What does a changing climate mean for Canadian agriculture?

Author: Sophie Oliver
Release Date: March 14, 2013
Pages: 17
Incremental warming and increased incidence of extreme weather events are likely here to stay. So, what does this mean for Canada and Canadian agriculture? Does Canada’s geography make it exempt from the more damaging effects of climate change? Will Canada in fact gain by being able to extend its agricultural lands further north as temperatures rise? Might Canadian agricultural producers be able to cash in on higher commodity prices as competitors’ crops suffer? And will agriculture then increase in importance within the Canadian economy?
This paper, authored by Canada 2020 Research Intern Sophie Oliver, looks at the present state of Canadian agriculture, current and future trends in the sector, and its level of preparedness for the challenges, the potential benefits and the uncertainties of climate change.
Download PDF

Climate change impacts on Canadian agriculture – no time for complacency

Climate has always mattered in agriculture. Farmers watch the weather, we all know that. But are they paying enough attention to the bigger changes?
In a 2007 study of Ontario farmers, 62 per cent of respondents viewed climate change as a long-term warming trend, and 21 per cent were entirely skeptical about its existence.
A U.S. Department of Agriculture report released in February 2013 — Climate Change and Agriculture in the United States: Effects and Adaptation — refers to this perception problem: “Social adaptation barriers represent a significant challenge to climate change adaptation in U.S. agriculture.” In other words, people are having a hard time accepting that climate change is real.
It would, however, be surprising if more recent data did not show Canadian farmers coming to understand the problem of climate change: 2009 and 2011 were major flood years in the Prairies, while 2012 saw widespread drought in many of Canada’s growing areas.
It’s worth noting that climate change will not affect all of Canada equally: it is likely to hit hardest where it hurts the most. The Canadian Prairies — home to more than 80 per cent of Canada’s agricultural land — already has experienced warming at a faster rate than the global average. The area of the Canadian plains at risk of desertification is estimated to have increased by about 50 per cent between recent conditions (1961-90) and those projected for the 2050s.
So whose head is stuck in the ever-deepening sand?
Perhaps it’s the government’s. Agriculture and Agri-Food Canada’s Medium Term Outlook for Canadian Agriculture, 2011-2021, projects a picture of continuity, with prices of grains, oilseeds and special crops remaining well above historic levels (though below recent peaks).
The catch is that the report “… assumes no impact from climate change and from policy to mitigate climate change nor significant animal disease outbreaks or unusual climatic conditions over the period of the outlook.”

Climate change is likely to hit hardest where it hurts the most. The Canadian Prairies — home to more than 80 per cent of Canada’s agricultural land — already has experienced warming at a faster rate than the global average.

Why the complacency? A host of studies from the early 2000s served to reinforce the belief that there was not too much to worry about in Canadian agriculture. Although the studies considered a wide range of outcomes, the take-home message was that climate change could be positive for Canadian agriculture. Longer growing seasons, increases in arable land and a possible shift to higher-value crops would work in Canada’s favour, enabling us to capture greater market share and, in general, to prosper.
More recently, though, that optimism has been dampened by studies showing that crops are often more sensitive to temperature extremes than to averages. So the effect of temperature on many crops has been found to involve thresholds, above which yields rapidly decline. We have also experienced more extreme climatic events and there appears to be a dawning realization that man-made climate change implies more than just a steady warming trend: it implies intense variability, specifically in precipitation. The impact on crops and agricultural production is consistently negative. Expanded agricultural area is of no benefit if the land is regularly flooded or parched.
Here is what we know we will see more of in the future: moisture stress, droughts, disease outbreaks, weed growth and soil erosion as well as higher average temperatures. A recent report issued by PricewaterhouseCoopers pours cold water on any hope that warming can be limited to 2 degrees C, a widely shared aspiration: “Even doubling our current rate of decarbonisation would still lead to emissions consistent with 6 degrees (C) of warming by the end of the century”.
With changes of this magnitude in store, this is no time for complacency. Agriculture and Agri-Food Canada’s 2012 overview of Canadian agriculture paints a picture of a dynamic agriculture and agri-food system directly providing one in eight jobs and accounting for 8.1 per cent of total GDP. But is it prepared for what comes next? Does it have the adaptive capacity required not only to survive the climate future, but to take advantage of any benefits it may offer — even if they’re short-lived?
Federal and provincial governments are spending $8 billion annually on agriculture, but just $156 million goes into research programs — less than 2 per cent of the total spent. With so much uncertainty ahead, is this enough? Will it enable us to be ready with a flexible toolkit of responses when things change? It would be a different situation if the private sector were stepping up its own research spending, but Canada lags other countries in terms of the proportion of private money going into agricultural research.
There is much to applaud in the agri-sector. We’re seeing greater diversification and a change in farming practices to become less environmentally damaging. The 2011 Census of Agriculture showed that, for the first time, over 50 per cent of the total area prepared for seeding across the country employed the less ecologically-disruptive no-till methods.
But we need to ask ourselves if there is more we can do, both to maximize the potential of the sector (how are all those Asian megacities going to feed themselves, after all?) and to help it prepare for a very uncertain future. If the USDA is right when it says that “… continuing changes in climate conditions … (are) likely to overwhelm the ability of the agricultural system to adapt using existing technologies”, there surely we have no more time to waste.

