What Dominic Barton thinks Canada should do to boost the economy

The chair of the expert panel that is to advise Justin Trudeau's government on the development of a long-term economic strategy believes Canada should pursue free-trade agreements with Asia's major economies, woo foreign capital and significantly upgrade national infrastructure as it attempts to boost the national economy and deal with serious long-term challenges.

"I think there's quite a lot to do," Dominic Barton, managing director of McKinsey, the powerful global consulting firm, told the CBC's Rosemary Barton during an interview on Power & Politics on Wednesday.

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Barton, a Canadian, is chair of the "advisory council on economic growth" that Finance Minister Bill Morneau appointed in March. The 14-member group is to guide a strategy that will be delivered by the end of the year.

The prime minister name-dropped Barton during a speech in January at the World Economic Forum in Davos, Switzerland, and Barton hosted a breakfast and dinner in the resort town that allowed international bankers, investors and executives to meet with Trudeau.

Barton then met with the federal cabinet in Alberta in April.

Free trade with China?

Barton previously led McKinsey's operations in Korea and Asia and said his "own personal view" is that it would be "very good" for Canada to enter into negotiations with China on a free-trade deal.

More generally, he said the goal must be establishing a long-term relationship with the global giant.

"Going in and out doesn't really help there. We should be thinking about decades," he said.

Economic connection, in Barton's thinking, would also better position Canada to influence Chinese governance and address concerns about human rights in the country.

"I think you can wag your finger at someone from the side, and if you're not doing very much I don't think you get listened to very well," he said.

"I'm biased being a Canadian, but I do believe Canada can play a unique role in helping China as it evolves over time. But there has to be a basis for it."

Deepening trade ties with China should include improving the infrastructure that can get Canadian goods and resources to the international market: pipelines, ports and railways.

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Building infrastructure and attracting capital

Barton has projected a national gap of $500 billion in infrastructure funding, and in Tuesday's interview, he argued that governments can't be expected to make up that shortfall. Instead, governments must partner with private capital. 

"There are $16 trillion in the global financial system that's generated negative returns in bonds," Barton said. "There's a lot of private capital looking for the opportunity to invest in infrastructure, and they're not expecting extraordinary returns. They're expecting stable returns."

That would include drawing foreign direct investment, an area in which Barton said Canada is "punching well below our weight."

"Let's get some of the private capital that's in the Japanese banks that's earning negative returns that wants to get a good return investing in projects in Canada. It could be in railcars, grain cars, where we have a shortage of them.

Foreign investment has emerged as a keen interest of the Trudeau government: in addition to his trips to venues such as Davos, the prime minister spoke to investors at a conference in Sun Valley, Idaho, in July. 

Speaking with the CBC, Barton suggested a goal of drawing global companies to base their North American operations in Canada.

"I think we should also be looking at having more headquarters based in Canada," he said. "For example, Asian companies that are going to be into North America in a significant way. How can we have them hub themselves in Canada, as opposed to the U.S.?"

In addition to a China deal, Canada should pursue free trade deals with Japan and India, Barton said, and think about how to increase the international participation of small and medium enterprises. Canada, Barton said, has one of "the least globalized" groups of such businesses in the world.

Seeking to 'jolt growth'

Barton figures prices for commodities such as oil will eventually increase, but on the horizon are two challenges: an aging population that could reduce productivity and technological automation that could affect as many as half of the jobs in Canada.

"So we've got to think about our training systems for labour markets," Barton said, "and how we make sure Canadians keep up with all the technology changes and not only benefit, but thrive."

All of which might amount to the makings of an economic blueprint for the government that Barton is advising.

"I think it's essential that we do be deliberate and we try and jolt growth," he said. "The good news is there's lots of opportunity to do it in Canada."