Canada, Business and Partnerships

I am pleased to introduce Bill L'Heureux, Managing Partner and President of Hees International Bancorp. He is speaking on the subject Canada, Business and Partnerships.

Recessions end--eventually. And corporate executives and consumers alike are finding reasons for cheer in the latest upbeat economic numbers. Yet even as recovery begins to take hold, it's hard to shake a deep-rooted worry: That the North American economy has lost its edge.

Whatever the causes, and there are many, the economy has turned in a dismal productivity performance for two decades. Stagnant incomes and low productivity growth have led some economic commentators to ask the question: Should Canada and the U.S. have industrial policies to nurture and promote technology and industry? (If the label "industrial policy" sets off alarm bells, try substituting technology policy, competitiveness program or growth agenda.)

A recent issue of Business Week answered the question on the need for an industrial policy, geared toward the global economy of the 1990s, in the affirmative. The authors commented:

Competitive advantage no longer belongs to the biggest or those blessed with abundant natural resources or the most capital. In the global economy, knowledge is king. And those nations that excel at creating new knowledge and transforming it into new technologies and products will prosper in years to come.

The article's authors are quick to point out:

A knowledge-based growth policy doesn't call on government to pick winning and losing industries. Nor does it create ponderous bureaucracies or shelter stumbling companies from tough foreign rivals. And while the government may sow a lot of seed corn, it will be up to the private sector to risk its own money to develop commercially valuable ideas. It's the market that picks the winners and losers, not government.

Any discussion of industrial policy raises the prospect of increased interaction and dialogue--and perhaps even a partnership--among several of the major constituencies in society.

Inevitably, whenever there is a change in government and a new political party comes to power, one of the first orders of business is to call together the leaders of the four major constituencies--government, business, academe and labour. The agenda is usually very straight forward: How can we work more closely together in the future?

Few people dispute the need for more frequent interaction and meaningful dialogue among these constituencies. The benefits are obvious! The national agenda for this country can only be accomplished if there is a greater harmony of priorities and agreement about the role each must play on the leadership team.

Why does this interaction and dialogue not happen over a sustained period? Robert Ferchat, Chairman of Atomic Energy of Canada Limited, has a number of explanations. First, it is clear that each constituency has its own priorities and time-consuming administrative duties. Second, the tradition of dependencies and adversarial roles are barriers. Third, the metronome that governs the behaviour of each group is very different; the beats of the various constituencies are difficult to get "in sync" when shared problems are attacked. Fourth, in the North American economic theology, governments have only a limited role to play.

In the Anglo-Saxon model, governments should protect private property rights, then step back, get out of the way, and let individuals do their thing. According to Lester Thurow, Dean of MIT's Sloan School of Management: "Profit maximization will lead capitalism in the right directions." (Compare this theology with the economic strategies of Germany and Japan. In both countries, governments have pushed actively to throw coal into the economic steam engines. Governments have ensured that economic combustion did indeed take place.)

And, one final hurdle in the way of increased government-business interaction: Everyone has to agree on the rules of the game, the referees and how to split the proceeds.

Bill L'Heureux's address today--on the need for a co-operative approach, rather than a combative one, between government, business and the other principal constituencies--is very topical and timely. The Ontario Government's Speech from the Throne this week made numerous references to the need for co-operation with the business community. For many Queen's Park civil servants, the term "partnership" has become almost a mantra.

Bill L'Heureux brings to this discussion an impressive portfolio of credentials and experiences. By way of background, Bill left the law partnership of Tory, Tory, DesLauriers & Binnington in 1983 to join Hees International Bancorp as Managing Partner. He was named President of Hees in 1988.

Bill has degrees from University of Western Ontario and University of Toronto and has made a significant commitment of time and energy to such extracurricular and community organizations as Canadian Special Olympics, Lester Pearson College of the Pacific and St. Christopher Community House.

Bill, The Empire Club is a small independent association with a lively understanding of legal fees. Accordingly, at the request of The Empire Club directors, I've reviewed my introductory remarks with counsel. Bill, I think that you will agree with me that they contain no defamatory material or actionable statements!

Ladies and gentlemen, please join me in welcoming Bill L'Heureux to The Empire Club lectern.

Bill L'Heureux:

Mr. Chairman, distinguished head table guests, ladies and gentlemen. It is an honour for me to be invited to speak to you today. The Empire Club is an important forum for public discussion and I feel privileged to have this opportunity at such an interesting time in Canada's (and Ontario's) history. Thank you Mr. Chairman for your kind words of introduction. The name L'Heureux, as you may know, is French for "the happy one." As a businessman these days I often need to be reminded of that translation.

In 1965, Canadian writer, John Robert Colombo said: "Canada could have enjoyed: English government, French culture, and American know-how. Instead, it ended up with English know-how, French government, and American culture."

I chuckled when I first heard this quote.

