Formerly known as the Canada Student Leadership Conference, Withinsight is an annual event that promotes an exchange of ideas between the current leaders of Canada and youth who are leaders in their communities and academic institutions.
Thank you for inviting me to join you today to talk about how Canada can achieve its global potential and our leadership role within the international business community.
I believe that a country’s economic potential flows above all from its human capital, from what its people can do and want to do. I therefore would like to spend most of my time today talking about how Canada’s multiculturalism helps Canada compete in the global economy and why honing our immigration advantage may critical to achieving our national potential.
First, though, I would like to say a few words about my organization, the Canadian Council of Chief Executives, and what we have done and are doing to support our country’s leadership role within the global business community.
The Council is made up of the chief executives of 150 leading Canadian companies. We used to be known as the Business Council on National Issues, and are probably best known as the leader within the private sector in developing and championing the idea of a free trade agreement with the United States and then Mexico.
But we know that as a trading nation, Canada’s prosperity depends on the free flow of goods, services, investment, people and ideas across national borders. As a result, we have been leaders across a wide range of international relationships and activities. Let me give you a few examples:
The World Trade Organization: Only effective multilateral rules can provide the certainty and support Canadian companies need as they do business around the world. The CCCE has consistently supported the spread of liberalized trade globally through the WTO, and we have worked directly with business organizations across Europe, North America and Asia to persuade governments to keep global trade talks moving and to ensure that the benefits of freer trade flow to every corner of the world.
Asia Pacific Economic Cooperation: When the APEC meeting came to Vancouver in 1997, we hosted the first-ever APEC CEO Summit, bringing 200 of the top business leaders from across this vast region together with six of the economic leaders and more than a dozen key ministers. The CEO Summit has now become a regular part of every APEC meeting.
European Union: We have worked hard with our European business counterparts for many years to encourage closer transatlantic ties. These efforts paid off last year with the agreement between Canada and the European Union to negotiate a Trade and Investment Enhancement Agreement.
Japan: Our relationship with Japanese business leaders goes back more than a quarter century. A few years ago, we began serious study of how to move our bilateral relationship to a new level. Over the past year, we worked intensively with our Japanese counterparts, the Nippon Keidanren, to develop a proposal for an economic framework agreement, and during his visit to Tokyo yesterday, Prime Minister Paul Martin and Japanese Prime Minister Junichiro Koizumi formally agreed to launch the process leading to negotiations.
China: This is another country in which we have a long history, and this spring, we are planning a week-long CEO mission to several Chinese cities as the next step in strengthening our relationships there.
Mexico: We held a Canada-Mexico Business Retreat in Montreal and Ottawa in October that led directly to a formal agreement with our Mexican counterparts, the Consejo Mexicano de Hombres de Negocios, to work closely both in pursuing an ambitious bilateral and North American agenda.
The Retreat culminated in a lunch with both President Fox and Prime Minister Martin, who held a lively and frank joint question-and-answer session with participants in the Retreat and Council members.
Earlier that day, the two leaders signed a Canada-Mexico Partnership agreement that calls for development of a detailed bilateral action plan by June 2005 through a process involving government and business in both countries. We had a direct hand in the drafting of this agreement, and we have offered to convene a working group on competitiveness within this process.
The United States. Two years ago, we concluded that the time had come for a new look at the state of economic integration with our largest trading partner, and we launched what we called our North American Security and Prosperity Initiative. Our research led to a discussion paper last April called New Frontiers: Building a 21st Century Canada-United States Partnership in North America. We proposed action on five fronts: reinventing borders, reducing regulatory differences, ensuring resource security, reinvigorating our military alliance and developing new institutions for managing the relationship.
The visit to Ottawa and Halifax by President Bush in December was noted publicly more for its friendly tone than its substance, but more was accomplished than meets the eye. The joint statement issued by the two leaders under the title Common security, common prosperity: A new partnership in North America went well beyond the Smart Border Accord in laying out a broad economic and security agenda that includes many of the elements in our Council’s strategy, such as reducing the burden of rules of origin on bilateral trade, joint approaches to smart regulation and expansion of the North American Aerospace Defence Command (NORAD).
