Chairman's Desk

When fighting Goliathes, Canada should be David

“To fully exploit the opportunities, we must be prepared to spend not millions, but billions. Not on broad subsidies, but on laser-targeted incentives.”

Should governments be in the business of picking winners and losers? Well, for many conservatives, including this one, the answer was always no. And the answer was no for a very good reason: governments are very bad at it.

But here’s a news flash: in today’s economic climate, the debate is over and our governments have no other choice but to pick.

And the reason for this is that the ground has shifted under us all. Before us now, there’s no fictional land of Pollyanna, where government subsidies and incentives don’t exist, where our American friends aren’t dangling far juicier, far larger carrots before global businesses enticing them to set up shop down south.

They are. They will continue to. And the only certain thing is that their incentives will grow more generous and aggressively so.

Whether we like it or not, this is our reality. So, the question must be: how does Canada compete, particularly against a neighbour with far deeper pockets? The answer? By taking three vital steps.

First, we need to reframe the debate. Relitigating whether governments should pick winners or losers is obsolete when the world’s largest economy and our biggest competitor for investment is doing exactly this and making no bones about it.

Our energies must instead be squarely focused not if, but how, we choose winners. This does not mean abandoning all sense of fiscal restraint. Nor does it mean there won’t be losers since no market is truly free without them. What it does mean is ensuring we thoughtfully choose amongst opportunities that will incentivize the most productive potentials within our economy and that play to our natural strengths. It means building funding programs with robust strings attached that guarantee Canadian interests, for taxpayers and workers alike, and entice those with capital to spend.

Accordingly, second, we must draw practical inspiration from our competitors. As the federal budget release approaches, two of the Biden administration’s major recent initiatives are on everyone’s lips. The CHIPS Act, providing US$280 billion for American advanced research and manufacturing of semiconductors, and the Inflation Reduction Act (IRA), allocating billions more toward clean energy. Both these baskets of taxpayer-financed programs include astonishingly generous incentives and grants to attract business.

By these numbers alone, it’s clear that Canada cannot aim to simply duplicate such programs. But although we cannot match the U.S. dollar for dollar, we can and should focus our limited resources on specific areas where we know we can contribute an indispensable component in newly forming supply chains. Though we will never be Goliath, surely we can be David.

Therefore, third and finally, we must find and loudly trumpet where we punch above our weight.

Case in point. Last week’s announcement that Volkswagen will construct its first North American “gigafactory” in St. Thomas, Ont., for battery cell manufacturing is a major victory. This is not an anomaly but a road map.

A recent Clean Energy Canada report highlighted that Canada, with the right approach, can become an electric vehicle battery powerhouse — with $48 billion flowing into our economy annually.

Why? Because all the indispensable ingredients are right here in the True North, Strong and Free. A domestic supply of necessary critical minerals. A highly educated workforce. Political stability. Free trade agreements. Low carbon electricity in our manufacturing heartland. It’s a golden opportunity, and irrespective of Biden’s vast carrot patch south of the border, businesses like VW have taken notice.

To fully exploit these opportunities, we must be prepared to spend not millions, but billions. Not on broad subsidies, but on laser-targeted incentives. And let’s be clear: this kind of bold and committed action, the kind our reality demands, is exactly what government is for.

In the biblical tale of David and Goliath, diminutive David understood that he had one advantage, not size or strength, but his sling. If Canada intends to avoid being trampled by our competitors, we must pick up our rocks, aim high and start slinging.

This article first appeared in the Toronto Star on March 20, 2023.

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