How the Canadian economy continues to benefit from the U.S.-China war

When Jerome Powell, the world’s most powerful central bank governor, met with the media on Wednesday, no one expected him to say that the surge in inflation we saw forced him to raise interest rates.

Although the data released last week showed that the year-on-year inflation rate has soared to the level Not seen in 13 yearsMost economists predict that the Fed is not ready to end the low interest rate stimulus measures provided to the economy that has once again become the engine of North American and global economic growth.

Some people worry that Canada will be excluded from the boom in the U.S. economic recovery because U.S. buy American strategy, But a series of developments last week proved that this country can continue to profit by meeting the needs of its larger neighbors.

Nevertheless, as the United States is focused on competing with China for future industrial and technological hegemony, some experts here say that if Canada wants to take full advantage of the upcoming technological renaissance, it must increase its industrial policy.

Different stimulation

After Washington’s normally divided Senate passed a new bill aimed at countering China’s growing technological prowess last week, a stronger economic stimulus could boost North America’s long-term economic prospects.

successfully passed Innovation and Competition Law With the support of Democrats and Republicans in the Senate-although it has not yet passed the Democrat-led lower house-it marks a major step forward instead of trying to hype the economy with low interest rates as the central bank has been doing. . Instead, the new focus is to target the dual drivers of economic growth: innovation and productivity.

The government’s investment in China’s complex economy has begun to challenge the United States in many aspects, including technology, and the United States is trying to fight back. (Jason Lee/Reuters)

Essentially, they want to beat Beijing in their game and use hundreds of billions of dollars in government funds to invest in key industries and technologies to prevent the United States from falling behind China’s recent technological leap.

James Meadowcroft, a long-time industrial policy advocate in Canada, said: “It is indeed a bill to put the United States on the technological frontier of competition with China, and China sees it as an adversary.” Meadowcroft is the public of Carleton University Professor of the School of Policy and Management and the lead author of a report on private sector topics Transition accelerator.

As for Canada, Timothy Lane, the deputy governor of the Bank of Canada, pointed out last week that there are early signs that adapting to the severity of the pandemic has produced business innovation by shifting efforts to Canada’s digital economy.

He said: “As the main driver of potential, productivity growth is likely to be stronger than expected, thereby providing more room for economic growth before inflation becomes a concern,” he said. Tell a virtual party Financial advisor in Western Canada.

Although Lane said there are more and more signs that post-pandemic innovation is sprouting on its own in response to market forces, this is no longer good enough for the Biden administration. The U.S. Senate does not seem to have it either.

‘Not a dirty word anymore’

As CBC Washington reporter Alexander Panetta reported, if Innovation and Competition Law Behavior becomes law, it can turn Serious political and economic demands on Canada Because it will not only use government funds to stimulate investment, but also require its allies to reduce the use of Chinese technology.

Carleton University professor James Meadowcroft recently wrote a report for the Private Sector Transformation Accelerator. He said that Canada must follow the example of the United States and develop a coordinated industrial strategy. (Carleton University)

This will require the Canadian government to make some difficult decisions.

But on the phone on Friday, Meadowcroft said that a decision was obvious. If Canada wants to have a place on the table of the bigwigs who make economic decisions, the country must formulate its own industrial policy.

He said that industrial policy, which was crucial in Canadian history for things like building railroads across Canada and developing oil sands, fell out of favor during the Thatcher and Reagan era. But it “is no longer a dirty word” and has become popular again, especially as a tool to combat climate change.

In fact, he said, it never really disappeared, even in the United States, many industries continue to receive support under the guise of military spending.

Where did the work go?

In Canada, the government has targeted special government-supported projects, such as last week’s Invest 1.3 billion US dollars to build a hydrogen plantBut Meadowcroft said Canada must follow the example of the United States and develop a broader coordination strategy.

One example he cited is in the electric vehicle industry. Canada already has a foothold in minerals, battery technology and automobile manufacturing traditions, not to mention a large amount of low-carbon electricity. Canadian champions can easily be purchased or co-opted by larger foreign players. .

Meadowcroft said: “But combining all of these to build an industrial base requires strategic government intervention.” “Otherwise we will lose the opportunity and wake up 15 years later and say’what happened to those auto jobs.'”

Follow Don Pitis on Twitter @don_pittis

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