- The Empire Club of Canada Addresses (Toronto, Canada), 7 Feb 1991, p. 271-282
- Pottie, Dr. Ross F., Speaker
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- Canada's growing inability to compete with the rest of the world, and some reasons why that is happening. A consistent trade deficit in the higher value-added goods. Canada's rating in the last World Competitiveness Report. The strong correlation between spending on innovation and success in world markets. What innovation means. Reasons for Canada's low level of spending on research and development. Some statistics. A review of what has been done; the little impact it has made. Reasons why our progress has been so slight. Learning from other nations. The need for leadership: economic, financial, and technical. The lack of a national consensus, of a will for excellence. Finding ways to build on our strengths and achieve a national vision acceptable to all Canadians. Finding ways to capitalize on sources of excellence in Canada. Some suggestions for what we need to do to support research and development, and innovation in Canada. Initiatives of the National Research Council over the next five years, focusing on three broad areas. NRC as a catalyst only. What else is needed in all three sectors: industry, universities and government. A national strategy supported at ever level and funded on a long-term basis.
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- 7 Feb 1991
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- Dr. Ross F. Pottie, Executive Vice President,
National Research Council of Canada
THE COMPETITIVE EDGE: CANADA'S R and D STRATEGIES FOR THE GLOBAL MARKET
Chairman: Harold Roberts President
Our guest speaker today was to be Dr. Pierre O. Perron, President of the National Research Council of Canada. Unfortunately, Research and Development has not yet come up with a cure for the current flu bug that has attacked so many of us over the past few weeks, nor has it found a solution for the laryngitis that has prevented Dr. Perron from addressing us today.
In his place, Dr. Perron has sent Dr. Ross F. Pottie, the Executive Vice President of the Council. A man of distinction in his own right. A native Nova Scotian, Dr. Pottie has a Summa Cum Laude PhD in Chemistry from Notre Dame University. He is a winner of the Governor General's Medal and has had a post-doctoral Fellowship from Notre-Dame and the National Research Council of Canada.
Aside from beginning his career with Dupont, U.S.A., from 196064, Dr. Pottie has worked for the National Research Council in Ottawa and Halifax. His field of endeavour has taken him into science & technology, treasury, physical sciences and engineering and laboratory work.
Dr. Pottie's curriculum vitae reflects the experience in a broad spectrum of Research and Development covered by the Research Council.
In the light of the announced plans earlier this week by the Governments of Canada, the United States and Mexico to expand the boundaries of the Free Trade Agreement, the need for Canada to develop a leadership in Science and Technology is even more paramount.
Part of the mandate of the Council is outlined in their 1989-90 Annual Report:
"As a source of basic scientific and engineering strength for the national interest, N.R.C. carries out R and D in collaboration with universities, other government departments and private sector organizations to produce significant benefits for the people of Canada in such diverse areas as health care, public safety, transportation, astronomy, environmental issues, and in the fundamental quest for new scientific and technological knowledge."
In a time of continuing rapid change and uncertainty, Canadians more than ever need to know their strengths and to believe in themselves.
Dr. Pottie is here to tell The Empire Club of Canada what the National Research Council is doing and would like to do to help.
Dr. Ross E. Pottie:
Thank you for that kind introduction.
First of all, I'd like to pass on the apologies of NRC's President, Pierre Perron, who is ill and unable to be here today. I know he was very much looking forward to speaking to you. I am pleased to be here on his behalf, representing an organization that celebrates its 75th Anniversary this year. Over the years, the National Research Council has earned recognition not only in Canada but around the world. So I'm especially pleased to address The Empire Club, an organization with an equally proud tradition whose name commands the same level of respect.
NRC's association with your group actually goes back to our roots, and so I see this as something of a "return engagement." Professor A.B. Macallum, the first Chairman of the National Research Council, addressed The Empire Club 75 years ago. He had a strong and urgent message on that occasion. In his words: "For this nation to develop, all of us must crusade for research. I have been crusading in this country; I have been crusading in the University, and now I am going out into the larger field to crusade, and I call on everyone to join me in the crusade." The crusade he spoke of with such passion back in December 1916 was a ringing plea for research. Back then, The National Research Council was only a few months old. Yet, Macallum's message sounds familiar today.
We haven't been shy about urging the importance of research and development during the past three-quarters of a century. But today our message is more urgent than ever. You see, Canada's relative well-being in recent decades has created a fool's paradise. And I'm deeply concerned that we'll all wake up one morning to a rude surprise. We'll find the prosperity we Canadians take for granted has vanished and our standard of living will no longer support the lifestyles and social programs we value so highly.