Public policies for equality and social mobility in Canada

Author: Miles Corak, Professor of Economics, University of Ottawa
Release Date: February 22, 2013
Pages: 32
Author Miles Corak, Professor of Economics from the University of Ottawa, details the public policy drivers behind social mobility in Canada, and its links to equality of opportunity for Canadian citizens.
The paper offers a series of innovative policy solutions that the federal government could take to ensure high degrees of mobility, and lower degrees of inequality.
Download PDF
 

Productivity and pay – why Canadians are (somewhat) better off

Comparing ourselves with the United States is a national pastime in Canada. Sometimes the comparison makes us look good (health care, public education).
Sometimes it makes us look bad (consumer prices, productivity). Sometimes it reveals an altogether more nuanced story. Sadly, we often miss the nuance.
A month ago, the New York Times published a piece, titled Our Economic Pickle, on the conundrum represented by increasing productivity and declining real wages. Workers are producing more, yet taking home less of the overall pie: wages now represent only 43.5 per cent of GDP, down from over 50 per cent of GDP in the 1970s. Corporate profits are at an all-time high while wages and median household income have both fallen.
Within that 43.5 per cent, it is the top earners who are doing best — a familiar story from the broader income inequality debate. In 1979 the top one per cent took home 7.3 per cent of total wages. By 2010 this had risen to 12.9 per cent. This makes sense to those who have been following trends in income polarization: the ultra-rich are increasingly self-made and they earn wages, in large amounts, rather than rely on inheritances. The fact that their share of the pie has gone up by 50 per cent is no surprise.
At the opposite end of the spectrum, things are looking grim for U.S. workers: labour productivity has increased by 80 per cent since 1973 but median hourly compensation has gone up by only 10 per cent. Real GDP has increased by 18 per cent but median household income has fallen by 12 per cent since 2000. ‘Shared prosperity’, as the basis for societal cohesion, appears to have fallen by the wayside.
Is the same true in Canada? Somewhat. One of the biggest problems in this country is labour productivity: this rose by only about 50 per cent between 1980 and 2012 — about 30 per cent less than in the U.S. Average (mean) real hourly wages certainly did not keep up. They grew by 4 per cent between 1981 and 1998, before advancing at a more rapid rate between 1998 to 2011 for a cumulative 14 per cent increase. While by no means perfect, this is significantly better for workers, when lower labour productivity increases are factored in, than in the U.S.
This Canadian ‘advantage’ is reflected in the aggregate figures. In the U.S., the share of wages, salaries and supplementary labor income to GDP has fallen over time — from a high of nearly 54 per cent in the late 1960s to less than 44 per cent now. In Canada it has remained stable, close to 50 per cent of GDP (51 per cent in 1961 and up to 52 per cent in 2011). And in Canada we have minimum wage rates that substantially exceed those in the U.S.
In this week’s State of the Union address, President Barack Obama proposed raising the federal minimum wage in the U.S. from $7.25/hour to $9/hour. Few feel confident that he will be able to achieve this. Meanwhile, hourly minimum wages in Canada — which are set by provinces — vary from $9.50 in Saskatchewan to $11 in Nunavut (Ontario currently stands at $10.25, Quebec at $9.90 and Alberta at $9.75). Goods certainly cost more here — as was confirmed by a recent Senate report on the Canada/U.S. price gap — but at least those at the bottom of the wage scale take more home per hour.
One reason for this may be the relative rates of unionization in the two countries. Unions now represent around 11 per cent of American workers (though less than 7 per cent in the private sector) as opposed to 28 per cent in the 1960s. In Canada the unionization rate is still above 30 per cent, close to the U.S. mid-1950s peak of 35 per cent.
What does this tell us? That our problems are not as severe as those in the U.S.? Yes, at some level that is certainly true. But societies should judge themselves by what they themselves can bear and not by comparison with others. As is the case in the health care debate, if we stop thinking about the U.S., things do not look that great in Canada.
Collapse is by no means imminent, but we do need to do some soul-searching on how we want to move forward and what value we place on the factors that distinguish us from the U.S.

