Capstone - Shane Senecal Tremblay

Capstone Policy Priorities Agenda
“From input to output: Equipping Canada to increase trade”
Shane Senécal-Tremblay
March 31st
, 2016
Introduction
The size of a country’s GDP is the figure used to compare living standards in different
countries.1
Canada’s GDP growth was hit hard by the oil shock, which has seen oil prices
decline 60 percent since July 2014.2 3
The slump has resulted in a $16 billion drop in oil
sands spending and two consecutive quarters of contraction. Statscan said “real (i.e.
inflation-adjusted) gross domestic product rose just 1.2 per cent in the year, down from
2.5 per cent in 2014… the slowest growth since the 2009 recession.” Moreover, 17,000
jobs are estimated to have been directly lost in the oil and gas sector in the first half of
2015.4
During this period Canada was most strongly hit by business investment (buildings,
machinery and equipment; “key building blocks for economic expansion”), the effects of
which were moderated most by increased government spending and an improved trade
balance.
Despite the moderating effects of Canada’s trade-balance on GDP growth, it’s position as
a global exporter has been steadily declining. “Between 2000 and 2010, Canada’s export
growth was 5% slower than the global average. During the same period, Canada’s share
of the global export market declined from 4.5% to 2.5%. This decline made Canada the
second-worst performer in the G20.”5
In an effort to stimulate the Canadian economy in the short-run and sustainable growth in
the long run, Canada must bolster Canadian trading opportunities with the major
economies of the future. In effect, this means taking strategic steps to increase bilateral
trade with China and ratifying the TPP to ensure Canadian access to the Asian value
chains and to safeguard our access to the Japanese market.
Secondly, in fostering new trade relationships with China and TPP states, Canada should
not only look to take advantage of our current economic complementaries but also to take
advantage of emerging market demands, such as green technologies. This means making
up for Canada’s innovation lag by creating an Industrial Research & Innovation Council

1 Macroeconomics Principles. Section 6.3 GDP and Economic Well-Being. Creative Commons.
2 Parkinson, D. (2016, March 1). Canada's 2015 growth the slowest since 2009 recession. The Globe
and Mail.
3 Boutilier, A. (2016, January 21). Federal government orders study into long-term effects of oil
slump. The Toronto Star.
5 Lamb, C. (2015). Improving Productivity for the Prosperity of Canada. Institute for Research on
Public Policy.

that will drive innovation in these key sectors.
Last, and as the Center for Trade and Investment Policy states, “if trade is the oxygen of
the Canadian economy, then infrastructure is the lungs.” 6
Without the ability to move
goods efficiently to and from foreign markets, Canada will suffer.7
To be sure that
Canadian firms can trade efficiently, Canada should ensure that its infrastructure
investments are targeted at trade-related infrastructure projects and are efficiently
executed. This will be achieved through the creation of a common framework to evaluate
the merits of large infrastructure projects across Canada and through the implementation
of strategies to improve project delivery and reduce cost overruns.
Canada stands to gain significantly:
• Canada can double the value of exports to China by 2020 from $21 billion
in 2013 to $40-$50 billion, creating more than 2 million new jobs.8
• The Fraser Institute estimates that the TPP would boost annual income
gains of $9.9 billion and increase exports by $15.7 billion.9
• Canada’s public infrastructure would boost GDP upwards of $1.43 for
every dollar well spent on trade related infrastructure.10
• Synergies between investments in trade related infrastructure and
bolstering trade both directly (through strategic trade agreements) and
indirectly (investing in R&D in emerging sectors; i.e. green energy) would
increase these figures even more.

6 Law, J., & Dade, C. (2014). Building on advantage: Improving Canada's trade infrastructure. Centre
for Trade & Investment Policy.
8 Dobson, W., & Evans, P. (2015). The Future of Canada's Relationship with China. Institute for
Research on Public Policy.
9 Tencer, D. (2016, January 20). TPP's Economic Impact Will Be Fewer Jobs, More Inequality, New
Study Says. Huffington Post Canada.

