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What's Wrong With Exporting What People Want?

02/02/2016 12:07 EST | Updated 02/02/2017 05:12 EST
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The Port Metro Vancouver terminal stands at dusk in Vancouver, British Columbia, Canada, on Tuesday, April 16, 2013. Port Metro Vancouver, Canada's largest and busiest port, is the principal authority for shipping and port-related land and sea use in the Metro Vancouver region. Photographer: Ben Nelms/Bloomberg via Getty Images

In Jim Balsille's recent piece in the Globe and Mail on the TPP, it's hard not to wonder whether he's ever spent time outside of downtown TO?

Of course he has, but the piece still makes one wonder if he has any connection to the rest of this vast country.

There are three fundamental flaws in his piece.

The first is tying anything in his piece to the TPP. Canada's issues with innovation and patents aren't tied to the TPP. And he didn't make the case that the TPP will makes things worse.

There is the immediate need for the commodities Canada produces.

The second, and more problematic, issue is pitting commodities against other ways that Canada makes a living through trade.

Part of Canada is endowed with a wealth of natural resources. Producing and exporting these commodities is also a part of Canada's economy.

If you have something the rest of the world wants, you figure out how to profit by providing it; you do not denigrate the opportunity before you. That's just common sense. It's also common sense that you exploit other opportunities to make money. One does not prevent pursuing the other.

And commodities are a good business despite what Jimbo thinks. There is the immediate need for the commodities Canada produces. And here it is important to look at the full range of commodities. Hard commodities like ores and coal are and will be in a slump. But soft commodities like food are going to see a steady increase in demand.

In the longer term, demand for both types of commodities will increase from the addition of billions -- not millions or even hundreds of millions -- but billions with B, of new consumers joining the global middle class over the coming decades.

This is not the old "mouths to feed;" it's mouths with wallets (or, more elegantly but vaguely, people w/ more economic power). This means increasing demands not just for commodities like food but demands for different and higher quality foods. It also means rising demand for energy, meat and other commodities.

And this ties to innovation and, for Canada, diversification.

Billions of new consumers cannot have what they desire if we try to produce commodities the way we always have. The planet simply cannot do it. There is a need, and money to be made, in figuring out how to produce commodities more efficiently and with less environmental damage. If you can patent and sell the technologies and machinery to do this and become world class in teaching others how to use them; that's a nice business line. It's one that ties to something you're going to be doing anyway; producing commodities. This creates a nice virtuous feedback loop and a boost to your, literal, brand when folks walk into supermarkets.

This is not the entirety of the Canadian economy; something that Balsillie misses. It's a component, a piece of Canada's prosperity puzzle. And it's a very nice business line.

It's also a plan. Which appears is more than Jim or central Canada has for their part of the economy.

We've managed to do bits and pieces of this out west. SAG-d was developed with government investments into new technology. So was fracking in the US. Saskatchewan has the global institute for food security and investments in bio-tech and carbon capture.

A side point here is that we can't be afraid of government involvement. It is vital, looking around the globe I'd say it is fundamental. But neither can we look to government as the sole omniscient saviour. I have no idea what the proper mix is -- for Canada. But other countries seemed to have figured this out.

Third point, on Jim's comparisons with the U.S....

Look.

In 2015 the Pentagon budgeted US$11.5 billion for R&D; and that's after a US$500 million cut. It's also about ½ of the entire Canadian defence expenditures for that year. A recent paper out of the U.S. National Bureau of Economic Research (NBER) shows that military spending has a 'crowding in' effect on private R&D spending. And even though not all military R&D spending created direct private sector spinoffs, it still funded, or enabled, a lot of the broader R&D infrastructure in the U.S. that made other innovation and creation possible. (It also shows up in other areas, a lot of U.S. capacity in difficult foreign languages and area studies at universities, my education, is also thanks to Pentagon spending. Something else Canada will never be able to match.)

This also applies to medicine. Another NBER paper shows that, 10 million in NIH (sic US National Institute of Health) funding generates 3.1 additional private-sector patents in the research area that receives the funding. If you thought the Pentagon spends a lot on R&D, NIH is spending more, about US$30 billion in 2015. And that's just one agency, the NIH. In 2005, total spending in Canada on health R&D was just under CD$6 billion.

Spend the sort of money that the Americans spend and you're going to get patents and products that benefit people around the globe.

We benefit from the money that the Americans spend on developing medicines. It's not odd that our neighbours want to get paid.

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