The Council’s current activities also include a partnership with the Council on Foreign Relations in New York and with the Mexican Council on Foreign Relations as sponsors of an independent Task Force on the Future of North America. This Task Force, co-chaired by former deputy prime minister John Manley, former Massachusetts governor Bill Weld and former Mexican finance minister Pedro Aspe, held its first meeting in Toronto in October and its second in New York in December. Discussions to date have been highly productive. The next meeting will be held in Monterrey on February 4 and 5, and the goal of the Task Force is to produce a final report this spring.
That is a snapshot of how we are offering Canadian leadership within the international business community. Now I would like to come back to my central theme and talk about why I believe that immigration and multiculturalism are so important to our country’s economic success and to our ability to make a difference in the world and what we need to do as a country to make the most of this advantage. Canada is a country built on immigration, and I think we all have an intuitive understanding of the way that multiculturalism has added to our social and economic dynamism.
Today, I want to make two suggestions. First, we are failing to seize the full competitive advantage that we should from our uniquely successful society. Second, we cannot take this advantage for granted, and the issues we will need to address if we want to retain and build on our advantage may surprise you.
I don’t think we fully appreciate the value that our immigrants represent. Too often, we take our multiculturalism for granted. Take me, for instance. Just another white guy in a suit? True, but I am an Anglophone married to a Francophone who teaches Italian. We each have an immigrant parent and our daughter is Chinese. This is the reality of Canada today.
But the economic advantages of a high-immigration society are multiplying. Let me run through some of the most important reasons.
First, demographics. The most obvious force making immigration a competitive advantage is the steady aging of the population across the industrialized world. For any number of reasons, as societies get richer, people choose to have fewer children. People in advanced nations live longer, but without immigration, population growth stagnates and economic growth slows. That in turn undermines fiscal stability and public services. It means you, as the next generation of working Canadians, will have to pay higher taxes to look after your parents. And who is going to pay for your health care and public pensions when you get old?
Second, social attitudes. Despite this reality, large-scale immigration still faces genuine hostility in many industrialized countries. Last autumn, for instance, a senior commissioner of the European Union warned that the admission of Turkey to the EU would lead to the “Islamization” of Europe, in which case “the liberation of Vienna in 1683 would have been in vain.”
Even the United States, whose Statue of Liberty welcomes “your huddled masses yearning to breathe free”, the prospect of immigration raises hackles.
In a controversial cover story in Foreign Policy magazine last spring, titled “José can you see?” respected scholar Samuel Huntington argued that “the single most immediate and most serious challenge to America’s traditional identity comes from the immense and continuing immigration from Latin America, especially from Mexico.”
Canadians generally have a much more positive view of immigration, and with good reason — and this more positive social attitude holds the key to increasing our competitive advantage.
Third, the global reorganization of work. Now let me shift to the business world. Globalization is not just increasing the flows of goods and people between countries. It also has led to tremendous a wave of mergers and alliances that is transforming how and where business decisions are made. And it is having a fundamental impact on how work is organized and where it is done.
In their book A Future Perfect, published in 2000, British authors John Micklethwait and Adrian Wooldridge described a four-stage evolution of global companies, from “corporate colonialism” and “cheap-hands” production to the use of subsidiaries for ideas as well as production and finally toward a stage that has less to do with structure than with attitude. As they put it: “Businesses become genuinely multicultural multinationals in which the nationality of employees ceases to matter.”
The fact is that multinational enterprises are losing their national roots. They may still have an identifiable head office in a single country, but their management teams are increasingly multinational and their corporate functions increasingly dispersed.
Instead of a single head office running traditional country subsidiaries providing a full range of products to individual countries, operations are being organized to provide specific corporate services and make specific products for the company worldwide. In this model, any job and any function can be handled anywhere that it makes business sense to do so.
Fourth, connections and networks. In this world, personal relationships and networks can matter as much as corporate connections. Let me give you an example. When I was covering international trade for The Globe and Mail during the 1980s, Japan was really worried about protectionist policies aimed at keeping their cheap cars out of North America. When Japan talked deals with our country, its major focus was on how to use its relationship with Canada to ensure access to the United States market.
Last September, a small group of member CEOs of the Canadian Council of Chief Executives met with public and private sector leaders in Tokyo. For the first time ever, Japanese leaders expressed serious interest in pursuing bilateral trade and investment talks with Canada, and Prime Ministers Martin and Koizumi launched that process yesterday.
What I found intriguing is that our access to the United States is no longer the key driver. Rather, Japanese business leaders told our members that a major reason for wanting to build closer ties to Canada is our huge Chinese community. They see this as a critical resource that could help Japanese companies do better in penetrating a market that is far closer to their shores than to Canada’s. How many Canadians are thinking this way?