Criteria for Policy Options
The goal of this policy agenda is to improve Canada’s GDP to stimulate the economy in
the short run and grow it in the long run to ensure the economic prosperity of the country.
The primary selection criteria used were:
Economic efficiency: The policies should address market failures and distortions
to allow for a more efficient allocation of scarce resources.
Fiscal Sustainability: The policies chosen should cost-effectively improve
Canada’s GDP. They should also generate revenue and create short- and long-term
economic impacts.
Appropriate role for government: The policies should not exceed the appropriate
scope of government action or intervention.
*Equity: The policies selected here below do in fact represent a certain trade off
with regards to equity. However they were selected to adapt the Canadian labour market
to the changing global economic landscape. Thus, the short-term tradeoff in terms of
equity will ensure Canada’s adaptability, and in effect ensure intergenerational equity in
the long run.
Design Criteria
Political feasibility
Administrative feasibility
Cost effectiveness
Policy Selection
5. Foreign Policy: Develop a new, more strategic policy towards China, including
human rights and trade and investment.
13. Trade, Investment, Productivity: Ratify the TPP.
15. Trade, Investment, Productivity: Encourage better productivity performance
by creating an Industrial Research & Innovation Council.
22. Infrastructure: Create a common framework to evaluate the merits of large
infrastructure projects across Canada.
23. Infrastructure: Implement strategies to improve project delivery and reduce
cost overruns.

5. Foreign Policy: Develop a new, more strategic policy towards China, including
human rights and trade and investment.
Background:
There is no golden age in Canada’s history where it flourished as a nation that didn’t
require strategic trading relationships to ensure its growth. The very foundations of
Canada lie in the trade of goods with European markets and then increasingly with the
United States. Today, the center of global economic gravity is shifting to Asia. “The
Asian Development Bank (2011) estimates that by 2030 China will have 20 percent of
the world’s middle class, an urban population of more than a billion people and a related
explosion in demand for housing, education, health care, and financial and environmental
services.”11
Moreover, according to the Canadian Chamber of Commerce “while the U.S.
will remain our largest trading partner for the foreseeable future, maintaining Canada’s
prosperity and high quality of life demand diversified international trade.”12
Canada is
currently China’s 18th
place supplier and does not want to get left behind as this emergent
economy forges its economic partnerships. Resultantly, Canada must develop a new more
strategic policy towards China.
Solution:
To address this area of economic neglect and to avoid further losses, Canada should build
on the strong economic complementarities between Canada and China. This should be
undertaken with expediency to avoid competitors beating Canada to these emerging
opportunities.
With regards to bilateral trade with China, Canada can learn from Australia’s experience
in developing a Free Trade Agreement. Australia ranks as China’s 6th
largest supplier,
supplying nearly 5 percent of China’s total imports. Canada’s share languishes at less
than 2 percent. Where Australia excels in supplying China with iron ore, coal and
liquefied natural gas13
(Chinese concessions to Australia in meat, wine and seafoods14
),
Canada can excel at supplying food and water, clean energy sources, and educational,
touristic and infrastructural services.
Canada’s strategic response to China must also take account of domestic infrastructural
barriers to being a reliable supply chain for China. For example, according to the Centre
for Trade and Investment Policy “the live lobster fished off the East Coast of Canada is
world famous… China is now the second largest market for direct exports of lobster,
according to the Lobster Council of Canada. Yet, the full potential of the export
opportunity is being missed because we can’t move enough of it to market in a timely

12 Canadian Chamber of Commerce. (2013). The Foundations of a Competitive Canada: The Need for
Strategic Infrastructure Investment.
13 Australian Government: Department of Foreign Affairs and Trade. (2016). FTA information and
factsheets.

