annual report 2005

CHAIRMANTim HearnChairman, President and ChiefExecutive Officer, Imperial Oil Limited

VICE CHAIRMANTony ComperPresident and Chief Executive Officer,BMO Financial Group

PRESIDENT AND CHIEF EXECUTIVE OFFICERJack M. Mintz C.D. Howe Institute

HONORARY MEMBERS

Robert D. Brown, FCA

Marshall A. Cohen, C.C., Q.C. Counsel, Cassels, Brock & Blackwell, LLP

C. Kent JespersenChairman and Chief Executive Officer, La Jolla Resources International Ltd.

John D. McNeilCorporate Director, Sun Life Financial

Edward P. Neufeld

Roger Phillips, O.C., S.O.M.Honorary Director,Ipsco Inc.

Adam H. Zimmerman

C.D. HOWE INSTITUTE 67 Yonge Street, Suite 300Toronto, Ontario M5E 1J8telephone : (416) 865 1904fax : (416) 865 1866e-mail: [email protected]: www.cdhowe.org

DIRECTORS

Ms. M. Elyse AllanPresident and CEO, GE Canada

Mr. Stuart A. BelkinPresident and CEO, Belkorp Industries Inc.

Mr. Robert ChisholmVice-Chairman, Scotiabank, andPresident and CEO, Domestic Bankingand Wealth Management,Bank of Nova Scotia

Mr. Jack CockwellGroup Chairman, Brookfield Asset Mgmnt. Inc.

Mr. Peter W. CurrieExecutive Vice President and ChiefFinancial Officer, Nortel Networks

Ms. Hélène DesmaraisChairman and Chief Executive Officer, Centre d’entreprises et d’innovation deMontréal

Mr. Craig L. Dobbin O.C.Executive Chairman, CHC Helicopter Corporation

Mr. Marc DutilPresident and Chief Operating Officer,Canam Group Inc.

Mr. N. Murray EdwardsPresident, Edco Financial Holdings Ltd.

Mr. John T. FergusonChairman of the Board, PrincetonDevelopments Ltd.

Mr. Charles FischerPresident and Chief Executive Officer,Nexen Inc.

Dr. Peter J. GeorgePresident and Vice Chancellor,McMaster University

Mr. Bruce GordonSenior Executive Vice President andGeneral Manager, Canada, Manulife Financial

Mr. Kerry L. HawkinsPresident, Cargill Limited

Mr. Paul J. HillPresident and Chief Executive Officer,Harvard Developments Inc., A Hill Company

Mr. Stephen JarislowskyChairman and Chief Executive Officer,Jarislowsky, Fraser Limited

Mr. Brian K. Johnston C.A.President, Monarch ConstructionLimited

Mr. David W. KerrChairman, Falconbridge Limited

Mr. Daniel LabrecquePresident and Chief Executive OfficerN M Rothschild and Sons CanadaLimited

Mr. Stephen J.J. LetwinGroup Vice President, Gas Strategyand Corporate Development, Enbridge

Mr. Brian LevittCo-President and Co-Chair, Osler,Hoskin and Harcourt LLP

Mr. Donald J. LowryPresident and Chief Executive Officer,EPCOR

Mr. William A. MacKinnonChairman and Chief Executive Officer,KPMG LLP

Mr. Clive MatherPresident and Chief Executive Officer,Shell Canada Limited

The Board of DirectorsOUR PROFILEThe C.D. Howe Institute is a leading independent, economic and social policy research insti-tution. Headquartered in Toronto, the Institute promotes sound policies in these fields for allCanadians through its research, publications and activities nation-wide. They include regularpolicy roundtables and presentations by policy staff in major regional centres, as well as beforeparliamentary committees. The Institute’s individual and corporate members are drawn frombusiness, universities and the professions across the country.

Ms. Sarah Morgan-Silvester

Executive Vice President, PersonalFinancial Services and WealthManagement, HSBC Bank Canada

Mr. William Morneau

President and CEO, Morneau Sobeco

Mr. Eric P. Newell

Mr. David P. O’Brien

Chairman of the Board, EnCanaCorporation

Mr. Steven Parker

Chairman and CEO, The CCL Group Inc.

Mr. Michael E. J. Phelps

Chairman, Dornoch Capital Inc.

Mr. Herbert C. Pinder, Jr.

President, Goal Group of Companies

Mr. Aaron Regent

President, Falconbridge Limited

Ms. Charlotte A. Robb

President and CEO, Dynacare KasperMedical Laboratories

Mr. Joseph L. Rotman

Chairman, Roy-L Capital Corporation

Mr. Guy Savard

Vice Chairman and Chairman QuebecOperations, Merrill Lynch Canada Inc.

Mr. Brian Shaw

Chairman and Chief Executive Officer,CIBC World Markets Inc.

Mr. David Sutherland

President and Chief Executive Officer,IPSCO Inc.

Ms. Catherine Swift

President and Chief Executive Officer,Canadian Federation of IndependentBusiness

Mr. William E. Watchorn

President and Chief Executive Officer,Ensis Management Inc. and EnsisGrowth Fund Inc.

Mr. Stephen Wetmore

Executive Vice-President, BCE Inc. andGroup President, National Markets, Bell Canada BCE Inc.

CREDITS: ART DIRECTION AND DESIGN BY DIANE KING; PHOTOGRAPHY BY TOM SANDLER AND TERESA BARBIERI; PRINTING BY RICOH CANADA INC.

A Year of Renewal for Canada —And for the Institute

A MESSAGE FROM THE CHAIRMAN

OUR MISSION:The C.D. Howe Institute is a national, nonpartisan organization that aims to improve Canadian’s standard of living by fostering soundeconomic and social policies. The Institute promotes the application of independent research and analysis to major economic and socialpolicy issues affecting the quality of life of all Canadians in all regions of the country. It takes a global perspective by considering theimpact of international factors on Canada and bringing insights from other jurisdictions to the discussion of Canadian public policy.Policy recommendations in the Institute’s publications are founded on quality research conducted by leading experts and subject to rig-orous peer review.

W W W . C D H O W E . O R G C . D . H O W E I N S T I T U T E A N N U A L R E P O R T, 2 0 0 5 1

THE C.D. HOWE INSTITUTE’S VISION FOR CANADA is anation that creates a unique economic and social advantage for allits citizens. It envisions an economy that is dynamic and innovativeproducing the best living standards in the world, supported byworld-class private business and public services. Such a nationwould be a magnet for immigration, investment andopportunity. It is this vision that tied together theInstitute’s 2005 research agenda.

It was a year of outstanding success andprogress. It is fair to say that the Institute helpedinstigate, and contributed to, fresh thinking aboutCanada’s policy challenges. We owe our success to allthe Institute’s authors, researchers, staff and in par-ticular Jack Mintz, outgoing President and CEO.There is no greater champion of a vibrant, competi-tive Canada than Jack. Since he became InstitutePresident and CEO in 1999, he has crisscrossed thecountry, logging countless miles tirelessly advocating for excellentpublic policy. Under his leadership, the Institute won numerousresearch awards and influenced critical policy issues ranging fromfiscal policy and tax reform, in particular, to healthcare and financereform. During his tenure, the Institute doubled its annual budget,policy events and publications, and increased dissemination ofresearch on the web by a factor of four. Most importantly, Jackgreatly enhanced the Institute’s reputation as a respected independ-ent pan-Canadian voice shaping opinions in all regions, and com-manding respect and attention from all governments, the privatesector, the media and academia alike. Jack has made the Institutestronger than ever before and we congratulate him for a truly excep-tional job. His sense of humor and keen intellect will be missed.

Of course, as always, more needs to be done. The pace andscope of tax reform has been insufficient. Delivery of public servic-es and goods must be refashioned and modernized with greater useof free market principles. The nation must prepare for the dramaticdemographic shifts taking place.

