BUSINESS WATCH

Why Canada could be the new Manchuria

We produce only two per cent of the world’s scientific knowledge, but we are oriented to the fiction that we are a major science creator

Peter C. Newman June 26 1989
BUSINESS WATCH

Why Canada could be the new Manchuria

We produce only two per cent of the world’s scientific knowledge, but we are oriented to the fiction that we are a major science creator

Peter C. Newman June 26 1989

Why Canada could be the new Manchuria

BUSINESS WATCH

We produce only two per cent of the world’s scientific knowledge, but we are oriented to the fiction that we are a major science creator

PETER C. NEWMAN

What's wrong with Canada-U.S. free trade is that we should have signed an agreement with Japan instead, which would have had only one clause in it: that for every engineer they send us, we send them seven lawyers.

That wry observation, originally made by Dr. Pat McGeer, British Columbia’s former minister of science and technology, neatly sums up Canada’s scientific dilemma, discussed at a top-level conference in Halifax this week. We produce only two per cent of the world’s stock of scientific knowledge, and yet our legal and policy infrastructure is oriented to the fiction that we are a major science creator, rather than importer—and even that status is threatened. “The real question for Canada,” said Charles McMillan, a former senior policy adviser to the Prime Minister who is co-chairman of the conference, “is how best to apply our limited private, public and university resources to help raise our living standards. The argument some people use, that we can buy instead of doing research, is demonstrably false, because you have to be involved in research to know what data you need most usefully to purchase. Also, since technology is increasingly the basis of commercial competition, why would anyone sell us anything except at prohibitively high prices?”

McMillan and his co-chairman, Robert Fournier, associate vice-president of research at Dalhousie University in Halifax, brought together a blue-ribbon panel of international experts to try to place Canada within the context of the new world of mega-trade blocs. They examined ways we can compete at a time when high-grade scientific research has become the first requirement for staying in any business, no matter how low-tech it was once thought to be.

McMillan’s own paper best captures the urgency of our problem by comparing the Japanese experience with what hasn’t happened here. Canada and Japan currently enjoy total annual trade worth $18 billion, but, while

Japan is rapidly moving into its third technological revolution, we’re firmly stuck in a primitive, almost nonscientific mode, so that our main exports to Asia remain such raw materials as coal, wood and minerals. Wrote McMillan: “Canada is in the embryonic stage of developing a science and technology. Our institutions, resource allocation and policy commitments all reflect the century-old legacy of a resource-dependent, North American-based trade environment. In no other area do the 21st-century trends of globalization and Pacific Rim-based dominance in trade, capital and technology expose Canada’s anachronistic approach to profound structural changes.”

To prove his point, McMillan contrasts our situation with that of Japan, which in the past two decades has moved from a country with all the negatives—overcrowding, low quality of life, excessive pollution and a weak-kneed foreign policy—to one with all the wealth-creating advantages: a virtuous cycle of high productivity, long-run technology-and-profit horizons, enlightened management-labor relations, customer-driven production and a philosophy that emphasizes reinvestment of earnings into value-added technology. “What the Japanese have achieved has no precedent in world history,”

McMillan said. “They are doing what they have done best among all industrial nations since 1945: instead of fighting global trends, they have embraced them with a vengeance.”

Japan’s emergence as a superpower has been so swift that its fiscal might—rooted in advanced technology—is yet to be fully appreciated. Measured by total assets, 16 out of 25 of the world’s banks are now Japanese.

The fact that Japan has overtaken the United States as the world’s leading economic power is already a cliché, but the dimensions of that superiority remain impressive. The American share in the vital electronics sector has declined precipitously, to five per cent of consumer products in 1988 from nearly 100 per cent in 1970; phonographs are down to one per cent from 99 per cent; color TVs to 10 per cent from 90 per cent; machine tools to 35 per cent from 100 per cent. At the same time, federal research grants at two U.S. universities have fallen by 95 per cent and less than one-tenth of the funding available is relevant to commercial applications. Their high schools are short of 300,000 qualified math and science teachers, while engineering faculties at universities have as many as 1,800 vacancies. The most advanced research in the United States has been financed by defence-related projects, but even that has become dependent on Japanese electronics, with such high-profile projects as the new FSX fighter plane based on the patents of Tokyo’s Mitsubishi Heavy Industries.

Out of that and similar data, McMillan and the other participants at the Halifax conference, which for the first time brought together the federal and each of the provincial science councils and advisory boards, concluded that sponsoring more scientific research no longer is a choice for Canadians. Without it, we are doomed to become the Manchuria of the 21st century, supplying the raw materials that make other nations rich. The new instruments of international rivalry are no longer military strength or resource control but the ability to develop the most sophisticated methods of communication, cost and production control, and leadership in the many other technologies required to compete in a global, round-theclock marketplace.

To stay in the race, McMillan suggests that we will have to alter completely our educational system, at last spell out viable federal guidelines on scientific policy (and then arm them with legislative teeth), establish some industrial consortia to sponsor research with high commercial spin-off potentials, privatize government research labs and partially deregulate universities so that they can fund and direct their own research initiatives.

“Canada’s technological future is at a crossroads,” McMillan rightly insists. “The issue has far less to do with the Canada-U.S. Free Trade Agreement or nationalist hegemony. It has to do with answering the question of whether we want to remain a technological backwater based on low value-added commodities, or join the 21st century.”

Peter C. Newman’s Business Watch column will return in the Sept. 4 issue.