularly oil and gas), and tourism, hospitality, and culture. Timely and flexible support to these sectors will help stabilize them, prevent long-lasting impacts and position them for eventual recovery.

Airlines, airports, and aerospace

Canada's air sector is critical to building our nation and connecting our communities given our country's vast geographical size. Over 130 remote communities rely entirely on air transport to receive essential goods and services, including food and health care.Footnote 14 Air travel is also critical for business competitiveness. A functioning air transportation sector is vital for sectors as diverse as tourism and hospitality, professional services, mining, fishing and manufacturing. Prior to COVID-19, the air transportation sector was healthy and doing well. However, the pandemic has led to a sharp decline in air travel with the closing of borders and new travel protocols. Although some level of domestic air travel has continued, traffic in August 2020 was down by an average 66% when compared to 2019 levels.Footnote 15

The catastrophic drop in air travel worldwide has created ripple effects on Canadian airports and the country's aerospace sector. Aviation and aerospace are highly inter-reliant as travellers affect aviation demand, which in turn drives demand for aerospace products and services. Both are in urgent need of targeted assistance to avoid collapse, especially in Canada, where our aviation industry relies on one of the few user-pay systems in the world. The current situation is placing the entire system at risk. Despite cost-reduction efforts that have involved mass shut-downs and lay-offs, many airports and air carriers have reported an inability to meet financial obligations.

Air travel will be heavily dependent on the reopening of borders and enhanced consumer willingness to travel. Some efforts are already underway to restore travellers' confidence and ensure safety with new approaches to maintain physical distancing on planes. We heard from airports that have already made significant investments in health and sanitation, including autonomous floor cleaners, disinfectant tunnels for luggage, air quality monitoring stations, and digital platforms to monitor disease risks. Further investment in the adoption of digital technology and testing/screening systems for airports can help control the spread of COVID-19 and prepare facilities for future infectious diseases while increasing traffic.

With growing recognition of the need for government involvement and industrial strategy to support aviation and aerospace manufacturing, leading countries in the sector have taken different approaches to offer support. Many foreign governments have announced massive support and bridge financing initiatives for their air sectors. France was one of the first countries to unveil a major support package for aviation and aerospace manufacturing in the face of COVID-19.Footnote 16 Government investments will not only impact the ability of their national carriers to weather the economic impact of the pandemic, but will also shape the global competitive landscape in the air transportation industry for decades to come.

Absent decisive action, Canada's air transport system could emerge from COVID-19 in a much weaker state. Canadian air travellers could see reduced service, higher prices, diminished competition and a loss of connectivity. Higher ticket prices and reduced connectivity would place Canadian businesses that rely on air travel at a disadvantage compared to their foreign competitors. We heard from stakeholders in the sector that international air carriers that have been supported by their governments have increased their flight capacity to and from Canada, while the presence of Canadian carriers has fallen.Footnote 17 Canada's small domestic market also means that the growth prospects of top Canadian carriers are limited without an active presence in the highly competitive international markets.

The sector will also need investments in environmentally sustainable aviation and aerospace technologies to remain competitive. A mix of policy tools, including support for airlines, renewed innovation funding and procurement could reinvigorate the Canadian aerospace sector and supply chain. Canada boasts a diverse base of manufacturing firms in the industry. The Government could help position the Canadian aerospace sector for future long-term growth by investing in sustainable aviation and technology areas, such as hybrid electric propulsion and advanced biofuels.

Canada's aerospace sector ranks among the top five globally

The sector ranks first worldwide in the production of civil simulators, turboprop and helicopter engines, and ranks in the top 3 globally in the production of business jets and regional aircraft.Footnote 18 According to PwC's annual index, Canada's aerospace manufacturing attractiveness is ranked third globally, behind only the US and Singapore.Footnote 19

Furthermore, 93% of Canadian aerospace manufacturing firms were exporters in 2018 (44% higher than the manufacturing average).Footnote 20

Canadian carriers are losing their competitive footing

Internal analysis shared by an industry organization during the Council's consultations suggested that the share of international flight capacity to/from Canada for international carriers who received sector-specific state support grew from 4% in 2019 to 55% in 2020, while Canadian carriers fell by 20% over the same period.

Case studies: What global comparators are doing for aerospace
Taking action:
  1. Provide longer-term support (e.g., until return to pre-COVID-19 levels of activity) to allow firms that are particularly impacted or of national strategic interest to meet fixed costs and allow for greening of fleets in line with other competitive jurisdictions (complementary and/or in replacement of existing programs).
  2. Accelerate Restart of domestic and international travel by adopting innovative ways to manage risks and rebuild confidence (e.g., rapid testing for international visitors from low-risk jurisdictions with significantly reduced quarantine times).
What we heard
Resources of the future

The resources of the future include forestry, mining and oil and gas—natural endowments that add to the richness of our country. These industries represent a key pillar of our current economy, as well as an immense growth opportunity. As we focus on addressing the impacts of COVID-19, we have an opportunity to take actions to ensure that the full potential of these sectors can be leveraged to benefit the Canadian economy now and in the future. This is why we have proposed actions to tackle immediate challenges facing the sectors and have proposed further actions toward reimagining our economy.

Of Canada's resources of the future, oil and gas have been particularly hard hit by COVID-19. This sub-sector, which is responsible for 11% of GDP (excluding impacts of capital investment), was already facing issues related to reduced investor confidence in Canada prior to the onset of the pandemic. While investment in upstream oil and gas activities (e.g., exploring, drilling, extraction) had been increasing globally, it was declining in Canada. The pandemic exacerbated investment declines. Oil producers responded to the current situation by cutting capital spending budgets, including for green house gas (GHG) reducing projects, cancelling future investment, project development, curtailing production, and shutting down facilities. Oil and gas job losses are expected to be high and to continue to 2021.Footnote 26 This is expected to impact the broader economy as the sector has the highest multiplier effect on broader employment.Footnote 27

Oil and gas is the largest contributor to Canada's trade.Footnote 28 Given this, recovery in the sector is a crucial component of the nation's overall economic recovery. Government liquidity and credit measures will be required to help the sector survive and stabilize in the short term. It will also need support for the sustainable transformation required for the industry's long-term viability and global competitiveness. Prior to COVID-19, the sector was positioned to play a critical role in the transition to a low-carbon energy future both through R&D in low-carbon solutions, and by providing significant revenues to the Government for reinvestment in the transition towards net-zero emission targets. According to the Canadian Association of Petroleum Producers, the oil and gas sector accounts for 75% of all clean technology investment in Canada.Footnote 29

Recovery in the sector will depend on the industry's ability to de-risk and incentivize capital investments to generate activity, which has a ripple effect on other Canadian industries. This means providing incentives to reignite spending for large scale projects that stimulate growth, reduce GHG emissions and lay the groundwork for energy and resource efforts. These projects include sustaining production, diversification into petrochemicals, hydrogen, liquified natural gas (LNG), and environmental technologies (e.g., carbon capture, utilization, and storage (CCUS)).

The sector will also require liquidity support until activity resumes. This is especially important for some, like oilfield service firms, who may be unable to access existing support due to lower revenue profiles and high debt levels. Other recovery factors for oil and gas include the continuity of supply chains, market access, agile and effective regulations, global competitiveness and investment, and adoption of innovations to drive environmental performance.

Case study: What a global comparator is doing for the resources sector
Taking action:
  1. Provide additional incentives for upstream operators to sustain long-term viable operations and to reignite their capital expenditures with consideration to long-term ESG/resource objectives and ensure existing business credit programs provide bridge funding to long-term viable producers and service operators until investments resume.
What we heard
Tourism, hospitality, and culture

The tourism sector was performing well pre-pandemic with three consecutive years of record-breaking growth and high expectations for 2020.Footnote 31 The pandemic immediately affected businesses of all sizes in this sector due to the closure of borders to non-essential travel and a steep decline in air transit. Public health restrictions also limited options for large gatherings. The summer season, representing 60% of annual tourism revenues was mostly lost, paralyzing operators, businesses, hotels and festivals across the country. As a result, 80% of businesses in the sector are considered at risk.Footnote 32

While some local and domestic consumer spending is expected to return as the economy reopens, continued restrictions on travel and large gatherings are anticipated to impact short-term revenue and employment. Some of these firms may be successful in transitioning to new operating models (e.g., online sales, increased proportion of local clientele). However, extended restrictions and resurgences of COVID-19 will pose ongoing challenges for most firms, particularly those that are heavily dependent on seasonal travellers and large in-person gatherings for revenue, or those that offer niche products or services that cannot be delivered through alternative mechanisms.

Given this trajectory, at-risk businesses will need to have supports for restructuring and transformational changes. While the Government has set up broad-based programs of general application that have provided some support to the sector (e.g., the Canada Emergency Business Account loan, Canada Emergency Rent Subsidy and payment deferrals for commercial leases and operating licences in national parks, historic sites and marine conservation areas), these general programs alone will not be sufficient. Tourism-dependent local economies and regional and community tourism/hospitality anchors would also benefit from upticks in domestic travel and efforts to encourage activity in these communities.

A tough year and a long road ahead

Businesses in the tourism industry, and other sectoral SMEs alike, noted the struggle of keeping their doors open. They spoke to the challenge that the CERB presents; the CEWS being a good program but needing to be extended to address ongoing financial costs; and the rent program not being accessible due to the eligibility issues and the involvement of landlords. Given the urgency of necessary support, these views were shared as the Council conducted its work.

Recent announcements made by the government, highlight some of the changes made to improve these supports—CERB transition to EI, CEWS being extended, and changes to the rent program (now Canada Emergency Rent Subsidy).

Of course, the tourism industry is uniquely affected during COVID-19, which is why we have noted the need for more immediate attention to bridge to recovery.

Case studies: What global comparators are doing for tourismFootnote 33
Taking action:
  1. Provide patient capital to allow anchor firms with high brand-value and long-term business models (who have challenges accessing capital) to weather subdued demand and overcapacity in the medium term, particularly where smaller communities are disproportionately impacted.
  2. Collaborate with the private sector to ensure sufficient restructuring and transformation funding is available—crowding in private capital at attractive rates and ensuring that entrepreneurs have the opportunity to transform their businesses in the wake of COVID-19.
What we heard

Recover: Set a trajectory of inclusive growth

As part of the Recover stage, we see an opportunity to tackle pre-existing challenges laid bare by the pandemic. While these challenges are not new, they are pressing for Canada's growth now ever more. As part of its work, the Council considered many of the recommendations previously put forward to the Government, as well as existing federal programming currently in place to support industrial growth. Through building on these efforts, we see significant potential to accelerate our recovery.

Recommendation C: Reignite growth by doubling down on a future-oriented investment plan

Canada can unlock its potential and build a digital, sustainable and innovative economy by investing strategically and significantly in core foundations that benefit the economy as a whole. Key to Canada's competitiveness and future growth is our talent, technology and trade as well as an enabling environment that promotes innovation and ingenuity.

As such, we propose the following sector-agnostic measures: upskilling the workforce; driving innovation, commercialization, digitization and intellectual property (IP); improving access to capital so high growth firms can achieve scale; investing in strategic trade infrastructure for efficient global market access; investing in digital infrastructure, including high-speed Internet for rural small to medium enterprises (SMEs); eliminating regulatory barriers to unlock economic growth and investment; and leveraging procurement as a powerful tool to create demand and support priority areas.

These themes emerged in all our conversations with industry leaders about Canada's path to recovery and long-term growth. They are understood to be mutually reinforcing and interdependent and are essential to drive recovery and reignite growth. Previous private sector councils, mandated by the federal government, have also made recommendations related to these cross-cutting themes. Therefore, efforts already underway can be leveraged. Our consultations have also underlined the significance of doubling down on these horizontal themes.

The Economic Strategy Tables identified six signature initiatives in their September 2018 report, The Innovation and Competitiveness Imperative, Seizing Opportunities for Growth

  1. Own the podium: More high-growth firms to anchor Canada's prosperity
  2. Agile regulations that support economic growth
  3. Skills and talent: Position Canadians for jobs of the future
  4. Technology adoption centres: Drive technology adoption and leapfrog global competition
  5. Physical and digital infrastructure: To connect Canadians and enable export growth
  6. Branding: Telling the world what our innovative economy has to offer
Case studies: Examples of investments where global comparators are doubling down
Diversity, talent, and workforce innovation

During our engagement sessions with employers, unions and universities, it was clear that the pandemic has accelerated some employment trends and has led to a new set of workforce challenges. While some businesses struggle to keep workers employed during the COVID-19 pandemic, others are still working to fill vacancies and/or develop new skills within their workforce, as a result of adaptations such as changing business models and technology adoption.

This accelerated pace of change has made it clear that Canadians need opportunities to continuously access the latest training in support of new skills demands. To facilitate this, it would be beneficial to compare workers' current skill sets to the skill sets required for jobs in sectors with higher demand. Reskilling programs could then be targeted to providing the required skill sets. Where there are limits to what reskilling and training can achieve, positions may need to be filled through recruitment of global talent.

Sectoral crosswalk: Talent/skills strategy

COVID-19 has forever changed our view of "essential workers". Transit operators, grocery store cashiers, retail clerks, truck drivers, farmers and many others, joined health care workers and first responders on the front line to keep our economy moving and to keep Canadians safe. Despite a few noted and unique distinctions, the need for a cross-cutting talent and skills strategy and an economy-wide labour market response was identified across all sectors. The pace of change has highlighted the continued importance of bringing international talent to Canada, exacerbated current talent and labour gaps and has reinforced the need for reskilling and upskilling to meet demands in high-growth sectors.

Diversity

The Council was also cautioned about the growing social inequities and disproportionate impact that the pandemic is having on underrepresented groups (e.g., women, youth, new Canadians and Indigenous peoples). Given that our hardest-hit sectors employ these groups disproportionately (e.g., youth in tourism and service sectors), a slower recovery could leave underrepresented groups even further behind. For example, COVID-19 saw women's participation in the workforce drop to 55% in April, for the first time in over 30 years, threatening to wipe out decades of progress on gender equality.Footnote 37 Although this has improved since April, women, youth and new Canadians are still lagging in their employment.

For Canada's recovery to be inclusive, we need to improve the potential for all workers to participate in the economy. Inclusiveness is not only a good thing for workers; it helps employers thrive. Ethnic and gender diversity are correlated with profitability, yet women and visible minorities remain underrepresented.Footnote 38 Going forward, Canada's workforce innovation strategy must place a strong focus on closing these gaps, and redeploy displaced and underemployed Canadians into industrial areas with strong growth trajectories and high demand for talent. By removing barriers and advancing gender equality in work, Canada could see an additional $150B in incremental GDP in 2026.Footnote 39

Sectoral crosswalk: Inclusive economic growth

COVID-19 has had a significant adverse impact on Indigenous businesses and communities. The pandemic has reinforced gaps in food security, health care, air service to remote areas, and digital connectivity. The resources and tourism and hospitality sectors are among the largest private sector employers of Indigenous peoples in Canada, and both have been hard-hit by COVID-19. Stronger partnerships with clean technology, digital, and health/bio-sciences and associated investments will drive economic development and public health outcomes.

Workforce innovation

Broader access to training and opportunities for employment in high-demand areas is one important approach to facilitating redeployment. Yet despite significant improvements in recent years, Canada continues to lag behind other OECD countries in upskilling its existing workforce. For example, Canadian organizations spend an average of 81 cents for every dollar spent by American organizations on learning and development.Footnote 40 In addition, the Advisory Council on Economic Growth indicated that the average amount an organization spent on investments in worker training fell by more than 40% between 1990 and 2010.Footnote 41 Additional training can provide employees with skills to build and scale the companies of the future, for example in the clean technology sector.

Historically, the largest training interventions have been implemented by provinces and territories, enabled in part by federal transfer programs. Federal leadership, in close partnership with provinces and territories and with industry, could help achieve improved coordination in the delivery of reskilling and employment opportunities that align with industry needs while meeting shared provincial and national priorities. Collaboration must also lead to smarter training infrastructure and digital learning models that make navigating career pathways and talent pipelines easier for employers and employees.

Labour market programming must provide Canadians the necessary support; however, it must also support and garner input from employers. When skills development measures are not developed in collaboration with employers, there is a risk that training solutions will not match their needs. Working closely with industry and demonstrating federal leadership will decrease this risk. Additionally, knowing that training is relevant to employers gives workers the confidence that investments in their own training will pay off and position them for good quality job opportunities.

Global talent

Finally, firms still struggling to access the talent required to support their growth spoke to the ongoing importance of bringing international talent to Canada. Canada tripled its international student population over the last decadeFootnote 42 and, prior to COVID-19, ranked third in international student attraction.Footnote 43 Our consultations highlighted the benefits of international students studying in Canadian post-secondary institutions, as well as the ongoing importance of onboarding experienced global talent. Figures from 2018 show that the majority of these students (60%) plan to apply to become new Canadians.Footnote 44 Those that do become permanent residents often pursue employment in areas critical to Canada's innovation capacity.

In addition to implementing programs announced in the Speech from the Throne, we should continue to leverage the Global Skills Strategy and the International Student Program, to attract the best and brightest in key areas where we face shortages, like engineers, software developers and C-suite executives. While COVID-19 has created some uncertainty about the future of economic immigration, now is not the time for Canada to forego its momentum in the fierce competition for global talent. Canada should continue to capitalize on the opportunity to retain and attract highly skilled workers, especially as other nations consider or implement new measures that prevent the entry of top talent.

Sectoral crosswalk: Immigrants and new Canadians

In recent years, the growth of the Canadian labour force has been driven by immigration. While immigrant employment is critical for sustaining economic growth, this group lost employment at nearly twice the rate of their Canadian-born counterparts.Footnote 45 Women, youth, and recent immigrants have been hardest hit as they are overrepresented in sectors that were disproportionately impacted and slower to recover, such as tourism and hospitality, retail and the services sector.