The Institute will attack these policy issues withmuscle and vigor. Leading the charge will be ournew President and CEO, William Robson, for-merly Senior Vice President and Director ofResearch at the Institute. A rigorous search processconducted by the Board of Directors made it clearthat Bill is a person of exceptional quality who isbest positioned to build on the past successes ofthe Institute. He will be an invigorating force forpolicy change in Canada. When it comes to theInstitute, I think it is safe to say the best is yet tocome.

Finally, and importantly, I would like to acknowledge theInstitute’s members. Our work would not have been possible with-out your strong financial backing. Thank you sincerely for support-ing a national dialogue aimed at making our country a better placeto live, work and invest.

Tim HearnChairman

It is fair to say that

the Institute helped

instigate, and

contributed to, fresh

thinking about Canada’s

policy challenges

2 C . D . H O W E I N S T I T U T E A N N U A L R E P O R T, 2 0 0 5 W W W . C D H O W E . O R G

Rethinking the Roadmap toCompetitiveness and Prosperity

THE PAST YEAR HAS BEEN A TRANSFORMATIVE ONE— both for the country and for the C.D. Howe Institute. A spiritof openness to fresh policy approaches took root in the publicsquare during 2005. At the Institute, we played a part, with new,non-partisan thinking on a roster of policy issues, from tax reformto fixing fiscal gaps, that have risen high on the public agenda. Theelection of a new minority Conservative Government in Ottawa thisJanuary opened the door even more to creative thinking about newpolicy approaches — on foreign policy, fiscal reform, tax policy,banking and federal-provincial fiscal relations.

For a public policy think-tank like the C.D. Howe Institute, this is a grand opportunityto continue getting some great ideas on the polit-ical table with the aim of making Canada a goldmedallist in economic performance, far surpassingour performance in Turin this past year.

In my mind, two key issues are critical toCanada’s future. The first is competitiveness,which encompasses notions like productivity andeconomically efficient public policies. The secondis demographics with a vastly larger retiring pop-ulation needing the support of those who work. Get good policiesin place and Canada’s future will be sound. The C.D. HoweInstitute’s mandate is to bring out fresh new ideas to improveCanada’s economic performance so Canadians can debate them. Ifpublic policy improves as a result, the Institute achieves its primaryobjective.

Last year, as you can read in the following pages, we added to along list of research publications with lots of good ideas to improvepublic policies in Canada. In the past seven years that I have enjoyedas President and CEO, the Institute has been at the forefront ofmany public policy debates, including: the “big idea” for enhanc-ing Canada-US relations; healthcare initiatives that would providealternative operational and funding arrangements; tax policyreforms aimed at competitiveness and demographic issues; educa-tional reforms, including a new measure for testing quality inschools; and new approaches to funding provincial and municipalpriorities and federal equalization programs. This is only a short listof research activities and publication topics that are available on ourwebsite.

We cannot, however, rest on past ideas. The new political land-scape makes it necessary for the Institute to shift its analysis intohigh gear to provide new, innovative ideas for a very busy politicalagenda in the near future. The Supreme Court decision on timelypublic health services, as well as the challenges facing Canada in thefields of energy policy, equalization, foreign investment, and demo-graphics attest to the growing need for competent, relevant andindependent policy analysis that can assist federal and provincialgovernments to develop more effective policies.

Without the support of our members, wecould not have been actively engaged on somany relevant topics recently. We are proudthat we have been able to double our budget inthe past seven years, but even more proud thatwe have more than doubled our research andevent activities with this increased support. Allof us take great pride when the media refers, asit often does, to the C.D. Howe Institute as anindependent, non-partisan, relevant — andCanada’s most influential — think-tank.

This designation comes by no accident. It isa result of the hard work of the employees at the C.D. Howe Institute. They are dedicated to the Institute’s work andenjoy the excitement of delivering the best research and event activ-ities that significantly impact on Canada.

As I retire as President and CEO this July, I want to personallythank all of you for the wonderful support you have given theInstitute. Even though I return to scholarship, I plan to support theInstitute in a variety of ways. I hope you continue to give the C.D.Howe Institute and the new President and CEO, Bill Robson, yourutmost backing. While other charities make excellent cases for fund-ing, the Institute is one place that can help make a difference toCanada’s economic performance, which is critical to making sure wecan afford the best quality of life. Your support is crucial to achieve it.

Jack MintzPresident and Chief Executive Officer

With a new political

landscape, the

Institute has moved

into high gear to

provide new,

innovative ideas

A MESSAGE FROM THE PRESIDENT AND CEO

THOSE WHO LIVE IN “INTERESTING TIMES” MAY OFTEN REGRET THE EXPERIENCE, but in the field of Canadian publicpolicy, 2005 turned out to be not only interesting, but in many respects rewarding.

The spectacle of a federal government spreading itself too thin, and spending too much, sparked deeper appreciation of the need to setpriorities and clarify the tasks of different levels of government. Strong resource prices and pressure on manufacturing refocused attentionon the need to enhance Canada’s competitiveness. The Supreme Court’s Chaoulli decision opened the lid on a discussion of the limits of thestate’s monopoly on healthcare provision — a discussion that the Romanow report had once seemed to stifle.

Reinvigorated debate on these and other challenges to Canadian well-being provided many opportunities for the C.D. Howe Instituteto contribute its unique blend of non-partisan, analytically sharp and policy-relevantresearch. The pages that follow document our many publications, eventsand presentations on subjects ranging from tax reform and fiscal federal-ism, through investment and productivity, to regulation and internationaltrade.

An Intersection of Ideas: Along with academic research and conversa-tions with policymakers, the Institute’s research team also benefits greatlyfrom contact with supporters and Canadians in all regions. Our roundtablesand seminars draw people of knowledge and experience. Our publicationsfrequently prompt responses from readers; responses that are an importantsource of information about policy problems and how we might resolvethem.

A solid grounding in the actual experience of Canadian individuals andbusinesses, and the practical steps required to turn imaginative ideas into con-crete programs, is indispensable to the development of relevant policy advice.New and growing Institute activities, such as the Financial Services ResearchInitiative, launched in 2005, and the ongoing Tax Competitiveness Program,depend vitally on this input.

For the C.D. Howe Institute’s Director of Research, then, looking back on2005 is an occasion to reflect on three important facts. First, we live in a countrywhere standards for public policy and its understanding are high. Second, theInstitute has a research team and network of esteemed contributors whose combinedskill and devotion to improving public policy is second to none. I salute Jack Mintz,Finn Poschmann, Danielle Goldfarb and Yvan Guillemette for their work, and thankour colleagues who play such a vital role in nurturing the research and getting it outinto the wider world. And finally, I gratefully acknowledge our debt to the Institute’smembers and supporters, whose contribution to better public policy in Canada isessential to everything we do.

Rising to the Challenge of“Interesting Times”

THE 2005 RESEARCH PROGRAM

William B.P. RobsonSenior Vice President and Director of Research


Monetary Policy CouncilThe C.D. Howe Institute’s Monetary Policy Council (MPC),chaired by William Robson, the Institute’s Senior Vice Presidentand Director of Research, comprises 12 of Canada’s most distin-guished financial-market and monetary economists. It providesthe Bank of Canada, financial markets and commentators with aregular independent assessment of the appropriate target for theshort-term, overnight interest rate that will allow the Bank to hitits 2-percent inflation target. The members of the MonetaryPolicy Council are:

• Don Drummond, TD Bank Financial Group• Richard Egelton, BMO Financial Group• Richard Harris, Simon Fraser University• Warren Jestin, Bank of Nova Scotia• David Laidler, University of Western Ontario• Tim O’Neill, O’Neill Strategic Economics• Michael Parkin, University of Western Ontario• Daniel Racette, HEC Montréal • Christopher Ragan, McGill University • Angela Redish, University of British Columbia • Nicholas Rowe, Carleton University• Craig Wright, RBC Financial Group

The Bank of Canada’s interest-rate announcements coincidedwith the MPC’s recommendations on all eight occasions in 2005.