What could possibly make this happen? Quite simply our growing inability to compete with the rest of the world. The gap between Canada and our economic rivals has been steadily widening. And the future prospects for our economy are weaker than ever. One of the main reasons is that Canada's resource-based economy is a poor foundation for our future success. In fact, The World Economic Forum has compared Canada to a third world country, importing manufactured goods and exporting raw materials. Year after year we're running a consistent trade deficit in the higher value-added goods--that is medium and high technology products. The last figure I've seen is $15 billion. That's half of our total national deficit right there!
The World Competitiveness Report recently rated us last among the Group of Seven industrialized nations in industrial efficiency, and next to last in "Future Orientation." Our manufacturing labour productivity is half that of Italy and a third that of Japan. In short, Canada is simply not winning in the world economic games!
How can this be so? The yellow pages are full of businesses; our stock exchanges list hundreds of Canadian companies. Surely that's a good sign. Unfortunately not good enough. Canada's economy grew by only 3 percent in 1989, 1.7 percent in 1990 and is expected to slow to just over 1 percent this year. In today's free-trade environment and recessionary climate it is difficult to see how these trends can be reversed.
I heard a comment recently by economist Dian Cohen, whose words summed up our bleak prospects very well. She stressed the importance of a national commitment to innovation but wondered whether Canada could find the will to take action. And she warned parents that if their children chose technical careers, they'd better be prepared to visit them in foreign countries--because at the rate we're going that's where their jobs will be. I don't relish the thought, but she may be right. Sadly, many of our industrial sectors are behind the pack. Most of our goods and services are supported by technologies that have passed their prime. The crux of the problem is our low level of commitment to research and development.
Study after study has shown, both on the national level and within industries, that there is a strong correlation between spending on innovation and success in world markets. And innovation, let me stress, means far more than breakthroughs in pure science. It also means adapting and modifying processes and knowledge developed elsewhere.
One reason for Canada's low level of spending on R and D is what might be called our industrial profile. We have a large number of resource-based industries--they tend to make lower outlays on innovation. And we have many small and medium-sized businesses--they often find it difficult to justify expenditures for extensive research. There are other reasons, of course--the number of branch plant companies in Canada, our tax structure, the scarcity of venture capital, and even our cultural neglect of scientific and technological activity. But the hard fact remains--we're simply not investing enough in innovation and we're not investing where we should.
We've all heard the statistics so often now we can almost rhyme them off by heart. As a percentage of Gross Domestic Product, our spending on research and development is nearly the lowest among the G7 nations. Countries such as Japan, West Germany, and the United States spend proportionately at least twice what we do. The Japanese file over 8 times more patents per capita than we do. The Germans 6 times. And what's worse, over 90 percent of patents filed in Canada come from abroad. In Japan 8 out of every 1,000 employees is a research scientist or engineer; in Canada it's half of that. We're told Canada will need an extra 10,000 to 20,000 engineers by the end of this decade.
With evidence like this, it's clear that Canada's prospects for the future are poor. Unless this country spends more on developing its brainpower--unless it invests more in primary research--and unless it takes its destiny into its own hands by supporting the kind of intellectual capital that will provide growth for developed nations, Canada will keep moving closer to economic catastrophe.
I'm concerned, however, that in the face of these realizations, we in Canada often do little more than recite our R and D statistics and performance indicators like a mantra. Repeating them constantly, telling each other the bad news. Almost believing that if we chant the numbers long enough they will magically change for the better. Sadly we seem incapable of decisive action to make that happen.
I'm reminded of another time some years ago when our national pride was hurt so much that we couldn't ignore it. ° We were all told then that the average 60 year old Swede could run circles around a younger Canadian. That wasn't easy to take, and in that case we actually did something about it. Thanks to a basic change in our attitude and a lot of hard work, not to mention Participaction, Canadians turned the tables. I'm told that the 60 year old Swedes now have a hard time keeping up with us. The same sense of national spirit and commitment is needed to work our country's R and D abilities into shape. I'd like to tackle that issue and give you my views on what's missing and what we can all do.
To start with, I do recognize we've tried. We've appointed Royal Commissions, had national conferences, given clarion calls to the provinces and made many attempts to develop a national science policy and a national industry policy. We've reorganized our federal departments to sharpen our focus on industry, science and technology. Yet we seem to have made little impact.