Labour shortages are an ongoing concern for agricultural producers and the issue has been exacerbated by the pandemic. With some effort and financial assistance to producers, temporary foreign worker arrivals were between 85–90% of 2019 levels in the summer of 2020.Footnote 46 The modernization of the Temporary Foreign Worker (TFW) Program could be accelerated to address pre-existing labour shortages in the long term.

Canada also experienced a broad-based decline in immigration in the second quarter of 2020 as permanent resident arrivals dropped 67% from the same quarter of 2019 due to the pandemic.Footnote 47 High levels of immigration are required to support Canada's rapidly aging population, the growth of Canadian cities, Canada's post-secondary institutions, our innovation through the opportunity to draw on the world's best talent and to realize our goal of building a diverse, inclusive Canada.

Taking action:
  1. Expand scope and increase funding of reskilling programs in partnership with provinces and territories to drive smarter digital learning models and infrastructure for future demands (e.g., supporting upskilling and reskilling to fill labour gaps).
  2. Capitalize on the opportunity to retain and attract highly skilled global talent, particularly in digital and data areas, as other countries close/ reduce access to work permits (e.g., retain recent STEM graduates, displaced H-1B visa holders, assist job placement for accompanying spouses).
  3. Develop a National Workforce Innovation Strategy to develop a system of lifelong learning that is aligned with commercial needs, ensuring graduates are well positioned for jobs of the future, while closing the gender gap and advancing inclusion and diversity in the workforce (e.g., skills needed for Manufacturing 4.0, internships and dual programs, micro-credentials, and flexibility with online learning).
What we heard
Innovation ecosystem and R&D funding

Canada's business sector has long faced an innovation challenge, particularly in exploiting R&D and our ability to capture value from our intellectual property. This is consistent with our need to enhance our commercialization capacity in Canada. In recent years, the federal government has introduced a new suite of industrial tools and supports for businesses to enhance their growth and innovation capacity. Many of these are centred on a partnership approach, between government and private sector, or among stakeholders, to maximize resources and knowledge transfer, market expansion and commercialization.

In speaking with Canadian businesses, we heard about the success of many of these programs, as signaled by their over subscription in several regions of the country, prompting calls to expand programs such as the National Research Council's Industrial Research Assistance Program (IRAP). In other cases, we heard specific limitations and gaps in the existing programs that can be amended to better support innovation. For example, there were requests to remove existing employment caps, which prevent some medium-to-large-sized businesses from participating in programs such as IRAP.

More generally, businesses are also looking for more flexible support to enhance investments in areas such as intellectual property, digitization, and technology adoption. Existing programming could be reviewed, where necessary, to encourage and incentivize Canadian businesses to invest in the "intangibles", which have the potential to generate better long-term value (e.g., in R&D, data and computing, digital services and operations, new designs and brands, and in workforce upskilling). Incentives for investments in these areas can be integrated into the existing suite of innovation programs, particularly as work advances on Canada's Intellectual Property Strategy and Digital Charter.

Federal programs provide early support to firms

The government offers early support to firms at the pre-commercialization stages via the National Research Council's Industrial Research Assistance Program (IRAP); support for companies to scale up via the Regional Development Agencies (RDAs), the Accelerated Growth Service and the Trade Commissioner Service; and additional funding and knowledge transfer driven by the Strategic Innovation Fund and the Innovation Superclusters Initiative, and the large-scale partnerships that they support.

Canada's innovation performance: An age-old tale

On the Conference Board of Canada's last Innovation Scorecard (2018), Canada fell from 9th to 12th place of 16 peer countries, as a result of stronger performance by a number of international peers, as well as our decline in R&D. Canada also continues to fall significantly behind in developing and capturing value from intellectual property, ranking 17th on both the World Intellectual Property Organization's Global Innovation Index and on ICT-related patents among the OECD (down from 8th from 2000–2012). Other indices also point to Canada lagging its OECD peers in innovation areas such as adoption of robotics (20th) and e-commerce (21st).

Taking action:
  1. De-risk and encourage industries to digitize, automate, and drive productivity for SMEs and upper-middle companies (e.g., build on technology access centres; explore giving superclusters a mandate on technology adoption with increased focus on upper-middle companies; incentivize the private sector to invest in intangible assets and technology such as Manufacturing 4.0; improve digital adoption and service delivery within health care and education with an acute demand post-COVID-19; invest in software infrastructure projects).
  2. Continue to strengthen Canada's Digital Charter and IP Strategy, and build a modern digital regulatory system to better manage, safeguard—which includes added enforcement capabilities to reduce data infringement—and commercialize our assets (e.g., guidelines on drone use, IP education, IP filing costs for SR&ED-eligible Canadian companies, micro-patent pools).
  3. Recapitalize, expand, and modernize key government programs to stimulate immediate and longer-term private investments in innovation and R&D (e.g., the Strategic Innovation Fund (SIF), Sustainable Development Technology Canada (SDTC), SR&ED, incorporate technology adoption into the IRAP mandate).
What we heard
Access to capital to accelerate growth of Canadian firms

To support businesses facing more protracted and slow recoveries, the federal government responded in record speed with unprecedented liquidity and capital supports (e.g., Canada Emergency Business Account (CEBA), Large Employer Emergency Financing Facility (LEEFF)). In its Speech from the Throne, the Government has committed to continuing the CEBA program and improving the Business Credit Availability Program (BCAP).

Throughout the pandemic, these measures have been critical to the survival of Canada's hardest-hit businesses. However, beyond survival, firms also need access to capital so they can invest in innovation and sustainable technologies, in new growth opportunities and in training to reskill their workers for the new digital economy.

Continued access to patient capital remains important for competitive firms with strong growth trajectories. Expanding programs offered through Crown corporations—Business Development Bank of Canada (BDC), Export Development Canada (EDC), and Farm Credit Canada (FCC) can help Canadian business not only survive, but also thrive in this changing environment.

Access to capital is a pre-condition to growth for all firms, regardless of size. Additional support is required to grow our high-performing SMEs and upper-middle companies that have the potential to become the next global leaders in their field. History has shown that when these companies are not able to access capital within Canada, they look to international investors. Leaders in the financial sector have suggested that leveraging private sector capital by creating patient capital growth funds, building up our venture capital industry and incenting investment in Canadian firms, and infrastructure projects will help companies scale up. Each of these measures will boost our economy's productivity and drive GDP growth and were echoed throughout our consultations. While improvements have been made in the venture capital industry, an extension of the BCAP program would allow further growth.

Finally, we know that the pandemic has had disproportionate impacts on some segments of the Canadian population. It is important that support reaches businesses owned by members of underrepresented groups, who have been more negatively affected by the pandemic. For instance, 91% of Indigenous-owned businesses reported being adversely impacted by COVID-19.Footnote 48 Women entrepreneurs, who are more likely to own newer and smaller businesses, had to lay off their employees (80%+) at higher rates than male-owned businesses.Footnote 49 For inclusive recovery that works for all Canadians, dedicated funds should be established to support entrepreneurship from diverse groups.

Sectoral crosswalk: Access to Capital

Each sector identified specific capital requirements to either stabilize, recover or grow the hardest-hit or highest-potential firms. These recommendations include, but are not limited to, targeted liquidity supports, patient capital, new financing models and the greater mobilization of private sector investment. Given the current uncertainty of the duration of COVID-19, access to capital will continue to shape our economic recovery, as well as our ability to seize new growth opportunities across all nine sectors.

Taking action:
  1. Consider an expanded role for the financial Crown corporations—BDC, EDC and FCC— to support the relaunch of the economy in partnership with the private sector and in alignment with the overarching strategy to boost productivity and innovation:
    • Direct the financial Crown corporations to move up the risk curve and to provide significant additional growth and scale-up capital to Canadian businesses.
    • Establish new special purpose funds to support business scale-up, including financing of the larger venture capital (VC) rounds that have proven elusive in Canada.
    • Direct these institutions to increase support to Canada's larger and most competitive businesses to help them "own the podium" (e.g., R&D investment in digital product innovation, investment to adopt latest technologies).
    • Cultivate sector-specific capabilities through strategic areas aligned with key industrial strategy priorities.
  2. Ensure capital gaps (e.g., women entrepreneurship funds, Indigenous community development funds, bio-science research funds) are addressed in partnership with the private sector
    • Expand on existing diversity-oriented growth funds to increase access to capital and stimulate inclusive growth.
    • Expand proven partnership models on growth capital, including incentives to crowd in private capital and deepen investment expertise domestically (e.g., Venture Capital Catalyst Initiative (VCCI)).
What we heard
Strategic infrastructure – Digital and physical
Digital infrastructure

The pandemic has underscored the importance of reliable, secure and affordable digital infrastructure, as well as the risks associated with a growing digital divide in Canada. Approximately 60% of rural communities still do not have access to reliable, high-speed Internet, leaving businesses, consumers and important service providers behind.Footnote 50 Canada has a proud history of building great infrastructure—including completing what was at the time the world's longest railway across a sparsely populated country in 1885. Now, we can enhance Canadian success in the digital economy by accelerating access to high-quality Internet for all Canadians. In its Speech from the Throne, the Government committed to improving Canadians' access to virtual health care and to using digital technologies to make government services more accessible. Investing in digital infrastructure will improve our chances of connectivity for all Canadians and better access to these services. Digital infrastructure is much bigger than broadband, and we discuss this further in Recommendation D.

A $10B-infrastructure plan to create jobs and grow the economy

On October 1, 2020, the Government of Canada announced the three-year Canadian Infrastructure Bank Growth Plan, including $10B in infrastructure initiatives designed to help Canadians get back to work by creating approximately 60,000 jobs across the country. The plan will connect more Canadian households and businesses to high-speed Internet, strengthen Canadian agriculture, and help build a low carbon economy though five initiatives:

The plan is part of the Government's campaign, launched in the Speech from the Throne, to create over one million jobs to rebuild from the pandemic.

Taking action:
  1. Accelerate plan to ensure coverage and access to high-quality Internet for 100% of Canadians by 2026, in collaboration with the private sector and other levels of government.
What we heard
Physical Infrastructure

During our conversations with Canadian business leaders, we heard about the future dividends of investing in physical infrastructure for our long-term growth. Canada could obtain higher market value for its resource endowment and be a more competitive supplier of innovative products to world markets, by strengthening our trade-enabling infrastructure. This includes our ports, railways, and world-class air hubs, which connect millions of people around the globe, move goods efficiently, and can support new jobs for Canadians, including underrepresented groups. We also heard about opportunities to expand our view on public–private partnership models and on the types of infrastructure projects that support Canada's industrial competitiveness and efforts to reduce GHG emissions, such as public transit, digital transportation networks, CCUS, and large-scale irrigation. Yet, Canada does not invest sufficiently in such strategic assets.

While large infrastructure project commitments have been made across all transportation modes, it has been estimated that Canada has a $150B-infrastructure gap.Footnote 51 Canada ranks 20th out of 36 OECD countries on the World Bank's Logistics Performance Index (2018).Footnote 52 This is an area of huge potential for Canada's recovery and reimagined future. With investments in infrastructure, we could reduce congestion, increase intermodality and improve trade flows. For example, Canada boasts access to deep water ports in three oceans, as well as the important St. Lawrence/Great Lakes corridor, which could be further leveraged with the right investments in infrastructure.

Transforming the future food economy requires intermodal global trade flows for bulk commodities and infrastructure that can support surge capacities in those flows for certain products (e.g., crops). Our current infrastructure creates bottlenecks and cannot effectively support surge capacity. By strategically investing in passenger/freight infrastructure and trade corridors, Canada can better position itself to attract private sector investment and compete in the economy of the future. This is something the Government has been working to address.

The Council also heard about opportunities to further develop Canada's trade network in the energy sector. This network (e.g., east-west electricity transmission and pipelines) would allow provinces to provide ESG-leading energy, including green energy.

Figure 7: World Bank Logistics Performance Index

(2018, Index = 1-5)

Source: World Bank, Aggregated LPI, 2018 (Accessed September 2020)
Text version

The countries, in order from highest to lowest LPI, are the following:

Germany

4.20

Sweden

4.05

Belgium

4.04

Austria

4.03

Japan

4.03

Netherlands

4.02

Singapore

4.00

Denmark

3.99

United Kingdom

3.99

Finland

3.97

United Arab Emirates

3.96

Hong Kong, China

3.92

Switzerland

3.90

United States

3.89

New Zealand

3.88

France

3.84

Spain

3.83

Australia

3.75

Italy

3.74

*Canada

3.73

Norway

3.70

Czech Republic

3.68

Portugal

3.64

Luxembourg

3.63

Korea, Rep.

3.61

Case studies: How global comparators are doubling down on infrastructure
Taking action:
  1. With the support of the Canada Infrastructure Bank, drive nation-building projects by:
    • Developing a strategic perspective on the highest productivity-enhancing infrastructure priorities for the country.
    • Unlocking a pipeline of investable infrastructure projects by increasing the acceptability of user-pay models.
    • More proactively incentivizing these projects to happen, including non-traditional asset classes (e.g., digital and green infrastructure, including CCUS and small modular reactors (SMRs)).Footnote 56
    • Creating fast-track approval processes across all levels of government to increase the scale and velocity of investment.
  2. Invest in strategic trade infrastructure that addresses critical bottlenecks (e.g., create gateways and corridors strategy for bulk commodities and containers). Infrastructure needs to be trade-focused. Rail, road, ports, airports, pipelines and tech capacity are priorities, and we have well-known infrastructure deficits in these areas. We will not be able to keep pace with demand in fast-growing markets if we do not ramp up infrastructure investments significantly.
What we heard
Agile regulation

A regulatory ecosystem that encourages and facilitates innovation is an important tool for the Government to facilitate recovery. In Budget 2018, the Government announced that it would pursue a regulatory reform agenda focused on supporting innovation and business investment and make Canada's regulatory system more agile, transparent and responsive in order to stimulate opportunity. For example, duplication in federal/provincial regulatory requirements create bottlenecks by increasing costs for businesses and encouraging investment outside of Canada. Targeted regulatory reviews to remove such barriers to economic growth are being conducted on high-growth sectors and strategic areas. These include clean technologies (to grow the sector and support the adoption of new technologies across sectors), digitization and technology neutrality (by simplifying regulatory approvals and making regulations more adaptable to technology changes), and international standards (harmonization through incorporating international standards in our regulations).

The Council strongly supports these efforts and encourages accelerated activity where the Government can leverage these vehicles for change to ensure a regulatory system that supports a vision of innovation, sustainability and growth. We can simplify the existing system and provide new areas of growth, namely by harmonizing, codifying, and setting new industry standards. In addition, continued efforts to cut red tape on commercial operations and marketplace exchanges, and to digitize and automate approval processes and client service interactions, will help businesses reduce time spent on activities that distract from value creation.

We note that our call to action in this area echoes what has been put forward by previous councils and advisory committees to the Government. If COVID-19 has taught us anything, it is the art of the possible. When needed, we can move very quickly, in a coordinated manner with governments and the private sector, to find our way through red tape that prevents action and agility. As a Council, we want to reiterate the importance of action here, especially in key areas for accelerating our growth.

Sectoral crosswalk: Regulations

The speed and responsiveness of the Government and its ability to mobilize quickly to deliver a range of emergency benefits and relief measures was on full display in the early days of the pandemic. A comparable degree of urgency is required to streamline and modernize our regulatory system to support innovation and encourage investment.

The need for an agile, transparent and responsive regulatory framework was reinforced in five sectors including Resources for the Future, Digital Industries, Clean Technology, Transportation and Health/Bio-sciences, with stakeholders signaling their support for a new collaborative relationship between industry and regulators. COVID-19 should be the impetus to accelerate critical work on regulatory reform.

Taking action:
  1. Fast-track regulatory reviews in sectors where delays have a disproportionate financial and societal impact (e.g., clean technology, resources), conduct targeted regulatory reviews to support most impacted sectors (e.g., oil and gas, aerospace), and build on ongoing regulatory reform efforts to eliminate areas of federal and provincial overlap.
What we heard
Strategic use of procurement

Previous studies including the Advisory Council on Economic Growth (2016)Footnote 57 and Jenkins Report (2013)Footnote 58 have highlighted the importance of the strategic use of procurement to support Canadian business. During our engagement sessions and deliberations, we heard frequent reminders of the key role that the purchasing power of federal, provincial, and municipal government play to stimulate demand and create markets for new products. Strategic procurement could be used to accelerate and support innovation, help small- and medium-sized companies scale up and gain the experience and credibility to become fully integrated in global supply chains, as well as provide economic support to Indigenous communities.

Government procurement can accelerate the development of technologies directly and generate "investment credits" that incentivize the behaviour of large private sector actors (e.g., Industrial and Technological Benefits). We encourage the Government to use these powers judiciously to achieve strategic goals—including support for priority sectors, high-growth potential firms, and future-focused technologies, like digital, clean technology, and health/ bio-sciences. Strategic procurement can help Indigenous-led business grow and can contribute to reconciliation by encouraging business development and socio-economic outcomes that support the path to self-determination.

COVID-19 has served as a stark reminder of the value of domestic resilience, and domestic supply chains. We should follow the examples of our peer countries and apply a national security lens more broadly to drive domestic procurement in areas critical to the well-being of Canadians, such as transportation, energy, bio-technology and life sciences. When the Government is the first buyer of innovative technologies in these spaces, it enables our firms to scale more quickly, create more jobs and adopt an export orientation. Moreover, strategic procurement can be used to unlock economic benefits throughout the entire innovation ecosystem.

Crosswalks between procurement and strategic sectoral activity

Our clean technology, digital, and health/bio-sciences sector-specific recommendations are included in our Feature Section: Deep Sector Insights. They include a call for the strategic use of procurement to accelerate demand of made-in-Canada technology, incentivize industrial deployment, and ensure the resilience of our domestic supply chains and capabilities.

A targeted approach could better support domestic innovation, increase export potential, create meaningful jobs in high-growth sectors and ensure Canadian competitiveness.

