Canada needs a bold industrial strategy

As published in The Globe and Mail

When he became a presidential candidate back in 2019, Joe Biden made it unambiguously clear that his administration would pursue an aggressive industrial strategy to ensure U.S. competitiveness vis-à-vis China in key advanced industries and technologies.

The recent adoption by Congress of the Inflation Reduction Act (IRA) and the CHIPS and Science Act – which received broad bipartisan support – are the manifest incarnations of his long-stated policy objective.

For Canada, though, it is still searching for its own industrial strategy. As far back as August, 2020, I’ve written that Canada would be ill-advised to not prepare for the resurgence of the importance of industrial policy, in the context of the rising geopolitical tensions. Now, the need to do that is evermore pressing.

Last week, in front of an audience at the Massachusetts Institute of Technology (MIT), U.S. Secretary of Commerce Gina Raimondo presented a clear, concise and comprehensive articulation of the American game plan that starkly defines its economic priorities, such as building talent and manufacturing abilities.

Where specifically does the U.S. think it needs to compete and win? Ms. Raimondo states: “We believe there are three families of technologies that will be of particular importance over the coming decade: first, computing-related technologies, including microelectronics, quantum information systems and artificial intelligence; second, biotechnologies and biomanufacturing; and third, clean energy technologies.”

For those who claim that modern industrial policy is central economic planning, the Commerce Secretary rightly emphasized the dynamic interaction between technological change and national security. In the context of the intense technological rivalry and national-security imperatives, how effective would a “free-market” dynamic be in practice for semiconductors, critical minerals, vaccines and more broadly to ensure key supply chain resiliency?

Ms. Raimondo’s speech should be mandatory reading for all Canadian policy makers. Not only for the identification of U.S. industrial-strategy priorities, but also for the limpid articulation of the implementation of these priorities. Clearly, the Americans have done this before, and done it well. Just look at the historical impact that the Defense Advanced Research Projects Agency (DARPA) and NASA have had on fostering private investments and building U.S. global anchor companies in these advanced sectors.

It is worth putting in historical context the magnitude of the IRA and the CHIPS and Science Act. With investments cumulating to about US$460-billion, it is in constant dollars almost two times what the U.S. government spent in the 1960s on the entire Apollo space program.

What does this all mean for Canada? To be sure, there will be some North American integration on industrial policy and supply chain resiliency. But in an era of protectionism and political economy, it would be a mistake to think the Americans will carry the day for us. What is abundantly clear today is that the U.S. has a robust, comprehensive and ambitious industrial strategy with a clear roadmap to implement it; meanwhile, Canada is tinkering in the margins of both.

The Trudeau government’s challenge is two-fold: First, it has yet to articulate coherently and in detail what Finance Minister Chrystia Freeland calls Canada’s “muscular” industrial strategy; and second, we need to raise the degree of sophistication and policy focus that is noticeable in Ms. Raimondo’s speech.

On electric vehicles, thanks to the relentless work of Industry Minister François-Philippe Champagne and partnership with labour, industry and the provinces, the federal government has made important strides in attracting key investments in the automotive sector and parts of the EV supply chain. But providing subsidies to companies in one sector is not a comprehensive industrial strategy, nor will it be a substitute for reimagining our national innovation ecosystem well beyond adding more bureaucratic structures.

As a key component in an industrial strategy, we need a modern incarnation of what used to be corporate labs where industrial research done in collaboration between governments, universities and businesses led to real innovation at scale in the economy.

Ms. Raimondo’s speech at MIT should inspire Canadian policy makers to think strategically about fundamental questions. In the context of national-security considerations and intense strategic competitiveness at the technological level, what sectors should a modern industrial strategy be focused on? What should be the key objectives and outcomes for Canada?

And more importantly, as Ms. Raimondo concluded in her speech, how will Canada ensure “clarity of purpose, consistency in execution, and long-term commitment” to protect the economic and national security of all Canadians?