Tax Competitiveness Program Following its launch in September 2004, the Tax CompetitivenessProgram convened its first meeting of the Tax CompetitivenessCouncil in 2005 and published its first annual report, Unleashingthe Canadian Tiger, on September 20, the anniversary of theIncome Tax War Act of 1917. The Program also produced numer-ous e-briefs on current topics, and these have played a significantrole in stimulating and guiding recent debates over provincial andfederal tax reform.


Fiscal and Monetary PolicyCANADA FACED SOME INTRIGUING FISCAL and mone-tary challenges in 2005, which were reflected in analysis and eventsat the Institute.

On fiscal matters, the looming election worsened an alreadyalarming trend to spending increases. Ottawa’s lack of clear policygoals or a fiscal target prompted the Institute to identify a majortheme in this area: making competitiveness a focus for fiscal policy.The Institute’s Tax Competitiveness Program released its first annualreport, The 2005 Tax Competitiveness Report: Unleashing theCanadian Tiger. The message — that Canada’s distressingly higheffective tax rates on new investment threatened economic growth,and that the country needed smarter and lower taxes — reverberatedat home and abroad. The Commentary, which compared effectivetax rates in 36 nations, was featured in the September 22, 2005 issueof The Economist magazine.

Canada’s monetary challenges in 2005 arose from a worldwiderun up in energy prices. The link between commodity prices and theCanadian dollar had been well-established in prior C.D. HoweInstitute work, and the renewed upward pressure on the loonieprompted concern about the future of Canadian manufacturing. Yetan e-brief analysis by David Laidler and Bill Robson provided com-pelling reasons for sticking to an inflation target as a guide for mon-etary policy.

As they explained in Two Percent Target — Canadian MonetaryPolicy Since 1991, which in May won the illustrious Donner Prize forbest book in public policy, the Bank of Canada’s pursuit of low andstable inflation has served Canadians — including manufacturersand exporters — well. The investment environment would sufferfrom the higher and more variable inflation that would followattempts to steer the exchange rate with monetary policy.

The challenge for any country today is to provide an

economic environ-ment that promotes

economic growth and job creation in a

dramatically changing world

Congratulations to DavidLaidler, Fellow-in-Residence,and William Robson, incomingPresident and CEO, whosebook, Two Percent Target, waspresented in May 2005 withthe Donner Prize for best bookin public policy.

THE INSTITUTE’S 2005 RESEARCH AGENDA

PublicationsMONETARY POLICY

Robson, William B.P. “Reading theCurrency Compass: Keeping MonetaryPolicy on Course Through a ChoppyExchange Rate.” e-brief (June).

FISCAL POLICYRobson, William B.P. “What’s $12.5

Billion? MPs Must Regain Control ofFederal Spending.” e-brief (February).

McLure, Jr., Charles E. “Tax Reformand Investment: Will the US Sneeze?Will Canada Catch Cold?” BenefactorsLecture 2005 (November).

Mintz, Jack. M. with Duanjie Chen,Yvan Guillemette and Finn Poschmann.“The 2005 Tax Competitiveness Report:Unleashing the Canadian Tiger.”Commentary No. 216 (September).

Chen, Duanjie, Jack M. Mintz andFinn Poschmann. “Attention G-7Leaders: Investment Taxes Can HarmYour Nations Health.” e-brief(September).

Chen, Duanjie and Jack M. Mintz.“Revised Corporate Tax Cuts inFederal Budget Will ReduceInvestment Gains by Half: C.D. HoweInstitute Report.” e-brief (April).

Chen, Duanjie and Jack M. Mintz.“Federal Corporate Tax Cuts: WouldLift Canada’s Standard of Living.” e-brief (April).

Gendron, Pierre-Pascal. “Un prob-lème imposant : améliorer l’attrait duQuébec pour l’investissement.”Bulletin de Recherche No. 89 (March)

Gendron, Pierre-Pascal. “A TaxingIssue: Enhancing Quebec’s InvestmentAttraction.” Backgrounder No. 89(March).

Robson, William B.P. and FinnPoschmann. “Restoring Purpose: AShadow Federal Budget for 2005.”Commentary No. 208 (February).

Chen, Duanjie and Jack M. Mintz.“How To Become Seductive: MakeCanada More Investment-Friendly.” e-brief (January).

EventsROUNDTABLE TORONTO:

Post-Budget Briefing, Thursday, Mar.

3, 2005; Mark Carney, Senior Associate

Deputy Minister, Finance Canada.

ROUNDTABLE TORONTO:

Taxing Smarter for Prosperity,

Tuesday, Mar. 29, 2005; Roger L.

Martin, Dean, Joseph Rotman School

of Management, University of Toronto.

ROUNDTABLE VANCOUVER:

The Loonie: Set to Soar ... or Sink?,

Monday, Jun. 6, 2005; Richard Harris,

Telus Professor of Economics, Simon

Fraser University and Warren J. Jestin,

Senior Vice-President & Chief

Economist, Bank of Nova Scotia.

POLICY SEMINAR:

Provincial Fiscal Equalization and

Territorial Formula Financing: Expert

Review Panel, Friday, Jun. 10, 2005.

POLICY CONFERENCE:

Federal-Provincial Fiscal Reform,

Thursday, Jun. 23, 2005.

TAX COMPETITIVENESS COUNCIL:

Tax Competitiveness Council Meeting,

Thursday, Sept. 8, 2005.

ROUNDTABLE REGINA:

Growing Saskatchewan: Can Business

Tax Reform Lead the Way?, Friday, Oct.

21, 2005; Jack Mintz, President and

Chief Executive Officer, C.D. Howe

Institute.

BENEFACTORS LECTURE:

The U.S. Debate on Tax Reform and Its

Implications for Canada: Will the U.S.

Sneeze? Will Canada Catch Cold?,

Thursday, Nov. 3, 2005; Charles E.

McLure, Jr., Senior Fellow at the

Hoover Institution, Stanford University.

SPECIAL DINNER:

Calgary Dinner with Jack Mintz,

Tuesday, Nov. 15, 2005.

POLICY SEMINAR:

The Canadian Dollar and the Economy,

Friday, Nov. 25, 2005.


A Moving OccasionThanks to the generosity of members’ contributions to the2004/05 Capital Campaign, the Institute moved to its newheadquarters at 67 Yonge Street in Toronto in early 2005. Theofficial opening was held in March, with then-prime-ministerPaul Martin in attendance (at top right with Jack Mintz). Aspecial Donor Recognition Dinner was held in January 2006 tothank the many members who contributed to the capital cam-paign that made the move possible.

An excellent library:(At left) Librarian Jan Moffatt consults with Wendy Longsworth in The Eleanor and Jack Mintz Library; (at right) Monique Cormier and Nairy Emirzian.

WITH RELATIONS STRAINED BETWEEN CANADA and itssouthern neighbour, and border issues of singular importance, theInstitute provided welcome debate and fresh analysis in this policyfield. Roundtable speakers included recently retired US Ambassadorto Canada Paul Cellucci, Canadian Consul General to New YorkPamela Wallin, Head of Canada’s Washington advocacy efforts ColinRobertson, and former Canadian Ambassador to the US DerekBurney. C.D. Howe Institute policy analyst Danielle Goldfarb alsobriefed David Wilkins, then newly appointed as US Ambassador toCanada, on the possible effects of US border security actions on theNorth American economic space.

The Institute also addressed challenges and opportunities posedby China’s economic rise, the proliferation of bilateral free-trade

deals, and the glacial pace of WTO talks. Speakers debated the issuesraised by Chinese investment in Canada’s natural resources sector,while Institute presentations highlighted Canada’s limited role inglobal supply chains.