Previous recommendations on strategic procurement

A number of reports have included calls for action on procurement. These include:

Taking action:
  1. Improve supply chain resiliency through strategic domestic procurement, particularly in strategic sectors impacted by COVID-19 and/or where there is opportunity to create scale in health care, clean technology, education and Indigenous-led businesses. The recommendations of previous reports on procurement should be fully implemented.
What we heard

Reimagine: Catalyze GDP growth beyond pre-COVID-19 levels

As we Reimagine Canada, we can further build on our areas of strength to position us for success in the years to come.

Recommendation D: Canada needs an industrial strategy with four key pillars for a digital, sustainable, and innovative economy for all Canadians

COVID-19 has highlighted the need to strengthen and build a competitive and resilient economy. Without a clear, overarching industrial strategy to help Canadian sectors excel in an increasingly innovative global landscape, Canada risks being left behind.Footnote 63 Canada's recovery and our competitive edge will depend on us developing an industrial strategy to address our challenges. This includes identifying the areas and sectors in which we are best set to compete and lead globally. As a start, we are rightly focused on the parts of our economy that are struggling or have been hit hard by COVID-19, but we also need to expand that focus to strategic sectors where we can double down investment, scale businesses and go global.

We need to bear in mind the shifts in global demand and the need to aim the Canadian economy more in that direction. Put another way, if we are going to grow, it is going to be on the global trade front and in non-traditional markets. Long before COVID-19, Canada's current account balance was in a deficit. This position reflects Canada's trade and investment relationships with the rest of the world.Footnote 64 Combined with the effects of the pandemic, policy makers are forced to address two challenges in tandem: the pre-COVID-19 current account deficit and new fiscal and global market pressures. These are the two mountains we now need to climb. To describe the issue more clearly, Canada is facing a need to double down on our abilities domestically and on how we approach trading relationships globally.

We recognize that a call for an industrial strategy might be contentious. However, the economy-wide damage caused by COVID-19 amplifies the need for an agile and targeted approach, focused on leveraging our competitive advantages and maximizing economic and social outcomes. This is not about the Government "picking winners". Throughout our consultations, we heard about Canada's competitive strengths and the economic benefits that could be realized if we had a targeted strategy to promote specific sectors and their productivity. The overriding goal should be to cultivate innovative firms and new technologies that can compete globally and in turn boost economy-wide productivity.Footnote 65

We had the opportunity to meet with many of the best and brightest of Canadian business, labour, academia, and civil society over the summer, and we were inspired by their vision for Canada. An industrial strategy would serve to rally Canadians around our economic future long after the threat of COVID-19 has passed.

Through an industrial strategy rooted in evidence-based policy and strategic investments, we can build the capacity that is required to support a resilient recovery. Such a strategy can improve Canada's productivity, competitiveness and future attractiveness on the global stage through investments in our comparative advantages and where there is global demand.

We have identified four interconnected pillars, which could form the cornerstone of an industrial strategy and would have real economic impact across Canada's provinces and territories, industrial sectors, and population. These include: becoming a digital and data-driven economy; being the ESG world leader in resources, clean energy technology; building innovative and high-value manufacturing where we can lead globally; and leveraging our agri-food advantage to feed the planet.

The interconnectedness between these four pillars is a key strength. Our ability to identify and invest in elements that cross-cut industrial sectors to create value, will enable us to fully leverage the associated economic benefits and yield economic growth. The sectoral diversity represented on our Council has provided a unique lens through which to identify these crosswalks.

Implementing an industrial strategy is no easy task. There are important steps to consider to ensure success. To implement Canada's industrial strategy, the Council recommends:

Canada's peer countries are making bold strategic choices and investments to build their industries for the future. They are investing heavily in stimulus measures and deploying sector-specific support to drive productivity. Countries such as Italy and Germany have implemented aggressive fiscal responses. Other countries including the US, UK, China, France, Israel, India, as well as the EU are significantly increasing support for innovation in the face of an accelerated move to a digital, data-driven and decarbonized global economy, particularly as a result of the pandemic.Footnote 66

In this new context, we need to ensure a stronger position for Canada on the global stage—one that supports more Canadian firms to become global leaders and that creates wealth and prosperity for all Canadians. By implementing the proposed industrial strategy, which focuses on leveraging our strengths to compete globally, we are laying the groundwork for success.

What is an Industrial Strategy?

In an article in the OECD Observer, "Industrial Policy's New Look", Anne-Lise Prigent effectively encapsulates thinking on the new industrial policy for the 21st century:

A broad definition [of industrial policy] includes both innovation, infrastructure and skills policies, as well as targeted interventions boosting a specific sector, activity or cluster of firms. And it is not about shoring up old-style manufacturing, but rather about encouraging high value-added activities in agriculture, industry and services… Industrial policies nowadays require a high level of co-ordination and sequencing of actions directed at skills, finance, infrastructure and the like. This means investing in more and better training and addressing skill mismatches. It also means increasing access to finance for companies to invest in innovation and developing production…[I]ndustrial policies imply "targeted government actions aimed at supporting production transformation that increases productivity … improves domestic capabilities and creates more and better jobs.Footnote 67

Canada: Our strengths can position us for the future
Pillar 1: Become a digital and data-driven economy

Establish Canada as a leader in digital through purposeful R&D and connectivity investments in order to create world-leading digital native companies, transform traditional sectors, retain Canadian talent, and prepare Canadians for the future.

While digital disruption was well underway long before the onset of COVID-19, the pandemic has dramatically accelerated the global shift to digital. In mere months, segments of Canada's economy, including e-commerce and education, have been propelled forward upwards of ten years in their digital adoption. Given this new reality, governments around the world are taking appropriate action (investing in essential and strategic industries, next generation digital platforms, legal frameworks, data, privacy, and IP) recognizing that their firms must embrace digital or be rendered obsolete in the global marketplace.

The pandemic showed the extent to which operational resiliency depends on the ability of firms to adopt and deploy modern digital technologies and to leverage the data that come with it. Globally, digital and data-transformed companies are projected to increase from approximately $12T in GDP production to $50T over the next four years.Footnote 74 To capitalize on these global opportunities, Canada will need to drive toward robust digital infrastructure that provides the platform upon which all firms can build up their digital footprint. As noted earlier, Canada's future prosperity is linked to our ability to eliminate the digital divide and enable all Canadians to participate in a digitally connected future.

Canada conducts world-leading R&D and does well at creating promising tech start-ups; however, few of our digital native firms grow to scale within Canada. Fortunately, the Government has many tools at its disposal. In addition to strategic procurement and eliminating regulatory barriers, current innovation support programs (e.g., IRAP, SIF, SR&ED) can be adapted to fill the gap that currently exists to support firms scaling from SMEs to upper-middle or large firms. Countries like Germany, France, China and the United States, have focused on scaling upper-middle companies to become world leaders. In our context, this would entail identifying Canadian-controlled companies (public or private) with greater than $75M per year in revenue, and supporting their growth to $1.5B in revenue.

The most important asset of any leading firm is its people, and Canada cannot build a digital and datadriven economy without sufficient talent. Canada has long been an attractive destination for globally mobile talent and has the opportunity to build on its reputation as a welcoming country at a time when other nations are turning inwards. However, estimates also show that we lose upwards of 60% of software graduates from leading universities in Canada.Footnote 75 To build a winning workforce, we need new solutions to retain and attract talent, and to ensure employees have continual access to the latest skills training.

Intangibles are the single biggest driver of future growth, and critical for every sector (oil, agri-food, clean-tech, etc.). We need to be the landlord of the future economy, not the renter.

INDUSTRY LEADER, INFORMATION TECHNOLOGY

Canada's recently unveiled Digital Charter, which contains principles to develop privacy, access, and support measures, will unlock innovation while maintaining Canadians' trust. The Government is now implementing its IP strategy, which is encouraging new opportunities for patent pools and IP services to build savvy in an economy of intangibles. Both of these broad initiatives could be further operationalized in partnership with industry to promote public-private collaboration and to fully leverage the value of our assets. The goal should be to unlock responsible and innovative use of data and ensure Canadian firms capture value from their IP. The Government already provides a suite of services for innovators working in the intangibles economy; these programs should be embedded with support for IP awareness and strategy development to increase the value we capture in Canada.

Case study: How global comparators are deploying sector-specific support to drive productivity
Taking action:
  1. Build a Global Canadian Digital Network (which could be called the Borealis Digital Network) to transform Canada into a digital society
    • Create a strategy to scale Canada's digital industry domestically and internationally (e.g., accelerate national data and cybersecurity standards and regulations, increase funding for trade commissioners to help build digital trading outposts and routes for Canadian technology).
    • Expand infrastructure investment strategy to amplify digital infrastructure components such as broadband, software, AI, 5G, etc., and leverage existing programs (e.g., Connectivity Strategy, Infrastructure Bank).
    • Leverage Canada's strengths (e.g., brand, privacy framework) to broaden access to international markets for Canadian firms (e.g., collaboration with upper-middle firms, leverage Canadian standards—such as privacy—to promote exports).
  2. Support Canada's upper-middle businesses
    • Increase focus on enabling upper-middle firms to win globally (e.g., allocate a proportion of patient capital to upper-middle firms poised for rapid scale-up, adapt eligibility of existing programs such as IRAP to better include them).
    • Build on key initiatives such as Innovative Solutions Canada, establish government procurement standards that support growing Canadian firms (e.g., government as first customer).
    • Encourage the adoption of digital technologies in large Canadian firms, including digitizing government services.

    What are upper-middle companies?

    Canadian-controlled companies (public or private) with greater than $75M per year in revenue and that have growth potential.

  3. Establish Canadian high-skilled talent as a global advantage
    • Enable a leading digital skills platform to upskill and reskill Canadian talent.
    • Create a retention strategy for sought-after talent trained in Canada through incentives and other efforts (e.g., wage top-ups).
    • Expand the global talent stream to more proactively attract and retain digital talent to Canada, especially as other nations close their doors to sought-after talent.
  4. Leverage IP and promote the value of data
    • Support IP creation and ownership within Canadian companies (e.g., IP filing costs, SR&ED application, policy education).
    • Modernize the privacy and data protection regime to harmonize the multi-jurisdictional regulations.
    • Create national regulatory and standards framework governing data, including open source, big data libraries to promote public-private collaboration, offer new R&D program funding and make better use of Canada's assets to grow the data-driven economy.
    • Embed IP strategy into government funding programs to ensure Canadian business and innovators have access to the best IP resources, and offer financial supports for IP development.
What we heard
Pillar 2: Be the ESG world leader in resources, clean energy, and clean technology

Position Canada as the global champion and provider of ESG across all our industrial sectors, especially in resources (oil and gas, forestry, mining), clean or low carbon energy, and clean technology, while leading globally on de-carbonization and GHG emission reduction.

Canada has the 3rd largest endowment of natural resources in the world, behind only China and Saudi Arabia,Footnote 82 meaning that Canada is the largest democratic resource base in the world. Resources account for almost half of our national exports.Footnote 83 This provides our country with the tremendous opportunity to supply the globe from our significant resources in oil, natural gas, forestry and mining, and to do so in a way that reflects Canada's values. These values include the rule of law, democratic and universal rights, care for the environment, engagement with our Indigenous citizens, inclusion and diversity, and effective corporate governance. These values are foundational to the ESG principles used to evaluate businesses, and uniquely position Canada to be the global champion provider of ESG in natural resources. Clearly, enhanced opportunities in Indigenous engagement, participation, and ownership in the natural resources industries are part of strengthening our social participation.

Canada needs to do better in reducing its carbon emissions. We are one of the highest emitters on a per capita basis, in part because Canada is the second largest country in the world (by area) with a low population density, we have an extreme cold climate, and we provide substantial resources to the world. In fact, it has been estimated that 45% of Canada's carbon footprint is associated with producing goods for export.Footnote 84

The resource sector understands the need to drive down GHG emissions to address climate change and meet societal expectations. Canada's oil and gas companies spend more on clean technology investments than all other industries combined.Footnote 85 The industry has made good progress over the past decade, but we need to do more at a quicker pace. Accelerated decarbonization is not only helping to drive down emissions in our resource sector, but is also creating new industries and global value chains in clean energy and technologies where Canada could compete and lead globally. Canada can and should be a leader in energy transition.

Achieving Canada's 2030 Paris commitment of 30% emission reduction (from 2005 levels), and the Government's commitment from the Speech from the Throne to achieving net-zero emissions by 2050 will require additional sector-specific decarbonization pathway development and clean technology infrastructure investments. Investments in these pathways and initiatives would greatly benefit Canada's higher GHG emission sectors (e.g., transportation, oil and gas, agriculture, and manufacturing). Our clean technology sector is well positioned to develop and deploy solutions to support decarbonization pathways across all sectors. This cannot be done without the collaboration of the Government and the resources sector, who want to be part of the solution.

The Government has committed to invest in renewable energy and next-generation clean energy and technology solutions, as well as to reduce the GHG emissions of current activity through technologies such as small modular reactors (SMRs) and CCUS. The Council supports a focus on building and scaling areas of clean energy/technology where we have exportable expertise, such as hydrogen, battery technology, SMRs, CCUS and biofuels. Canada has additional clean technology strength in renewable energy, energy storage, smart grids, transportation, water technologies, waste management, recycling and the circular economy.

New opportunities to capture global market share are also emerging as we pivot towards product innovation and value-added production in our resources sector. Our resource endowment, including increasingly eco-responsible oil and gas, coupled with our advanced manufacturing capabilities, position us to provide high value-added and refined products to meet world demand for the near future. While actively engaging in the development of renewable energies and the decarbonization of its economy, Canada must meet demand in the best possible way; it must present itself as an exemplary supplier. As we recover from COVID-19, this presents a tremendous opportunity for Canada to leverage its natural capabilities in resources and clean technology. Doing so will accelerate our pace of growth and ensure we provide responsible ESG resources and clean technology to the globe, while strengthening the Canadian economy.

Opportunity to be a global champion

The Council believes that Canada has a unique opportunity to be an ESG global champion in resources, which gives due consideration to the associated environmental, social and governance factors.

We can become a global champion in two ways: by creating new industries and global value chains in clean energy technology where Canada can complete globally, as well as supporting decarbonization pathways in the economy, including in the oil and gas sector.

This is combined with financial and social prosperity factors, in measuring the overall sustainability and impact of a company or business (or a whole sector). ESG global champions in resources are resource extractors, developers, processors and exporters who are world leaders in ESG.

Taking action:
  1. Support all natural resource sectors in becoming global ESG suppliers and product innovators
    • Build a resilient oil industry by becoming a world leader in CCUS to drive down the carbon footprint and provide energy that is based on ESG; support commercialization of SMRs to reduce emissions.
    • Accelerate innovation of engineered wood products and biomass and advance sustainable management practices to maximize net carbon absorption of forests.
    • Build on world leadership in sustainable mining practices and grow an economic, commercial-scale critical materials supply chain (e.g., rare earth elements, nickel) required for many new technologies (e.g., electric vehicles (EVs), energy storage, sensor and data processing applications) to improve national and North American supply chain resiliency.
    • Focus on nature-based solutions and accelerate development of low- or no-carbon biofuels.
  2. Leverage clean technology strengths to accelerate exports and domestic adoption and decarbonize key industrial sectors
    • Mobilize capital (and patient capital) to drive private sector investment into priority clean tech areas, especially for scale-up.
    • Produce hydrogen (blue, green, grey) fuel at scale and build associated infrastructure for domestic consumption and export.
    • Build the battery supply chain (from critical minerals to specific parts required for assembly) in Canada to meet North American and global supply needs.
    • Become a world-leading hub for sustainable aviation and bio-jet fuel (e.g., R&D support for aviation firms).
    • Establish a targeted strategy for development of technical and business talent (e.g., product commercialization, capital markets, IP protection, global supply chain development) to scale clean tech firms, while growing employment opportunities for underserved communities.
    • Advance Canada's clean technology strength in renewable energy, biofuels, energy storage, smart grids, transportation, and water technologies.
  3. Incentivize all sectors to meet Paris commitments with a cost and time optimal decarbonization pathway
    • Develop a national or pan-Canadian net-zero 2050 emissions plan and then work with each sector (e.g., resources, energy, manufacturing, agriculture, transportation, clean technology) and the private companies within the sector to gain alignment and execution of their portion of the plan.
    • Enable firms to use credits from any region in Canada and internationally to meet carbon reduction obligations.
    • Develop incentives for energy efficiency and decarbonization projects (e.g., US 45Q incentives) including the establishment of an interconnected electricity grid and renewable energy.
    • Invest in green infrastructure investments to support transition to a net-zero economy, e.g., CCUS, nationwide EV charging stations, energy efficient buildings and nature-based climate solutions and affirm Canada's intent to be a leader in energy transition and clean technologies.
What we heard
Pillar 3: Build innovative and high-value manufacturing where we can lead globally

Establish Canada as a global innovator in high-value manufacturing sectors by supporting private investment in R&D, enhancing productivity, commercializing innovation, and exporting globally, while building domestic resiliency.

Manufacturing has always been an economic driver and enabler in Canada. Our country has strong a history in advanced manufacturing including in the automotive, aerospace, food processing and machinery manufacturing sectors. These sub-sectors yield a substantial multiplier effect throughout the Canadian economy by creating jobs through the supply chain and as a purchaser of raw materials. Further, manufacturing adds value for other key sectors, such as health/ bio-sciences, resources of the future, clean technology, and agriculture, through the transformation of ideas, inputs or raw materials into new or improved products and processes. Advanced manufacturing can provide other sectors with the equipment and tools that help them to secure competitive advantages like keeping up with environmental goals, cost efficiencies, and increasing demands on migrant labour.

However, since the early 2000s, manufacturing production has been falling, though still stands as Canada's 2nd largest private sector contribution to Canada's GDP at 10%. Due to COVID-19, manufacturing saw a 30% decline in GDP, with automotive, aerospace, and machinery experiencing especially negative shocks.Footnote 86 The global pandemic has reinforced the importance of a strong domestic manufacturing footprint, especially in industries that support national health, safety and security. On a global scale, strategic considerations are leading countries to rethink their supply chains, in response to COVID-19 and in light of their national strengths. This is widely seen as a manufacturing renaissance, in Canada and around the world.