I don't believe Mr. Colombo was chastising Canada or lamenting our lost opportunities. He was laying down a challenge to Canadians, through humour, in an effort to help us overcome some of our provincialism, our solitudes,--and inciting us to put our foot down for what we stand for.

Today, I want to speak about one of the things we stand for, are good at, and should be proud of. That is partnership. Voltaire said: "Moderation is the pleasure of the wise" and partnership is a concept that fits well with our view of ourselves as a moderate people, co-operative and understanding--the "gentle Canadians."

As Canadians, we're usually appreciated for our partnerships. We're good Commonwealth partners, we're conscientious United Nations partners, and more often than not, here at home, we're fraternal provincial partners. We certainly are partners when it comes to defending our nation, our trading rights and our democratic principles.

Look at our North American partnership with the United States. In culture, free trade and defence--you see three areas where partnership principles of trust and compromise must be applied or success will elude us.

And in certain of these areas, we are more successful than in others. For example, "the longest undefended border in the world" (6,420 kilometres, which is not in the Guinness Book of World Records, by the way) used to mean something. We used to cherish our partnership with the Americans.

But in general, do Canadians see themselves as dealing with important issues in a partnership sense? I don't think so. I think we are somewhat timid, somewhat parochial? We want protected jobs, but we also want the prosperity of a larger society. We want Canadian culture, but who's prepared to give up American television. Most of us want our children to speak other languages--but a vocal group of Canadians don't want language matters of any sort legislated.

Look at Canada objectively. Where else has such a remarkable confederation of diverse provinces ever lasted 125 years? Yet, in our federal-provincial relations, there's always a welter of rhetoric of local or personal interests--but no consistent priorities that you could call truly national issues that can hold us together.

Many Canadians do have a national perspective. For example, we appreciate Canada's geographical variety. We have Carolinian Forests in Southern Ontario--tundra and ice packs in the North--the young Rockies in the West--and the world's largest system of fresh-water lakes--the Great Lakes--all in our wonderful, enormous country.

Wouldn't it be great if one of Canada's big newspapers ran a box on its Front Page every day of the year. And called it: This is what I love about Canada. We could put a new fact in every day, about the greatness of Canada I have a hunch it could be easy to raise money to pay for the message.

Have you been watching Europe? It's nothing short of astonishing. And it's based exactly on partnership principles. Twelve European nations are harmonizing their markets, and another group of countries want to join them.

Let's put this into perspective.

The Romans unified Europe in the first and second centuries; Charlemagne did it again in the eighth century; Napoleon did it early in the 19th century, and the Germans took a stab at it twice in this century. In those cases, the invaders used the Vandal's manual on how to harmonize nations: Plunder first and ask questions later.

This time it's different. This time all parties seem determined to build a single Europe. Think of it, 12 powerful, proud, competitive and traditionally protective industrial nations have all signed up for a market partnership. They've looked at world trade now and in the future and decided that if the European nations don't hang together, they'll hang separately.

What they've worked out diplomatically is the equivalent of squeezing the Skydome through the eye of the needle. For starters, and this is as surprising as anything that has happened in Europe in 1,000 years, the 12 nations have agreed to let the bureaucrats act as final decision-makers for the European Community.

That turn of events has relegated national politicians to a back seat. As back seat drivers the politicians find themselves in a position of advisers to the bureaucrats, rather than vice-versa.

When you think about it, the arrangement seems to make sense. Unlike politicians, bureaucrats don't live and die by their loyalty to a particular region, nation, or special interest group. The Single-Europe bureaucrats--the Commissioners--make decisions to suit the mandate; and the mandate is to harmonize the markets.

For example, if Europe requires legislation that can be applied uniformly, the Commissioners have the discretionary power to draft and promote the appropriate bill.

Is there a lesson here for Canada structurally? Reverse the power between politicians and public servants? I don't know, Do we want to take a straw vote here today for putting more power in the hands of bureaucrats?

In any event, Europe is heading toward a single market, and on top of that there's a commitment to a political and economic union in the future. In the meantime, we in Canada seem to be going in exactly the opposite direction.

That is, we seem to be going in the opposite direction, at least politically. But in business, there are thousands of daily transactions, communications, and modes of transportation that are drawing us closer together.

I can't help reflecting on Europe, its centuries of war, and the success those nations are having with market harmony. How can our cultural differences and wrangling over the distribution of power be so chronically insoluble at a time when modem Europe is burying its ancient hatreds in the interest of a common market?

Let me bring you back from Europe to Canada--Ontario--to discuss government and business partnerships. First of all, both government and private enterprise, in my view, have got to understand that Canada's future as an important industrial power lies in a productive partnership.

I think you all know that one of Premier Rae's first statements to business was to look to government as a partner. He repeated that invitation in the Throne Speech last Monday. So far, Mr. Rae's a man of his word--a lot of partnership activity that started under previous governments, continues.

