In this file photo, both workers and shoppers take precautions by using face masks and social distancing to stay safe from COVID-19 at a produce market in Vancouver on March 27, 2020. (File photo by THE CANADIAN PRESS)

COVID-19 is exposing Canada’s economic vulnerabilities, innovation experts say

Wake-up call for Canada’s resource-based industries

VANCOUVER — The COVID-19 crisis is exposing the shortcomings of Canada’s economy, particularly when it comes to supply chains and the development of value-added products that would keep the country competitive, innovation experts say.

Dan Breznitz, the co-director of the innovation policy lab at the University of Toronto, said he expects global trade in raw commodities to decline as the novel coronavirus makes it more difficult to move people and goods around the world.

It’s a wake-up call for Canada’s resource-based industries, he said, noting Canada “will have a problem just selling wood and unprocessed oil.”

The country must rebuild its capacity to produce sophisticated goods through innovation in those sectors and beyond, said Breznitz, who is also the chair of innovation studies at the Munk School of Global Affairs.

“We no longer can actually produce the basic things we need in order to survive under (a) pandemic, and we cannot count on global production networks to do that in times of crisis.”

Alan Winter, British Columbia’s former innovation commissioner, agrees, saying COVID-19 has further exposed Canada’s dependence on purchasing goods and technology offshore with profits from primary resource industries.

“The issues that we see today around (personal protection equipment) and getting stuff out of China is all illustrative of the fact that our economy, to some extent, has been totally submerged into other countries in terms of supply chains,” he said.

“Our strategy of selling raw natural resources doesn’t make a lot of sense. We need to have the capability of developing more finished goods ourselves.”

Canada lags behind other members of the Organization for Economic Co-operation and Development for investing in research and development on new products and technology, said Winter.

In his final report to the B.C. government, released last week, Winter pointed out that about 1.4 per cent of the province’s GDP goes towards research and development, while the OECD average is about 2.4 per cent. Several of Canada’s competitors make investments in the 3.5 per cent range, he added.

Breznitz said Canada lacks policies aimed at creating more small- and medium-sized enterprises and then helping them grow, particularly when it comes to access to capital in the early stages before investments from venture capitalists.

“Right now in Canada, it will be almost impossible to get the finance, just the basic finance for you to be able to scale up,” he said, using an example of a family owned, medium-sized business with an idea for a new product or technology.

Canadian entrepreneurs also face regulatory red tape in selling newly developed products in Canada, said Breznitz.

“It expensive and each province has its own little quirks. So, it’s actually easier to sell to the whole United States.”

He said the federal government should provide targeted grants and loans directly to entrepreneurs and companies, rather than funnel money into more innovation “superclusters,” accelerators and incubators.

The ”silver lining” is that Canada’s workforce is much more sophisticated than it was 15 years ago, with the proven potential for innovative ideas, Breznitz said.

Others are commercializing those ideas, said Breznitz, pointing to large multinationals that have ramped up operations in Canada including Facebook and Google.

“The question is what kind of policies would allow more Canadian entrepreneurs, small businesses and big businesses, old and new, to do exactly what the multinationals are doing.”

Private companies operating in Canada have also failed to invest in research and development because innovation is costly and risky, he said.

“You can make easy money with less risk by being less sophisticated.”

The need for economic support and opportunities is even more pronounced in rural communities, where Breznitz said the lack of investment has been ”catastrophic.”

Ken Coates, Canada Research Chair in Regional Innovation, said many residents lack access to a reliable internet connection, let alone access to start-up capital and training opportunities in science and technology.

“We should be delivering basic services at a national level to all Canadians. And we’re not even close to there right now.”

The pandemic may mobilize rural residents to demand the same essential service standards available in urban areas, said Coates, who also teaches at the graduate school of public policy at the University of Saskatchewan.

He said Canada’s natural resources have made the country rich and complacent.

The irony is that much of Canada’s resource development happens in and around rural and remote communities that should have become prosperous as a result, Coates said.

Economic development in rural and remote areas should capitalize on local strengths, he said.