Through our consultations, we heard that now is the time for Canada to review its place in global supply chains. This includes repatriating certain manufacturing capabilities, while seeking to enter new markets and establish international importance. Fortunately, there are areas of global leadership within Canadian manufacturing to develop and supply high-value products that the world needs for a sustainable future. We can leverage these to accelerate recovery within the sector, while also building a future-oriented and more resilient domestic manufacturing sector.

To take advantage of these possibilities, investments over the next 12 to 18 months could help to attract key global investments in our areas of strength. For example, Canada boasts health/bio-sciences companies with the scientific edge to become global anchor firms in biotechnology. We have a resource endowment that provides key materials underpinning modern technologies, but have yet to fully leverage this through large scale value-added production. We also have innovative firms that are developing the next generation of manufacturing equipment and technologies that incorporate automation, artificial intelligence, machine learning and robotics to achieve new levels of productivity, safety and precision.

The Council identified three Canadian sectors poised for global growth because of their sheer size, successful utilization of innovation, and spin-off to other domestic companies in the supply chain. Focusing on these will position Canadian manufacturing for the future and allow us to seize emerging opportunities and new areas of growth:

In automotive, Canada is one of the world's top 10 producers of light vehicles.Footnote 90 With over 100 years as an auto-producing nation, automotive manufacturing is well positioned with the infrastructure and R&D expertise required to make our country a global leader in emerging automotive technologies such as electric vehicles and fuel cells. We now have the potential to translate these strengths in both the aerospace and automotive sectors into global leadership in sustainability.

A focus on building the products that we, and the world, need to achieve a sustainable future will enable Canada to lead globally. This will require patient capital in research-intensive areas that hold the potential of producing transformative technologies. Our industry peers have identified a need to drive cross-functional collaboration among researchers and firms working on future-oriented areas such as hydrogen fuels, materials and minerals for EV batteries, virtual care technologies and sustainable aerospace and aviation technologies. This includes providing incentives to accelerate R&D investment and commercialization among firms and doubling down on achieving global scale with a focus on export potential and supply chain resilience. The Government announced plans to incentivize production of sustainable technologies in its Speech from the Throne.

Now is time for the manufacturing renaissance in Canada to realize our place as the most competitive jurisdiction in the world for building high-value products that Canada and the world need for a sustainable future.

Sectoral crosswalk: Advanced manufacturing with talent and workforce recommendations

People are critical to advanced manufacturing no matter how advanced the technologies become. An important issue in supporting progress in this sector is moving labour up the technology ladder. In our workforce recommendations we suggest more support for reskilling programs. This is equally important for the trades and workforces with specific expertise in manufacturing that need to continuously improve with advancements in technologies and processes.

Taking action:
  1. Boost investment in innovation and commercialization
    • Establish supports to ensure Canadian products and IP remain differentiated (e.g., explore incentives for companies that turn domestically produced IP into locally produced products).
    • Develop a strategy to drive local and international private sector investment in priority sub-sectors— potentially via blended finance and a patient capital fund with a focus on research-intensive products.
  2. Accelerate technology creation and adoption
    • Increase investment incentives (e.g., for next-generation autonomous manufacturing equipment), directly tied to outcomes (e.g., skills and talent training, commercialization, exports, and environmental performance) to enable rapid scale-up.
    • Incentivize productivity-enhancing technology adoption (e.g., fund capability-building programs, offer diagnostic services to help firms understand available technologies and respective applications).
  3. Connect technology clusters and manufacturing firms
    • Establish infrastructure to encourage cross-functional collaboration in nascent but growing areas (e.g., tech meetups focused on bio-sciences innovations, incubators specializing in developing alternative aviation fuels).
  4. Build skills and talent for Manufacturing 4.0
    • Ensure a robust labour force (e.g., targeted scholarships, course reimbursements, expedited visas for high-skilled workers and their families).
    • Support female and minority workers in manufacturing to ensure positive progress on employment parity is not lost through COVID-19 and continued into the future (e.g., work-sharing program update, targeted upskilling efforts).
What we heard
Pillar 4: Leverage our agri-food advantage to feed the planet

Leverage Canada's agri-food production and value-added processing, endowment in natural resources, and strengths in AI to become a global leader in precision agriculture, leading to a sustainable, traceable and safe food system supplying high-quality products, including processed food, to local and global markets.

In the wake of the pandemic, some global economies acted defensively to restrict cross-border trade, limit exports, and protect domestic supplies of agricultural products. Despite this, many countries remain reliant on imports for trusted, reliable and safe products, positioning Canada's agri-food sector as a strong engine of growth through recovery.

Canada is the world's 2nd largest agricultural trader per capita and one of the top exporters of key commodities including wheat, oats, lentils, and live beef.Footnote 91 Similarly, the food and beverage processing industry is Canada's second largest manufacturing industry (value production) and largest manufacturing employer.Footnote 92 To ensure that we fully leverage this positioning, Canadian agri-food businesses need longer-term solutions to ensure consistent availability of labour. Approximately 4,000 agricultural operations across Canada rely on the Temporary Foreign Worker (TFW) Program to address ongoing labour shortages.

Canada's agriculture sector is also well positioned for longer-term growth. Despite declines in projected global agriculture supply due to climate change and degradation of cultivable land, yield projections in Canada are expected to increase for many principal field crops.Footnote 93 As we strive to supply the world, we want to strengthen our domestic local providers, and to the extent possible, leverage their growth to achieve our global ambitions. Simultaneously, rising consumption levels in emerging markets, particularly in East Asia, will increase global demand for key food commodities. Canada can avail of the opportunity for greater market share with increased adoption of cutting-edge digital tools (e.g., precision agriculture) that create step-change in productivity and sustainability along the supply chain.

Nevertheless, to fully capitalize on increased global demand for food commodities, we must strategically address current trade infrastructure gaps to ensure that Canadian businesses can get their products to global markets quickly. Over the past decade, global confidence in Canadian trade infrastructure has fallen. Previously ranked 10th (2007) in the world, Canada is now ranked 20th (2018) by the World Bank.Footnote 94Footnote 95To maintain our long-term trade competitiveness, Canada needs a modern, multi-modal transportation system that will support the increased trade opportunities available in the economy of the future.

Canada's regulatory system contributes to the nation's overall competitiveness; however, the Government must maintain regulatory agility to support the growth and scale of Canadian businesses. Internal regulatory barriers hinder innovation and competitiveness. Since the emergence of COVID-19, the Canadian government has shown agility in regulatory processes within the agri-food sector, including providing temporary exemptions for the interprovincial movement of meat and poultry products and providing flexibility on certain labelling requirements for food service products that do not have an impact on food safety. Our vision is that the Government continues to prioritize regulatory flexibility over the long term.

Canada also has unique strengths in bio-sciences and a highly skilled workforce that can be leveraged to develop and commercialize innovative products including zero-carbon fertilizers, phenotyping, drought-resistant crops, and plant-based products and proteins. Investing in these innovations will allow ambitious farmers to grow their agri-food businesses into globally competitive firms. At the same time, Canada will look to harness new talent from outside the traditional agri-food sector, particularly as it prioritizes opportunities for digitization.

We envision that agri-food jobs of the future will recruit some of Canada's most talented minds from industries including digital, bio-sciences, and clean technology. Similarly, innovations in the agri-food sector are poised to help advance innovation within other industries. For example, renewable biofuels made from agriculture and food sources, present significant opportunities to help Canada achieve its sustainability and climate change goals. We were pleased to hear a commitment to reducing emissions from farming and forestry, as well as strengthening Canada's food supply chain in the Government's Speech from the Throne.

Taking action:
  1. Build the necessary infrastructure and market access for future waves of growth
    • Accelerate investments in trade infrastructure to address critical bottlenecks for the transport of goods (e.g., multi-modal port and rail, northern access).
    • Develop a rolling, 50-year "Trade Corridors and Gateways National Infrastructure Plan" to ensure a long-term approach to infrastructure planning and funding.
    • Continue expanding international market access through bilateral agreements focused on removing tariff and non-tariff trade barriers.
  2. Deploy investments in competitive areas
    • Support investments in value-added transformation of raw goods, to allow Canadian players to capture a larger share of value from processing activities (e.g., maintain investment focus and momentum for plant-based protein, additional focus on other areas such as renewable fuels).
    • Encourage development and commercialization of innovative bio-science products (e.g., zero-carbon fertilizers, phenotyping, drought-resistant crops, plant-based products) and processes (e.g., increasing carbon absorption of soil).
  3. Increase digitization to improve productivity
    • Accelerate broadband infrastructure investments to enable connectivity, especially in rural and Indigenous communities, and increase the adoption of digital technologies that are critical to productivity improvements in the sector.
    • Incentivize digital investments across supply chains to lower inventory requirements and improve overall efficiency (e.g., blockchain and automation of processing lines).
  4. Modernize regulatory systems and build a 21st century talent pipeline
    • Modernize regulatory system with a focus on removing internal trade barriers to enable the growth of the Canadian agri-food sector and help businesses achieve scale and become globally competitive.
    • Attract new talent into the agri-food sector, with a particular emphasis on digital and business skills.
    • Modernize the TFW Program to address pre-existing labour shortages in the long term.
What we heard

Recommendation E: Establish renewed private sector partnerships and investments anchored in a sound and rigorous fiscal framework

Figure 8: Comparing size of stimulus measures in Canada's peer countries

(September 2020, Stimulus as a % of GDP)

Source: McKinsey & Company, The $10 trillion rescue: How governments can deliver impact, September 2020 (Accessed September 2020)
Text version

This image shows the size of stimulus measures in select countries as a percentage of GDP (as of September 2020). The image includes a world map with countries shaded on a scale of light blue (0% of GDP) to dark blue (50% of GDP) depending on the size of stimulus measures relative to GDP. Where there is no data, the country is shaded in light grey. Six countries are featured, and these nations are bolded in the table below. The size of stimulus measures compared to GDP are the following:

Argentina 2.3%
Australia 23.9%
Austria 26.9%
Bahrain 10.9%
Belgium 14.9%
Brazil 27.6%
Canada 13.7%
Chile 9.4%
China 2.0%
Colombia 1.7%
Denmark 7.7%
Egypt 2.7%
El Salvador 0.3%
Finland 14.5%
France 22.4%
Germany 41.7%
Hong Kong 5.5%
India 7.4%
Indonesia 5.2%
Israel 7.2%
Italy 46.5%
Japan 43.7%
Kenya 1.5%
Kuwait 11.7%
Lebanon 1.4%
Luxembourg 13.5%
Malaysia 16.7%
Mexico 2.2%
Morocco 13.4%
Netherlands 0.0%
New Zealand 25.1%
Nigeria 1.4%
Norway 3.7%
Oman 27.9%
Pakistan 2.0%
Panama 0.1%
Paraguay 0.6%
Peru 17.0%
Philippines 17.5%
Russia 5.4%
Saudi Arabia 6.7%
Singapore 23.3%
South Africa 47.0%
South Korea 21.5%
Spain 20.2%
Sweden 11.6%
Switzerland 9.1%
Thailand 18.6%
Turkey 0.9%
UK 16.2%
United Arab Emirates 1.1%
Uruguay 4.6%
USA 13.5%
Poland 12.9%
Norway #N/A

Successful implementation of the Council's recommendations will require a strong fiscal framework and renewed public–private partnerships. Historically, Canada's debt-to-GDP ratio has been among the lowest in the G7. In addition, a strong federal balance sheet allowed Canada to have one of the most ambitious fiscal responses globally to the COVID-19 pandemic.Footnote 96

For governments around the world, the pandemic will continue to necessitate spending on urgent public priorities. Similarly, the measures proposed in the Council's action plan will require further investment. Nevertheless, it will be important for Canada to maintain its strong fiscal position over the medium term and to avoid significant increases to our debt-to-GDP ratio.

As our government makes the investments needed to meet the challenges of Canadians, it should also aim to preserve Canada's hard-won fiscal foundations. To do this, some of the larger interventions implemented to support the economy throughout the pandemic should eventually conclude or demonstrate a return on investment over the longer-term (e.g., investments in human, physical and intellectual capital). Similarly, it is important to ensure that any new or expanded support measures do not discourage private sector investment that could be leveraged to spur competitiveness.

In this context, renewed public–private partnerships, through establishing the right frameworks and incentives, are needed to accelerate economic recovery by mobilizing private capital.

Figure 9: Net debt-to-GDP ratio

(2019, % of projected GDP)

Source: Global data from International Monetary Fund, World Economic Outlook Database, 2019; Canadian data from RBC Economics, Canadian Federal and Provincial Fiscal Tables, 2020 and the Fraser Institute, The Growing Debt Burden for Canadians, 2020 (Accessed September 2020)
Text version

This vertical bar graph shows the net debt-to-GDP ratio, as a percentage of the projected GDP, by country.

Country National Provincial

Japan

155%

N/A

Italy

123%

N/A

France

89%

N/A

US

84%

N/A

UK

75%

N/A

Germany

41%

N/A

Canada*

26%

30%

*~80% with COVID-19 response

Maintain a sound and rigorous fiscal framework

Prior to COVID-19, Canada had been experiencing a current account deficit since 2009. Adding to this, the pandemic introduced new fiscal pressures, including an expansion of public debt, heightened demands for social security and health care, and further erosion of the price of Canada's largest export (oil and gas). However, the pandemic is pushing governments around the world to explore and consider important changes to fiscal policy, including the use of new tools to achieve inflation goals, and alternate indicators, such as unemployment rates, to guide fiscal measures.Footnote 97 In the short term, Canada has been able to dynamically and aggressively respond with fiscal policy measures aimed at ensuring that demand does not collapse, while also mitigating some of the impacts on underrepresented groups.

A rigorous fiscal framework is needed to ensure that Canada maintains a strong credit rating and has continued access to low-cost capital. It is more important than ever for Canadian governments to have a medium-to-long term plan to restore public finances, and to communicate effectively with citizens, markets, global trading partners and investors about how they intend to get there.

Throughout this report, we identify measures that will generate significant economic returns for Canada, and we call for these investments to be anchored in a strong and predictable fiscal framework to ensure our country's continued prosperity.

Taking action:
  1. Develop a realistic and predictable plan for economic recovery and reimagination to meet four clear fiscal objectives:
    • Canada remains an acknowledged leader among industrialized countries in the management of public finances and level of debt and deficit.Footnote 98
    • Careful program design ensures that an expansion of public financing does not crowd out private investment in Canada.
    • New spending mostly supports future growth (e.g., investment in human, physical and intellectual capital to improve productive capacity and export potential) rather than simply fueling short-term consumption; outcomes are rigorously tracked and managed.
    • Canada improves the competitiveness of its tax regime.
What we heard
Establish new private sector partnerships

Our go-forward action plan should maximize opportunities to encourage, incentivize and partner with the private sector in order to increase investment. The new economic environment has increased the importance of establishing renewed private-public partnerships in order to multiply public investments with private capital (e.g., prolonged low-interest environment for investors, additional liquidity requirements in hardest-hit sectors, and an unprecedented opportunity to consolidate for well-positioned firms). To accomplish this, Canada should build on its existing strengths, which include leading institutional investors and one of the safest financial systems globally; a proven track record of public–private partnerships delivering large capital projects; and experience attracting capital.

Throughout our engagement sessions, we heard a strong desire to establish renewed private-sector partnerships. We must leverage the resources of the public sector and the know-how of the private sector to advance our industrial and competitive advantages. While we have what it takes to be a global leader in several industries (e.g., clean technology, digital industries, high-value manufacturing, and agri-food), we need to better organize our public and private sector to work together to unlock our economy's full potential. We heard of different ways to increase partnerships, for instance by designing programs to crowd in private capital.

To be a true leader, Canada needs stronger public– private partnerships through which it can align an industrial strategy as a tool to spur growth, innovation and competitiveness. In taking this approach, each stakeholder group is better served than in isolation and Canada is better positioned to leverage its competitive advantages. In some cases, an arm's length organization, with close ties to both our private and public sector, would provide a unique mechanism to unite and implement such a partnership.

One of the lessons learned from Canada's pandemic response is the tremendous amount that can be accomplished by working together. We have seen that when provincial and federal governments work collaboratively, in partnership with the private sector and civil society, Canada can pivot quickly to address emerging challenges. For example, at the onset of the pandemic, when PPE was difficult to source internationally, Canadian businesses stepped up to retool their plants to produce masks, face shields, medical gowns, and other PPE for front-line workers.

Building on this partnership approach will allow us to protect core elements of the economy, and take bold and decisive action to set Canada on a path for future success. Renewed partnerships between business, citizens, and governments will help to reimagine Canada's future economy to be more inclusive and competitive, and will open the doors to new opportunities. The long-lasting relationships created by such partnerships can yield multiple socio-economic benefits long after specific funding agreements expire. The seeds of this collaboration have already been sowed through past collaborative efforts such as the Advisory Council on Growth and the Economic Strategy Tables (ESTs), created in April 2017.

Through the Industry Strategy Council, the Minister of Innovation, Science and Industry asked industry to work collaboratively to assess challenges and forge a path forward together. The relaunch of the ESTs will build a framework for continued partnership in examining sectoral needs, and enabling industry to support the development of government policies that are anchored in mutual understanding and a joint approach. There are also other partnership forums, such as the unique Canadian Automotive Partnership Council, which can be further leveraged.