And Mr. Rae--according to the Throne Speech--is considering new initiatives. Some of the effort has been brought on by the recession. Some of it has been generated by Canada's Free Trade Agreement with the U.S., for better or worse.

But to be frank--and I know the Premier would agree with this--government and business must work together if we're going to maintain our very high standard of living and manage to pay for our substantial social and welfare commitments.

Canadians--particularly Ontario Canadians--want both: a high standard of living and a strong social net. So, to be productive, it's impossible for business and government to operate in air-tight compartments.

The NDP government is working with business. Let me give you a couple of quick examples.

About two years ago, the vice-chairman of a Scarborough manufacturer went down to Queen's Park to visit the Ontario International Corporation. (Never heard of it? Most of us haven't.) With him was an adviser to the national power utility of Iran.

Iran, not exactly a country known for its political stability; and bordering on Iraq, which only a year ago was up to its sand dunes in tanks and missiles.

Somehow, despite the tens of thousands of reasons that you might think would kill a potential deal with the Iranian power utility, the Ontario International Corporation, in partnership with several Ontario businesses, brought home a $900-million contract to build a power plant in Iran.

And Bob Rae's government knew what it was doing. Ontario demanded a cash deal because Iran has no line of credit with Canada.

I'm impressed.

And so are the consortium members, which include such Ontario manufacturers as Babcock & Wilcox and the Howden Group and two engineering firms, Acres and Monenco.

The new government of Ontario, with business, also operates the Manufacturing Research Corporation of Ontario, the Ontario Centre for Materials Research, the Information Technology Research Centre and the Telecommunications Research Institute.

These centres are partnerships with companies such as Bell Canada, Noranda, 3M, Westinghouse, IBM, General Motors and Imperial Oil, to name a few. And the partnerships include universities such as the University of Toronto, Waterloo, Queen's and McMaster.

Private enterprise has contributed nearly $16 million to these research centres, and so far the centres have produced 65 patents and 35 technical licenses. Not bad.

Furthermore, the recession of the past two years has caused business and government to work together to get companies back on their feet. Something we try to do at Hees.

For example, there's the Industry Adjustment Program--a partnership that tries to head off trouble before it arrives. And so far the managers of the Industry Adjustment Program believe they have saved more than 12,000 Ontario jobs since the beginning of the recession, and created, with private enterprise, another 6,000 jobs.

Surveys tell us that one of Canada's and Ontario's great strengths is our educated work force. And it's true. Economic success demands it. In my view, no industrial economy will ever exceed the level of a poorly educated work force.

But education must continue to improve. Nothing is more important than education to help this generation, the next generation and the one after that maintain our enviable standard of living.

But first let me tell you an anecdote.

A recent survey of students in industrial nations had the United States dead last in maths and sciences. Now we weren't far ahead, but imagine students from the most powerful economy in world history--students in the world's greatest export nation--dead last in maths and sciences.

But those same students ranked No. 1 in self-esteem. Imagine that, you have to love the Americans. We Canadians should look into that self-esteem thing.

There's no doubt that we have a well-educated and well-trained work force. In fact, in some situations, we're the world's best.

Example? The president of Toyota Canada and his Cambridge, Ontario, plant were given last year the award for the highest initial quality for all North American auto manufacturers and all Toyota plants in the world. Mr. Kunii, the president, was very pleased with this accomplishment, and told me the major reason for their success was the quality of the employees in the plant. Right here in the heart of Ontario.

One final word on government and business. While my partners and I are not directly involved in the new Ontario labour legislation, it certainly has captured the attention of the business community.

If you can believe what you read in the media, the proposed reforms have created a heck of a controversy. But it's gone beyond a debate about the specifics, or even the philosophy, of the amendments. I think it has become a symbol of the business community's concern that in the middle of this recession, the Bob Rae government is anti-business.

From my remarks today, you can see that I, for one, do not adopt that view. This government is trying hard to work with business.

However, about this particular piece of labour legislation, and this is not an original thought, it might be a good idea for the Premier to consider calling a time-out and send these proposals back to their intellectual parents--with a note--"needs more work." Mr. Premier, the business community is looking for a signal.

Then a joint business-labour task force should be appointed to study the Ontario economy and its long-term future, including new manners of conducting business and labour relations. Wouldn't it be lovely, if the relations between business and labour could develop into a partnership.

English know-how. French government. American culture. Maybe that's what we Canadians are today. So what. Mr. Colombo reminded us that, as a nation, we have a joint responsibility to develop and nurture our own economy, our own governments, and our own culture. And could we do it as a team--a partnership? Could we somehow forge strong links between business and labour--and government, and links between the provinces? Links--one at a time if necessary to hold us together--to build a new, prosperous and harmonious Canada?

I think we can. If people of good faith--you and me--start today. Then we will.

Thank you.

The appreciation of the meeting was expressed by John Campion, Partner, Fasken, Campbell, Godfrey, and a Director of The Empire Club of Canada.