BoC monitoring protectionism, innovation

A senior Bank of Canada official says the central bank is seeing encouraging signs that exports and business investment are broadening and strengthening.

Deputy governor Timothy Lane said in a lunch time speech to the Saskatoon Regional Development Authority that international trade is key to Canada’s economic growth potential.

However, he cautioned the central bank is also keeping close tabs on the rise in protectionist sentiment in some parts of the world and what it might mean for the Canadian economy.

Lane noted that populist movements in some of Canada’s major trading partners are demanding new trade barriers and that such protectionist measures would undoubtedly mean less trade, which would reduce economic growth.

Ongoing talks between Canada, the United States and Mexico to renegotiate the NAFTA agreement began this summer.

U.S. President Donald Trump promised changes to the deal in his election last year.

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Creative destruction

Lane also talked about the economic winners and losers that come with technological advances, saying, “the rewards for innovation, particularly in the digital economy, often accrue to the few who own the related IP.”

He cautioned that tackling those issues are “not part of the Bank of Canada’s monetary-policy remit, which is to keep inflation low, stable and predictable.” He did acknowledge, however, how challenging those issues are.

“We can’t turn back the clock on technological innovation; nor is the answer to try to limit its scope by closing our borders,” he said. “What we can try to do is focus on supporting workers as they adapt to changing economic realities. That requires investments in retraining and lifelong learning as well as social safety nets.”

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He also noted that “another priority is to make sure that profits, including those derived from IP, can’t be shifted to avoid taxation. This includes stronger international co-operation—an area where the G20 has made meaningful progress.”

Read Lane’s full speech here.

Staff, with files from The Canadian Press

The Canadian Press is a national news agency headquartered in Toronto and founded in 1917.