fashion.”15
This infrastructural gap to efficient trade is further addressed in Option 22 (Create a
common framework to evaluate the merits of large infrastructure projects across Canada).
Canada’s strategic response to China must further take account of China’s emerging
demands for green technologies and infrastructural development. This is further
addressed in Options 15 (Encourage better productivity performance by creating an
Industrial Research & Innovation Council) and 23 (Implement strategies to improve
project delivery and reduce cost overruns).
Impact:
Increasing bilateral trade with China would have significant impacts on Canada’s GDP
growth and secure Canada’s capacity to participate in the important human rights, trade
and security discussions of the future, by virtue of being at the table.
By following Australia’s Free Trade Agreement as a model, Dobson and Evans point out
Canada could achieve similarly improved access, with annual total trade with China
increasing from C$77 billion in 2014 to nearly $90 billion, with exports of pulp and
paper, oilseeds, base metals, energy products and aircraft.16
Australia’s exports to China helped it escape the worst effects of the global economic
meltdown in 2008.17
Diversifying Canada’s exports will be expected to have similarly
moderating effects in the face of another market downturn.
Global Affairs Canada estimates budgetary expenditures of $5.5 billion in 2016-17 on
Foreign Affairs, Trade and Development. This could be expected to rise if trade were to
increase, but this would be outweighed by the gains.
According to Dobson and Evans the target should be to “double the value of exports to
China by 2020. This would mean from $21 billion in 2013 to $40 or $50 billion. The
additional exports could create more than 2 million new jobs.”18
This does not account for
the increased benefits of additional service exports in infrastructure (discussed in Option
23 [Implement strategies to improve project delivery and reduce cost overruns]
) and new green technologies (discussed in Option 15 [Encourage better productivity
performance by creating an Industrial Research & Innovation Council]).
Evaluation
Developing a new, more strategic policy towards China, was selected for its financial

17 Voice of America. (2010, March 24). Australia Signs Mammoth Gas Deal With China.

sustainability, given its capacity to improve Canada’s GDP in the long run.
This is an equitable forward-looking choice; it is specifically chosen to adapt Canada into
the future, making it intergenerational by definition.
The primary design obstacle is in terms of its political feasibility, given the Canadian
public’s anxiety towards China. Addressing this will namely involve changing the
Canadian public’s distrust towards China through public leadership and education.

13. Trade, Investment, Productivity: Ratify the TPP.
Background
According to the Fraser Institute “Canada has traditionally traded with advanced,
industrialized economies, such as the United States and Western Europe, which are now
experiencing slow or stagnant growth.” 19
More specifically, Real GDP growth in the United States declined from 2.8% in 2012 to
1.9% in 2013 and Real GDP growth in the Eurozone (France, Germany, Italy, Spain) was
-0.5% in 2013.20
Conversely, growth rates in countries such as Singapore, Chile, Malaysia, and Peru are
two and even three times that of the United States.21
Most importantly, the growth rates in
these emerging markets are predicted to remain relatively high over the next several
years.22
Diversification, first to Mexico in 1994 through NAFTA and more recently to China
through the WTO, is helping to generate new market opportunities, but high-growth
economies still receive less than five percent of Canada’s exports.”23
In effect, Canada can no longer afford to focus its trade efforts on slow-growing
economies.
Solution
To diversify our trading partners Canada should ratify the Tran-Pacific Partnership.
The Trans-Pacific Partnership trade agreement will secure a trade alliance between
Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand,
Peru, Singapore, the United States, and Vietnam.24
“The combined economy of these
countries is over $27 trillion, nearly 35 percent of global GDP and about one third of
global trade.”25
Impact

19 Dawson, L., & Bartucci, S. (2013). Canada and the Trans-Pacific Partnership: Entering a New Era of
Strategic Trade Policy. The Fraser Insititute.
Public Policy.