Canadian trade policy was another major focus. Research pre-sented in Institute publications and in testimony before parliamen-tary committees on foreign affairs and trade argued that Ottawa wasfailing to set trade and foreign aid priorities and pursuing marginaltrade deals, and that Canada’s position at the WTO talks condemnedit to playing defense rather than pursuing liberalization initiatives.Institute publications and seminars also profiled costly but diminish-ing Canada-US agricultural disputes, Canada-Mexico relations, theUN Oil-for-Food scandal, and the situation in Iraq.


International and Trade Policy


The British-North American CommitteeThe British-North American Committee (BNAC) is a long-standing element in the C.D.Howe Institute’s international program. Co-sponsored by the Institute, with the AtlanticCouncil of the United States, and the UK British-North American Research Association,the BNAC convenes leaders from business, labour and the professions in all three coun-tries to discuss common concerns and investigate possible solutions. Full BNAC meetingstake place each spring in the UK and each fall in North America. The BNAC maintainsan active research and publishing program. Its current research efforts centre on electricityavailability and conservation, and threats to the security of the Internet. Dr. ThomasSymons of Trent University chairs the BNAC Executive Committee, and William Robsonserves as the BNAC ’s Canadian Liaison Officer.

ROUNDTABLE TORONTO:

Canada — U.S. Relations: The View from

New York, Monday, Apr. 25, 2005; Pamela

Wallin, Canadian Consul General, New York.

ROUNDTABLE TORONTO:

Global Prospects, Global Imbalances and

Canada —-a view from the IMF, Monday,

May 2, 2005; Kevin G. Lynch, Deputy Minister,

Department of Finance, Canada.

ROUNDTABLE TORONTO:

Iraq: A Transition in Trouble? Monday, May 9,

2005; Sir Jeremy Greenstock, UK Special

Envoy to Iraq and UK Ambassador to the

United Nations, Director, The Ditchley

Foundation.

BNAC:

BNAC General Meeting — UK,

May 12-15, 2005.

BNAC:

BNAC General Meeting — USA,

Oct. 20-25, 2005.

ROUNDTABLE TORONTO:

Canada-US Relations: Still Under

Construction, Tuesday, Sept. 20, 2005; Derek

H. Burney.

ROUNDTABLE TORONTO:

Does Chinese Accession to the WTO prevent

Canada from Protecting Its Strategic

Resources? Thursday, Dec. 8, 2005; Stanley H.

Hartt, Chairman, Citigroup Global Markets

Canada Inc. and Alan S. Alexandroff, Director,

LECG, LLC.

PublicationsINTERNATIONAL POLICY

Goldfarb, Danielle “Canada at the WTO Negotiations:All Defence, No Offence.” e-brief (December).

Barichello, Richard, Timothy Josling and Daniel A.Sumner “Agricultural Trade Disputes Between Canadaand the United States: Costly but Diminishing.”Commentary No. 224 (December).

Goldfarb, Danielle “US Bilateral Free Trade Accords:Why Canada Should Be Cautious About Going the SameRoute.” Commentary 214 (September).

Goldfarb, Danielle. “The Canada-Mexico Conundrum:Finding Common Ground.” Backgrounder No. 91 (July).

Sikorski, Radek “Cleaning Up the UN in an Age ofU.S. Hegemony.” Commentary No. 212 (June).

Hart, Michael “Great Wine, Better Cheese: HowCanada Can Escape the Trap of Agricultural SupplyManagement.” Backgrounder No. 90 (March).

EventsROUNDTABLE SASKATOON:

U.S. — Canada Relations: My Reflections, Friday, Feb.

25, 2005; Paul Cellucci, U.S. Ambassador, Embassy of the

United States of America.

ROUNDTABLE CALGARY:

Prospects for Canada -US Relations, Tuesday, Mar. 15,

2005; Jonathan T. Fried, Privy Council Office, Senior

Foreign Policy Advisor to the Prime Minister and Head

of the Canada-United States Secretariat Foreign and

Defence Policy.

ROUNDTABLE TORONTO:

’So why does it matter to me?’: Pushing Canada on

Capitol Hill and Beyond, Monday, Apr. 4, 2005; Colin

Robertson, Canadian Embassy Minister (Advocacy) and

Head, Washington Advocacy Secretariat.

POLICY SEMINAR:

Canada and Mexico: What Common Ground? Friday,

Apr. 15, 2005.

Economic Growth and InnovationTHE INSTITUTE’S ECONOMIC GROWTH and innovationprogram addressed both economy-wide and sector-specific chal-lenges in 2005. While publications highlighted barriers to R&D andlagging capital investment per worker, an appearance by the formerIrish president provided members with a first-hand perspective onthe factors behind his country’s economic success to Institute mem-bers. With energy prices rising to unprecedented levels, roundtablesexamined the regulatory environment for developing the oil sandsand offshore energy resources. Institute publications also exploredelectricity metering and pricing.

As Canada’s population ages, raising concerns about future pen-sion liabilities, the Institute has maintained an active program onpension issues. Institute Senior Vice President Bill Robson advised aninternational audience on Canada’s experience with social securitypensions, and helped Ottawa evaluate its Old Age Security pension.Roundtables and publications discussed better work incentives in the

public pension system, problems with federal pension guarantees, thesurvival of defined-benefit plans, and the investment environmentfor pension plans.

With the beef industry affected by the repercussions of mad cowdisease, the Institute also held a one-day conference to address thisand other agricultural issues, and published a piece explaining thebenefits of eliminating supply management in dairy and poultry. Asdiscussions on income trusts permeated public debate, Institute pub-lications and roundtables addressed that issue. Jack Mintz, theInstitute’s president and CEO, appeared before the SenateCommittee on Banking, Trade and Commerce to provide his adviceon the issue, which included raising the dividend tax credit and low-ering corporate income tax rates. The Institute also published on theissue of cell phone regulation, urging fresh approaches and increasedcompetition between rival technologies.

PublicationsECONOMIC GROWTH AND INNOVATION

Boyer, Marcel. “Augmentons le prix del’éctricité au Québec — pour le bien detous.” e-brief (March).

Boyer, Marcel. “Raise Electricity Prices inQuebec — and Benefit Everyone.” e-brief(March).

Faruqui, Ahmad and Stephen S. George.“Preventing Electrical Shocks What Ontario— And Other Provinces — Should LearnAbout Smart Metering.” Commentary No. 210(April).

Harris, Richard. “Canada’s R&D Deficit —And How To Fix It.” Commentary No. 211(May).

Milligan, Kevin. “Making It Pay to Work:Improving the Work Incentives in Canada’sPublic Pension System.” Commentary No. 218(October).

Robson, William B.P. “Off the Hook, ForNow: Taxpayers Should Hope that Talk ofFederal Pension Guarantees Ends With theMinority Government.” e-brief (November).

Quigley, Neil and Margaret Sanderson.“Going Mobile — Slowly: How WirelineTelephone Regulation Slows CellularNetwork Development.” Commentary No. 222(December).

Mintz, Jack. M. “Unfinished Business:Achieving Neutral Taxation of Corporationsand Income Trusts.” (December).

Huberman, Michael. “Are Canada’s Labour StandardsSet in the Third World? Historical Trends and FutureProspects.” Commentary No. 209 (February).

EventsPOLICY CONFERENCE:

Growing Markets for Canadian Agriculture, Friday, Mar.4, 2005.

ROUNDTABLE MONTREAL:Global Imbalances: Challenges for Policy Makers andRisks for Asset Managers, Tuesday, Mar. 8, 2005; Henri-Paul Rosseau, President and CEO Caisse de depot etplacement du Quebec.