Taking action:
  1. Collaborate with the private sector to deliver the recommendations and leverage proven approaches, including:
    • Stand up new forums for regular, transparent dialogue on investment opportunities between the Government and Canada's financial ecosystem.
    • Establish a framework for risk-sharing in public–private partnerships that can be adapted for individual projects (e.g., risk-sharing, first loss, mediation).
    • In collaboration with provinces, establish a unified national strategy for attracting global capital into the country while maintaining high standards for corporate governance and disclosure.
    • Provide targeted incentives to de-risk and accelerate investments, and create win-win opportunities for investors to earn appropriate levels of return while helping the economy.
What we heard

4. Conclusion: A call to action to make it real for Canadians

We envision a future Canadian economy that provides health and prosperity for all Canadians. Economic and social recovery from COVID-19 affords us a once-in-a-generation opportunity. A moment of pause, though difficult and imposed upon us, that permits us to reimagine our future. A chance to boldly refocus towards a competitive, inclusive, sustainable and resilient economy. We must not miss this opportunity to build back better. It is for this reason that after our many conversations with Canadians and following vigorous debate amongst Council members, we carefully proposed recommendations to bring this vision to fruition.

The Council hopes the insights and recommendations of this report will inspire action and will meaningfully contribute to the Government's economic and policy agenda.

As they are implemented, our recommendations will have the potential to accelerate growth and drive the efficiencies needed to yield real economic impact. We are confident that our insights will help our country: respond effectively to the sectors in greatest need; double down on our areas of existing strength; and solidify a path to recovery that positions Canada for global success. This will mean taking a short-term and long-term approach to closing output gaps, creating new jobs and managing barriers to growth.

To ensure that the returns can be materialized for Canada, we need the right investments and partnerships leveraged from across the economy. Our country needs new approaches to attracting and incentivizing investment, training people so they are equipped to take on new jobs or roles, leveraging our trade relationships in newly reshaped supply chains, and working with the public sector on program design to maximize benefits for the economy and for Canadians.

As industry leaders, we know that execution counts. For one, our recommendations cannot be actioned in isolation. Canada's governments and private sector must work collaboratively, continuing to build trust and confidence, to implement the actions we outlined. One of Canada's greatest strengths is our solidarity and collaborative spirit, which must be maintained and indeed strengthened in this shifting geopolitical landscape. The foundation for implementation already exists: the Council sought to leverage and adjust existing government programs and the private sector is already making substantial investments to set Canada on the path for growth.

The Council's recommendations reinforce one another, span the mandate of several federal organizations and call for significant public–private partnerships to crowd in private investment to support a true industrial strategy.

Each of the Council's recommendations follow one of the following principles to ensure a prudent fiscal approach with real GDP benefits and private sector investments:

To illustrate the potential returns from the Council's recommendations, preliminary high-level estimates were conducted. Based on this work, it was estimated that with investments of $85 to $115B in Restart and Recover, GDP levels could potentially return to and exceed pre-COVID-19 levels, adding a projected $100 to $155B in the short to medium term.

And, bolder investments of $130 to $170B in actions to Reimagine our economy could add an incremental 0.8-1.1% to Canada's GDP annually. This would potentially increase GDP by an estimated $235 to $310B in 2030.

To reap the full benefits of the action plan, all actors need to be committed, coordinated, and aligned. A strong implementation mechanism is required to effectively deploy the investments and ensure the plan responds to on-the-ground feedback. The Council and the Economic Strategy Tables could contribute to this role.

Furthermore, a plan with that level of ambition calls for a commitment to secure the required investments.

In that context, we believe that one promising option would be to introduce some form of industrial growth fund (an "Industry Growth Fund") that is aligned to support the objectives of the industrial strategy we have recommended herein.

The Industry Growth Fund would need to be sufficiently large to make a difference—somewhere in the initial range of $30 to $35B. The right amount could be higher than this, depending on the country's take-up and capacity to move ahead with a Global Canadian Digital Network (which could be called the Borealis Digital Network) as described in Section 3, under Recommendation C of this report. This is necessary if we really want to see ourselves as leaders against countries doubling down in their areas of strength.

The Industry Growth Fund could consolidate the proposed investments and proposals into one place, especially given the various entities involved. Creating it would permit Canada to reach the right level of resources and direct them to priority actions relating to the four pillars of the industrial strategy (i.e., digital economy, ESG leadership in resources and clean technology, building high-value manufacturing and leveraging our agri-food advantage to feed the world).

Execution is not simple; several approaches are possible. As the goal is to make our recommendations for Canadians come to fruition, the Council is offering options that will stimulate and infuse investment and partnerships in the economy. For instance, leveraging private pension funds could be considered. Alternatively, or additionally, the Government could consider standing up or having an existing Crown corporation manage the fund. A robust implementation mechanism would send a strong signal that the Government is committed to executing the proposed industrial strategy and rally federal organizations to implement it cohesively.

As we have expressed throughout this report, Canada is an exceptional country, whose people have a strong willingness to work with one another and to develop a new solidarity and ambition, with a bold objective to position Canada's small- and medium-sized firms as leaders on the global stage. Canada also has the potential to attract more foreign investment, building on our potential to be global leaders in ESG, particularly in sectors such as clean technology and resources. We are known for our strong cultural foundation built on values of sustainability and strong governance.

Now is the moment to address this crisis and our country's pre-existing challenges laid bare by the pandemic. We need to do this to foster growth of Canada's businesses and generate prosperity and wealth for all Canadians. This is why the Industry Strategy Council and the Economic Strategy Tables are committed to continue to work on the cohesive strategy outlined in this action plan.

We call on our colleagues, our federal and provincial partners, and on all Canadians to work together to bring to life our common aspiration for Canada's future. Together, we will build a digital, sustainable and innovative economy for all Canadians.

Real GDP Impact and Jobs

Our proposed investments would yield multiplier effects throughout the Canadian economy and materialize economic benefits beyond GDP growth. An October 2020 IMF article, Public Investment for the Recovery, stated that "in times of high uncertainty, increasing public investment by 1% of GDP could strengthen confidence in the recovery and boost GDP by 2.7%, private investment by 10%, and employment by 1.2% if investments are of high quality and if existing public and private debt burdens do not weaken the response of the private sector to the stimulus."

The 2016 federal budget stated that, with the right conditions (e.g., when resources in the economy are underutilized and policy interest rate is close to its effective lower bound), government investment is expected to have a larger short-term impact (through fiscal multiplier) as it does not displace private investment. It also assumed that, based on the historical relationship between growth in employment and real GDP in Canada, a 1% increase in real GDP would immediately translate into a 0.2% increase in employment, rising to about 0.6% after eight quarters. For example, at current employment level of 18.5 million, a 0.2% increase would mean 37,000 jobs for the first year and a 0.6% increase after two years would mean an average of 55,000 jobs per year.

There are different approaches to estimating job creation but regardless there is a level of return that comes with public–private investment, particularly during times of crisis. We have provided a level of potential GDP return associated with investment amounts that serve as an illustration of the possible economic growth.

Setting aside these estimates, the Speech from the Throne, noted that our recovery will require one million new jobs to bring Canadian employment back to pre-COVID-19 levels. Our proposed investments can help the Government achieve that mission.

Figure 10: Illustrative effect of recommendations on GDP

(2019 to 2030, Q4 = 100)

Source: Historical growth rate based on Statistics Canada data, Table: 36-10-0104-01(Accessed July 2020); Projected GDP and illustrative impact of recommendations based on McKinsey analysis for Council.
Text version

The line graph illustrates potential effects of Council recommendations on GDP. The horizontal axis lists a year range from 2019-2030. The vertical access represents GDP indexed to the fourth quarter (Q4=100) in 2019, and includes a line drawn horizontally across the middle of the graph at 100.

There are three lines. The first line extrapolates the historical growth rate of 1.97% at a constant rate.  The line rises steadily from the middle of the vertical axis to the top right corner of the graph. The second line represents projected GDP based on a scenario 1 type recovery. The line illustrates the impact of the pandemic on the economy, whereby there is a sharp drop in GDP over the next year, followed by a several year period where GDP would remain low.  The line plateau's and then rises steadily eventually mirroring a similar but slightly lower projection then the historical growth rate.

The third line illustrates the impact the Council's recommendations could have on the economy. There are three inflection points along this line noting the three phases of recommendations. The line follows a similar path downward but stops earlier then the second line. Rather then plateauing, the line shoots upward for Restart and Recovery ($100-155B), with an incremental increase of 0.8 to 11% for the Reimagine measures.

5. Feature section: Deep sectoral insights

Canada's sectoral pain points and opportunities

Part of what makes up Canada's diverse economy is a sophisticated level of activity across a variety of sectors. As Council members, who work in some of those sectors, we have experienced first-hand the pain points facing our economic portfolio of sectors and have noted the importance of addressing these as part of our recovery and growth.

In our recommendations, we call for urgent action to stabilize the hardest-hit sectors and protect their long-term prosperity: aerospace, aviation, tourism and hospitality, retail and resources. With deep sectoral insight and evidence, we developed our recommendations to also target the less affected sectors where we can accelerate recovery and double-down on growth opportunities: advanced manufacturing, agri-food, health/bio-sciences, clean technology and digital industries. This section shares those detailed insights on Canada's sectoral pain points and opportunities for action for the sectors in the following order: resources of the future, advanced manufacturing, retail, tour- ism and hospitality, transportation, agri-food, clean technology, digital industries, and health/bio-sciences.

Figure 11: Share of Canadian GDP by sector

(2019, GDP in dollars as %, employment in number of people as %)

Source: Statistics Canada, Tables: 36-10-0434-02 and 14-10-0023-01 (Accessed July 2020)
Text version
Sector Share of GDP (%) Share of employment (%)

Resources of the future

11.5%

4.7%

Advanced manufacturing

10.1%

9.0%

Retail

5.2%

13.0%

Tourism

4.9%

12.0%

Transportation

4.0%

4.5%

Agri-food

3.5%

2.7%

Clean technology

2.9%

1.2%

Digital industries

2.9%

2.9%

Health/bio sciences

1.8%

3.0%

Resources of the Future

The resource sector is the largest capital expenditure contributor in Canada at 31%, with the highest economic multiplier effect to the economy, representing almost 11.5% of GDP. It is also the leading contributor to Canada's trade, mainly driven by crude oil, accounting for around 40% of exports, or approximately $250B, in 2019.Footnote 100

The sector provides important social contributions to Canada. Over 900 communities were economically reliant on at least one natural resource sector (including $3.3B spent by oil and gas companies alone on procurement from Indigenous-owned companies).Footnote 101 The mining sector is the second-largest private sector employer of Indigenous Canadians.Footnote 102 The forestry sector builds roads to support travel in remote communities, and develops harvesting plans informed by engagement with Indigenous peoples. All resource sectors are a driver of economic development in northern and remote communities, providing business, employment, training, procurement, and infrastructure development.

Canada's resource sector prides itself on its environmental leadership. Canada's mining sector is a leading producer of many minerals required for clean technology development. Indeed, Canada is the 5th largest producer of nickel (with an even stronger presence in Class 1 nickel),Footnote 103 which is an essential component of nickel-cadmium batteries in EVs, and the 2nd largest producer of uranium, a key ingredient for nuclear reactors.Footnote 104 Actors in Canada's oil and gas industry own two of the world's five CCUS projects, and the sector has enormous ability to increase the application of these processes while significantly reducing Canada's GHG emissions. Accelerated environmental, social and governance pressures from capital markets and investors are creating an opportunity for Canada's resource sector to provide the most responsible and sustainably-produced resources in the world.

Figure 12: Canadian exports by commodity

(2019, $ millions and %)

Source: Statistics Canada, Table 12-10-0012-01 (Accessed October 2020)
Text version
Canadian exports by commodity, 2019 ($ millions, %)
Resource exports (energy products, forestry products, metals and ores)

42% of total exports

250,627 ($, millions)

All other exports (consumer good, aircrafts, industrial machinery)

58% of total exports

342,543 ($, millions)

Total Exports

100%

593,171 ($, millions)

It has been a tremendous pleasure to work alongside such accomplished leaders from across various Canadian Industries to talk about how to recover from COVID and chart the path forward for the country. From the resources sector, we are excited about the potential to help Canada recover quickly and for us to demonstrate Canadian values of inclusion, the rule of law, human rights, Indigenous engagement and environmental stewardship to bring our resources, innovation and clean technology to the globe and make the world a better place for all.

Council member Mark Little, President and CEO, Suncor Energy Inc.
Sectoral pain points:
Oil and gas:
Basic materials and mining:
Forestry:
Taking action:
What we heard

Advanced Manufacturing

Canada has historic areas of strength in manufacturing—automotive, aerospace, food, and machinery manufacturing. Sectors such as aerospace have even been a point of national pride. Together these sectors are important to economic factors like R&D activity and exports. Since the early 2000s, however, some manufacturing sub-sectors have been declining in terms of GDP contribution (from approximately 16% to around 10%)Footnote 108 and employment levels. The impact of the pandemic has been mixed but significant. Overall, sector exports and GDP contribution fell by over 30%.Footnote 109 In terms of the sub-sectors, automotive, aerospace and machinery faced an especially negative impact. Since the onset of the pandemic, aerospace saw no new orders and recovery is expected to take three to five years. Food and chemical manufacturers were comparatively less affected and are recovering to levels of GDP contribution similar to those in 2019.

Building back better… leveraging almost 200 years of Canadian manufacturing success in building products to advance society, the economy and our quality of life. This next chapter will produce (build) the products that Canada and the world need for a more sustainable and prosperous future by focusing our efforts on driving innovation, leveraging digitization while balancing the need for workforce diversity and the environment. Building back better in Canadian manufacturing will continue to advance society, the economy and our quality of life.

Council member: Rhonda Barnet, President & COO, AVIT Manufacturing
Sectoral pain points:

As of 2018, Canada's robot density in manufacturing was 13th ranked globally—less than ¼ the density of the leading nation, South Korea. Additionally, investment in innovation has been approximately 30 to 40% of competing nations such as France and USA in the R&D intensive industry of aerospace.Footnote 111

Figure 13: Manufacturing productivity as GDP per hour worked

(1995-2017, % and index relative to 1995)

Source: OECD, GDP per hour worked, 2017 (Accessed July 2020)
Text version

The line graph shows manufacturing productivity as GDP per hour worked, indexed to 1995 levels (1995 = 100), for Canada and globally.  The horizontal axis is labeled year and lists the years from 1995 – 2017. The vertical axis lists the index from 80 to 220.  The line for manufacturing productivity in Canada shows slight increases and decreases over this period, with an overall slight rise in productivity.  By contrast, while global manufacturing productivity also experienced slight drops over this period, the line shows that overall growth has been significantly greater.  The graph also includes the percentage increase between 1995 and 2017, with Canada's manufacturing productivity increasing 1.3% as compared to the global increase of 3.4%.

Figure 14: Share of manufacturing employment, job losses and rehires
Sources: Statistics Canada. Table 33-10-0232-01; Statistics Canada table 14-10-0022-01 (Accessed June 2020)
Text version

The graph illustrates female and male share of manufacturing in: employment, job losses and rehires. The graph includes three bars, each bar is stacked with the share of females illustrated in dark blue and males in light blue.

Share of manufacturing employment, job losses and rehires Total

Share of manufacturing employment (2020, %)

Female – 29.6%

Male – 70.4%

~$1.8 million

Share of manufacturing job losses (2020, %)

Female – 38%

Male – 62%

~$300,000

Share of manufacturing rehires (2020, %)

Female – 15%

Male - 85%

~$79,100

Figure 15: Overview of Canada's aerospace sector
Source: ISED, State of Canada's Aerospace Industry, 2019; Press search (Accessed July 2020); Expert interviews conducted by ISC
Text version
Breakdown of Canadian aerospace sector (2019, % of revenue)
Subsector % of revenue

Aeroengines

36%

Airplanes, rotocraft, and spacecraft

33%

Other components

11%

Avionics

9%

Landing gear

6%

Simulators

5%

Segment Example company Implications from pandemic

OEM / Tier 1 – Non Canadian ownership

Thales

Pratt & Whitney

Airbus

Safran

Foreign investment reduction and manufacturer rationalization:

  • OEMs see more upside in domestic investments
  • Accelerated by Canadian inaction relative to competing nations (e.g., France's €15B aerospace plan)

OEM / Tier 1 – Canadian ownership

Bombardier

Heroux Devtek

CAE

Substantially weakened financial position, leading to job losses:

  • Some Canadian OEMs and Tier Is entered the pandemic in financial distress
  • Divestitures and job cuts already occurring with more planned

Tier II / III

Shimco

Exact Earth

Centra

Consolidation and loss of domestic ownership is a risk to this segment

  • Canada's tier II / IIIs are more fragmented than in other regions
  • Fragmentation has put more small firms at risk of financial distress, with few potential Canadian acquirers

OEM: Original Equipment Manufacturer

Taking action:
What we heard:

Retail

Retail is one of the major sectors of the Canadian economy (5.2% of GDP, 13% of employment), which employs more women, youth and new Canadians than any other sector.Footnote 113 Before COVID-19, discretionary retailers (e.g., department stores, apparel, etc.) were losing market share to large e-commerce players. With COVID-19, discretionary retailers have been among the hardest hit. On the other hand, non-discretionary retailers saw their sales increase during the early stages of the pandemic, as households stockpiled essential goods and shifted to more at-home dining.

The latest sales figures show the share of e-commerce in retail sales has increased to record levels as COVID-19 shutdowns drove Canadians to make an increased number of their purchases online.Footnote 114 Other key forces affecting the sector include the fall in consumer confidence; store closures; erosion of profit margins due to higher costs to comply with new health and safety standards; the shift to digital sales; labour shortages due to disincentives to return to work; and inventory disruptions, partly as a result of border closures and availability of credit. 

Discretionary retail has been particularly hard hit by the pandemic significantly impacting the livelihoods of many Canadians particularly women, youth, minorities and new Canadians. Rebuilding the sector is critical to both employment and the economy and requires action to ensure we restore consumer confidence, invest in e-commerce and have targeted programs in place to support businesses over the short to medium term with liquidity, credit and rent payments.