The need to experiment in healthcare

This month the Health Council of Canada published the 2012 Commonwealth Fund International Health Policy Survey of Primary Care Doctors. This informative study is based on a survey of more than 2,000 primary health-care workers across the country.
It focuses on how front liners perceive the system (Does it require minor or major change? Do patients get too much or too little care? Can they get diagnostic tests when they need them?) and how they themselves operate (Do they make home visits? Prescribe electronically? Monitor their own performance against targets?) (To ready the study, click HERE.)
It provides a fascinating insight not just into how we are doing, but also into how we are doing relative to other countries. Sadly, the answer is “not that well.”
Canada’s health system sits more or less in the middle of the pack on physicians’ perceptions of how much change is required: 40 per cent of respondents say the system needs “only minor changes” and our doctors themselves are happy (82 per cent say they are satisfied or very satisfied with practising medicine).
But does their happiness come at the expense of patient care? The disparity between physician satisfaction and the measures in the survey that would seem to translate directly into patient satisfaction, is telling.
As the report notes: “Compared to physicians in nine other countries, Canadian primary care physicians are the least likely to routinely provide same-day or next-day appointments (47 per cent). They are also among the least likely to make home visits (58 per cent) or have after-hours arrangements so that patients can see a doctor or nurse without going to a hospital emergency department (46 per cent).” But doctors themselves may be oblivious to this, because Canadian primary care physicians are also among the least likely to work in practices that regularly review clinical performance against targets (41 per cent average, varying between 62 per cent for B.C. and 19 per cent for Quebec).
Overall, then, this is not an uplifting survey. It finds that “In overall national performance, Canada shows no relative improvement in any areas of access to care … since 2006.”
Canadians are always wont to compare our system to the U.S. This makes sense, but only in geographic terms. There are numerous examples of mixed public-private systems around the world that exhibit substantially greater cost effectiveness and better medical outcomes than our own. None is perfect and all systems struggle to rein in costs, but should we not be learning from elsewhere? And isn’t the Health Council survey a good place to start identifying our deficiencies?
At Canada 2020, we have been gathering information on an alternative public-private hybrid model currently being tested in the U.K. (a country in which 95 per cent of primary care workers say their patients can get after-hours service outside a hospital emergency department and where 96 per cent of physicians regularly review clinical performance against targets).
In 2012, The Circle Partnership was awarded a 10-year contract to manage a publicly funded, full-service hospital in Huntingdonshire. The National Health Service continues to employ most of the hospital’s staff. Health care remains free and universal at the point of delivery, but private-sector incentives have been introduced. Doctors, nurses, and other Circle employees collectively own 49.9 per cent of the company, while the rest is owned by a group of hedge and venture capital funds.
The model is relatively simple: if efficiencies by Circle yield a surplus at Hinchingbrooke Hospital, profits will be shared by the hospital, the NHS, and Circle. If the hospital continues to post a deficit under Circle’s management, Circle will earn nothing and has agreed in its contract to be responsible for the first £5 million of fresh debt.
It is too early to judge Circle’s success. On the one hand, the hospital’s emergency room, which regularly failed to meet targets in the past, was ranked first of 46 hospitals in eastern England after six months under Circle’s administration. Monthly targets for cancer treatment, which had last been met in June 2010, were being fulfilled every month and the length of a patient’s stay after hip or knee surgery fell from an average of 5.6 days to 2.6 days, allowing for faster turnaround of rooms.
On the other hand, Circle has yet to demonstrate its ability to keep costs under control (although it is early days yet). The hospital’s losses reached £4.1 million within eight months, just over double the £1.9 million of debt that Circle had predicted for the hospital by that point.
Here in Canada, no legislation prevents the introduction of private health-care administration. What’s more, our current system should lend itself well to the transition because Canadian primary-care doctors are already paid under a fee-for-service system, rather than earning a fixed salary.
It seems, though, that the largest roadblock to introducing a similar model to Canada lies in public resistance to change. Opposition to any linkage between the private sector and health care remains strong (back to that American comparison problem) and a number of Canadian facilities that have incorporated private incentives have been closed, despite their success (for example the Canadian Radiation Oncology Services clinic in Ontario and a private clinic at Montreal’s Sacré-Coeur Hospital).
But aren’t we Canadians open-minded people? Surely we can open our minds to alternative ways to deliver universally accessible publicly funded health services. The Circle model may not be the perfect solution, but it is well worth watching from our shores if only for the reason that health care improves most when the medical community does what it does best: experiments.

