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Trade drives innovation and prosperity


September 23, 2010
by PLANT STAFF

TORONTO:  Ontario and Canada should continue expanding international trade as part of their efforts to enhance our innovation performance, which will lead to higher prosperity, says a research paper from the Institute for Competitiveness & Prosperity.

The independent, not-for-profit research organization supported by the Ontario government says expanding trade includes advanced economies like the European Union and developing economies like China and the other BRICs.

The Institute contends that although there may be concerns about increasing trade with low-wage countries, the industries operating on the basis of high value products and services and creativity will compete effectively.

These are some of the key conclusions of the Working Paper, Trade, innovation, and prosperity, released today by the Institute for Competitiveness & Prosperity. Previous research by the Institute has focused on the innovation and prosperity gaps in Ontario and Canada – the failure to achieve our full economic potential. In the research released today, the Institute draws the connection between innovation and prosperity and international trade.

“We are all familiar with the traditional arguments for international trade—it opens markets to our businesses and enables them to achieve scale and specialization; it offers our consumers more variety and lower prices,” said Roger Martin, Dean of the University of Toronto’s Joseph L. Rotman School of Management and Chairman of the Institute. “But we conclude that trade also stimulates our innovation, economic success, and prosperity. Innovation is driven by a combination of support and pressure, and international trade contributes to both.”

The report says trade leads to larger market opportunities and access to better supplies of materials, people, and capital—critical supporting conditions for innovation. But trade also puts pressure on businesses to become more innovative. The Institute notes imports from China and other emerging economies are still relatively unsophisticated; but many of these economies will reach an “innovation tipping point” when they begin to compete on new ideas, design, and value added.

The Institute recommends engaging with these emerging economies and for Canada to step up its innovation capabilities. “Expanded trade with European Union countries will expose us even more to savvy trade partners and, through pressure and support, will help boost our capabilities.”

Click here for a copy of Trade, innovation, and prosperity.
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