Former Research in Motion co-CEO Jim Balsillie says that joining the data economy of the 21st century will be a challenge for Canada, one which just got a whole lot tougher thanks to the newly negotiated USMCA trade agreement.
The months of dealmaking and bargaining over a revamped North American Free Trade Agreement came to a conclusion last week with the announcement of a new United States Mexico Canada Agreement, but the debate has only begun on how the new deal will impact Canadians and help shape the country’s economic prospects for years to come.
Key concessions on issues like dairy and Canada’s ability to further trade relations with foreign parties like China have already been flagged as trouble spots, along with concerns that the new deal doesn’t do enough on environmental and human rights fronts.
But it’s the rejigged rules surrounding intellectual property and the movement of data that mark the USMCA as a step backward for Canada, says Balsillie, founder and chair of the Centre for International Governance Innovation.
“I think it’s a mistake to call it NAFTA 2.0. I think it’s NAFTA 0.7. It’s degrading and we’re worse off from it,” says Balsillie, in conversation with BNN Bloomberg.
“It was a difficult situation and there were hard tradeoffs and one of the things that we’ve sacrificed in the tradeoffs was innovation,” he says. “Specifically, they raised the IP rights and protections that benefit those who own IP, and Canada is by far a pauper on these things, which means that we’re going to be permanently writing more cheques than collecting them.”
On the IP front, the USMCA is said to look a lot like the Trans-Pacific Partnership (TPP) signed by Canada earlier this year, as the new agreement calls for increases to data protection and copyright term lengths, new rules regarding counterfeit or pirated goods and stronger trademark infringement regulations.
Balsillie says that beyond the USMCA, Canada membership in the new data- and idea-based economy is seriously under threat due to a lack of government policies encouraging the creation of homegrown IP.
“You can’t succeed in the innovation economy without understanding data. The eight most valuable companies in the world are all data-driven,” he says. “So if you want to look at the reason why we’re having issues with scale-ups and our innovation outcomes and our productivity, look no further than our lack of sophistication on policies for accumulating IP and data assets in the 21st century economy.”
“Performance in the ideas economy means that you have to generate intellectual property after you invent something, so the accumulation of assets and data are the central part of it. The S&P 500, about 90 per cent of its value now is intangibles, up from about 16 per cent in the mid-70s,” Balsillie says. “Our policy community has failed us in understanding that this needs to be a priority.”
On the related issue of attracting tech giants like Google and Amazon to set up shop in Canada, Balsillie contends that it will further the flight of data and patents to other countries.
“You have to understand that when these companies come here, they’re just opening cheap foreign branch plants and they exfiltrate all the IP and data to the benefit of their home country, and all the taxes are paid there and all the wealth effects are there,” he says. “This is why Canada and Ontario and Toronto have a revenue problem. If you don’t participate where the money is, you can’t afford new roads and subways and hospitals and the things we value.”