According to the Fraser Institute “the TPP could yield annual income gains of $9.9 billion
for Canada and increase exports by $15.7 billion.”26
If the TPP expands to include all Asia-Pacific Economic Cooperation countries (APEC),
it will further increase Canada’s market access.27
If China joins the TPP it would become
the first regional agreement to include the world’s three largest economies: the United
States, China, and Japan.28
In addition to Option 5 (Develop a new, more strategic policy towards China, including
human rights and trade and investment), ratifying the TPP will further diversify Canada’s
exports in effect having moderating effects in the face of another market downturn.
Canada gains from the TPP not only by expanding its economic partnerships but also by
playing a significant role in shaping the rules that will govern trade relationships in the
twenty-first century.29
The economic gains from ratifying the TPP will be amplified through Canada’s increased
ability to deliver in infrastructural development (discussed in Options 22 [Create a
common framework to evaluate the merits of large infrastructure projects across Canada]
and 23 [Implement strategies to improve project delivery and reduce cost overruns]) and
in innovative sectors (discussed in Option 15 [Encourage better productivity performance
by creating an Industrial Research & Innovation Council]).
Evaluation
According to Dawson and Bartucci, “Canada’s trade rules and procedures are already
strongly aligned with those of the United States and, as such, implementation of the TPP
should not be costly.”30
Private sector support will be key since ratifying the agreement does not bind it in law.
For it to be legally binding, it must pass through the house which is subject to private
sector influence. It is therefore important to demonstrate to emerging service providers
how they will benefit from the agreement, in addition to those major suppliers who
already stand to benefit.
Ratifying the TPP will however require a certain trade off with regards to equity. It is
projected that it will cost approximately 58,000 Canadian jobs and increase income


inequality.31
However, these effects will be offset in part through the investment in
infrastructure, which will create jobs (discussed more in Options 15 [Encourage better
productivity performance by creating an Industrial Research & Innovation Council] and
23 [Implement strategies to improve project delivery and reduce cost overruns]).
Moreover, investment in R&D in strategic emerging green sectors (discussed in Option
15 [Encourage better productivity performance by creating an Industrial Research &
Innovation Council]) will increase jobs in innovative sectors. Once trade of the goods
created in these sectors is underway with TPP partners, these jobs may greatly outnumber
those lost during the immediate transition to a TPP economy. Thus, the short-term
tradeoffs in terms of equity will ensure Canada’s intergenerational equity in the long run.


15. Trade, Investment, Productivity: Encourage better productivity performance by
creating an Industrial Research & Innovation Council.
Background
Innovation is one of the major driving forces of GDP growth in developed economies like
Canada.32
Despite this, a World Economic Forum report showed that Canada has slipped
from the 12th most innovative country in 2010 to the 25th in 2014.33
Moreover, at the World Economic Forum in Davos, Switzerland, Prime Minister Justin
Trudeau conceded the need for Canada to rely less on its natural resources (which have
fallen in value) and should look increasingly to its “resourcefulness” to bolster the
country’s growth.34
Canada’s resourcefulness, however, has not been significantly invested in. Investments in
research and development (R&D) are important for developing business innovation. “In
2013, Canada’s annual business expenditure on research and development (BERD) as a
percentage of GDP ranked 20th out of all OECD countries.”35
Despite this the funds
available have been notoriously challenging for firms to obtain, with over 60 programs
across 17 different government departments and no agency to help businesses find the
right programs for their needs.36
This has resulted in low usage of the funds available to
Canadian firms.37
There is international demand for innovative services and goods that Canada does well at
innovating, but could excel in. For example, Dobson and Evans point out “a cleaner
environment is a high priority for both the Chinese public and the leadership… China is
increasingly turning to clean energy sources, conservation and renewables — a sector
where Canadians are becoming innovators.”38
Given a policy agenda that seeks to bolster bilateral trade with China and other emerging
markets, Canada should not neglect nurturing these key innovative sectors that are
internationally sought after.
Solution
Investing in research and development (R&D) is one way in which Canada can start to
make up for Canada’s lagging innovation and capturing the economic benefits of trade

32 Rosenberg, N. (2004). Innovation and Economic Growth. Organization for Economic Cooperation
and Development.
33 Eichler, L. (2014, August 14). Is there an innovation gap in Canada? The Globe and Mail.
Public Policy.
36 Jenkins, T., Dahlby, B., Gupta, A., et al. (2011). Innovation Canada: A Call to Action. Review of
Federal Support to Research and Development.
37 Government of Canada. (2011). Innovation Canada: A Call to Action. Page 5-8.