Council member: Paviter Binnning, President, Wittington Investments Limited
Figure 16: Retail GDP by sub-sector

(2019, % of GDP contribution)

Source: Statistics Canada, Table 36-10-0434-04 (Accessed July 2020)
Text version

Discretionary – 48%

  • Motor vehicles 15%
  • Apparel 8%
  • Building and outdoor supplies 8%
  • Furniture 5%
  • Electronics 4%
  • Sport and entertainment 3%
  • Miscellaneous store retailers 5%

Non-discretionary – 52%

  • Food and beverages 19%
  • Health and cosmetics 12%
  • General merchandise 11%
  • Gas stations 5%
  • Non-store retail 5%
Sectoral pain points:
Taking action:
What we heard

Tourism and Hospitality

The tourism and hospitality sector was experiencing year-over-year growth prior to COVID-19. Responsible for 4.9% of Canada's GDP, it provided more than $25B in tax revenues and employed around 13% of Canadians, dispersed widely among urban and rural communities across Canada.Footnote 116

Its presence in key regions outweighed the impact of several other major industries. The sector's activities have typically conferred significant social benefits, such as regional development, urban revitalization and resilient employment.

The tourism and hospitality sector has also been a driver of inclusivity, with greater ownership of SMEs by women, Indigenous peoples, and visible minorities compared to other sectors.

The COVID-19 crisis has almost completely decimated anchor attractions that were the lifeblood of their communities' tourism and hospitality industries, such as the amusement, gambling and recreation industries, museums, historical sites, hotels and accommodations, food services and drinking places. Some of these establishments, like restaurants, are cornerstones in our communities, both economically and culturally. Many Canadians also get their first job in the industry, pay for college, or make a career there.

While federal programming efforts in tourism have typically lagged behind support for other rural sectors (e.g., agriculture), the sector will need support to revive domestic demand. Other opportunities for growth will depend on increasing attraction to adventure tourism. Canada has a global brand and reputation as a top nature-based destination, benefiting from more than 100 world-class attractions (e.g., Garibaldi Park, BC; Prince Albert Park, SK; Drumheller, AB; Eastern Townships and la Gaspésie, QC; Auyuittuq Park, NU).

Figure 17: Tourism contributions to government revenue

(2014 - 2016, $ and billions)

Source: Statistics Canada, Table 36-10-0434-04 (Accessed July 2020)
Text version
Contribution of tourism sector to government revenue
Categories 2014 ($ billions) 2015 ($ billions) 2016 ($ billions)

Domestic tourists

18.6

19.1

19.4

Foreign tourists

5.4

5.6

6.1

Total

24.1

24.7

25.5

Tourism contribution to government revenue
Categories 2014 ($ billions) 2015 ($ billions) 2016 ($ billions)

Municipal/Aboriginal

1.3

1.4

1.4

Provincial

11.9

12.3

12.7

Federal

10.9

11.1

11.3

Total

24.1

24.8

25.4

Figure 18: Provincial/territorial share of GDP by sector

(2017, % share of GDP by sector)

Sources: Statistics Canada, Table 36-10-0402-01; Statistics Canada, Canadian Tourism Satellite Account, 2015 (Accessed July, 2020)
Text version
Sector Province/Territory Provincial/Territorial share of GDP (%)

Finance and insurance

Ontario & Quebec

80%

Oil and gas extraction

Alberta

90%

Retail trade

Ontario & Quebec

60%

Tourism

British Columbia

Alberta

Ontario

Quebec

20%

20%

30%

20%

Figure 19: Provincial/territorial tourism employment and share of Canadian tourism

(2015, Provincial/territorial share of Canadian tourism employment as % / Provincial employment from tourism as %)

Sources: Statistics Canada, Canadian Tourism Satellite Account, 2015; Statistics Canada, Provincial-territorial human resource module of the Tourism Satellite Account, 2015 (Accessed July, 2020)
Text version
Provincial/territorial share of Canadian tourism employment, %
Province Share of tourism employment (%)

Ontario

36%

Quebec

21%

British Columbia

17%

Alberta

13%

Atlantic

6%

Prairies

6%

Territories

0%

National

100%

Provincial/territorial employment from tourism %, 2015
Province Share of tourism employment (%)

Ontario

9.3%

Quebec

9.2%

British Columbia

13.2%

Alberta

9.4%

Atlantic

9%

Prairies

8.9%

Territories

10.3%

National

9.7% 

As an extremely important sector that makes up approximately 10% of Canadian jobs, tourism and hospitality was hit first and hit hardest by the pandemic. 2019 was a record-breaking year for Canadian tourism and success was felt across the country, but 2020 has brought unemployment and, along with it, a difficult path back to our earlier success. As a key part of the fabric of our country, we know we can rebuild our world-class sector to once again help carry Canada's brand to a global audience.

Council member: Ben Cowan-Dewar, Co-founder and CEO, Cabot Links
Sectoral pain points:
Taking action:
What we heard

Transportation

Transportation plays a key role in the Canadian economy, accounting for approximately 4% of GDP and 4.5% of employment.Footnote 119 While freight is the largest sub-sector of transport, air travel is critical to the economy, especially for a country such as Canada with its dispersed geography.

The transportation sector experienced one of the most severe shocks and will take the longest to recover (recovery not expected before 2024) with air travel and transit more impacted than freight-reliant sectors. Air travel, a sector that is critical to the economy, has seen an approximate 50% drop in GDP in 2020. Footnote 120 Accordingly, governments around the world have announced significant fiscal stimulus measures.

Figure 20: Fiscal stimulus measures by peer governments for air travel
Source: Government press releases, press searches, 2020 (Accessed September 2020)
Text version
Italy

Nationalize Alitalia

Netherlands

90% of KLM payroll covered by gov't for 3 months

United States

$32B in grants for airlines + cargo carriers, contingent on companies maintaining >90% of payroll

New Zealand

$510M loan in two tranches at interest rate of ~7%

United States

$29B in loans for airlines and cargo carriers

Australia

$715M in fee waivers, including $159M in reimbursements for fees paid in 2020

Netherlands

Reduced corporate and capital gains taxes

European Union

Allowing airlines to issue vouchers with passenger consent

European Union

Four month suspension of 'use it or lose it' slot rules

Hong Kong

2/3 of Hong Kong's $129M package is in waivers for air traffic control charges for 2019-2020 fiscal year

South Korea

Airport landing, parking and facility fees deferred

Sectoral pain points:

COVID-19 has both introduced new and highlighted existing pain points in the transportation sector:

The situation we are going through calls upon all our abilities to innovate, work together and create a new sustainable environment conducive to a growth-enhancing economic recovery. The hard-hit transportation sector is mission-critical to all economic sectors. With the right support, it will once again prove its role as a leading economic catalyst. I am proud to carry the transportation industry's message.

Council member: Sylvie Vachon, President and CEO, Montreal Port Authority
Figure 21: Air passenger confidence

(May 2020, % of respondents)

Source: McKinsey & Company Report, "Make it better, not just safer: The opportunity to reinvent travel", June 15, 2020 (Accessed July, 2020)
Text version

Air passengers are anxious about waiting around at the airport, clearing customs and boarding. Of North American travellers, 85% are anxious about taking flights.

Traveller anxiety levels across the journey
Stage of journey Activity Anxiety level Colour

Pre-travel

Exploring & booking

10%

Grey

At airport

Arrival, check in & security check

30%

Orange

 

Waiting/using services at the airport

75%

Orange

In flight

Boarding & In-flight experience

90%

Red

At destination

Arrival/customs

75%

Orange

Taking action:
What we heard

Agri-Food

Agri-food is a key sector of the Canadian economy (3.5% of GDP, 2.7% of employment).Footnote 123 It is a life-line of nourishment but also an important driver of economic growth and trade surplus. Canada could offset losses from other sectors by doubling down in agri-food, which has been one of the industries least affected by the pandemic (GDP contribution rose 2% in June). Furthermore, with strategic digital investments and technology adoption, the sector would be well positioned to leverage efficiencies in production, improve traceability and trust amongst Canadians, and enhance food safety.

However, this sector has had to deal with new challenges, including the fact that ensuring the safety of employees and consumers now requires more time and resources; increased shipping costs and times; and shifts in demand that require repositioning traditional production and delivery models. The sector also continues to face increased labour shortages and other pre-pandemic pain points.

The world's shortage of fresh water and arable land presents an opportunity for Canada to lead the efforts to feed the growing world population and the consumer of the future. Our sustainable agriculture, when powered by our efforts to digitize and produce value added food, fuel and fibre from our commodities will be a compelling growth driver of the New Canadian Economy.

Council member Murad Al-Katib, President and CEO, AGT Food and Ingredients
Figure 22: Agri-food GDP by sub-sector

(2019, % of GDP contribution)

Source: Statistics Canada, Table 36-10-0434-04 (Accessed August, 2020)
Text version

Food production – 51%

  • Crop production 41%
  • Animal production 8%
  • Fishing & hunting 2%

Food manufacturing – 40%

  • Meat 8%
  • Bakeries 7%
  • Dairy 4%
  • Grain & oilseed 3%
  • Sugar & confectionary 3%
  • Fruit & vegetables 3%
  • Animal food 2%
  • Seafood 2%
  • Other 7%

Beverage and manufacturing – 10%

  • Breweries 5%
  • Soft drink & ice 3%
  • Wineries & distilleries 2%
Sectoral pain points:
Taking action:
What we heard

Clean Technology

Canada's clean technology industry is united around shared sectoral interests, with an active ecosystem of companies, universities, clusters, incubators, accelerators, and industry associations. Comprising about 800 firms and representing approximately 3% of GDP,Footnote 126 the sector includes a diverse set of technologies at varying maturity levels and with cross-sectoral uses related to energy, water, agriculture, forestry, waste management, biodiversity, minerals, and adapted goods, such as energy efficient equipment and sustainable mobility.

Clean technology is also an enabler of economic growth, environmental performance, and long-term competitiveness across sectors. It can contribute to reconciliation and equality through economic development, job creation, and climate resilience in Indigenous and remote communities. A vision for made-in-Canada clean technology that goes beyond innovation but that is specific to commercial success, economic impact, job creation, and contribution to climate goals, may enable a new conversation on energy, the environment, and the economy on common ground versus current polarization.

Canada has growing competitive advantages in clean technologies, such as hydrogen production, water technologies, renewable energy smart grids, batteries and energy storage, waste management, CCUS, SMRs, and sustainable transportation.Footnote 127 Though largely dependent on the US, Canadian clean technology exports have grown significantly since 2016.Footnote 128 The expected and rapid growth of global markets for clean technology will create new industries and value chains where Canada could compete by leveraging its unique strengths. To realize these benefits, challenges with the innovation landscape must be addressed as we position this sector for accelerated growth.

Figure 23: Technology areas within clean tech sub-sectors

(March 2019, # of technology areas in each sub-sector)

Source: Statistics Canada, Catalogue no. 16-511-X, Clean technologies and the Survey of Environmental Goods and Services: A technical reference guide, March 2019 (Accessed July, 2020)
Text version
Clean tech sub-sectors as per Statistics Canada taxonomy Number of technology areas

Environmental protection activities (protection of air and climate, waste treatment and management, protection and remediation of soil, sediment and water)

99

Sustainable resource activities

-Energy (alternative fuels, renewable electricity, heat, smart grid & energy storage (CCUS and SMRs))

147

-Water (reduction of water use, water management and recycling)

15

-Agriculture, forestry and biodiversity (agriculture, aquaculture, wild flora and fauna, forestry)

22

-Minerals (green mining, substitutes to mineral-based materials)

7

-Adapted goods (energy efficient equipment, sustainable mobility)

42

Achieving Canada's net-zero future by 2050 requires a focused industrial strategy that accelerates innovation timelines and drives the rapid commercialization of clean technology across all sectors of our economy. Canada has the skills and the ambition to lead the world in achieving a low-carbon future but the work to deploy and scale made-in Canada clean technology and grow and retain the clean technology companies of the future must happen now.

Council member: Karen Hamberg, Vice President of External Affairs and Sustainability, Westport Fuel Systems INC.
Sectoral pain points:
Taking action:
What we heard

Digital Industries

The sector is defined quite broadly to include firms that manufacture digital products, deliver services related to digital tools, operate with a digital operating model (i.e., digital natives), and support digitization of incumbent industries. When these firm types are included, the sector represents 2.9% of Canada's GDP and 1% of employment (excluding telecommunications firms).Footnote 130 The pandemic has had mixed impacts on digital industries. There are digital companies in hard-hit sectors like retail and air transportation that have seen major negative impacts, while other digital providers remained relatively steady with a small positive impact. Companies with a digital operating model have generally thrived both domestically and globally.

Digital technologies (AI, cloud computing, big data, IoT, blockchain, 3D printing, robotics) were already transforming life, business and government pre-COVID-19. The pandemic has accelerated the pace at which these technologies will be adapted because of the additional benefits they can provide during the crisis. COVID-19 has accelerated the shift to digital by 3 to 7 years,Footnote 131 dramatically increasing the use of digital tools for work, education, health care, thus creating new opportunities for digital natives. Those digital companies entering the pandemic with scale have been better able to capitalize on market opportunities. Governments around the world are developing policies and infrastructure to capitalize on digital investments and advance new technologies in support of productivity and innovation.

Outside of the digital sector, Canadian industries have significant room to enhance their digital posture. Canadian firms have typically underinvested compared to other OECD countries in technology adoption, and as a result, Canada's productivity from key sectors such as manufacturing and natural resources is lagging behind US firms in the same sector.

The World Economic Forum (WEF) has suggested that, for governments looking to drive economic recovery following the pandemic, supporting digital competitiveness will be key in the intangibles economy.Footnote 132 Digital firms require different policies and regulations to encourage investment given that digital business models differ from traditional brick-and-mortar businesses. Such measures could include data protection and data sovereignty, digital infrastructure, as well as other policies that encourage digital technology development. Improving these measures not only supports the growth of domestic firms, it is also key to attracting foreign direct investment (FDI) from digital firms.

Over the next decade, digitization is expected to transform the economy and the way businesses operate. As a result, businesses will look for help to adopt digital technologies and ensure they have the financial resources and skill sets to support it.

We are at a crossroads—in the next four years most of our world's economy will be captured by digital or by digitally transformed enterprises. We will either miss that opportunity and simply be digital consumers, or we can invest now and become the trusted builders of world-leading digital companies. This is a defining moment for Canada and for the future prosperity of Canadians.

Council member: John Baker, President and CEO, D2L Corporation
Figure 24: Digitization index for Canadian sectors

(2018, degree of digitization)

Sources: IHS Global Insights, 2018; World Economic Forum, The Global Information Technology Report, 2015 (Accessed July 2020)
Text version
Sector Sectoral Relative Digitization Index

Utilities

(Green) Relatively high digitization

Finance and insurance

(Green) Relatively high digitization

ICT Sector

(Green) Relatively high digitization

Agriculture

(Yellow) Medium-high

Government and otherFootnote *

(Yellow) Medium-high

Transportation and warehousing

(Orange) Medium-low

Wholesale and retail

(Orange) Medium-low

ManufacturingFootnote **

(Orange) Medium-low

Educational Services

(Orange) Medium-low

Health care

(Orange) Medium-low

Arts, entertainment & rec

(Red) Relatively low digitization

Professional and business services

(Red) Relatively low digitization

Natural resourcesFootnote **

(Red) Relatively low digitization

Accommodation and food services

(Red) Relatively low digitization

High cost and perceived lack of necessity for continued operations cited as largest roadblocks to adoption

Sectoral pain points:
Taking Action:
What we heard

Health/Bio-sciences

The Health/Bio-sciences sector is one of the fastest growing industries in the Canadian economy (1.8% of GDP, 3% of employment).Footnote 135 The sector comprises businesses that operate in scientific R&D and commercialization in biotechnology, medical technology and digital/AI health technologies. A sustained increase in investments in Canadian biotech and med-tech firms in recent years, speaks to the growing momentum behind the innovation in the sector. As a result of some of that capacity, several Canadian teams are leading vaccine research efforts as government and private sector players globally have been mobilizing to fund and research COVID-19 treatments and vaccines.

The Health/Bio-sciences sector is expected to be affected by a range of demand and supply forces triggered by COVID-19. Since the start of the pandemic, there has been a surge in demand for critical medical products, devices and essential drugs. The pandemic revealed limitations in pharmaceutical supply chains as the world's main suppliers imposed slowdowns and export restrictions in China and India. Governments have had to consider a range of measures for reshoring and stockpiling, including retooling of Canada's manufacturing supply chains to produce high-demand PPE and devices.

COVID-19 also triggered an interruption in elective procedures, medical care appointments and clinical trials, which led to a drop in new prescriptions and medical device orders. Medical equipment manufacturers, as well as wholesalers of pharmaceutical and personal goods, were in turn impacted by the effects of the pandemic on the health care system. Pent-up demand is likely to drive a quick recovery as economic activity resumes and consumer confidence returns. To respond to these supply bottlenecks, the Government scaled up domestic procurement and manufacturing efforts, while Health Canada expedited the authorization of high-demand products through interim COVID-19 measures. These measures have created an opportunity to build on lessons learned. COVID-19 has highlighted the importance of a modern and agile regulatory system. As two examples, in response to the pandemic, the Government of Canada allowed temporary regulatory agility for accepting internationally recognized specifications for PPE, as well as regulatory agility and guidance on how clinical trials are conducted.

The impact of bio-science innovation on human health and well-being, and its impact on human economic well-being will grow exponentially during the course of this century. Canada is well positioned through its demonstrated strengths in science, discovery, innovation, entrepreneurship, and a well-educated, diverse and talented workforce to turn this opportunity into an innovation-driven economic engine. This is Canada's time, to unleash the best of our intellect, our competitive advantage and to mobilize innovation in every sector of our economy; building bold and better will secure a sustainable future for Canada.