ROUNDTABLE HALIFAX:Offshore Energy Development: The Regulatory andPolicy Environment, Wednesday, Apr. 20, 2005; GerardProtti, Executive Vice President Corporate Relations,EnCana Corporation.

BOARD OF DIRECTORS DINNER:The Irish Success Story, Wednesday, Jun. 1, 2005;Garret FitzGerald, Chancellor, National University ofIreland.

ROUNDTABLE EDMONTON:Oil Sands Infrastructure: Building Success, Wednesday,Jun. 8, 2005; Gregory Melchin, M.L.A., Minister ofEnergy, Government of Alberta.

ROUNDTABLE TORONTO:The Investment Environment for Pension Plans,Tuesday, Jun. 14, 2005; Paul G. Haggis, President andChief Executive Officer, Ontario Municipal EmployeesRetirement System (OMERS).

ROUNDTABLE OTTAWA:R&D Roadblocks and How to Get Around Them,Monday, Jun. 20, 2005; Richard Harris, Telus Professorof Economics, Simon Fraser University and BernardCourtois, President and CEO, Information TechnologyAssociation of Canada (ITAC).


Financial Services Research Initiative The dynamism and competitiveness of the financial services sector matters greatly toCanadian households and businesses. There is also a growing sense among financialservice providers and policymakers that a fresh push is needed to understand the sectorand promote more efficient regulation of its activities. To provide an independent per-spective on the critical issues facing the sector, the Institute launched its FinancialServices Research Initiative in 2005. Its inaugural meeting in December focused on theeffects of globalization on financial services and the role of regulation in the financialsector.

The Financial Services Research Initiative is a two-pronged project. One thrust isa series of policy seminars engaging senior financial service sector leaders, regulators andacademics. The second thrust is to address sectoral challenges through policy researchpublications that respond to key current and future issues.

ECONOMIC GROWTH AND INNOVATION(cont’d)

ROUNDTABLE MONTREAL:Building an Innovation-based Economy in Canada,Wednesday, Sept. 14, 2005; Jean-Michel Halfon,President, Pfizer Canada Inc.

SPECIAL DINNER:Calgary Dinner, Thursday, Oct. 20, 2005; Tim Hearn,Chairman, President and Chief Executive Officer,Imperial Oil Limited.

ROUNDTABLE TORONTO:Defined-Benefit Pension Plans: Can They Survive?Should We Care?, Tuesday, Nov. 8, 2005; SteveBonnar, Principal, Towers Perrin.

ROUNDTABLE EDMONTON:Building a Winning Organization through RelentlessInnovation and Improvement, Friday, Nov. 18, 2005;Nizar Somji, Matrikon Consulting Inc.

ROUNDTABLE TORONTO:Income Trusts: Benefits and Risks, Wednesday, Dec.7, 2005; Ira Gluskin, President and Chief InvestmentOfficer, Gluskin Sheff + Associates Inc. and Jeffrey F.Olin, Managing Partner, Ontario Head of InvestmentBanking, Desjardins Securities.

SEMINAR:Financial Services Research Initiative, Friday, Dec.9, 2005.

PublicationsGOVERNANCE AND PUBLIC INSTITUTIONS

Poschmann, Finn and Stephen Tapp. “SqueezingGaps Shut: Responsible Reforms to Federal-Provincial Fiscal Relations.” Commentary No. 225(December).

McKenzie, Kenneth J. “Reflections on thePolitical Economy of Fiscal Federalism in Canada.”Working Paper (September).

Smart, Michael. “Federal Transfers: Principles,Practice, and Prospects.” Working Paper(September).

Poschmann, Finn. “The Fiscal Background to aFiscal Gap.” Working Paper (September).

Dahlby, Bev. “Dealing with the Fiscal Imbalances:Vertical, Horizontal, and Structural.” Working Paper(September).

McKenzie, Kenneth J. “Reflections on thePolitical Economy of Fiscal Federalism in Canada.”Working Paper (September).

Kelleher, Maria, Janet Robins and John Dixie.“Taking Out the Trash: How To Allocate the CostsFairly.” Commentary No. 213 (July).

Payne, A. Abigail. “Firm Foundations PuttingPrivate and Public Foundations on Level Ground.”Backgrounder No. 88 (February).

Laidler, David E.W. and William B.P. Robson.“Prospects for Canada: Progress and Challenges 20Years after the MacDonald Commission.” Book(January).

EventsPOLICY SEMINAR:

Provincial Fiscal Equalization and TerritorialFormula Financing: Expert Review Panel, Friday,Jun. 10, 2005.

POLICY CONFERENCE:Federal-Provincial Fiscal Reform, Thursday, Jun. 23,2005.

ROUNDTABLE TORONTO: NAV CANADA: A Privatization Success Story, Friday,Sept. 23, 2005; John W., President & CEO, CrichtonNAV CANADA.

ROUNDTABLE TORONTO: The Business Case for City Building, Wednesday,Oct. 12, 2005; David Miller City of Toronto Office ofthe Mayor.

ROUNDTABLE TORONTO: Economic Reform in Australia and the Question ofP3s, Wednesday, Nov. 16, 2005; Sharman StoneParliamentary Secretary to the Minister for Financeand Administration, Australia.


Governance and Public InstitutionsFOR MANY, THE YEAR 2005 will be etched in Canadian politi-cal history as the year of the Gomery inquiry, which brought thesponsorship scandal to full light and reminded Canadians of theimportance of good governance and of confidence in public institu-tions. The Institute’s work in this area for 2005 took the form ofthree publications and six roundtables. A volume edited by DavidLaidler and Bill Robson reviewed the progress accomplished in the20 years since the landmark Royal Commission chaired by the Hon.Donald Macdonald, and drew lessons from subsequent experience tooutline a program for future action. The two other publicationsfocused on more immediate and specific issues. Maria Kelleher andco-authors argued for a better sharing of the costs of garbage dispos-al through variable user fees that would at the same time provideincentives to reduce trash. Abigail Payne raised the question of whyprivate foundations are treated differently from public ones by thetax system and argued for putting the two on level ground.

The Institute’s 2005 events in this policy arena featured verynotable speakers, including Quebec Premier Jean Charest on creatinga new federalism, Toronto Mayor David Miller on the business casefor city building, then federal minister John Godfrey on a new deal

for cities and Canadian Security Intelligence Service Director JamesJudd on the Canadian response to terrorism.

Federal-provincial fiscal relations also remained fraught in 2005.Unexpected federal surpluses, ad hoc spending increases, and a dealthat divorced the Equalization program from its intended role inreducing interprovincial fiscal disparities, created a strong sense thatfresh reforms were needed. It was in this context that the Institutehosted consultations with the federal Experts Panel on Equalizationand Territorial Formula Financing, mounted a major conference on“Federal-Provincial Fiscal Reform,” and issued a series of relatedworking papers and a Commentary, Squeezing Gaps Shut: ResponsibleReforms to Federal-Provincial Fiscal Relations. The central theme: rem-edy the imbalance of revenue collection and spending responsibilitiesthrough lower federal taxes — for example, by lowering the Goodsand Services Tax rate — to create room for provincial revenue-rais-ing measures. The potential for fiscal realignments that wouldimprove government accountability proved to be a dominant themeheading into 2006.


Social PolicySOCIAL POLICY RESEARCH BY THE INSTITUTE focused primarily on educationreform and innovation in 2005. Papers in the Education Papers Series addressed some ofthe key challenges facing the education system, from enhancing the quality of elementaryand secondary education, and lowering high-school dropout rates, to changing the waysuniversities are funded and professors are paid.

With regard to primary education, Institute research challenged the conventionalwisdom that smaller class sizes are better. The Institute also published a groundbreakingstudy of elementary school test scores in Ontario by David Johnson. His analysis allowedpolicymakers to compare all Ontario schools on an equal footing by removing the influ-ence of socioeconomic context on school performance. The school performance indica-tors thus produced became one of the most downloaded items on the Institute’s websitein 2005. As for high-school education, another study showed that educators can helplower drop-out rates by raising the school-leaving age above 16 years of age.

