Part 2

CANADIAN CLUSTERS One prominent example of a Canadian cluster is the aerospace cluster in the Montreal area. The major corporate players are Bombardier for airplanes, Pratt & Whitney and Rolls-Royce for engines, and CAE for flight simulators. In education, The École Polytechnique has special programs to train aircraft manufacturing staff, and the CEGEPs (junior colleges) provide aerospace-specific welding courses. Concordia University uses a special MBA for the industry and McGill University runs a high-level executive programs. Industry associations include SIDA, the little-known but important agency which has a major mission in Montreal; its major mission is to provide the world's largest network that helps airlines communicate with each other. Both the federal and provincial governments have provided considerable support beyond their development of educational institutions. Most famously, Ottawa has provided loan guarantees to some of Bombardier's biggest foreign customers, most recently Air Wisconsin and Northwest Airlines. This type of support may diminish in light of Canada's and Brazil's ongoing battle at the World Trade Organization. That support, however, symbolizes the importance of this sector to the city, provincial and national levels of government.

Bombardier is hardly the only success story in the sector in the Montreal area. CAE is a world leader in flight simulation hardware and software, Pratt & Whitney is one of the jewels in parent United Technology's crown, and Rolls-Royce Montreal holds important world-product mandates. The entire cluster is a mix of related but generally non-competing firms, excellent educational facilities, a workforce willing to travel and change employers, and supportive governments. The success of the aerospace industry in Montreal has been central to the city's economic renaissance in the mid- and late '90s. Nortel, though down for the moment, has in the past acted as a veritable launch pad for a fleet of medium- and small-sized suppliers across the world, but especially in the Ottawa, Toronto and Montreal areas. Nortel's influence has been enormous in the development of the telecom sector in all three cities. STRATEGY: GLOBAL OR LOCAL?

Another myth surrounding globalization is the belief that MNEs develop one global product for the world market and are then able, through vast economies of scale, to dominate local markets everywhere. Again, hard reality intervenes. Multinationals have to adapt their products for the national market. For example, there is no global car.

Rather, there are American, European and Japanese factories that are supported by local regional suppliers who provide steel, plastic, paint and other necessary parts for producing autos for the region. Also, cars popular in one region are often rejected by customers in other areas. The Toyota Camry that consistently tops the U. S. sales charts sells poorly in Japan. The Volkswagen Golf, in its heyday, the largest selling car in Europe, did not make an impact in North America. During the last year, one of us took our family, including a five-year-old and a three-year-old, to the Disney theme parks in Paris, Tokyo and California. Though the parks can be considered a classic example of a global service with a uniform offering, the reality was quite different.

Europeans want to sit down with their meals and take their time, preferably to enjoy a glass or two of wine or beer; too many smiles make them suspicious; and smoking is seen as relatively benign pleasure. In Japan, the rides were duplicates of the Anaheim original, down to the hippo which surprises customers by rising out of water on the Jungle cruise. But the spirit was absolutely Japanese, as was the food. Meanwhile, in California, it was American, down to the animated conversations that total strangers struck up in every line. White-good manufacturers have tried to sell North American clothes washers, refrigerators and the like, but they have done poorly, despite low prices. Culture still matters when we wash our clothes. Even pharmaceutical companies, which manufacture medicines that are often referred to as "universal products," have to respond to national and state regulations, thus effectively stumping global production and distribution. THE ROLE OF GOVERNMENT What does all this mean for the governments of Canada and the United States? Simply this: As we recognize that the world is not a single global entity, but is in fact made up of three large regions, a regional agreement like the Free Trade Agreement of the Americas makes a great deal of sense, as did the NAFTA. We recommended that federal, provincial and municipal governments increase their focus on clusters and reinforce the existing clusters rather than try to start new clusters in remote areas. Yes, Canada may well boast some new clusters in 20 years, but the main drivers of the Canadian economy in 2020 will most likely be the same ones that are in place today.

The three levels of government must co-operate more effectively. While the great Canadian debate of whether it is a federal or provincial responsibility provides grist for the Royal Canadian Air Farce, it overlooks the role of the city government and is based on a dated view of the country.

Can Ontario or Quebec be open to cross-provincial clusters such as aerospace in Toronto and Montreal, or is that Montreal and Toronto? Universities and community colleges are critical in an economy ordered on clusters. However, as they bask in their new-found importance, the educational institutions must also be willing to interact much more with business to help identify areas of need for well-educated and trained employees. This may require that student enrolment grow rapidly in some areas, but decline in others. This may be unsettling for certain educational institutions, but it will be necessary nevertheless.