For example, the capital of Sweden’s northernmost county was well-suited to become the host of Facebook’s European data servers. The city of Lulea has cheap and abundant hydro electricity and cold temperatures for the hot servers, much like parts of B.C., said Coates.

But it takes a lot of nerve, enthusiasm, commitment and support for a rural or remote community to decide to stand up and fight for new jobs, investors and residents, he said.

“There’s no easy solution whatsoever.”

This report by The Canadian Press was first published May 20, 2020.

BusinessCoronavirus

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

robbery
UPDATE: Shooting suspect arrested by Wetaskiwin/Camrose RCMP

Rimbey RCMP had responded to a complaint of an armed robbery at the Bluffton City General Store

Quality Inn & Suites in Rimbey. Photo Submitted
Rimbey hotel gets new lease on life

The Quality Inn & Suites in Rimbey is now open and taking bookings

Leanne Evans, Rimbey Neighbourhood Place Program Coordinator, accepts a donation of $5,000 from Kevin Maxwell manager of Field Support for Telus. (Photo Submitted)
Rimbey Neighbourhood Place making big changes behind the scenes

Rimbey Neighbourhood Place recently recieved a $5,000 donation from Telus

Alberta chief medical officer of health Dr. Deena Hinshaw updates media on the Covid-19 situation in Edmonton on Friday March 20, 2020. nbsp;Alberta is reporting it's highest daily number of COVID-19 cases, with 364 new infections. THE CANADIAN PRESS/Jason Franson
Alberta confirmed 323 COVID-19 cases Tuesday

Central zone active cases at 145

Health Minister Tyler Shandro and Dr. Deena Hinshaw, the chief medical officer of health, receive flu shot. Photo via Government of Alberta
COVID-19: One more death in central zone

Ponoka County on province’s watchlist

Alberta Premier Jason Kenney arrives for an announcement at a news conference in Calgary, Alta., Tuesday, Sept. 15, 2020.	Kenney is isolating at home after one of his ministers tested positive for COVID-19. THE CANADIAN PRESS/Todd Korol
Alberta premier tests negative for COVID-19 but will isolate for a week

Kenney said he will isolate until Oct. 29 and, in the meantime, work from home

COVID-19. (Image courtesy CDC)
Temporary COVID-19 testing sites coming to Wetaskiwin and Ponoka

The Wetaskiwin location will open Oct. 23, 2020 and the Ponoka location will open Oct. 29.

ACC President and CEO Ken Kobly spoke to Ponoka Chamber of Commerce members over Zoom on Oct. 20. (Image: screenshot)
Alberta chambers are ‘411’ to members, government: ACC president

Changes to government supports, second wave and snap election

Smartphone showing various applications to social media services and Google. (Pixabay photo)
National media calling for level playing field with Google, Facebook

In Canada, Google and Facebook control 80 per cent of all online advertising revenues

RCMP. (Black Press File Photo)
Calgary man dies in two-vehicle collision near Sylvan Lake

A semi truck collided with a SUV just east of Hwy. 781 on Hwy 11.

RCMP. (Phil McLachlan - Black Press Media)
British Columbia man dies during ski trip near glacier west of Calgary

Kananaskis Public Safety and Alpine Helicopters responded around 2:30 p.m.

Prime Minister Justin Trudeau arrives on Parliament Hill in Ottawa on Monday, Oct. 19, 2020, following a week-long break for the House of Commons. THE CANADIAN PRESS/Sean Kilpatrick
One crisis after another for Trudeau since last federal election one year ago

It has been a year of unprecedented calamity and crisis

Alberta's provincial flag flies on a flag pole in Ottawa, Monday, July 6, 2020. Advisers are reportedly recommending Alberta's kindergarten to Grade 4 arts and social studies curriculum remove all references to residential schools because it's "too sad" for young children. THE CANADIAN PRESS/Adrian Wyld
Advisers suggest Alberta students not learn about residential schools before Grade 4

Documents suggest children younger than Grade 4 are too emotionally vulnerable to learn about residential schools

Most Read