In the postsecondary arena, the Institute’s work focused on the challenge for govern-ments to enact policies that give the right incentives for students, teachers and institutionsto provide a high-quality education that is responsive to student demands. ACommentary by Kirk Collins and James Davies showed that changes in taxes and subsi-dies have improved the incentive for young people to attend university. Fellow-in-Residence David Laidler responded to the Rae Review of postsecondary education inOntario with arguments for fundamental reform, including making greater use of vari-able tuition, student-based financing and competition in the delivery of higher education.A Toronto Roundtable with David Lindsay also provided a forum for members to react

to Bob Rae’s report. John Chant’s contribution showedthat professor’s pay should be based on performance,not longevity. His study demonstrated that the salarystructure of university professors can influence researchand teaching performance and that greater use oughtto be made of merit-based pay.

More education papers focusing on the financing ofpostsecondary education are slated for 2006.


PublicationsSOCIAL POLICY

Oreopoulous, Philip. “Stay in School: New Lessonson the Benefits of Raising the Legal School-LeavingAge.” Commentary No. 223 (December).

Chant, John. “How We Pay Professors and Why ItMatters.” Commentary No. 221 (November).

Coulombe, Serge and Jean-François Tremblay.“Public Investment in Skills: Are CanadianGovernments.” Commentary No. 217 (October).

Collins, Kirk A. and James B. Davies. “Carrots &Sticks: The Effect of Recent Spending and TaxChanges on the Incentive to Attend University.”Commentary No. 220 (October).

Laidler, David E.W. “Redirecting Rae: SomeProposals for Postsecondary Education in Ontario.”Backgrounder No. 92 (October)

Guillemette, Yvan. “School Class Size: Smaller Isn’tBetter.” Commentary No. 215 (August).

Johnson, David. “Signposts of Success:Interpreting Ontario’s Elementary School TestScores.” (March).

Guillemette, Yvan. “School Enrolment Is Down;Spending Is Up. What’s Wrong With This Picture?” e-brief (January).

EventsROUNDTABLE SASKATOON:

Saskatchewan’s Labour Law Pops A Gasket, Monday,Apr. 11, 2005; John Richards, Simon Fraser University,Master of Public Policy Program.

ROUNDTABLE TORONTO:Postsecondary Education: The Rae Review andBeyond, Wednesday, May 11, 2005; David Lindsay,President, Association of Colleges of Applied Arts &Technology of Ontario. and Ian D. Clark, President andChief Executive Officer, Council of Ontario Universities.

ROUNDTABLE MONTREAL:What is the future of our Canadian universities?Thursday, Jun. 16, 2005; Michel Pigeon, President,Laval University.

ROUNDTABLE MONTREAL:The Medicare Monopoly: Caught between theTaxpayers and the Judges, Tuesday, Nov. 22, 2005;Claude E. Forget, Senior Vice-President and Directorof Research, CEF, Ganesh Corporation and WilliamRobson, C.D. Howe Institute.

Donner Prize finalist: David Johnson’s ground-breaking study of elementary school test scores,Signposts of Success, allowed policymakers to com-pare all Ontario schools on equal footing. Thebook has been named as a finalist for the2005/2006 Donner Prize for the best book onCanadian public policy.

Cross-country encounters:Quebec’s Hélène Desmarais, Institute Director, at the podium; Alberta’s Premier Ralph Klein(left) discusses the state of the nation with Ontario’s Robert Prichard, President and CEO,Torstar Corporation and President Emeritus, University of Toronto.

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HIGHLIGHTS FOR 2005

Making Our Voice HeardExposure and Ad Value of the 2005 C.D. Howe Institute Media CoverageRaising awareness of policy ideas is a key goal of the C.D. Howe Institute. Our mediaand dissemination campaign continued to generate outstanding results in 2005. TheInstitute uses two useful measures to help track the effectiveness of its media cam-paigns: Exposure and Equivalent Ad Value of citations to Institute research in themedia.

Ad value is a dollar figure which attempts to quantify the cost of purchasing anadvertisement with similar parameters and reach as a particular article in the media.Exposure is a measure of the potential number of people who may have viewed an arti-cle. This is usually the circulation of a particular paper. The Institute uses an independ-ent third-party service supplier to track and analyze media coverage.

Source: FPinformart.ca

Visitors to www.cdhowe.org andPublication Downloads in 2005Another useful measure of the C.D. Howe Institute’s reach is the degree to which theInstitute website is a meeting place for opinion leaders, researchers, policy makers andothers interested in policy research. The Institute tracks its web presence and the num-ber of policy papers downloaded from its site.

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66,715,733 $23,292,244

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C.D. Howe Institute Output(publications & events)

Staff behind the scenes:(Top, left to right) Duncan Munn, RowenaJeffers and Donna Leitch; (Middle) JulieKelsey (left) and Nairy Emirzian; (Bottom)Kristine Gray and Warren Mahomed.

THE INSTITUTE’S PEOPLE

Policy Staff: Seen and HeardINSTITUTE POLICY STAFF APPEAR REGULARLY BEFORE PARLIAMENTARY COMMITTEES and address decision makersin various other forums — all with the purpose of fostering debate about smarter public policy. Whether it concern a level playing field forincome trusts and corporate shares, lowering corporate taxes, rebalancing fiscal federalism, boosting economic innovation, or assessingCanada’s policy approaches to the US and the rest of the world, C.D. Institute policy analysts have been seen and heard where it counts.Examples of their many presentations include:

Jack Mintz: The wisest way to deal with income trusts was addressed by Jack Mintz before the Standing Senatecommittee on Banking, Trade and Commerce on September 29, 2005. He advised the Committee that the bestway of maximizing the efficiency of the economy is to redesign the tax system to ensure that it is neutral betweendifferent types of business organizations. This could be accomplished by lowering general corporate income taxrates to 20 percent across Canada, he said, or by raising the dividend tax credit on public corporate shares. Several federal and provincial ministers and their ministries across the country also solicited his views on a rangeof topics.

William B.P Robson: The need for clearer priorities and less spending was a major focus of presentations onParliament Hill by Senior Vice President and Director of Research Bill Robson in 2005. He discussed the meritsof a new fiscal forecasting body — an idea later embodied in the April 2006 proposal for a Parliamentary Budgetofficer — before the House of Commons Standing Committee on Finance in March, and addressed aDepartment of Finance retreat on fiscal priorities in May. He criticized the run-away spending sanctioned by BillC-48 before the Standing Committee on Finance in June, and returned to the Committee one more time inSeptember to advocate a new fiscal framework that would curb in-year spending increases.

Danielle Goldfarb: Canada’s International Policy Statement fails to adequately set priorities, according to DanielleGoldfarb, Senior Policy Analyst for the C.D. Howe Institute. In comments before the House of CommonsStanding Committee on Foreign affairs and International Trade in November, Goldfarb said that, to most effec-tively meet Canadian interests, Ottawa should focus its limited resources on a narrower set of issues and countriesthan the paper envisions.

Finn Poschmann: Amid a war of words over federal transfers to the provinces, the House of CommonsSubcommittee on Fiscal Imbalance launched cross-country hearings. The C.D. Howe Institute’s AssociateDirector of Research, Finn Poschmann, addressed the Committee in Toronto in March. His remarks, “TheFederal Provincial Balance: Teetering on the Edge of Coherence,” suggested that the current system is in disarray,but he also saw good reasons for optimism.

Yvan Guillemette: Among other appearances, Guillemette presented to the Senate Standing Committee onBanking, Trade and Commerce in relation to its study of productivity in Canada. He discussed the importanceof US R&D and technology transfers for Canadian productivity, and linked that with the importance of havinga business climate conducive to investment because technology is embodied in capital goods (with associated taximplications).

