TORONTO—Prime Minister Mark Carney has got it right. We are going to have to live with a United States that seeks to impose a zero-sum relationship and one that bolsters the U.S. economy at our expense, including the jobs of Canadian workers. Our trade negotiators are doing their best to negotiate a new trade deal, but, as Carney has acknowledged, it will come with a price.
So what to do? This is where Carney is right: Canada should focus on what it can control, and there is much that we can do. Much of this is set out in the Liberal platform: reduce interprovincial trade barriers; diversify trade; build needed infrastructure; improve the speed of regulatory approvals, from energy projects to new drugs; invest in skills; accelerate housing construction; identify and support major nation-building projects; buy Canadian in government procurement; reform the tax system; transition to a green energy; build a defence industrial base to meet our defence needs; pursue an Arctic strategy; and invest in the needed infrastructure for the AI and quantum economy for the future.
If we want to be a prosperous and sovereign nation then big change is needed. It will be disruptive, but unavoidable.
Many changes are long overdue, even without U.S. President Donald Trump. For some time, Canada has been falling behind. As other nations innovate and grow, and new economic and technological powers emerge with sweeping changes to the geopolitical and technological landscapes, Canada has failed to keep up—too focused on debt to sustain consumption while neglecting innovation and investment in new industries and companies. While productivity is the critical source of rising living standards and generation of wealth to support needed public programs, such as health and education, Canada has had one of the worst records in innovation and productivity among the advanced economies while newcomers, such as China and India, are making huge leaps in technology and innovation.
Our economy has been transitioning. But not in the right way. Between 2001 and 2024, the number of employees, paid payroll workers, in Canada rose by 5.2 million to 18.2 million. But out of that growth, almost 40 per cent—just over two million paid positions—came from increased employment in health, education, and public administration, sectors heavily dependent on government spending and support. In 2001, these three sectors accounted for about 16.1 per cent of all paid jobs in Canada and by 2024, their share had nearly doubled, to just over 28 per cent.
With our dismal performance in innovation, productivity growth and gains in GDP per capita, we are already too dependent on debt to keep these programs functioning. And we are not creating enough wealth to sustain them at the high levels of accessibility that Canadians expect.
In a service economy, service jobs accounted for almost 90 per cent of the gains in employment in this period, with professional, scientific, and technical services, including lawyers and accountants, adding 586,321 paid jobs, trade (retail and wholesale) 563,754 jobs, and accommodation and food 355,505 paid jobs. In the goods-producing industries, mining and oil and gas extraction added just 74,155 jobs, bringing the total to 213,102 paid jobs or little over one per cent of paid employment in Canada, while manufacturing jobs fell by just over 20 per cent or 418,518 jobs to just 1.6 million.
These changes in employment reflected changes in the production side of the economy. The share of goods-producing sectors fell from 33 per cent in 2001’s $1.1-trillion economy to 29 per cent in 2021’s $2.4-trillion economy, while the services sector rose from 67 per cent to 71 per cent. Industrial production fell from 25 per cent of the economy to 19 per cent, while the public sector share rose from 18 per cent to 20 per cent. At the micro-level, tech—represented by information and communications technology services—rose from $40-billion or four per cent of the economy in 2001, to $116-billion, or five per cent of the economy, in 2021.
Three features of the changing Canadian economy explain important job shifts. One is the increased role of construction and real estate. Their combined share of the economy rose from 17 per cent in 2001 to 21 per cent in 2024. Second is the growing role of largely public-funded activities, including education, health, and public administration. Their combined share rose from 17.8 per cent to 20.4 per cent. Third is the decline in manufacturing, whose share fell from 17 per cent of the economy in 2001 to just 10 per cent in 2021. To be sure, mining, and oil and gas extraction did see its size of the economy rise, from 5 per cent in 2001 to seven per cent in 2021, with export gains.
Canada has had some success in trade diversification, mainly due to increased exports to China and India. Between 2001 and 2024, overall exports of goods and services more than doubled, from $481.2-billion in 2001 to $996.8-billion in 2024. And the U.S. share of Canadian exports of goods and services fell from 80.7 per cent in 2001 to 70.3 per cent in 2024 while that of China and India together increased from 1.5 per cent in 2001 to 6.1 per cent in 2024, from a combined $7.5-billion in 2001 to $61-billion in 2024. Trade with major European countries have seen only modest growth. Likewise Japan: in 2001, Japan was Canada’s second largest market for goods and services; by 2024, it had fallen to fifth place.
So building an economy for the future poses huge challenges that will require strong leadership and a focus on clearly set targets and timelines, co-operation from provinces, and cities as well as the private sector, and an earned buy-in from the public. The credibility of the upcoming budget is test number one. Implementation will be test number two. Success is urgent. And some early deliverables are vital for ongoing public support. It’s all about our future.
David Crane can be reached at crane@interlog.com.
The Hill Times