Why Mexicans Don't Drink Molson. Andrea Mandel-Campbell

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СКАЧАТЬ Neil Tate. In 1995, Canada was the leading destination for Chinese outward investment. Today, it doesn’t rank among the top ten.

      “Canada will just become a nice, pleasant country to visit,” says Fred Lazar, of the Schulich School of Business. “We’ll have resources and some large companies coddled by government. More and more, foreigners will wonder why they even bother, and the relative standard of living will continue to decline.”

       THE TIES THAT BIND

      The thing about Gordian knots is they are virtually impossible to unravel. When King Gordius of Phrygia tied the first one, in homage to the god Zeus for making him monarch, the mass of woven bark did not reveal a single exposed end. The intricacy of the knot became a thing of wonder and eventually prompted an oracle to prophesy that the first to untie it would be the next ruler of Asia. The knot remained intact until the arrival of Alexander the Great, who promptly unsheathed his sword and sliced through the bundled fibre. The rest, as they say, is history.

      The answer to Canada’s own conundrum could be just as deceptively simple. It’s not about coming up with convoluted “innovation agendas,” productivity perks or even tax-relief schemes tied to the next election. It’s about breaking the ties that bind and getting out of our Canadian comfort zone. “What’s missing is a bit of moxie,” says Interbrand’s Jeff Swystun.

      “The biggest question facing Canada is, do we want to be a player?” Adds federal trade commissioner Bill Johnston, “At the root there has to be ambition, and it comes from having a passion in the first place. The question is whether as a people we have that passion.”

      If the answer is yes, then the surest way to enter the big leagues is, well, to join them. Trade and foreign investment, in particular, are crucial to being globally competitive. By outsourcing, offshoring and manufacturing abroad, companies can lower costs and boost productivity, resulting in higher profit margins and higher wages. Foreign exposure not only allows companies to access new markets and new technologies, but it hones competitive skills, driving innovation and nurturing managerial know-how.

      According to Stephen Poloz, senior vice-president and chief economist at state-run Export Development Canada, “foreign investment by Canadian companies is the biggest factor pointing to productivity gains.”⁵⁹ A study by td Bank shows that trade-oriented Canadian firms increased their productivity from 5 to 12 per cent between 2001 and 2004, whereas firms geared solely to the domestic market suffered a decline of 0.4 to 10 per cent.⁶⁰ Outward-oriented companies, as numerous studies have shown, are not only more productive, but enjoy higher growth and a better return on capital.

      Canadian Manufacturers and Exporters, as part of an action plan to confront what it describes as a “crisis” in Canadian manufacturing, is recommending that Canada not only dramatically increase the share of exports directed outside the United States, but also double the annual growth of outward investment to 16 per cent by 2020. The two goals are highly complementary. Every dollar spent on foreign investment generates on average two dollars in future trade. For fast-growing developing countries, the return is even higher — between three and six times the initial investment.⁶¹ Foreign investment creates “trade bridges,” says Poloz, “and once they are built you can’t help driving on them.”

      The economy as a whole also benefits from repatriated profits and the redeployment of the domestic labour force to more sustainable high-value-added jobs. “There is always this agonizing debate about those people who lose their jobs, and nobody talks about the fact the whole growth curve moves outward and makes everything better,” says Poloz. “Everyone is better off in this thing, and we know it.”

      Just look at the United States. Over the past fifty years, U.S. manufacturing output has increased by a factor of six while its share of the workforce dropped from 31 per cent to 11 per cent, says Poloz. And while millions of manufacturing jobs were lost between 1998 and 2003, close to six million new service-sector jobs, mostly professional and high-paying, were created. (A further 5 million non-manufacturing jobs were added from 2003 to July 2006.) Many of the job losses and much of the concomitant surge in productivity, he says, can be traced to investment abroad, with U.S. offshore subsidiaries representing 37 per cent of all U.S. imports and generating $3 trillion in annual sales.

      If Canadian companies want to compete in the United States they will need to follow suit— and not only to service their American customers. The real competition is coming from the South Koreans, Taiwanese, Japanese and others who are harnessing China’s cheap manufacturing might, says David Fung. A single Taiwanese facility, Shenzhen Foxconn, a subsidiary of Hon Hai Precision Industry, shipped us$8.3 billion in exports from China in 2004. “Everyone is using the competitive Chinese manufacturing infrastructure to take over our American market. By the time we figure it out, it will be a bit late,” says Fung. “If we are willing to fight with one arm tied behind our back, it’s our choice. The Asian train is coming down the track. We can stay on the track and get rolled over, or we can steer the train.”

      The difference between being in the driver’s seat and becoming a casualty of the commodity aisle is the ability to source people, materials and technologies internationally, says Michael Novak, executive vice-president of SNC–Lavalin. It allows companies to keep their head offices in Canada and to focus on value-added components, such as design, branding, intellectual property and managerial knowledge, that keep them one step ahead of the competition. “We have to see ourselves as managers of a global supply chain, and we have to keep moving up that chain,” says Novak.

      For Fung, who has made his fortune stitching together international projects that might, for example, marry European technologies and Chinese venture capitalists with Canadian resources, the next rung in the ladder for Canada should be as a global go-between in the tradition of Switzerland or Hong Kong. Neither location has much in the way of natural resources, yet both are international arbitrageurs par excellence, parlaying financial and managerial expertise into global might.

      “The Swiss are smarter then we are. They manage to use our resources to make money for themselves,” says Fung. “Fortunately or unfortunately, we are spoiled by our own wealth. The hope is, more people will realize we don’t need to hack trees down to make a living. We can use our brain power.”

      According to Amos Michelson, we already do. Former CEO of the Vancouver-based digital printing company Creo, Michelson argues that Canadians have superb technical skills and are relatively more productive than their American counterparts. He notes that while Canadians work 75 per cent of the hours of someone in, say, Silicon Valley, they are paid half as much. The upshot is a “cost performance that is much better in Canada than in North America overall,” he says. “And you get great people.”

      The country’s real weakness, he says, lies elsewhere. Unfortunately it is the key to unravelling our own Gordian knot. Michelson, who navigated Creo’s ballsy breakout from $20 million in sales in 1995 to becoming an $800 million challenger to global leaders like Agfa and Fuji before being bought out by Kodak in 2005, doesn’t believe Canada has the raw material necessary to produce high-tech successes like, for example, his native Israel does.

      The war-torn, desert-parched spit of land of 6.3 million people is a hotbed of technological innovation, with more high-tech listings on New York’s NASDAQ exchange than any other country except the United States. While Canada is flush with all kinds of advantages that other countries might only dream about, it lacks the one thing Israel has in abundance: drive. “Israelis are enormously aggressive in their desire to achieve something. The U.S. is somewhere in the middle, and Canadians are at the other end of the spectrum,” says Michelson. “We’re nice. But business and nice don’t work. Some people do whatever it takes to win, and other people just stop. That’s why there are not a lot of important companies in Canada— people are not willing to walk the distance because it’s not important to win.”

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