Tim Barber one of the ‘most influential people in government and politics’ – The Hill Times

Canada 2020′s Co-Founder Tim Barber has been named one The Hill Times’ 101 most influential people in government and politics in their yearly Power&Influence feature.
Ranking the 100 most powerful politicians, lobbyists, staffers, media and other influencers, Barber is hailed by Bea Vongdouangchanh for his ability to bring the ‘top people into one room.’
From the profile: “Back in the day, he co-founded the ‘Cathay Club’ dinners and annual ‘Bluesky’ sessions at Meech Lake where he would bring Ottawa’s top people together to deliberate on important public policy issues. Now he’s doing it formally with Canada 2020, but on a much larger scale, attracting elite international speakers and hundreds of people to must-attend, sold-out events. Canada 2020 has access to people that other think tanks don’t have…”
Power&Influence is available online.

Barriers to competition must fall if productivity is to gain

Canada’s lacklustre productivity growth has become a preoccupation of policy makers, and a prime suspect is the lack of competition faced by Canadian firms.
Many of Canada’s productivity detectives increasingly suspect that because key sectors aren’t disciplined by adequate competition, many businesses don’t face the “creative destruction” that drives innovation.
The average Canadian worker produces roughly 20 per cent less than her or his U.S. counterpart.
We’ve heard it before: If we want to sustain our living standards, Canada must achieve better productivity growth. Various studies have concluded that our laggard growth owes to a failure to invest and innovate. But why? Wouldn’t any rational firm seek productivity gains to increase profitability?
Reflecting on Canadian businesses’ record retained earnings from 2003 to 2007, economist Don Drummond puzzled: “Why did corporations just sit on their profits over this period? Did they not realize that this was a golden opportunity to ramp up their productivity to better withstand global competition?”
As Mr. Drummond observed, we’ve largely checked off the list on his Economist’s Manifesto for productivity growth with stable government finances, reductions in taxes on capital, predictable inflation and a sound banking system. So what gives? Canada’s competitive landscape seems to be the looming, amorphous challenge with which policy makers have yet to fully grapple.
We now have a world-leading framework for competition law, and the Competition Bureau has ramped up its enforcement activities substantially in past years. However, regulatory barriers to competition remain, particularly for key network sectors, such as telecommunications and airlines, and under foreign investment restrictions.
In a report published Thursday by Canada 2020, we survey Canada’s competitive landscape. As we conclude, the productivity agenda for Canada must shift from macroeconomic and fiscal reforms to the microeconomic foundations of innovation and particularly to competitive intensity as a driver of firm performance.
Many of the main policy levers to boost competition were identified in Red Wilson’s landmark Competition Policy Review Panel. There has been some progress on implementing its recommendations – such as the 2009 amendments to modernize Canada’s Competition Act and the federal government’s liberalization of foreign ownership restrictions in telecommunications.
However, certain items remain. In particular, the Investment Canada Act places the burden on the foreign investor to prove “net benefit,” and foreign airlines remain restricted from flying domestic routes. As argued in a recent commentary on Economy Lab, the cost of airfare for Canadian travellers would likely be improved by allowing foreign airlines to fly between Canadian cities. As well, Canada should improve the climate for foreign competition by reversing the onus on foreign investment review, placing the burden on the minister to demonstrate “net detriment.”
Yet, recent debates have flared regarding “national champions,” showing that not everyone is sold on competition as the necessary medicine.
Certain policy makers may still feel the lure of protecting “infant industries” from the full brunt of the market. The question is whether protecting certain firms from competition does more harm than good.
As Canadian public policy increasingly turns toward addressing our productivity shortfall, competition in our national economy must be a key issue.

Competition Matters

Author: Grant Bishop, University of Toronto
Release Date: January 16 2013
Pages: 21
Acting as a background paper for our event The Canada We Want in 2020: Competition Matters, Grant Bishop explores the various policy discussions on the impact of competition. The first part discusses the current context, examining the statutory and regulatory environment in Canada, as well as particular barriers to domestic competition and foreign entry.  The second part briefly summarizes theories and evidence of linkages between competition and productivity.
Download PDF