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THE INSTITUTE’S PEOPLE

StaffMonique CormierVice President Operations

Nairy EmirzianOffice Coordinator

James FlemingEditor

Danielle GoldfarbSenior Policy Analyst

Kristine GrayExecutive Assistant/Event Financial Coordinator

Yvan GuillemettePolicy Analyst

Rowena JeffersSenior Coordinator, Memberand Financial Services

Julie KelseySenior Event Planner

Diane KingPage Layout Designer

Donna LeitchCorporate Secretary and Senior Executive Assistant to the President and CEO

Tracy LerdorfDevelopment and MembershipCoordinator

Wendy LongsworthInformation Technology and Publications Manager

Warren MahomedSystem and DatabaseAdministrator

Jack MintzPresident and CEO

Jan MoffattLibrarian and InformationServices Coordinator

Duncan MunnDirector of Development and Public Affairs

Finn PoschmannAssociate Director of Research

William B.P. RobsonSenior Vice President andDirector of Research andCanadian Liaison Officer, BNAC

The Funded Scholars ProgramThe Funded Scholars Program enables the C.D. Howe Institute to engage leading scholars, for aportion of their time, to participate actively in its research program. Chairs are selected on the basisof their record of scholarship and supported by the generous donations of several organizations. Wewould like particularly to acknowledge the following organizations and individuals who participat-ed in the Program during 2005.

• George Weston Ltd. for its support of Duanjie Chen, George Weston Analyst in Tax Policy;• Encana Corporation for its support of Kenneth J. McKenzie, EnCana Scholar in Public Policy;• Marcel Boyer, Quebec Scholar in Economic Policy;• Roger Phillips for his support of John Richards, Phillips Scholar in Social Policy.

Fellows-in-Residence:Alan AlexandroffMarcel BoyerDuanjie ChenDavid LaidlerKenneth J. McKenzieJohn Richards

Senior Fellows:Yvan AllaireJohn W. CrowDon DrummondClaude ForgetFred GorbetStanley Hartt

Peter MeekisonAl O’BrienSylvia OstryGrant ReuberGordon Thiessen

Research Fellows:Charles BeachRichard BirdJames DaviesW. Erwin DiewertWendy DobsonPierre FortinCharles FreedmanRichard Harris

Michael HartJohn HelliwellJon KesselmanPaul MassonKevin MilliganPatrick MonahanAlice NakamuraNancy OlewilerChristopher RaganWilliam ScarthMichael SmartMichael TrebilcockDaniel TreflerWilliam Watson

Thomas A. WilsonRobert Young

International Fellows:Richard BlundellWillem BuiterJonathan GruberRobert HavemanPeter HowittRobert HowseNeil QuigleyHans-Werner Sinn

2005 Scholars

The C.D. Howe Institute Staff, 2005

Canadian Tire Corporation, LimitedCanadian Western BankCanam Group Inc.Candor Investments Ltd.Cangene CorporationCanWest Global Communications Corp.Cargill LimitedCarleton University Catalyst Paper CorporationThe CCL Group Inc.Ken ChapmanCHC Helicopter CorporationBen CherniavskyKenneth ChristoffelClairvest Group Inc.CMA Holdings Inc.CNJack CockwellCogeco Inc.Marshall A. CohenConcordia University ConocoPhillips CanadaE. Kendall CorkMarcel CôtéGlen CronkwrightPaul R. CurleyThomas P. d’AquinoCatherine A. DelaneyDeloitte & Touche LLPIldiko K. DerezaDesjardins Ducharme LLPDeutsche Bank AG, Canada BranchWendy DobsonDofasco Inc.Domtar Inc.Donner Canadian FoundationDuke Energy Gas Transmission CanadaDynacare Kasper Medical LaboratoriesE.I. du Pont Canada CompanyJanet EckerJohn F. EckertEconomap Inc.Edco Financial Holdings Ltd.Edmonton Economic Development

CorporationE-L Financial Corporation LimitedElk Valley Coal Corp.Emera Inc.William F. EmpeyEnbridgeEnCana CorporationEnergy Council of CanadaEnerplus Resources FundEnsign Resource Service Group Inc.Ensis Growth Fund Inc.Ernst & Young LLPMorrey M. EwingExport Development CanadaFalconbridge LimitedFednav LimitedJohn T. FergusonFidelity InvestmentsFinning International Inc.Aaron FishJames D. FleckFord Motor Company of Canada, LimitedForest Products Association of CanadaRobert and Julia FosterFour Halls Inc.Four Seasons Hotels LimitedFraser Milner Casgrain LLPFraser Papers Inc.Gaz Métro

GE CanadaGeneral Motors of Canada LimitedGibson Energy Ltd.Christine GirvanGluskin Sheff + Associates Inc.Goal Group of CompaniesGoldberg GroupGoodmans LLPPeter GoringJohn A.G. GrantJames K. GrayGreater Saskatoon Chamber

of CommerceThe Great-West Life Assurance Company,

London Life Insurance Company and Canada Life

John HaagGeoffrey HaleThe Harold Crabtree FoundationHarvard Developments Inc., A Hill

CompanyG.R. HeffernanLawrence HermanHill & KnowltonHistorica FoundationWilliam L. HoltHoneywell CanadaHSBC Bank CanadaHSD Partners Inc.H. Douglas HunterHydro-QuébecLou Hyndman, Q.C.IBM Canada Ltd.Imperial Oil LimitedImperial Tobacco Canada LimitedInco LimitedIndustrial Alliance Life Insurance Company

Information Services Corporation of Saskatchewan

The Institute for Competitiveness and Prosperity

Insurance Bureau of CanadaInter Pipeline FundInvestment Dealers Association of CanadaThe Investment Funds Institute of CanadaInvestors GroupIpsco Inc.J.D. Irving LimitedJ.P. Morgan Securities Canada Inc.Jackman FoundationJarislowsky, Fraser LimitedW. Edwin JarmainJohn Dobson FoundationRobert JohnstoneJTI-Macdonald Corp.Juniper Fund ManagementJohn A. KazanjianJames T. KiernanThomas E. KieransFrank F. KolbKPA Advisory Services Ltd.KPMG LLPJoseph Kruger IILa Jolla Resources International Ltd.Laval University Law Commission of CanadaR. John LawrenceJacques A. LefebvreLehigh Inland Cement LimitedDavid A. LeslieDavid LindsayLockerbie & Hole Inc.Lombard Canada Ltd.

Kevin Abarbanel, President, ABARCAV Risk Capital

Accenture Inc.Acklands-Grainger Inc.AdvocisAGF Management LimitedAgricore UnitedAIM Trimark InvestmentsAlcan Inc.AltaGasThe American Chamber of Commerce

in CanadaAON ConsultingARC Financial CorporationARC Resources Ltd.E. James Arnett, Q. C., of CounselATB FinancialRichard H. BakerBank of Nova ScotiaBarrick Gold CorporationHarry G. BaumannBCE Inc.Stuart BelkinBell CanadaBennett Jones LLPThe Birks Family FoundationWilliam BlackBlake Cassels & Graydon LLPBMO Financial GroupBoardwalk Equities Inc.Bombardier Inc.David E. BondR.A.N. BonnycastleBorden Ladner Gervais LLPBP Canada Energy CompanyJack BrodskyBrookfield Asset Management Inc.Brookfield Properties Corp.