Finally, where people live has a real economic impact. To illustrate what a difference even a few individuals can have, let me give you one example from the book I co-authored in 2001, Northern Edge: How Canadians Can Triumph in the Global Economy.
Air Liquide is a French-based multinational with some 29,000 employees spread across 60 countries. In 1999, it invested in two major expansions in Canada, an $85-million unit in Hamilton and a $150-million plant in Edmonton. Both plants were built by the same division of the company and reported to the same executive, a Canadian living in Houston. But the project management team for Hamilton came from France, while that for Edmonton was from Texas.
In a post-project analysis, Air Liquide found that the Hamilton plant had twice the European content of the Edmonton one, while the western plant had much greater American content. Same French company, same American division, same Canadian executive in charge: but the individual managers on the ground continued to direct tens of millions of dollars in purchasing to the suppliers they knew and trusted personally. People matter.
How is Canada doing?
I have to say that our record today is mixed. In Northern Edge, Tom d’Aquino and I explored in detail how the changes in the organization and distribution of work were playing out within corporate Canada.
We talked at length with more than 60 of Canada’s leading chief executives, within both Canadian-owned and foreign-based multinationals. And what we heard was a story of both great promise and considerable worry.
On the positive side, it was clear that Canada’s diverse society produces talented people who flourish in the global economy. We heard many stories of Canadian subsidiaries expanding as centres of leadership and innovation within global firms, and of Canadians being hired locally and moving on to positions of great responsibility in other parts of the world. Because Canadians grow up in a multicultural society, we seem to travel well and flourish in managing others around the world.
The combination of our advanced economy and our diverse society of worldly consumers also has helped Canada become recognized as a centre for product innovation. The Canadian unit of Nestle, for instance, has developed a role as the global product innovator and test market for its Swiss-based parent. Similarly, global banking giant HSBC uses Canada as its preferred market for developing and testing new products — and its top software development centre worldwide is in Burnaby. And in the automotive sector, Canada has been winning a greater share of the research and development work of Detroit’s Big Three.
But perhaps the most vivid example of the power of Canada’s openness and diversity comes from computer giant IBM. IBM Canada used to be a typical country subsidiary, but a large portion of its workforce now carries out North American responsibilities. In this respect, the biggest single unit is telephone technical support, and in the late 1990s, IBM decided to create a single centre to provide these services across North America, one that would involve 1,500 high-tech jobs.
The Canadian unit got on the shortlist for its 1,500 jobs because of the country’s solid supply of computer science graduates at competitive prices — but Toronto came out on top because of that city’s ability to provide people who could do the job in 23 languages.
That’s the good news. Now comes the bad. In the course of our interviews, we also heard many worrying stories about the difficulties Canadian companies were having in attracting and keeping top talent. Some anecdotes were about individuals who went abroad on assignment and refused to come home or who were hired abroad but insisted on working in the United States. Other CEOs told us bluntly of wholesale head-office moves either underway or being planned.
The best-known example came from John Roth of Nortel, who made headlines at the height of the dot-com bubble in 1999 when he revealed that only 28 of the company’s top 400 executives were still living in Canada — an exodus driven not by corporate need but by individual choices about where people wanted to live.
Nortel’s experience is not unique. It reflects an important reality of today’s global business world. The location of jobs and incomes, especially of high-value work, is being dictated increasingly not by where a company has its roots or where its shareholders live, but rather by where people with the necessary talents either live or can be persuaded to move.
Given the inevitable focus of Canadian companies on the United States as a primary foreign market, the most significant general trend has been a steady southward shift in core executive positions. In a few cases, this has led companies to shift most or all of their head-office jobs to the United States.
For instance, as Nova Chemicals expanded into the United States in the 1990s, it hired a series of top U.S. executives to manage its growth. With a single exception, these new American hires insisted on being based in the regional office in Pittsburgh rather than the head office in Calgary.
By 1999, the vast majority of its employees, customers and investors were within an hour’s flight of Pittsburgh. And since the job of senior management is to build relationships with employees, make an impression on customers and sell stock to investors, it simply made sense to move the company’s Canadian executives to Pittsburgh as well.
