Canada should lead by example, Janice Stein tells Wall Street Journal

November 30, 2010

After years of being treated like the U.S.’s poor cousin, Canada is increasingly demanding a place in the global spotlight.

The country has pulled through the downturn in better shape than most of its peers, with the healthiest banking system and strongest economic recovery in the Group of Seven wealthy nations. And that solid performance is fueling a growing assertiveness in a country often known for its reserve.

Earlier this month, Canada said “no” to Anglo-Australian miner BHP Billiton’s $39 billion bid to buy fertilizer giant Potash Corp. of Saskatchewan—a move surprising for a country that’s approved nearly every foreign takeover for the past 25 years and one that some saw as an attempt to take better control of the country’s natural resources.

At the same time, Canadian politicians are aggressively campaigning for free trade, seeking out new markets and trying to lessen the country’s dependence on the U.S. Canada is pushing for a bigger presence in world affairs, particularly areas like banking and finance, where its track record is strong.

In the global-summit sweepstakes, Canada hosted June meetings of G-8 and G-20 leaders, where it used its position to push its views on banking regulation—just as it used the February Olympic Games for a show of patriotism and an ambitious drive to capture medals.

“When countries feel confident they tend to assert their national interests,” says Perry Spitznagel, vice-chair of law firm Bennett Jones LLP and organizer of a business forum last week titled “Canada Rising: Our Future as a Global Economic Leader.”

Down the road, experts say, Canada might use its newfound muscle in any number of ways, from demanding better treatment in trade deals with the U.S. to taking a leading role in the development of oil and other resources in the Arctic.

Some Canadians are even suggesting what would have been unthinkable just 15 years ago, when an editorial in The Wall Street Journal dubbed Canada an “honorary member of the Third World”; in many ways, Canada now stands to outshine its neighbor to the south.

“We don’t have to accept being second fiddle,” says Brian Lee Crowley, managing director at the Macdonald-Laurier Institute, an Ottawa policy think tank, and lead author of “The Canadian Century—Moving Out of America’s Shadow,” published in May. “We have the potential of enjoying a very long run of higher levels of economic dynamism, prosperity, success than the United States.”

Perhaps, but as far as Canada has come, there are still obstacles to get past before it emerges fully from the shadow. The country is one of the smaller of the big global economies—the International Monetary Fund estimates it’s No. 9 this year, between Brazil and Russia—putting it at a disadvantage in terms of international heft. Canada also has consistently lagged behind peers in labor productivity, threatening to crimp future growth. It’s facing many of the same demographic challenges as other developed nations, with an aging population and ballooning costs for retirees and health care.

Governmental instability has hampered the country’s ability to tackle thorny problems. For the past six years, none of Canada’s four main parties has managed to get the support of a majority of the population. That has led to a succession of shaky minority governments and a national election almost every other year.

Canada’s global ambitions got a slap in October, when it was bested by Portugal in its quest for a temporary seat on the United Nations Security Council. During the past few months, the Canadian government has also feuded over airplane landing rights with the United Arab Emirates, which has thrown Canadian forces out of an air base and ended a policy of allowing Canadians into the country visa-free.

“We shouldn’t be immodest here,” says Janice Stein, director of the Munk School of Global Affairs at the University of Toronto. Because of Canada’s smaller size “we have to lead by example, rather than lead in the way that the U.S. and Europe can, which is to lead by the weight of who they are.”

By Phred Dvorak. Continue reading this article online at www.online.wsj.com.