By Peter Copeland, December 16, 2024
Canada recognizes that, in the post-COVID era, its focus must be on building a better future by fostering competitiveness, especially as data and information become key drivers of production. Innovation and technology have the capacity to bridge the regional and demographic gaps between Canadians across all sectors of the economy. In 2021, the National Research Council of Canada (NRC) convened an informal working group of forty thought leaders to identify areas of potential development over the next ten to fifteen years. The six broad categories highlighted in this 2030–35 “horizon scan” were resource futures, big data and artificial intelligence, cybersecurity and privacy, healthcare futures, climate change, and new models of innovation.
Canada faces significant challenges – but also tremendous opportunities in terms of its technology future.
Innovation and food security
Through the Agri-Tech Innovation Initiative, up to $25 million will be allocated to eligible farm and food processing businesses to increase the production and consumption of locally grown food in Ontario by 30 per cent by 2032. This will support qualified businesses in funding innovative technology, equipment, or processes that enhance efficiency or expand operations. This initiative is part of Sustainable Agricultural Partnership, a $3.5-billion agreement between federal, territorial, and provincial governments aimed at fostering competitiveness and resilience in the agri-food industry.
When it comes to sustainability, Canada’s approach is to foster innovation through greater and more profitable agricultural production, rather than through regulation. As a result, we see higher sustainability factors in the Canadian agricultural sector, as compared to places like the EU that adopts precaution-based regulations. The proof is in the pudding: Canadian farmers have embraced the growth of genetically modified (GM) crops, thereby reducing the need for tillage. Canada has also adopted plant breeding technologies to enhance agricultural efficiency. Finally, Canadian farmers have demonstrated their ability to produce more food with fewer inputs.
Machine learning medical devices
In 2023, Health Canada released Pre-market Guidance for Machine Learning-Enabled Medical Devices, a draft outline detailing its expectations for the safe operation of such devices. The draft also introduced a process for pre-approving anticipated modifications to machine learning-enabled devices using a predetermined change control plan, allowing for proactive risk management. These devices possess the ability to revolutionize the healthcare sector. Health Canada has already approved of some of its applications. Some of these include:
- Critical Care Suite (GE Healthcare): This refers to a collection of artificial intelligence algorithms incorporated in an x-ray device, which would reduce the time taken by a radiologist to review a type of a collapsed lung.
- Advanced intelligent Clear-IQ Engine (AiCE) for MR (CANON MEDICAL SYSTEMS CORPORATION): This refers to the world’s first magnetic resonance (MR) Deep Learning reconstruction technology. It produces fast and detailed MR images that cover all body regions.
Broadband
Broadband access challenges exist in Canada, the world’s second-largest country in terms of landmass with many remote and rural communities. The country’s geography poses logistical, technological, and financial challenges to comprehensive coverage. The Canadian telecom sector is also not as competitive as other countries, resulting in higher costs and lower quality for consumers. The Canadian Radio-Television and Telecommunications Commission (CRTC) has established the Broadband Fund to help provide all Canadians with access to broadband Internet and mobile wireless services. During its first five years of operation, up to $675 million will be available for projects that help achieve this goal. It will be important for the federal government to coordinate with the provinces to ensure regulations are aligned and not duplicative. Canadian governments should focus on creating incentives for private investment, rather than making substantial government investments tied to specific technologies and objectives, which can deter private investment.
Digital economy and technology
Artificial intelligence: The EU’s Digital Markets Act has taken a broad approach to AI regulation, which may end up stifling innovation, whereas California’s framework is much more innovation-friendly. Canada’s Artificial Intelligence and Data Act (AIDA) has been tabled, and may need further refinement if Canada wants to be a leader in the space. To balance innovation with protection from known harms, Canada could take a more cautious and targeted approach. By avoiding hasty overregulation and instead regulating AI applications in the different contexts and sectors in which it is embedded, innovation will be free to flourish. Policy-makers also need to grapple with the best ways to address the negative social and lifestyle side-effects resulting from pervasive technology use such as mental health issues and loneliness, addictive and manipulative algorithms, and the effects of the attention economy- a business model that relies on maximizing user time and attention, which is itself fraught with numerous ethical and health concerns.
Digital Services Tax (DST) & Canada-US-Mexico Agreement (CUSMA): In June 2024, Canada introduced a Digital Services Tax – a 3 per cent tax on Canadian‑source digital services revenue earned by large domestic and foreign taxpayers. With the DST, Canada is moving on its own, not with other OECD countries. Firms have indicated that the prices will be passed on to consumers, and the US that it will retaliate, likely in the upcoming trade negotiations between Canada and the US. The question remains as to how this policy will affect innovation and investment in Canada, but it seems likely that it could hinder it.
Online Streaming Act: The Federal government introduced the Online Streaming Act in April 2023. The act’s taxes on foreign streaming services may impact innovation and bottom lines, with prices being passed on to consumers.