Council member: Karimah Es Sabar, CEO and Partner, Quark Venture LP
Sectoral pain points:
Taking action:
What We Have Heard

Glossary

AI
Artificial intelligence
B2B
Business-to-business
B2G
Business-to-government
BCAP
Business Credit Availability Program
BDC
Business Development Bank of Canada
CCUS
Carbon capture, utilization, and storage
CEBA
Canada Emergency Business Account
CERB
Canada Emergency Response Benefit
CEWS
Canada Emergency Wage Subsidy
EDC
Export Development Canada
EI
Employment insurance
ESG
Environmental, social, and governance
EST
Economic Strategy Tables
EV
Electric vehicle
FCC
Farm Credit Canada
FDI
Foreign direct investment
FTE
Full-time equivalent
GHG
Greenhouse gas
ICT
Information and communications technology
IP
Intellectual property
IRAP
Industrial Research Assistance Program
LEEFF
Large Employer Emergency Financing Facility
LNG
Liquified natural gas
MNC
Multinational corporation
PPE
Personal protective equipment
R&D
Research and Development
RDA
Regional Development Agency
SDTC
Sustainable Development Technology Canada
SIF
Strategic Innovation Fund
SME
Small to medium enterprises
SMR
Small modular reactor
SR&ED
Scientific Research and Experimental Development
TFW
Temporary Foreign Worker
VC
Venture capital
VCCI
Venture Capital Catalyst Initiative
WEF
World Economic Forum

Annex A: Summary of the Council's recommendations

Text version

This image illustrates the Council's framework for action. The framework includes recommendations to help restart, recover and reimagine Canada's economy for long-term success.

The recommendations under restart are aimed at safely restoring confidence and commerce. This includes boosting the confidence of Canadian businesses and consumers to navigate the new normal and adjust the economic response plan to better support a safe reopening of the economy and secure the hardest-hit sectors through targeted measures for airlines, airports and aerospace, resources of the future and tourism, hospitality and culture.

The recommendations under recover are aimed at setting a trajectory for inclusive growth. These recommendations will reignite growth by doubling down on a future-oriented investment plan. Specifically, these recommendations address diversity, talent and workforce innovation; the innovation ecosystem and R&D funding; access to capital to accelerate growth of Canadian firms; strategic infrastructure (digital and physical); agile regulation; and, strategic use of procurement.

The recommendations under reimagine Canada needs an industrial strategy with four key pillars for a digital, sustainable, and innovative economy for all Canadians. The recommendations focus on becoming a digital and data-driven economy; being the ESG world leader in resources, clean energy, and clean technology; building innovative and high-value manufacturing where we can lead globally; and, leveraging our agri-food advantage to feed the planet.

Across the three pillars of restart, recover and reimagine, the Council recommends establishing renewed public-private sector partnerships and investments anchored in a sound and rigorous fiscal framework.

These recommendations are supported by deep sectoral insights and recommendations, informed by data-driven analysis, as given in the Feature section of this report. In turn, these sector-specific insights help inform the overall recommendations around economic restart, recovery and reimagining and the over-arching recommendations.

The recommendations and sector-specific insights and detailed recommendations are informed by the foundational insights from industry consultations and broad stakeholder engagement. These can be found in the Annex B, C, and D.

Recommendation A: Boost the confidence of Canadian businesses and consumers to navigate the new normal and adjust the economic response plan to better support a safe reopening of the economy

  1. Further strengthen coordination and best practices with the provinces and territories and advance a risk management approach, recognizing that COVID-19 will be with us for some time (e.g., a coordinated approach to reopen borders based on sound risk management principles, launching pilot projects to test innovative approaches to risk management).
  2. Fully engage the private sector to ensure public health measures and innovation are in place to support a safe restart (e.g., partner with industry consortia to increase viral testing capacity and decrease time to results, expand contact tracing to accelerate economic activity and eventually roll out vaccination at scale).
  3. Develop, in collaboration with Canadian financial institutions and federal financial Crown corporations, mechanisms to facilitate restructuring and refinancing for otherwise profitable firms that face extended recovery periods, allowing business to emerge with more sustainable business models.
  4. Further encourage workforce participation and smarter reskilling as emergency programs are phased out, building on recently announced changes (e.g., complement the transition from CERB to EI with innovation skills programming to reskill disrupted workers—women and racialized Canadians in particular—and revisit structure of EI training model).
  5. Leverage and promote the "Canada" brand domestically and internationally, emphasizing value addition and innovation (e.g., encourage local spending and support for local businesses, launch public health messaging campaigns abroad to instill confidence in potential international students).

Recommendation B: Stabilize and secure the hardest-hit sectors through targeted measures

Airlines, airports, and aerospace

  1. Provide longer-term support (e.g., until return to pre-COVID-19 levels of activity) to allow firms that are particularly impacted or of national strategic interest to meet fixed costs and allow for greening of fleets in line with other competitive jurisdictions (complementary and/or in replacement of existing programs).
  2. Accelerate restart of domestic and international travel by adopting innovative ways to manage risks and rebuild confidence (e.g., rapid testing for international visitors from low-risk jurisdictions with significantly reduced quarantine times).

Resources of the Future

  1. Provide additional incentives for upstream operators to sustain long-term viable operations and to reignite their capital expenditures with consideration to long-term ESG/resource objectives and ensure existing business credit programs provide bridge funding to long-term viable producers and service operators until investments resume.

Tourism, hospitality, and culture

  1. Provide patient capital to allow anchor firms with high brand-value and a long term business model (who have challenges accessing capital) to weather subdued demand and overcapacity in the medium term, particularly where smaller communities are disproportionately impacted.
  2. Collaborate with the private sector to ensure sufficient restructuring and transformation funding is available—crowding in private capital at attractive rates and ensuring that entrepreneurs have the opportunity to transform their businesses in the wake of COVID-19.

Recommendation C: Reignite growth by doubling down on a future-oriented investment plan

Diversity, talent, and workforce innovation

  1. Expand scope and increase funding of reskilling programs in partnership with provinces and territories to drive smarter digital learning models and infrastructure for future demands (e.g., supporting upskilling and reskilling to fill labour gaps).
  2. Capitalize on the opportunity to retain and attract highly skilled global talent, particularly in digital and data areas, as other countries close/ reduce access to work permits (e.g., retain recent STEM graduates, displaced H-1B visa holders, assist job placement for accompanying spouses).
  3. Develop a National Workforce Innovation Strategy to develop a system of lifelong learning that is aligned with commercial needs, ensuring graduates are well positioned for jobs of the future, while closing the gender gap and advancing inclusion and diversity in the workforce (e.g., skills needed for Manufacturing 4.0, internships and dual programs, micro-credentials, and flexibility with online learning).

Innovation ecosystem and R&D funding

  1. De-risk and encourage industries to digitize, automate, and drive productivity for SMEs and upper-middle companies (e.g., build on technology access centres; explore giving superclusters a mandate on technology adoption with increased focus on upper middle companies; incentivize the private sector to invest in intangible assets and technology such as Manufacturing 4.0; improve digital adoption and service delivery within health care and education with an acute demand post-COVID-19; invest in software infrastructure projects).
  2. Continue to strengthen Canada's Digital Charter and IP Strategy, and build a modern digital regulatory system to better manage, safeguard—which includes added enforcement capabilities to reduce data infringement—and commercialize our assets (e.g., guidelines on drone use, IP education, IP filing costs for SR&ED-eligible Canadian companies, micro patent pools).
  3. Recapitalize, expand, and modernize key government programs to stimulate immediate and longer-term private investments in innovation and R&D (e.g., the Strategic Innovation Fund (SIF), Sustainable Development Technology Canada (SDTC), SR&ED, incorporate technology adoption into the IRAP mandate).

Access to capital to accelerate growth of Canadian firms

  1. Consider an expanded role for the financial Crown corporations—BDC, EDC and FCC— to support the relaunch of the economy in partnership with the private sector and in alignment with the overarching strategy to boost productivity and innovation:
    • Direct the financial Crown Corporations to move up the risk curve and to provide significant additional growth and scale-up capital to Canadian businesses.
    • Establish new special purpose funds to support business scale-up, including financing of the larger venture capital (VC) rounds that have proven elusive in Canada.
    • Direct these institutions to increase support to Canada's larger and most competitive businesses to help them "own the podium" (e.g., R&D investment in digital product innovation, investment to adopt latest technologies).
    • Cultivate sector-specific capabilities through strategic areas aligned with key industrial strategy priorities.
  2. Ensure capital gaps (e.g., women entrepreneurship funds, Indigenous community development funds, bioscience research funds) are addressed in partnership with the private sector
    • Expand on existing diversity-oriented growth funds to increase access to capital and stimulate inclusive growth.
    • Expand proven partnership models on growth capital, including incentives to crowd in private capital and deepen investment expertise domestically (e.g., Venture Capital Catalyst Initiative (VCCI)).

Strategic infrastructure – Digital and physical

  1. Accelerate plan to ensure coverage and access to high-quality Internet for 100% of Canadians by 2026, in collaboration with the private sector and other levels of government.
  2. With the support of the Canada Infrastructure Bank, drive nation-building projects by:
    • Developing a strategic perspective on the highest productivity-enhancing infrastructure priorities for the country.
    • Unlocking a pipeline of investable infrastructure projects by increasing the acceptability of user-pay models.
    • More proactively incentivizing these projects to happen, including non-traditional asset classes (e.g., digital and green infrastructure, including CCUS and small modular reactors (SMRs)).
    • Creating fast-track approval processes across all levels of government to increase the scale and velocity of investment.Footnote 139
  3. Invest in strategic trade infrastructure that addresses critical bottlenecks (e.g., create gateways and corridors strategy for bulk commodities and containers). Infrastructure needs to be trade-focused. Rail, road, ports, airports, pipelines and tech capacity are priorities and we have well-known infrastructure deficits in these areas. We will not be able to keep pace with demand in fast-growing markets if we do not ramp up infrastructure investments significantly.

Agile regulation

  1. Fast-track regulatory reviews in sectors where delays have a disproportionate financial and societal impact (e.g., clean technology, resources), conduct targeted regulatory reviews to support most impacted sectors (e.g., oil and gas, aerospace), and build on ongoing regulatory reform efforts to eliminate areas of federal and provincial overlap.

Strategic use of procurement

  1. Improve supply chain resiliency through strategic domestic procurement, particularly in strategic sectors impacted by COVID-19 and/or where there is opportunity to create scale in health care, clean technology, education and Indigenous-led businesses. The recommendations of previous reports on procurement should be fully implemented.

Recommendation D: Canada needs an industrial strategy with four key pillars for a digital, sustainable, and innovative economy for all Canadians

Become a digital and data-driven economy

  1. Build a Global Canadian Digital Network (which could be called the Borealis Digital Network) to transform Canada into a digital society
    • Create a strategy to scale Canada's digital industry domestically and internationally (e.g., accelerate national data and cybersecurity standards and regulations, increase funding for trade commissioners to help build digital trading outposts and routes for Canadian technology).
    • Expand infrastructure investment strategy to amplify digital infrastructure components such as broadband, software, AI, 5G, etc., and leverage existing programs (e.g., Connectivity Strategy, Infrastructure Bank).
    • Leverage Canada's strengths (e.g., brand, privacy framework) to broaden access to international markets for Canadian firms (e.g., collaboration with upper-middle firms, leverage Canadian standards—such as privacy—to promote exports).
  2. Support Canada's upper-middle businesses
    • Increase focus on enabling upper-middle firms to win globally (e.g., allocate a proportion of patient capital to upper-middle firms poised for rapid scale-up, adapt eligibility of existing programs such as IRAP to better include them).
    • Build on key initiatives such as Innovative Solutions Canada, establish government procurement standards that support growing Canadian firms (e.g., government as first customer).
    • Encourage the adoption of digital technologies in large Canadian firms, including digitizing government services.
  3. Establish Canadian high-skilled talent as a global advantage
    • Enable a leading digital skills platform to upskill and reskill Canadian talent.
    • Create a retention strategy for sought-after talent trained in Canada through incentives and other efforts (e.g., wage top-ups).
    • Expand the global talent stream to more proactively attract and retain digital talent to Canada, especially as other nations close their doors to sought after talent.
  4. Leverage IP and promote the value of data
    • Support IP creation and ownership within Canadian companies (e.g., IP filing costs, SR&ED application, policy education).
    • Modernize the privacy and data protection regime to harmonize the multi-jurisdictional regulations.
    • Create national regulatory and standards framework governing data, including open source, big data libraries to promote public private collaboration, offer new R&D program funding and make better use of Canada's assets to grow the data driven economy.
    • Embed IP strategy into government funding programs to ensure Canadian business and innovators have access to the best IP resources, and offer financial supports for IP development.

Be the ESG world leader in resources, clean energy, and clean technology

  1. Support all natural resource sectors in becoming global ESG suppliers and product innovators
    • Build a resilient oil industry by becoming a world leader in CCUS to drive down the carbon footprint and provide energy that is based on ESG; support commercialization of SMRs to reduce emissions.
    • Accelerate innovation of engineered wood products and biomass and advance sustainable management practices, to maximize net carbon absorption of forests.
    • Build on world leadership in sustainable mining practices and grow an economic, commercial-scale critical materials supply chain (e.g., rare earth elements, nickel) required for many new technologies (e.g., electric vehicles (EVs), energy storage, sensor and data processing applications) to improve national and North American supply chain resiliency.
    • Focus on nature-based solutions and accelerate development of low- or no carbon biofuels.
  2. Leverage clean technology strengths to accelerate exports and domestic adoption and decarbonize key industrial sectors
    • Mobilize capital (and patient capital) to drive private sector investment into priority clean tech areas, especially for scale-up.
    • Produce hydrogen (blue, green, grey) fuel at scale and build associated infrastructure for domestic consumption and export.
    • Build the battery supply chain (from critical minerals to specific parts required for assembly) in Canada to meet North American and global supply needs.
    • Become a world-leading hub for sustainable aviation and bio-jet fuel (e.g., R&D support for aviation firms).
    • Establish a targeted strategy for development of technical and business talent (e.g., product commercialization, capital markets, IP protection, global supply chain development) to scale clean tech firms, while growing employment opportunities for underserved communities.
    • Advance Canada's clean technology strength in renewable energy, biofuels, energy storage, smart grids, transportation, and water technologies.
  3. Incentivize all sectors to meet Paris commitments with a cost and time optimal decarbonization pathway
    • Develop a national or pan-Canadian net-zero 2050 emissions plan and then work with each sector (e.g., resources, energy, manufacturing, agriculture, transportation, clean technology) and the private companies within the sector to gain alignment and execution of their portion of the plan.
    • Enable firms to use credits from any region in Canada and internationally to meet carbon reduction obligations.
    • Develop incentives for energy efficiency and decarbonization projects (e.g., US 45Q incentives) including the establishment of an electricity grid and renewable energy.
    • Invest in green infrastructure investments to support transition to a net-zero economy, e.g., CCUS, nationwide EV charging stations, energy efficient buildings and nature-based climate solutions and affirm Canada's intent to be a leader in energy transition and clean technologies.

Build innovative and high-value manufacturing where we can lead globally

  1. Boost investment in innovation and commercialization
    • Establish supports to ensure Canadian products and IP remain differentiated (e.g., explore incentives for companies that turn domestically produced IP into locally produced products).
    • Develop a strategy to drive local and international private sector investment in priority sub-sectors— potentially via blended finance and a patient capital fund with a focus on research-intensive products.
  2. Accelerate technology creation and adoption
    • Increase investment incentives (e.g., for next-generation autonomous manufacturing equipment), directly tied to outcomes (e.g., skills and talent training, commercialization, exports, and environmental performance) to enable rapid scale-up.
    • Incentivize productivity-enhancing technology adoption (e.g., fund capability building programs, offer diagnostic services to help firms understand available technologies and respective applications).
  3. Connect technology clusters and manufacturing firms
    • Establish infrastructure to encourage cross-functional collaboration in nascent but growing areas (e.g., tech meetups focused on bio-sciences innovations, incubators specializing in developing alternative aviation fuels).
  4. Build skills and talent for Manufacturing 4.0
    • Ensure a robust labour force (e.g., targeted scholarships, course reimbursements, expedited visas for high-skilled workers and their families).
    • Support female and minority workers in manufacturing to ensure positive progress on employment parity is not lost through COVID-19 and continued into the future (e.g., work-sharing program update, targeted upskilling efforts).

Leverage our agri-food advantage to feed the planet

  1. Build the necessary infrastructure and market access for future waves of growth
    • Accelerate investments in trade infrastructure to address critical bottlenecks for the transport of goods (e.g., multi-modal port and rail, northern access).
    • Develop a rolling, 50-year "Trade Corridors and Gateways National Infrastructure Plan" to ensure a long-term approach to infrastructure planning and funding.
    • Continue expanding international market access through bilateral agreements focused on removing tariff and non-tariff trade barriers.
  2. Deploy investments in competitive areas
    • Support investments in value-added transformation of raw goods, to allow Canadian players to capture a larger share of value from processing activities (e.g., maintain investment focus and momentum for plant-based protein, additional focus on other areas such as renewable fuels).
    • Encourage development and commercialization of innovative bio-science products (e.g., zero-carbon fertilizers, phenotyping, droughtresistant crops, plant-based products) and processes (e.g., increasing carbon absorption of soil).
  3. Increase digitization to improve productivity
    • Accelerate broadband infrastructure investments to enable connectivity, especially in rural and Indigenous communities, and increase the adoption of digital technologies that are critical to productivity improvements in the sector.
    • Incentivize digital investments across supply chains to lower inventory requirements and improve overall efficiency (e.g., blockchain and automation of processing lines).
  4. Modernize regulatory systems and build a 21st century talent pipeline
    • Modernize regulatory system with a focus on removing internal trade barriers to enable the growth of the Canadian agri-food sector and help businesses achieve scale and become globally competitive.
    • Attract new talent into the agri-food sector, with a particular emphasis on digital and business skills.
    • Modernize the TFW Program to address pre-existing labour shortages in the long term.