with China in emerging demand areas relating to clean energy sources, conservation and
renewables.
More specifically, the federal government should create an Industrial Research and
Innovation Council (IRIC), with a clear business innovation mandate (including delivery
of business-facing innovation programs, development of a business innovation talent
strategy, and other duties over time), to enhance the impact of programs. 39
This agency would have three main functions.
1. Delivery of the Industrial Research Assistance Program (IRAP) and a
commercialization vouchers pilot program40
o “The IRIC would also deliver the federal government’s pilot
voucher program. This three-year pilot program was introduced in
2014 to help facilitate the movement of ideas to the marketplace by
promoting industry collaboration and connecting businesses to
established providers of commercialization services.”41
2. Delivery of a national concierge service and related web portal42
o “As a common platform, the agency would provide advice and
assistance for businesses looking to navigate the complex federal
R&D landscape. The IRIC would also work to generate public
awareness to improve the overall uptake of public R&D
programs.”43
3. Development of a federal business innovation talent strategy44
o “This strategy would help businesses to attract and retain highly
qualified and skilled personnel to help drive innovation.”45
Impact
Creating an Industrial Research & Innovation Council (IRIC) “would begin to streamline
the process as the development of a common application portal and service to help
businesses find the right programs for their needs [a ‘concierge’],” in effect undermining
the low usage of the funds currently available to Canadian firms.46
By creating an Industrial Research & Innovation Council (IRIC), Canada could drive
innovation in sought after green technologies.

Public Policy.
Public Policy.
Public Policy.

Following the COP21 climate summit, Prime Minister Justin Trudeau announced Canada
will spend $300 million a year on clean technology innovation. The IRIC will better
ensure that this money makes it to the firms.
Examples of arm’s-length delivery of business innovation support include
“FPInnovations, a public–private partnership with the forest products sector, and
Sustainable Development Technology Canada, a federally funded non-profit corporation
that provides funding for environmental technology initiatives.”47
The synergy between the bolstered economic relationship with China and the capacity to
deliver increasingly in innovative goods and services will further increase the projected
exports to China up from $40 billion, as well as drive the prospected jobs creation in
these sectors.
Evaluation
The costs of this agency are expected to be relatively small.
If the political obstacles relating to trade with China are addressed readily, the increased
investment in these key sectors should be congruently politically palatable, given their
alignment with this broader goal.
Given an innovation lag in Canada and rising international demand in these sectors it is
responsibility of government to address these market failures and allocate resources to
create incentives in these areas.


22. Infrastructure: Create a common framework to evaluate the merits of large
infrastructure projects across Canada.
Background
As Canada developed as a country the federal government had to invest in its
infrastructure to accommodate trade, in effect yielding the Lachine Canal, a national
railway system, the lower Fraser River, the St. Lawrence Seaway, and the Trans-Canada
Highway.48
These investments in infrastructure had historic effects on the social and
economic outcomes of Canadians.49
They created jobs for the workers who built them,
allowed for the free flow of people throughout Canada (undermining mismatches in the
job market, thus structural unemployment), and allowed for Canadian businesses to
become more efficient and trade more proficiently.50
It was by virtue of trade and trade-
related infrastructure that Canada established the economic capacity and political will to
seek independence.51
As the Center for Trade and Investment Policy states, “if trade is the
oxygen of the Canadian economy, then infrastructure is the lungs.”52
However, Canada is currently loosing significant trading opportunities due to a
deficiency of trade-related infrastructure. For example, China is now the second largest
market for direct exports of lobster.53
However, with only two airports in Eastern Canada
capable of flying out lobster on wide-body aircraft, the capacity is not there during the
peak seasons.54
“Instead, the live lobster has to be trucked to much larger airports in the
U.S., such as Boston, where it is repackaged and flown to the market. But the additional
shipping time – as long as eight hours – means the mortality rate goes up and the profits
go down.”55
The current Liberal government plans to invest $125 billion in infrastructure over the
next decade.56
A study by the Canadian Centre for Economic Analysis shows that “around 20% of the
economic benefit of infrastructure investment comes from the short-term injection of
capital during construction.” However, upwards of 80% of the long-term economic
benefits of an infrastructure project come from spinoff growth activities that are