Why has our progress been so slight? Are the actions wrong or misdirected? Or is it, as I believe, that these issues present a more significant challenge for a nation like Canada than we have been willing to admit or have been willing to commit to? How have other nations overcome their barriers to achievement to emerge as global "winners?" Why has Japan risen to become a model of economic success? How has Germany focused its national will on accepted economic priorities and forged ahead to a position of dominance in the currently unifying Europe? What accounts for the almost lightning emergence of Korea as a manufacturing centre of world stature? And what's behind the recent miracle of the technological transformation in Spain?
What can we learn from these nations that seem to be doing better than we are? Most obviously, they are all willing to invest in R and D as a national priority. Take Japan for example. They've doubled their industrial R and D spending since 1980. But spending the money is the easy part. What is much harder is accepting that R and D investment is a priority and finding the national will to make that investment. That's what these countries really have going for them. Put quite simply, they all share the ability to build a national consensus and the ability to focus on narrowly defined industrial choices. Perhaps above all, they know how to move forward and stop re-examining the divisions of the past. They share a willingness to build a strong partnership among industry, financial institutions and government at all levels. What's important here is that this partnership is accepted and supported by both investors and workers.
Let me say it another way. Their successes have resulted from clear but differing expressions of national leadership, an element which seems lacking in Canada today. Instead, Canada appears preoccupied with areas that divide, rather than unify this nation.
When I talk of leadership, what do I really mean? Is it the political leadership of nationhood so familiar to the days of Sir Wilfrid Laurier when he spoke of the 20th century belonging to Canada? Or is it more of a declared partnership within the nation to work towards a common goal? I recognise that leadership cannot be shared. Leadership must respond to a clear vision and a firm understanding of how to move to that vision. But leadership breeds leadership and, in the end, can create that commonness of purpose we call national consensus. Our very history as a nation provides rich examples. Sir John A Macdonald showed true economic leadership with his vision of a united Canada linked by a national railroad. Donald Smith, later Lord Strathcona, picked up that vision of a national railroad and provided the financial leadership to make it possible. Finally, Sir William Van Horne added the technical leadership, putting in place the engineering skill needed to convert that vision into physical reality. All are examples of leadership, yes, but built on a declared and supportive partnership which gave us the beginnings we are so familiar with.
I do not believe we have today such a clear path to national consensus. We seem to have lost the ability to work together to choose those components of excellence in Canada that will allow us to achieve this consensus. It becomes difficult, therefore, for you in the private sector or for me and my colleagues in the public sector to build on those points of excellence. I believe the time is now urgently upon us to start to rebuild a national consensus. And we must begin that building by working together and focusing the available expertise on targets of opportunity we can all agree on.
We often spend a lot of time in discussions like this talking of the resources Canada is spending on research and development, on technology transfer, and on developing an appropriate base of highly skilled manpower. As I said before, the usual pattern is for us to examine how far we are from some arbitrary spending target, and try to pin-point the main problem. Invariably we find that instead of inching forward towards our goal, we are slipping back a little farther every year.
Evidence is that the Government is doing more than its fair share but is probably not spending enough in absolute terms. Today, Government spends about the same as industry and accounts for just under half the R and D spending in Canada. In 1989, the Government spent $2.5 billion on R and D--that is twice what it spent on R and D ten years ago. Relative to Canada's Gross Domestic Product, this outlay is comparable to those of some of the leading OECD countries. But what about industrial R and D? In Canada, industry accounts for only about 50 percent of our R and D. In countries like the United States or Switzerland industry performs more than 70 percent of their R and D. And the sad fact is that only about 3 percent of Canadian manufacturing companies do any R and D at all.
How can we not wake up to the gravity of our situation? We must have a greater sense of urgency and fix R and D as a national priority. We must have the courage and the national will to set our priorities and stick to them.
We should not argue about what we all recognize to be true. Instead, we need to find a way we can build on our strengths and achieve a national vision that is acceptable to all Canadians. We must find a way to capitalize on the sources of excellence in Canada. And we must find a way to forge these into economic strength. If we are to profit from the technological dimensions of our opportunities, we must apply all of the scientific and engineering competence we can muster.
Much of our national strength in science & technology is in government laboratories. Laboratories whose benefit is often badly undervalued. Considering the scarcity of R and D resources elsewhere in Canada, these are a national treasure, a treasure essential for the future. Yet we have neglected this splendid resource for many years. Our country, through its governments, has failed to identify priorities, has not made the tough choices of where we should concentrate our strength. Instead, in the absence of a national consensus, we have tried to give even treatment to all of our efforts--to winners and losers alike.
