Yule Heibel's Library tagged resources →  View Popular

The consequences of this global power shift could show up in lower pension benefits, substandard health care and rickety infrastructure for future generations of Canadians. Early signs are already apparent to discriminating eyes, such as those of Mr. Curtis, a former chief economist in the Department of Foreign Affairs and International Trade.

"We are declining relative to many other parts of the world," he said. "You don't really feel it unless you're cosmopolitan and travel a lot. You now stay at the three-star hotel instead of the four. But our cities - and the country as a whole - are quite clearly relatively less well off than before."

Where he sees languor in our policy apparatus, CAE's Mr. Brown detects an aversion to interventionist industrial strategy among governments. But as Canada has relied on the free market - auto bailouts notwithstanding - to determine its champions, governments elsewhere are actively nurturing their own winners.

"We seem to believe the free-market system will work, but no one else operates that way," Mr. Brown said. "If you rely only on market forces, you are going to react to what others are doing, rather than anticipating what is going to happen."

Research will become increasingly important to the competitiveness of Canadian auto plants as a strong loonie and wage concessions south of the border wipe out much of the edge they once held over U.S. facilities. But Washington's promise to provide $25-billion (U.S.) in loans to companies there to help develop more fuel-efficient cars threatens to widen the already gaping research chasm between each country's auto sector.

"Without comparable support in Canada, manufacturing capacity could follow the funding, taking engineering work and suppliers with it," warns the Academies report.

Still, foreign ownership is not the biggest reason for Canadian companies' R&D deficit. Despite a disproportionately large resource sector, compared with other developed countries, Canada has been a laggard when it comes to developing technology used to extract or process resources, or to blunt the environmental impact of such activities. Alberta's vow to plow $2-billion (Canadian) into the development of carbon capture and storage technologies is a start, but hardly a game-changing one.

"The failure of Canada to develop global export leaders in advanced machinery and equipment for the resource sector is one particularly telling indicator of the country's innovation shortcomings," the Academies report concludes.