48 Bothwell, R. (2007). The Penguine History of Canada. Penguine Canada: Toronto.
56 The Centre for Spatial Economics: The Broadbent Institute. (2015). The Economic Benefits of
Public Infrastructure Spending in Canada.

supported by the project.57
Canada must ensure that this spin off growth is trade related
for the greatest return on investment.
Solution
Canada should create a common framework to evaluate the merits of large infrastructure
projects across Canada that will give a prioritized status to infrastructure projects that are
trade-focused. In effect this means infrastructure projects that will bolster Canada’s
supply chain reliability: airports, roads, ports, bridges, railroads and other infrastructure
that move products and people.58
The framework should be aligned with the National Policy Framework for Strategic
Gateways and Corridors, with the following conditions:
1. International commerce strategy
o Gateway and corridor strategies must align with Canada’s most important
challenges and opportunities in global commerce.
2. Volumes and values of national significance.
o Strategies must involve transportation infrastructure that carry significant
levels of trade.
3. Future patterns in global trade and transportation. Strategies must be based on
empirical evidence and analysis.
o They must also address major trends in international transportation.
4. Potential scope of capacity and policy measures.
o Strategies should also address issues of integration and interconnectivity
across modes of transportation, between investment and policy and across
the range of stakeholder groups.
5. Federal role and effective partnerships.
o The federal government will work with other governments and the private
sector towards a coherent infrastructure vision and a “systems-based”
approach to gateway and corridor strategies.
The framework should be reviewed quarterly (in synchronicity with macroeconomic
updates) to keep stock of the changing macroeconomic supply and demand trends with
our major trading partners. By doing this Canada can quickly anticipate the
infrastructural needs of emerging trade areas.
Impact
Canadians could gain million of dollars a day due to increased trade, as facilitated by the
trade-related infrastructure. This could be taxed and reinvested into other key
infrastructure projects that improve the lives of Canadians in other ways, like hospitals

57 Siemiatycki, M. (2016). Creating an Effective Canadian Infrastructure Bank. The Residential and
Civil Construction Alliance of Ontario.

and commuter transit lines.59
By investing in strategic infrastructure projects that have long-term trade gains, Canada
can capture more than the 20% of economic benefit from initial investment in
infrastructure alone.
The potential economic benefits of prioritizing trade-related infrastructure projects should
capture the other 80% of economic benefit available by virtue of the additional trade
facilitated. This should therefore exceed the projected boost in GDP by $1.43 for every
dollar spent (of the $125 billion to be spent) by the government on infrastructure.60
By becoming a leader in infrastructure, Canadian firms can harness their strengthened
reputation in the infrastructure development sector to seize some of the $140 billion
worth of Chinese contracts available through their One Belt, One Road project. This is
further addressed in Option 23 (Implement strategies to improve project delivery and
reduce cost overruns).
Evaluation
Given the Government’s budgetary allocation towards infrastructure, the administrative
cost for developing such a framework is marginal at most.
Creating the framework is strongly justifiable on the grounds of fiscal responsibility,
given that it is designed to ensure merit based allocation of funds based on fiscally
sustainable priorities: trade.
The long term economic relationships facilitated by this strategic infrastructure
investment will help pay down our short term spending.

60 Rana, K. (2015, September 14). Public infrastructure initative would provide big economic boost,
study says. The Globe and Mail.

