Question B

It has been argued by some authors that there are principle economic weaknesses that prevent Canada from responding to a rapidly changing economic environment. Discuss what the weaknesses are and how they have hampered Canadian competitiveness. Finally, offer your own assessment, drawing on course materials, of this argument.

There are numerous economic weaknesses that the author has argued. This essay mainly focuses on these flaws and how they are hampering Canadian competitiveness. Firstly majority of the companies in Canada are foreign owned or foreign controlled. From manufacturing sector including auto, chemical, and electronics to giant retail stores such as Wal-mart, Costco, Sears, Hudson Bay, etc are all foreign owned. In automobile sector GM, Ford, Chrysler, Toyota, Honda, etc dominates the auto industry in Canada. The automotive industry employs 158,302 people in automotive assembly and component manufacturing, and another 336,212 in distribution and aftermarket sales and service[1]. These foreign operated companies are extremely aggressive in nature, tough for domestic companies to compete and have monopoly over Canadian market. In addition they are usually productive than domestically controlled companies.

Equally important it seems that foreign industry has assisted Canadian economy to become stronger and employ Canadian, however Government studies revealed that foreign enterprises had generally employed Canadian capital to expand their resource and manufacturing concerns rather than bringing new capital into the country to fund growth[2].Therefore foreign control in Canada directly affects the economy and has prevented the capacity of domestic industry to be innovative and competitive.

Secondly Canadian corporations or firms are outsourcing all or parts of their company to foreign countries where wages are cheaper which is another economic weakness. The wages in Canada differs from province to province and are expensive compared to other countries such as China, India, South American countries, or Asian countries. In Canada almost every financial institution has outsourced their Information technology, data processing, customer service, departments to foreign countries. In 2002, CIBC inked a $2 billion contract with HP to provide it with comprehensive IT services over the next seven years[3].As a result Canadian will lose the job opportunities they have due to outsourcing.

Thirdly, globalization, NAFTA and free trade also have negatively impacted Canadian economy. Goods or merchandise manufactured by different countries are entered into Canada which is usually cheaper than Canadian made. People usually tend to buy reasonable priced products than the expensive ones made. Again the higher prices are basically due to labor wages and higher taxes in Canada compared to other developing countries from where the products are imported. This directly hampers Canadian market and its competitiveness because people are not buying products from the domestic companies which forces small business to shut down their businesses. Another example is that some authors have argued that Canadian are losing their jobs or are taken away due to globalization or free trade. Citizens from developing or under developed nations enter Canada seeking for jobs, and are willing to work under minimum wages which is a huge disadvantage to Canadians and unemployment rises as well. For instance McDonald and Tim Horton are contracting workers from other countries. In the same way skilled worker or professionals such as doctors, nurses, accountant, etc are migrating to United States or overseas because the salaries paid in those countries are way higher than in Canada. This is also a weakness of our economy.

The other weakness is when Canadian dollar rises. Usually when the dollar value goes up it states how strong the economy is. But there is a flip side to this as well. Canada exports 74.9%[4] of its total export to states, therefore as soon as our dollar value increases; the export goes down and negatively affects our economy. American businesses minimize their business with Canada because it is more expensive to do business and import goods to their country. Also due to the strong dollar value Canadian tend to go to States or shop online taking money away from our economy because the goods and services are cheaper than Canadian market which is understandable. This also means people not buying merchandise from our own market and circulating the money in Canada which hurts Canadian businesses.

Economic weakness such as foreign ownership, outsourcing, trade liberalization and the Canadian dollar value has equally hampered Canadian economy and its competitiveness.

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[1] http://www.ic.gc.ca/eic/site/auto-auto.nsf/vwapj/cai-iac-pamphlet-brochure-stats2007_eng.pdf/$file/cai-iac-pamphlet-brochure-stats2007_eng.pdf
[2] Understanding Canada
[3] http://www.cbc.ca/news/background/economy/outsourcing.html
[4] http://www.ic.gc.ca/eic/site/cis-sic.nsf/eng/h_00029.html