Amid the continuing debate about Canada’s lacklustre record on productivity and innovation, one issue that stands out is the lack of vision on infrastructure. Aging industrial infrastructure and the absence of needed investment in new technologies, such as telecommunications, high-speed rail, clean technologies and industrial automation, have significantly undermined the country’s competitiveness.
If Canadian policy is to be realistic about broaching advanced manufacturing — including electric vehicles (EVs) — our country will need a strategic vision that moves us up the global value chain.
The truth is that Canada has struggled to find a strategy to compete at the global level. In contrast, other industrialized economies, such as the Republic of Korea or Sweden, have moved rapidly to invest in the digital infrastructure needed to innovate and compete. As innovation leaders, both nations understand the value of long-term planning around technological change. This commitment includes investments in the digital connectivity that now drives artificial intelligence (AI), “digital twins” (virtual systems) linked to transportation infrastructure and logistical networks, and a new generation of data-driven machines.
While Canada has a strong reputation for research, particularly in cutting-edge fields such as AI, biotechnology and renewables, we struggle to commercialize that research. In fact, Canada is expected to rank “dead last” among its peers over this decade, according to the Organisation for Economic Co-operation and Development (OECD). Unfortunately, this poor showing is not a one-off. As reported last year by The Globe and Mail, the OECD projects that between 2030 and 2060 Canada will be posting the worst economic performance among advanced economies, with real per capita GDP output advancing at less than one percent per annum.
Why is this the case? Part of the answer is a lack of technological investment. According to the OECD’s Going Digital Toolkit, Canada’s investment in information and communication technology in 2021 was just
2.47 percent of its GDP, a share far outpaced by Sweden at 5.26 percent and by Estonia (a year earlier) at 8.69 percent. By enabling the needed digital capacity, Canada could ensure that innovation efforts are driven by a broader strategic vision. That vision could include efforts at strengthening the country’s global position in manufacturing and ensuring that Canadian firms have the tools they need to innovate.
Making the Needed Investments
The hard reality is that Canada is in some measure of trouble. An aging population, slowing productivity growth and weaknesses in infrastructure investment are creating enormous headwinds that are combining to slow the country’s global competitiveness. Notwithstanding the current scramble to attract EV production, forge domestic anchor firms and propel “growth,” there is a notable and important gap — the need for a national infrastructure strategy. Such a strategy should wed the physical assets essential to a high-tech economy to the digital arteries and networks needed to gain a competitive advantage.
Canada has not updated its strategic planning on infrastructure since its historical focus on seaways and roadways and, before that, railways. Certainly, there has been no bold new vision from any quarter for infrastructure in the digital economy. Even the wave of infrastructure build-out that came with the Great Recession, while essential, was undertaken in response to an economic crisis. What we need today is long-term planning and long-term investment.
It’s important to highlight that in addition to what it could accomplish, a national infrastructure strategy could be both pragmatic and fiscally responsible. Investments in digital infrastructure need not be deficit-inducing or a burden on taxpayers. Neither should these investments serve as a lightning rod for polarization and ideological division. In fact, infrastructure funding already exists and is delivered in partnership with provinces and territories. Targets could be negotiated between provinces and territories and aligned around existing
priorities — but with a particular focus on digital assets.
The Way Forward
Building the platforms for Canadian innovation involves three critical pathways for consideration. First, we need a manufacturing strategy that avoids the traditional “resource trap” by simply extracting and exporting our primary resources to other countries. In the case of EVs or semiconductors or solar panels, for example, Canada needs to strengthen its capacity for value-added innovation alongside its skills in mining and manufacturing.
Second, a digitalized infrastructure means an opportunity to equip companies with the means to compete against a rising China. While Canadian businesses, particularly our small and medium-sized enterprises, struggle to obtain the necessary funds to scale, China’s government lavishes its young innovators with deep pools of capital. And the strategy is paying off. According to last year’s study by the Australian Strategic Policy Institute, China now leads the world in 37 out of 44 critical and emerging technologies.
Third, in the current context, an infrastructure push could be tied to Canada’s established global innovation cluster for digital industries, the “Digital Technology Cluster.” Certainly, with the cluster’s objective of creating a “list of flagship digital enterprises,” integrating it into a compatible infrastructure push would further strengthen these goals. Given the substantive delay on what was to be Canada’s premiere innovation agency — the Canada Innovation Corporation — leveraging the clusters to support a new digital infrastructure will be critical.
There’s a lot at stake here. Canadians face significant risks to their quality of life if the nation fails to prioritize economic planning in line with the United States and other advanced economies. Without a coordinated national strategy, the country may struggle to attract investment, retain talent and commercialize innovation, leading to a widening productivity gap and economic stagnation. Moreover, Canada risks being marginalized in North American supply chains, diminishing its influence in regional trade dynamics and geopolitical affairs.
As the United States intensifies its focus on strategic sectors, such as advanced manufacturing, clean energy technologies and digital infrastructure, Canadian industries risk falling behind in the global race for strategic advantage. Economic planning offers a means to coordinate policy objectives, mobilize resources and foster innovation across key sectors that drive growth.
Confronting a New Geopolitical Reality
None of this is happening in a geopolitical vacuum. The intensifying rivalry between the United States and China will continue to put downward pressure on middle powers, reducing their capacity to shape independent economic and social policies. These geopolitical shifts intersect with a wave of disruptive technologies that have begun to unleash a transformation across every major industry. Whether we focus on manufacturing or health care, or even national security, the resurgence of industrial planning in the United States and around the world reflects a strategic response to a new geopolitical reality.
The global order is changing. As a result, comparative economic advantage has taken on more urgency than in decades past. Intensifying competition with China has forced the Biden administration to deploy a range of industrial policies designed to expand productivity in new technologies. The United States is recalibrating its approach in order to ensure it remains globally competitive. Canada should too.
Bubbling below the surface of this tectonic shift is the well-worn concern around economic productivity and frontier innovation — now amplified in and by a new digital era.
The present geopolitical moment cries out for a national strategy that brings together policy makers, industry leaders and citizens. Getting infrastructure planning right will be key to shaping Canadians’ opportunities for decades to come. It’s high time we got to work.