That kind of shift is worrying for Canada, because head offices have a powerful impact not only through their direct economic activity but also on the growth of other businesses in their community. For instance, Canada’s CGI, now a global force in computer services, got its first international contract from Alcan. Why? Because their head offices were next door and the social relationships between individual executives gave CGI an opportunity to show its capabilities that it might not have had if Alcan had been based in another city or country.
In my view, Canada is simply too complacent about the need to attract and keep top talent from around the world. Other countries are being much more aggressive. Singapore, for instance, decided more than a decade ago to move into biotechnology and pharmaceuticals. Starting from scratch, it began by investing hundreds of millions of dollars to seek out the top researchers from around the world and bring them and their teams to Singapore. As its reputation as a leading research hub consolidated, it then went after the big global companies, offering them both economic incentives and access to their well-established knowledge base.
Canada maintains its traditional open door, but we are not doing well enough at persuading more people to walk through it. Other countries are waking up to the growing benefits of immigration and working harder to attract people.
How do we do a better job? We have to attract more people, we have to develop more people, we have to keep more people and we have to make the best use of the people we have.
Canada cannot develop a strategy for attracting, keeping and developing people solely through the departments of Citizenship and Immigration and of Canadian Heritage. The departments of Finance, Industry, Foreign Affairs, International Trade, Health, Environment, Social Development, Human Resources and Skills Development, Infrastructure and Communities — all have to be part of the solution, along with provincial and municipal governments. Let me just touch on some of the key policy drivers.
Most obviously, immigration policy matters. We need to be more aggressive in marketing abroad. We need more efficient immigration procedures that don’t need consultants to get through. We need to get much better at recognizing foreign credentials and at filling education gaps so that we can tap into the full potential of immigrants as quickly as possible. But a host of other, broader issues are critical too.
Tax rates matter. The Netherlands has based its successful campaign to attract European head offices on tax policy that gives the expatriate employees of multinationals a special deal on their personal taxes.
The quality of health care matters. Some Canadian employers have been forced to keep paying for the American health insurance plans of employees who move here from the United States because they are worried that our system will not guarantee timely access to quality care.
Social support networks matter. Immigrants often prefer to settle where they can find a community of others from their country of origin, and that gives a big advantage to major centres like Toronto, Vancouver and Montreal. Winnipeg responded by focusing its campaign to attract immigrants on a single source country, the Philippines, and quickly built up a major immigrant community.
Access to the United States matters. So do good airports and air service. For Canada in particular, the ability of executives to travel quickly and easily to the United States is critical to their ability to do their jobs. This is one reason the Canadian Council of Chief Executives has devoted so much of our time in recent years to keeping our common border as open as possible in the face of our neighbour’s overriding concern about security.
Finally, social attitudes matter. One of the most interesting studies I ran across in writing our book was done by a research firm in Massachusetts called Cognetics Inc. In a study of why some communities are better than others at attracting entrepreneurs and high-growth companies, it identified four “hard determinants” of success. These included the presence of universities, skilled labour and good airports. In addition, the community must be “a nice place to live”.
But Cognetics said that what it called “soft determinants”, which boil down to culture and social attitudes, were at least as important as all the other factors put together. As the company put it: “Not all communities welcome somewhat crazy upstarts who steal their customers and their labor force, and, in the process, become richer than anyone else in town — particularly if they let you know it…. Such wild and crazy people want to be wanted. They want to be recognized and respected for what they have done. They will gravitate to places that revere them and will avoid places that treat them badly.”
How do you think Canadian communities stack up against this standard?
Not all immigrants are people who will start their own businesses. But I believe that social attitudes are critical in attracting immigrants, because all immigrants are in some sense entrepreneurs. By their very decision to uproot themselves and their families, they show an entrepreneurial willingness to take risks in order to fulfill their dreams of a better life.
Canada has prospered because so many people have taken the risk of coming to this land and have succeeded in fulfilling their dreams. Today, the open and diverse society that we have built gives us a real competitive advantage in the global economy. Where else but in Canada could the diverse employees of the multicultural multinationals of tomorrow feel more at home?
But we cannot take this advantage for granted. We need to offer more than an open door. We must be the destination of choice. In our Canada Global Leadership Initiative a few years ago, we said our goal must be nothing less than to make Canada “the best place in the world in which to live, to work, to invest and to grow.” We have the potential. And Canada’s business leaders are determined to do our part in unleashing this potential and driving Canadian leadership in the global community.