Cybersecurity and data privacy
The National Cyber Security Action Plan (2019–2024) focuses on the prevention, response, and mitigation of cyber threats through the development of a resilient digital landscape. Supported by significant investments, the plan aims to enhance the finance and energy sectors by working in coordination with the Cyber Centre, while also improving integrated threat assessments to address the Centre’s expanding client base.
Given the above and Canada’s history of various past initiatives, there is hope for cooperation with AUKUS, the trilateral partnership between Australia, the UK, and the United States. AUKUS has three main pillars, and Canada could seamlessly contribute to the second and third. The second pillar involves collaboration on emerging technologies, while the third focuses on the production of military-related equipment. Canada’s investment in the National Cyber Security Action Plan would facilitate its integration with AUKUS initiatives. Additionally, Canada has the manufacturing capacity to enhance the production of legacy military capabilities.
Rare Diseases and Novel Technology Development
Canada has launched its first National Strategy for Drugs for Rare Diseases to improve access and affordability of treatments for rare conditions. Through bilateral agreements with provincial and territorial governments, the strategy aims to enforce early diagnosis, screening, and access to new drugs. Additional funding will be allocated to building efficient research and national governance structures to advance innovation in rare disease treatment. First Nations and Inuit patients will also receive dedicated funding to support their healthcare access needs.
Although this is a significant first step toward improving access to treatment for Canadians diagnosed with rare diseases, several enhancements can be made to the strategy.
- Incentives such as time-limited market exclusivity provisions, support for data protection of new uses for existing medicines, and funding for developers are essential. While the strategy may lead to lower drug prices, it might not be considered worthwhile for developers, who may respond by opting out of the Canadian market.
- Less restrictive criteria for patients to obtain coverage should also be a priority for enforcement.
- A measure supporting all government drug plans to list all rare disorder medications following successful price negotiations within a short timeframe is further recommended.
Trade Policy
In 2022, the federal government launched the Indo-Pacific Strategy, centred around five core objectives: promoting peace, resilience, and security; expanding trade, investment, and supply chain resilience; investing in and connecting with people; building a sustainable and green future; and positioning Canada as an active and engaged partner. Each objective is supported by comprehensive initiatives and involves the collaboration of multiple governments to achieve its goals. The initiatives and partnerships include:
- Export Development Canada’s 2023 Annual Report highlights its support for over 27,000 Canadian businesses, particularly SMEs, facilitating $131.4 billion in exports and investments while expanding in Indo-Pacific markets. Despite economic challenges, EDC generated $1.6 billion in net revenue, though net income fell to $450 million due to increased credit loss provisions.
- Canada confirms the opening of a new FinDev Canada office in the Indo-Pacific region in 2023 to drive economic growth with a focus on supporting renewable energy, transportation, water, and digital infrastructure solutions.
Conclusion:
Innovation and R&D spending are critical drivers of economic growth, productivity, and resilience in Canada. By investing in cutting-edge technologies and fostering innovation, Canada can enhance its global competitiveness and address pressing challenges in sectors such as agriculture, health care, AI, and cybersecurity.
Canada is performing well in areas like agri-tech, where initiatives like the Agri-Tech Innovation Initiative and the adoption of genetically modified crops demonstrate its ability to foster innovation and lead in sustainability. Similarly, Health Canada’s proactive guidance on machine learning-enabled medical devices and efforts to address rare diseases signal a commitment to leveraging technology to improve lives.
However, there are areas for improvement. Broadband access remains a persistent challenge, particularly in rural and remote areas, where a lack of competitiveness in the telecom sector leads to higher costs and slower progress. Similarly, policies like the Digital Services Tax and the Online Streaming Act may hinder innovation by discouraging private investment and creating trade tensions. On the trade front, Canada’s Indo-Pacific Strategy shows promise but requires sustained effort to fully capitalize on opportunities in emerging markets.
To strengthen its innovation ecosystem, Canada should focus on creating a regulatory environment that encourages private investment, ensures alignment across federal and provincial governments, and avoids overregulation that could stifle growth. Incentives for R&D, streamlined approval processes for emerging technologies, and better integration of broadband and digital infrastructure will be key. By addressing these gaps, Canada can unlock its full potential as a leader in the global innovation economy.
Peter Copeland is the deputy director of Domestic Policy at the Macdonald-Laurier Institute.
This article is an adaptation of MLI’s contribution to the Global Trade and Innovation Policy Alliance member organizations’ report on bridging the digital divide within and across countries. The report, GTIA Perspectives: The Vital Importance of Digital Inclusivity for Global Economic Growth, was prepared for the alliance’s annual conference, which took place from November 15 –17, 2024, in New Delhi, and was hosted by the Atal Incubation Centre, at Shiv Nadar University. The report can be found here.
