Policy Matters: Revisiting the 3 Most Popular Topics of the Year ...
December 17, 2024
Counting this one, we published 12 Policy Matters in 2024, covering a broad range of topics from productivity to housing to international trade. While a lot has happened in 2024, our three most popular topics — productivity, CUSMA and agriculture — are as relevant as ever.
Productivity (measured by GDP created per hour worked) is directly linked to our standard of living — rising productivity improves wages, lowers prices and increases tax revenue that supports the public services Canadians value and rely on. Unfortunately, Canada’s productivity levels have been in decline for decades. Currently, a Canadian worker contributes about $100 to the national economy with the same time and effort that an American contributes $130.
There are several factors that influence our poor performance: skilled labour shortages, supply chain disruptions, lack of competition, high proportion of small businesses, and slow adoption of new technology, such as AI.
We can’t change our productivity levels overnight, but it’s too important a factor in standard of living and our collective ability to pay for things we want to not prioritize. With the return of President-elect Donald Trump and his proposed 25% tariffs on Canadian exports to the U.S., we’re facing another critical hit to our productivity. In the recent BDL report, Partners in Prosperity, author and economics professor Trevor Tombe estimated that a 10% across-the-board tariff would result in a 1.6% decrease in labour productivity and lost income of $1,100 per Canadian annually. With a 25% tariff (and resulting trade retaliations), these numbers only get worse — roughly $1,900 per Canadian and a likely recession by the middle of 2025.
To help make up the productivity difference, we need to focus on what we can do here at home, like:
Strengthening investment in agriculture Increasing digital, technology and AI adoption in Canadian businesses, especially small businesses Ensuring intellectual property protection Increasing R&D investment Eliminating internal trade barriers for the free flow of goods across the countryAs a nation of highly educated people, with an abundance of natural resources and the largest pool of top-tier AI researchers in the world, we are well equipped to turn things around if we have the political will.
President-elect Donald Trump has already stated that he intends to reopen CUSMA in 2026 and make changes that better align with American interests. But with Trump’s protectionist policies (including the previously mentioned 25% tariffs), these changes will likely disrupt the stable and predictable trading environment Canadians and Canadian businesses have greatly benefited from.
To ensure that the 2026 CUSMA review advances Canada’s economic interests there are several trade irritants that Canada should proactively address ahead of time: our new digital services tax which is a major source of contention with the United States, frequent labour disruptions and breakdowns in our supply chains, and our continued inability to meet the NATO defence spending commitment of 2% of GDP.
It’s important that Canada first and foremost prioritize ensuring the continuity of the Agreement and its existing key provisions. Ahead of time, we should work collaboratively with the U.S. and Mexico to advance targeted measures to strengthen the Agreement and enhance North American economic security. This has been the purpose of our 2024 trade missions to the U.S., which provided Canadian businesses opportunities to increase ties with U.S. counterparts and policymakers.
Any strategic vision Canada has for the agri-food sector must facilitate access to expanding global markets, allowing us to achieve our 2028 goal of $95 billion in agri-food and seafood exports and $250 billion in sector revenues.
Investing in the agriculture and agri-food sector is good for Canada because the same measures that will lead to growth in the sector will also have ripple effects across our economy. For instance, the expansion of our agriculture and agri-food industry is largely dependent on our ability to move goods efficiently and reliably to international markets. This will require investing in strategic and long-term trade and transportation infrastructure that solidifies our international supply chains, which will benefit every other industry that exports.
And then there’s productivity. In general, sectors like agriculture that have a large share of SMEs are among the least likely to adopt new technology. However, technological adoption is a significant contributor to productivity and if we can help the agriculture sector increase adoption rates, not only will it benefit from the growth and increased productivity, but Canada’s national productivity will benefit too.
Finally, as President-elect Donald Trump’s tariffs loom, we can make more valuable products here at home and sell them globally at a higher price by developing our domestic processing and manufacturing capacity. We too often ship our raw commodities abroad to be processed by another country (like the U.S.) only to buy them back as a new product. Encouraging value-added agricultural processing will lead to more jobs and economic activity that is not as reliant on our trade relationship with the U.S.
