Economic Doctrine Is in Flux: What are the Implications for Canada’s Regional and Multilateral Trade Engagement?

Abstract

The current opportunities for Canada’s reengagement with the United States present themselves at a moment of profound changes in economic thinking in the United States and beyond. There are many factors behind the renewed interest in industrial policy, including the experience of the COVID-19 pandemic, the geopolitical competition with China, the return of shortages and inflationary pressures, the concerns about anti-competitive behaviour of platform firms, and the distributional dynamics of the data-driven economy. These have broad implications for trade policy and for the strategic approach for small, open economies like Canada. In an innovation-intensive world of superstar firms and geostrategic competition, the focus for Canada should be on innovation and firms. The measure of success: Canada’s count of unicorns would be rising steeply, as would be Canada’s R&D share of GDP, and private and public venture capital support for Canadian technology-intensive companies would be breaking records. Canada’s economic history is punctuated by the establishment of Crown Corporations to fill gaps. The maturation of the industrial era economy may have given the impression that this was history. Today, it’s not a question of necessarily resorting to Crown Corporations, but Canada should not hesitate to go that route if necessary.

Keywords: Canada-US relations, industrial policy, geopolitics, geoeconomics, data-driven economy, digital transformation, trade policy

JEL Classification: F13, F52