This has led to a lot of hard choices and a grinding down of our valuable R and D resources. At NRC we have had to make many tough choices in recent years. We chose what we could do best with the resources we had. We chose what we understood was needed by the country now and in the future. And we swallowed hard and made the difficult decisions to close down the rest. It wasn't easy, but I believe our actions have increased NRC's overall strength and given us the clarity of purpose to meet the national challenges ahead. There is every indication now that the National Research Council's programs can spearhead the changes that are so critical to this country's future. Our initiatives which I'll discuss in the remaining minutes, depend on your support for their success. And they depend above all on the cooperation of Canadian business, universities and governments.
First, who are we and what do we do? Put simply, NRC is~ Canada's leading science and engineering organization. We're 3,000 strong with an annual budget of over $400 million. We have laboratories and other technical facilities to serve Canadians in all regions of the country. We're there to support Canada's science and engineering activities; to do Research & Development; to stimulate investment in R and D; and to ensure vital expertise and knowledge is available where needed. Our challenge is to work together with all R and D players in Canada to raise Canada's competitiveness and preserve our economic well-being. Next week NRC will be launching a new Long Range Plan. The goal of that Plan is to improve Canada's competitive position. By the end of this decade, we intend to double the R and D we stimulate through partnerships with industry and academia.
Over the next five years we'll focus on initiatives in three broad areas.
First, we will maintain and strengthen world-class research. The National Research Council's top priority is to support its employees in world-class R and D, and to support such efforts in other sectors. This research excellence gives NRC the crucial base of knowledge and expertise needed to serve its clients and partners.
Second, we will work in partnership with industry and universities. Much of what we undertake is what we call "pre-competitive research." In the end several firms may share a common base of new knowledge, but choose to develop it in different ways. The result, as we've found in the past, is a strengthened position for all the businesses involved. NRC's partnerships will deal both with the research itself and the special people required to support it. A well-trained, technically-skilled workforce will be a key element of industrial capability and Canada's ability to increase R and D investments. NRC's Plan will see our laboratories provide a range of training programs offering unique on-the-job experience. In this way, NRC will enhance its contribution to the national pool of highly skilled people.
Third, we will work to develop Canada's competitiveness. Among other contributions, we will provide facilities and research for firms that may be too small to justify the outlay for researchers and elaborate equipment. And we will strengthen our world-renowned Industrial Research Assistance Program.
I can give you many examples of the kinds of results we have achieved. For instance, NRC has recently helped create the Solid State Optoelectronics Consortium. It brings together several firms in the communications hardware business to develop the next generation of technology for optical chips--which will replace current microelectronics. We have also brought together Canada's best loudspeaker manufacturers in a joint project to develop "smart speakers"--that will adapt automatically to provide top-quality sound in any room. And we are working closely with the plastics industry and their industry association, the Society of Plastics Industries of Canada, towards priorities the industry has defined for itself. I could go on. But these, and similar efforts elsewhere, can only be the start. There is much, much more that needs to be done.
Our bottom line? To spur further activity and encourage independent research and development in important areas of competitive advantage for Canada. Our new Long Range Plan underlines the fact that NRC has the mandate and the strength to lead the way in important technological areas. I believe too that we have the confidence to do so, and I encourage industry and other partners to join with us to sharpen Canada's competitive edge.
In the final analysis, however, NRC can only be a catalyst. Our budget and efforts are no substitute for outlays by business and others. We can't achieve technological superiority on our own. All three sectors--industry, universities and government--will have to make a commitment to the same national goal. Industry must devote more resources to R and D--recognizing that such expenditures may produce real gain only in the long-term. Businesses now more preoccupied than ever by the bottom-line will no doubt see R and D investments as expensive, particularly in times of recession. But failure to spend on R and D will be much more costly in the long run.
Most of all, government must champion the R and D cause. The Minister of Finance for Canada is right: we must do something about our fiscal situation. There's no better way to bring about long-term financial health than by supporting innovation.
We need a national strategy supported at every level and funded on a long-term basis. The joining together I have been talking about will require all the partners to attain a degree of trust in each other that certainly won't be easy, given the experience of recent years. But if we do not develop that trust and that ability to work together, to plan together, to make choices together, then we shall be back to contributing to the words but failing in the actions.
We all must realize that the stakes are high, and that we as Canadians have much resting on the decisions. Our future well-being as a nation demands a strengthened commitment to research and development.
I trust that 75 years from now my descendant at the NRC will address The Empire Club and praise this generation for its foresight.
The appreciation of the meeting was expressed by Robert Brooks, Executive Vice President, Bank of Nova Scotia and third Vice President, The Empire Club of Canada.