23. Infrastructure: Implement strategies to improve project delivery and reduce
cost overruns.
Background
As the Canadian government invests $125 billion in infrastructure over the next decade61
Canada will want to ensure that not only is it strategically selecting the best projects for
its economic development, but also making sure that each dollar spent is spent efficiently.
Cost overrun by the numbers:
• 9/10 projects experience a cost overrun
• Average size of cost overrun for all project types is 28%
• Average overrun for transit projects is 45%
• Average overrun for bridges or tunnel fixed links are 34%
• Average overruns of roads is 20%
• Pattern unchanged for 70 years that data is available62
The need for efficient infrastructure development is not only a domestic reality but also
an expanding international opportunity. Dobson and Evans point out “infrastructure and
transportation industries also have high potential for market development over the long
term [$140 billion worth of Chinese infrastructure contracts available], especially as
China strives to improve linkages along the historic land and sea routes between China
and Europe.”63
As Canada builds up its own infrastructure and increases trade with China, it does not
want to spend its investment funds wastefully on domestic projects nor does it want to
miss out on Canadian firms getting infrastructure development contracts with China.
Solution
To ensure against wasteful spending and to bolster international confidence in Canadian
firms’ capacity to deliver efficiently, Canada should create a Canadian Infrastructure
Investment Agency.
The proposed agency would complement the work done by the evaluative framework
presented in Option 22 (Create a common framework to evaluate the merits of large
infrastructure projects across Canada). In particular once projects are cleared by the
framework they will be subject to the evaluative scrutiny of the national agency to ensure
the soundness of financing, selection and delivery.
The agency would:

61 The Centre for Spatial Economics: The Broadbent Institute. (2015). The Economic Benefits of
Public Infrastructure Spending in Canada.
62 Flyvbjerg, B., Mette Skamris Holm, and Søren Buhl. Underestimating Costs in Public Works
Projects: Error or Lie? Journal of the American Planning Association, vol. 68, no. 3, Summer 2002, pp.
279-295.

• Be created by the federal government to review the technical studies of all
infrastructure projects over $10 million.
• Conduct project confidence assessments of projects prior to assigning funding.
• Ensure that all large infrastructure projects applying have a credible, independent
study of the project’s benefits and costs.
• Provide low interest loans or credit enhancement services to private sponsors of
innovative projects in priority sectors.
• Be a centre of excellence on effective infrastructure project delivery and a
convener of federal, provincial and municipal procurement practitioners to
develop recognized best practices.64
Impact
According to Siemiatycki, “by taking advantage of the federal government’s strong credit
rating and having a centralized agency responsible for raising money, an infrastructure
bank can lower the cost and improve the terms of public borrowing for infrastructure”65
Direct loans from the agency would shave 100 basis points off the cost of borrowing
$500 million, in effect saving the borrower $100 million in interest payments over a 35-
year loan term.66
Through these measures, Canada stands to enhance its international image as an
infrastructural sound society, increasing Canadian firms capacity to seize some of the
$140 billion worth of Chinese contracts available through their One Belt, One Road
project. This could incite long-term collaborative projects with China that can help pay
down the debt incurred by this initial infrastructure investment at home.
Evaluation
Given the Government’s budgetary allocation towards infrastructure, the administrative
cost for developing such a framework is again marginal at most.
The agency complements the evaluative framework from Option 22 (Create a common
framework to evaluate the merits of large infrastructure projects across Canada) in
ensuring the efficient allocation of government budgets on trade. While infrastructure
spending in the short run stimulates the economy, the long run emphasis of facilitating
trade and contract opportunities with China makes this an option that is equitable for
future generations.

64 Flyvbjerg, B., Mette Skamris Holm, and Søren Buhl. Underestimating Costs in Public Works
Projects: Error or Lie? Journal of the American Planning Association, vol. 68, no. 3, Summer 2002, pp.
279-295.

Conclusion
Canada stands at a crossroads.
The center of global economic gravity is shifting away from our major trading partners.
Oil, a pillar in recent Canadian trade, has lost significant value. And Canada continues to
lag as an innovator.
Thankfully, Canada is rich with other commodities that are wanted around the world:
food, water, clean energy sources, and green technologies.
And Canada, a country where over half the country has completed tertiary education, has
no reason not to lead the world in innovation if the appropriate incentives are put in
place.
As Canada sets itself up with the infrastructure to facilitate more trade, it simultaneously
has the ability to become a leader in key service sectors sought after around the world
like infrastructure development.
Canada must invest in itself, to harness its adaptability, to prosper in the face of changing
global economic landscapes.
It is the most equitable choice for aligning Canada with the economic realities of the
future.

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