Recommendation E: Establish renewed private sector partnerships and investments anchored in a sound and rigorous fiscal framework

Maintain a sound and rigorous fiscal framework

  1. Develop a realistic and predictable plan for economic recovery and reimagination to meet four clear fiscal objectives:
    • Canada remains an acknowledged leader among industrialized countries in the management of public finances and level of debt and deficit.
    • Careful program design ensures that an expansion of public financing does not crowd out private investment in Canada.
    • New spending mostly supports future growth (e.g., investment in human, physical and intellectual capital to improve productive capacity and export potential) rather than simply fueling short-term consumption; outcomes are rigorously tracked and managed.
    • Canada improves the competitiveness of its tax regime.

Establish new private sector partnerships

  1. Collaborate with the private sector to deliver the recommendations and leverage proven approaches, including:
    • Stand up new forums for regular, transparent dialogue on investment opportunities between the Government and Canada's financial ecosystem.
    • Establish a framework for risk-sharing in public–private partnerships that can be adapted for individual projects (e.g., risk-sharing, first loss, mediation).
    • In collaboration with provinces, establish a unified national strategy for attracting global capital into the country while maintaining high standards for corporate governance and disclosure.
    • Provide targeted incentives to de-risk and accelerate investments, and create win-win opportunities for investors to earn appropriate levels of return while helping the economy.

Sector-specific recommendations

Resources of the Future

Advanced Manufacturing

Retail

Tourism and Hospitality

Transportation

Agri-Food

Clean Technology

Digital Industries

Health/Bio-sciences

Annex B: Stakeholder and public engagement

The Industry Strategy Council carried out extensive stakeholder engagement over the course of its intensive meeting cycle. Without those insights, this work would not have been possible. Below is an overview of the Council's Public Engagement plan and the process undertaken. The Industry Strategy Council conducted nearly 100 public engagement sessions with stakeholders representing over a thousand businesses, academic institutions, associations, community organizations, Indigenous communities and youth groups across sectors and across Canada. We have carefully documented their input from these sessions and the written submissions we received. This input was fundamental for grounding the work in the reality facing diverse stakeholders and all Canadians.

Strategic engagement plan

The Industry Strategy Council met with stakeholders to obtain perspectives on:

Strategic engagement process

The Industry Strategy Council's public engagement process took place in multiple parts:

  1. Bilateral Engagement with Thought Leaders and Key Industry Stakeholders
    • Discussions with thought leaders and industry leaders deeply engaged in Canada's economy, from Canada's banks, financial institutions, academia and industry.
  2. Meetings with Pan-Canadian Associations
    • Pan-Canadian associations: Extensive engagement with Pan-Canadian associations representing the economic interests of Canadians.
    • Group Engagement: Engagement with many organizations including QG100, Réseau des Femmes d'affaires du Québec, Dock, Cercle des Présidents and Cirano.
  3. On-Line Engagement
    • Council website: The Council developed an open, accessible engagement platform inviting Canadians to speak about their experiences and to share insights on how to establish a strong and resilient Canadian economy.
  4. Written Submissions: Over 100 submissions were transmitted to the Chair directly or via departmental channels, including the Council's website sharing their views.
  5. Business Survey, with support from McKinsey, of 726 small- and medium-sized businesses, to inform analysis for the Council's workshops and discussions and to provide timely insight on sector-specific dynamics arising from COVID-19.
  6. Sectoral Engagement
    • Council members led sectoral engagement in their respective sectors with leading CEOs and associations.

What we heard

The general consensus that emerged from our engagement process is that the time to position Canada to win in the future is now. Several common themes emerged in nearly all of the Council's engagement sessions. These are covered in our report.

  1. Canada is in a good position, compared to international peers, and has the capacity for further response, if required.
  2. Canada's policy frameworks should achieve multiple objectives in tandem (i.e., improving the economy while driving progress on other strategic goals).
  3. Need to consider impacts on our fiscal framework and our long-term trajectory.
  4. Resilient recovery proposals should reflect three elements:
    • Economy – yielding timely, lasting economic benefits and jobs
    • Environment – clean competitiveness and climate resilience
    • Equitability and Feasibility – particular attention paid to youth, women, Indigenous peoples and vulnerable groups

Annex C: List of stakeholders engaged

The Council expresses its gratitude to all those who took the time to speak with us and to submit their views. Their insights helped to shape our work and recommendations. Reimagining Canada for the prosperity of all Canadians has been a collective endeavour.

Pan-Canadian Associations, Provincial Organizations, key industry leaders, thought leaders, and other business groups

Arms' Length Government Organizations

Sectoral consultations

Advanced Manufacturing:

Transportation:

Clean Technology:

Retail:

Tourism and Hospitality:

Digital Industries:

Health/Bio-sciences:

Agri-Food:

Resources of the Future:

Associations:

Ministers and Deputy Ministers

Ministers

Considerable discussions were held with the Honourable Navdeep Bains, Minister of Innovation, Science and Industry.

Complementary discussions were also held with:

Deputy Ministers

Other Presenters

The Council also received considerable insight from organizations through report submissions, website submissions and letters to Council members.

These are included in Annex D.

Annex D: Submissions to the Council – Reports, articles and other materials

Title of documents appear in the language in which they were submitted to the Industry Strategy Council.

Aéro Montréal

Aerospace Industries Association of Canada

Airbus Canada

Air Transat

Alliance de l'industrie touristique de Québec

Atlantic Provinces Economic Council

Bank of Canada

Bell Canada

BlackRock

Business Council of Alberta

Business Council of Canada

Canada Foundation for Innovation

Canada Green Building Council

Canadian Airports Council

Canadian Chamber of Commerce

Canadian Federation of Independent Business

Canadian Labour Congress

Canadian Manufacturers & Exporters

Canadian Media Fund

Canadian Rare Earth Elements Network

CGI, Inc., Département des Affaires économiques

Chartered Professional Accountants of Canada

Chief Scientist of Québec

CIBC

Corus Entertainment

Council of Canadian Innovators

CVCA

Digital Technology Supercluster

Efficiency Canada

Entrepreneurs Associations

Ernst & Young

Ernst & Young, Réseau des Femmes d'affaires du Québec

Export Development Canada

Forest Products Association of Canada

Genome Canada

Groupe des onze

Indigenous Tourism Association of Canada

Industrial Alliance Financial Group

Innoventures Canada

International Air Transport Association

Inuit Tapiriit Kanatami

Le Pacte pour la transition

National Aboriginal Forestry Association

National Airlines Council of Canada and International Air Transport Association

Palette

Petroleum Services Association of Canada

Pierre Rivard, David Isaac, Vicky Sharpe, proposed Indigenous Infrastructure Fund

Prospectors & Developers Association of Canada (PDAC)

Public Policy Forum

Québec International

Railway Association of Canada

Rising Economy Taskforce

Rogers Communications Inc.

Sollio Cooperative Group

Task Force for a Resilient Recovery

Task Force for Real Jobs, Real Recovery

TELUS

OpenText

Universities Canada

WaterPower Canada

WestJet

Women in Renewable Energy

Additional Resources

Website submissions

Letter submissions

Annex E: Industry Strategy Council – Membership

Ex-Officio Members:

Annex F: Council's roadmap

Text version

The image illustrates all of the Council's recommendations on one page. The banner at the top includes the report's title: Restart, Recover and Reimagine Prosperity for all Canadians: An Ambitious Growth Plan for Building a Digital, Sustainable and Innovative Economy. There are three columns: Restart, Recover, and Reimagine.

A second banner is featured titled: Foundational insights from industry consultations and broad stakeholder engagement.

Recommendations under the restart column aim to safely restoring confidence and commerce. There are two recommendations under Restart: A and B.

Figure A: Boost the confidence of Canadian businesses and consumers to navigate the new normal and adjust the economic response plan to better support a safe reopening of the economy

Action items recommended by the Council include:

  • Strengthen coordination with the provinces and territories and advance a risk management approach
  • Fully engage the private sector on public health measures
  • Introduce mechanisms to facilitate the restructuring and refinancing of otherwise profitable firms
  • Encourage workface participation and smarter re-skilling
  • Leverage and promote the 'Canada' brand domestically and internationally, emphasizing value addition and innovation

Image 1: Results of the survey conducted by the Industry Strategy Council:

  • 726 respondents
  • All 13 provinces and territories
  • Several sectors and firm sizes
  • 78% of respondents were concerned about the financial viability of their own business
  • Tourism -50% revenue losses expected
  • Retail -32% revenue losses expected
  • Adv. Manuf. -30% revenue losses expected
  • 44% of women owned businesses expected revenue drop in 2020
  • 64% of respondents found it difficult to obtain credit
  • -39% revenue losses for businesses that sell online
  • -41% revenue losses for businesses that are direct-to-consumer

Source: McKinsey Survey, June 25 to July 14, 2020

Figure B: Stabilize and secure the hardest-hit sectors through targeted measures

Action items recommended by the Council include:

Airlines, airports and aerospace

  • Provide longer-term support (e.g. firms of national interest)
  • Accelerate restart of domestic and international travel with an innovative risk management strategy

Resource of the future

  • Incentives for upstream operators to sustain viable operations re-ignite capital expenditures

Tourism, hospitality and culture

  • Provide patient capital to anchor firms with high brand value
  • Collaborate with the private sector to crowd-in private capital

Image 2: Sectors have been unevenly impacted and the recovery ahead is likely to be different across sectors

The hardest hit sectors are differentiated using highlight. These include resources of the future, advanced manufacturing, retail, tourism and hospitality, and transportation.

Sector Actual GDP Q4 2019, share of total GDP Actual June 2020 GDP delta from Q4 2019, percent Time to recover to Q4 2019 level
Scenario 1 Scenario 2

Resources of the Future

11.5%

-12

Q3 2022

Q3 2023

Advanced Manufacturing

10.1%

-11

Q4 2024

Q4 2024

Retail

5.2%

1

Q1 2022

Q4 2022

Tourism and Hospitality

4.9%

-64

Q2 2024

Q2 2024

Transportation

4.0%

-32

Q4 2024

Q4 2024

Agri-food

3.5%

2

Q2 2022

Q4 2022

Digital Industries

2.9%

-2

Q2 2022

Q1 2023

Health/Bio-sciences

1.8%

-6

Q1 2022

Q2 2023

Clean Technology

2.9%

Not modeled due to lack of real-time GDP data

Source: McKinsey analysis, in collaboration with Oxford Economics

Recommendations under the recover column aim to set a trajectory for inclusive growth. There is one recommendation under recover: C.

 Figure C: Reignite growth by doubling down on a future-oriented investment plan

Action items recommended by the Council include:

Diversity, talent & workforce innovation

  • Expand scope and increase funding of re-skilling programs
  • Capitalize on the opportunity to retain and attract highly-skilled global talent
  • Develop a National Workforce Innovation Strategy

Strategic use of procurement

  • Improve supply chain resiliency through strategic domestic procurement

Innovation ecosystem and R&D funding

  • De-risk and encourage industries to digitize, automate, and drive productivity
  • Strengthen Canada's Digital Charter and IP Strategy, and build a modern digital regulatory system
  • Recapitalize, expand and modernize key government programs

Strategic infrastructure – Digital and Physical

  • Accelerate plan to ensure coverage and access to high-quality internet: 100% by 2026
  • Drive nation-building projects with support of CIB
  • Invest in strategic trade infrastructure that addresses critical bottlenecks

Agile regulation

  • Fast-track regulatory reviews in sectors where delays have disproportionate financial and societal impact

Access to capital to accelerate growth of Canadian firms

  • Consider an expanded role for BDC, EDC, and FCC
  • Ensure capital gaps are addressed (e.g. women entrepreneurship funds etc.)

Image 3: Government have deployed sector-specific supports to drive ambitious recovery plans

Country Description

Germany

€50B to be invested in future areas: hydrogen economy, quantum technologies, AI

Spain

€40B loan guarantee scheme for new investments in technology and the green economy

European Union

€387B for transition to environmentally and socially sustainable and market-oriented agricultural sector and rural development

South Korea

>$2B to be invested in strengthening digital capabilities, as part of C$85B 'Korean New Deal'

France

€15B in support of the aerospace industry, split evenly between the airlines and aerospace sectors

Source: Press search, Government announcements as of August 2020

Recommendations under the Reimagine column aim to catalyze GDP growth beyond pre-COVID-19 levels. There is one recommendation under Reimagine: D.

Figure D: Canada needs an industrial strategy with four key pillars for a digital, sustainable, and innovative economy for all Canadians

Action items recommended by the Council are listed below.

Become a digital and data-driven economy

  • Build a Global Canadian Digital Network to transform Canada into a digital society
  • Support Canada's upper middle businesses
  • Establish Canadian high skilled talent as a global advantage
  • Leverage IP and promote the value of data

Be the ESG world leader in resources, clean energy, and clean technology

  • Support all natural resource sectors in becoming global ESG suppliers and product innovators
  • Leverage clean technology strengths to accelerate exports and domestic adoption and decarbonise key industrial sectors
  • Incent all sectors to meet Paris commitments

Build innovative and high-value manufacturing where we can lead globally

  • Boost investment in innovation and commercialization
  • Accelerate technology creation and adoption
  • Connect technology clusters and manufacturing firms
  • Build skills and talent for Manufacturing 4.0

Leveraging our agri-food advantage to feed the planet

  • Build infrastructure/market access necessary for future growth
  • Deploy investments in competitive areas
  • Increase digitization to improve productivity
  • Modernize regulatory systems and build 21st century talent pipeline

Image 4: Illustrative effect of recommendations on GDP (2019 to 2030, Q4 = 100)

The line graph illustrates potential effects of Council recommendations on GDP. The horizontal axis lists a year range from 2019-2030. The vertical access represents GDP indexed to the fourth quarter (Q4=100) in 2019, and includes a line drawn horizontally across the middle of the graph at 100.

There are three lines. The first line extrapolates the historical growth rate of 1.97% at a constant rate. The line rises steadily from the middle of the vertical axis to the top right corner of the graph. The second line represents projected GDP based on a scenario 1 type recovery. The line illustrates the impact of the pandemic on the economy, whereby there is a sharp drop in GDP over the next year, followed by a several year period where GDP would remain low. The line plateau's and then rises steadily eventually mirroring a similar but slightly lower projection then the historical growth rate.

The third line illustrates the impact the Council's recommendations could have on the economy. There are three inflection points along this line noting the three phases of recommendations. The line follows a similar path downward but stops earlier then the second line. Rather then plateauing, the line shoots upward for Restart and Recovery ($100-155B), with an incremental increase of 0.8 to 11% for the Reimagine measures.

Source: Statistics Canada, Table: 36-10-0104-01; GDP and Illustrative recommendations based on McKinsey Analysis

Image 5: no title

A map of Canada is featured at the bottom right corner of the roadmap. The map includes icons that correspond to the four thematic areas identified in Figure D. The image illustrates where opportunities for action exist across Canada.

  • Yukon:
    • Be the ESG world leader in resources, clean energy, and clean technology
    • Leveraging our agri-food advantage to feed the planet
  • Northwest Territories
    • Be the ESG world leader in resources, clean energy, and clean technology
  • Nunavut
    • Be the ESG world leader in resources, clean energy, and clean technology
    • Leveraging our agri-food advantage to feed the planet
  • British Columbia
    • Be the ESG world leader in resources, clean energy, and clean technology
    • Leveraging our agri-food advantage to feed the planet
    • Build innovative and high-value manufacturing where we can lead globally
    • Become a digital and data-driven economy
  • Alberta
    • Become a digital and data-driven economy
    • Be the ESG world leader in resources, clean energy, and clean technology
    • Leveraging our agri-food advantage to feed the planet
  • Saskatchewan
    • Be the ESG world leader in resources, clean energy, and clean technology
    • Leveraging our agri-food advantage to feed the planet
    • Become a digital and data-driven economy
  • Manitoba
    • Leveraging our agri-food advantage to feed the planet
    • Become a digital and data-driven economy
    • Build innovative and high-value manufacturing where we can lead globally
  • Ontario
    • Be the ESG world leader in resources, clean energy, and clean technology
    • Leveraging our agri-food advantage to feed the planet
    • Build innovative and high-value manufacturing where we can lead globally
    • Become a digital and data-driven economy
  • Quebec
    • Be the ESG world leader in resources, clean energy, and clean technology
    • Leveraging our agri-food advantage to feed the planet
    • Build innovative and high-value manufacturing where we can lead globally
    • Become a digital and data-driven economy
  • Newfoundland and Labrador
    • Be the ESG world leader in resources, clean energy, and clean technology
  • New Brunswick
    • Leveraging our agri-food advantage to feed the planet
    • Build innovative and high-value manufacturing where we can lead globally
  • Nova Scotia
    • Be the ESG world leader in resources, clean energy, and clean technology
    • Become a digital and data-driven economy
  • Prince Edward Island
    • Build innovative and high-value manufacturing where we can lead globally

Figure E: Establish renewed public-private sector partnerships and investments anchored in a sound and rigorous fiscal framework

Action items recommended by the Council include:

Maintain a sound and rigorous fiscal framework

Develop a plan for economic recovery and re-imagination to meet four clear fiscal objectives:

  • Acknowledged leader among industrialized countries in the management of public finances and level of debt and deficit
  • Careful program design ensures an expansion of public financing does not crowd out private investment in Canada
  • New spending mostly supports future growth rather than simply fuels short-term consumption
  • Canada improves the competitiveness of its tax regime

Establish new private sector partnerships

Collaborate with the private sector to deliver the recommendations and leverage proven approaches:

  • Stand-up new forums for dialogue on investment opportunities between the government and Canada's financial ecosystem
  • Establish a framework for risk-sharing in public-private partnerships that can be adapted for individual projects
  • Establish a unified national strategy for attracting global capital
  • Provide targeted incentives to de-risk and accelerate investments, and create win-win opportunities for investors

The bottom banner includes the following text: Feature Section, Deep Sectoral Insights and Recommendations, Informed by Data Driven Analysis. There are icons included in the banner, one for each sector the Council represents.

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