Meeting innovation challenges critical for a better future

TORONTO—In its latest global ranking of innovation performance, the World Intellectual Property Organization ranks Canada 14th, a modest improvement from 16th position in 2015 but far from the fifth place position then-industry minister Navdeep Bains claimed his policies would achieve. The most innovative nations are Switzerland, Sweden, and the United States, with China rising fast to 11th place, compared to 29th in 2015. The report also found that the world’s five biggest science and technology clusters are now all located in East Asia: Japan, China, and Korea. Of the world’s top 100 science and technology clusters, 26 are in China. While Canada has moved up a notch in the global rankings, in two of the most important categories, our country has had quite disappointing outcomes. According to WIPO’s Global Innovation Index 2024, we ranked 20th in knowledge and technology outputs—knowledge creation, knowledge impact, and knowledge diffusion—while in creative outputs—creation of intangible assets, creative goods and services and online creativity—we have fallen to 25th position. These are two areas where Canada has to do much better if we are to prosper in the years ahead. Globally, the four largest areas of business research and development spending are information and communications technologies (ICT), pharmaceuticals and biotechnology, software and ICT networks, and automobiles. These are industries where, aside from auto parts, Canada lacks the world-scale companies it needs. But opportunity is there. Technological progress, the report says, “remained strong in 2023, particularly in health-related fields such as genome sequencing, as well as computing power and electric batteries.” However, it continued, “the rate of progress in green technologies lagged behind average growth for the decade, highlighting the challenge reducing supercomputers’ growing energy consumption and a slower reduction in renewable energy prices.” The report also found that technology adoption increased in 2023, “especially in 5G, robotics, and electric vehicles,” with penetration levels higher than a decade ago. Yet Canada is weak in investment in intangible assets, including research and development, and intellectual property, and in business investment in tangible assets, especially next-generation machinery and equipment. So far, efforts to correct these weaknesses have largely failed. If anything, the gap between our performance and that of our leading competitors is widening, not decreasing. North American trade deals did not bring needed change, and overdependence on oil and gas has made us complacent. In many areas, technology is advancing rapidly, leading to sharp falls in costs, and the ability to exploit technology. For example, the cost of sequencing an entire genome, based on American data, has fallen from $US100-million in 2001 to US$500 in 2023. Similarly, while the global average cost of wind power was 95 per cent higher than the cheapest fossil fuel power in 2010, by 2022 it was 52 per cent cheaper and, in the case of solar power, while it was 710 per cent more expensive than the cheapest fossil fuel power, by 2022 it was 29 per cent cheaper. In the case of lithium-ion batteries, the cost has fallen from nearly US$800/kWh in 2013 to US$139/kWh in 2023. Artificial intelligence, including semiconductors, also show similar advances, all of them potentially highly disruptive. The use of technology is also accelerating worldwide. Even though investment in connectivity in 5G networks only began in 2019, by 2023 some 38 per cent of the world’s population had access. Likewise, adoption of robotics is spreading worldwide, led by the electronics and automotive industries. Five countries—China, Japan, U.S., South Korea, and Germany—together accounted for 74 per cent of robotics in use in 2022, with China’s share expanding and that of the U.S. and Germany declining. For Canada, there are two big challenges. The first is to build the businesses and capacities to participate in the industries of the future, while the second is to become a leader—rather than a laggard—in the adoption of the most advanced technologies. Successfully meeting those challenges is critical for a better future for our country. Failure would mean a diminished nation, hard-pressed to generate the wealth to support valued public services. So what to do? First, we need a better understanding of why we are not doing better. The Institute for Research on Public Policy, a Montreal-based public policy organization, is the latest to promise answers. In a new project, Should Governments Steer Private Investment Decisions? Framing Canada’s Industrial Policy Choices, the IRPP promises to explain what constitutes a successful industrial policy—innovation policy would be a better description—show how existing industrial polices have fared, tell us how we can improve on existing industrial policy efforts and whether we should do more, and outline how much industrial policy can we and should we undertake. But it says this will be a multi-year project, so no answers soon. “Our interest in industrial policy stems from three overarching realities,” the IRPP explains. “Canada faces real challenges to which it has a limited window of time to respond and risks losing out on critical opportunities as both allies and rivals invest heavily in their own industrial policies; governments in Canada are already pursuing industrial policy and it is unclear whether their decisions are adequately coordinated or based on a coherent strategy; and there has been limited research on industrial policy in Canada.” These are all important reasons and the big question is why it has taken so long for politicians, policymakers, think tanks, and business groups to recognize we have a problem. The challenges have been staring us in the face for most of the 21st century. We are in the midst of a disruptive industrial revolution, facing daunting prospects if we fail to deal with climate change, and must accommodate an aging world. While economic growth from innovation won’t solve all these problems, it will make it easier to deal with them. This makes innovation-led growth a national priority, though that’s not fully recognized yet. Let’s hope things won’t get worse before we start to make them get better. David Crane can be reached at crane@interlog.com. The Hill Times