Burgundy Asset ManagementBurlington Resources Canada Ltd.BURNCO Rock Products Ltd.Business Council of British ColumbiaBusiness Development Bank of CanadaC.D. Howe Memorial FoundationC.M. Harding FoundationCadillac Fairview Corp. Ltd.Caisse de dépôt et placement

du QuébecRobert C. CaldwellCameco CorporationCampbell StrategiesCanada Deposit Insurance CorporationCanada Overseas Investments LimitedCanada Post CorporationCanadian Association of Petroleum

ProducersCanadian Association of Recycling

IndustriesCanadian Bankers AssociationCanadian Chamber of CommerceCanadian Chemical Producers’

AssociationCanadian Energy Pipeline AssociationCanadian Federation of

Independent BusinessCanadian Finance & Leasing AssociationCanadian Imperial Bank of CommerceThe Canadian Institute of

Chartered AccountantsCanadian Life and Health Insurance

Association Inc.Canadian Manufacturers & ExportersCanadian Oil Sands LimitedCanadian Pacific RailwayCanadian Pension Plan Investment BoardCanadian Tax Foundation

The Institute’s Members


The Benefactors Lecture and DinnerThe Benefactors Lecture, 2005, raised many pertinent issues fora Canadian audience. Delivered by Charles E. McLure, Jr.,Senior Fellow at the Hoover Institution, Stanford University,the Lecture and Dinner was sponsored by Enbridge Inc.

Dr. McLure spoke on “The US Debate on Tax Reform andits Implications for Canada: Will the US Sneeze? Will Canada

Catch Cold?” He was instru-mental in developing the 1984tax reform study by the USDepartment of the Treasury thatled to the US tax reform of1986, and thus was well placedto present a review of US taxdevelopments that could havemajor impacts on Canada. In awider context, he pointed out,many countries have reducedtaxes on saving in favour of expand-ing the taxation on consumption.


THE INSTITUTE’S MEMBERSLowndes Lambert Group Canada Ltd.J.W. (Wes) MacAleerWilliam A. Macdonald, Q.C.Robert M. MacIntoshMaclab EnterprisesJohn MacNaughtonMagellan Aerospace LimitedThe Manning Centre for Building DemocracyManulife FinancialGeorg MaraisMarsh Canada LimitedMasonite International CorporationMax Bell FoundationMcCarthy Tétrault LLPMcGill University James P. McIlroyMcMaster University McMillan Binch Mendelsohn LLPJohn D. McNeilMercer Human Resource Consulting LimitedMerrill Lynch Canada Inc.Minto Developments Inc.William MolsonMonarch CorporationMonitor GroupMoosehead Breweries LimitedMorneau SobecoRussell J. MorrisonF.W. Orde MortonMTS Allstream Inc.John P. MulvihillN M Rothschild & Sons Canada LimitedNational Bank of CanadaNational LeasingNAV CANADAEdward P. NeufeldNew Brunswick Power CorporationNexen Inc.Norbord Inc.Northam Realty Advisors LimitedNOVA Chemicals CorporationSheila H. O’BrienOnex CorporationOntario Centres of Excellence Inc.Ontario Hospital AssociationOntario Municipal Employees Retirement System (OMERS)Ontario Power Generation Inc.Ontario Securities CommissionOntario Teachers’ Pension Plan

Ontario Trillium FoundationWilliam OrovanOsler, Hoskin & Harcourt LLPJames S. Palmer, C.M., ADE, Q.C.Pembina Pipeline Income FundPenn West Petroleum Ltd.Petro-CanadaPhillips, Hager & North Investment Management Ltd.Roger PhillipsPirie FoundationPower Corporation of CanadaPratt & Whitney CanadaPricewaterhouseCoopers LLPProcter & Gamble Inc.Property and Casualty Insurance Compensation CorporationQueen’s UniversityThe Railway Association of CanadaRBC Capital MarketsRBC Financial GroupDr. Donald S. ReimerRogers Communications Inc.Ryerson University Samuel Son and Co. LimitedSaskatchewan Wheat PoolGuylaine SaucierSceptre Investment CounselJon Schubert, President and CEOHugh D. SegalLindsay K. ShaddySejal ShahGordon SharwoodShell Canada LimitedSherritt International CorporationMary-Anne SillamaaSimon Fraser University Leslie A. SinclairPaul G. SmithSNC Lavalin Group Inc.Sobeys Inc.Philip Spencer, Q.C.Wayne SteadmanStewart McKelvey Stirling ScalesMorley StockSun Life Financial Inc.Suncor Energy Inc.Harry SwainChristopher SweeneyThomas H.B. Symons

Syncrude Canada LimitedTax Executives Institute, Inc.TD Bank Financial GroupTeck Cominco LimitedFrederick H. TelmerThe Thomson CorporationThe Toronto Board of TradeTorstar CorporationTorys LLPTransAlta CorporationTransCanada CorporationTranscontinental Inc.True Energy Inc.Robert J. Turner, Q.C.UBS Global Asset Management

(Canada) Co.Université de MontréalUniversity College of the Fraser ValleyUniversity of Alberta University of British Columbia The University of CalgaryThe University of LethbridgeUniversity of Manitoba University of Ottawa University of Regina University of Saskatchewan University of Toronto University of Waterloo The University of Western OntarioG. Douglas ValentineVia Rail Canada Inc.Warren ViegasW. Garfield Weston FoundationJack H. WarrenWeston Forest Corp.David J.S. WinfieldAlfred G. WirthWatson WyattAdam H. Zimmerman

View’s expressed by the C.D. Howe Institute do not neces-sarily reflect those of its members.

Dinner guests enjoy food for thought (left); Russell Morrison (centre left) with Alison Dyer and Alfred Wirth; eminent Canadian AllanGotlieb (left in photo at right), with then-US consul general Jessica Le Croy and Grant Reuber, a former Institute chairman.

AUDITOR’S REPORT ON FINANCIAL STATEMENTS

To the Members of C.D. Howe InstituteThe accompanying summarized balance sheet and statement of revenue, expenses and accumulated netrevenue are derived from the complete financial statements of C.D. Howe Institute as at December 31,2005 and for the year then ended on which we expressed an opinion without reservation in our reportdated February 17, 2006. The fair summarization of the complete financial statements is the responsi-bility of management. Our responsibility, in accordance with the applicable Assurance Guideline of TheCanadian Institute of Chartered Accountants, is to report on the summarized financial statements.

In our opinion, the accompanying financial statements fairly summarize, in all material respects,the related complete financial statements in accordance with the criteria described in the Guidelinereferred to above.

These summarized financial statements do not contain all the disclosures required by Canadiangenerally accepted accounting principles. Readers are cautioned that these statements may not beappropriate for their purposes. For more information on the Institute’s financial position, results ofoperations and changes in financial position, reference should be made to the related complete finan-cial statements.

Chartered AccountantsToronto, OntarioFebruary 17, 2006



AUDITOR’S REPORT ON FINANCIAL STATEMENTS

SUMMARIZED BALANCE SHEET

As of December 31, 20052005 2004

ASSETSCURRENT

Cash $ 274,480 $ 440,693

Marketable securities — at cost, which approximates market value 1,493,401 1,498,559

Accounts receivable and accrued interest 155,367 48,015

Prepaid expenses 37,878 61,368

1,961,126 2,048,635

CAPITAL ASSETS 503,950 224,143

$ 2,465,076 $ 2,272,778

LIABILITIESCURRENT

Accounts payable and accrued liabilities $ 214,797 $ 364,790

Deferred revenue 850,240 955,961

1,065,037 1,320,751

LONG TERMDeferred capital contributions 233,933 —

Deferred rent 209,540 6,263

443,473 6,263

1,508,510 1,327,014

CAPITAL AND ACCUMULATED NET REVENUE

Capital 212,898 212,898

Accumulated net revenue 743,668 732,866

956,566 945,764

$ 2,465,076 $ 2,272,778

Year ended December 31, 20052005 2004

REVENUE

Contributions and subscriptions $ 2,745,102 $ 2,380,091

Publications, interest and other 337,690 265,724

3,082,792 2,645,815

EXPENSES

Research, administrative and project expenses 3,001,790 2,587,845

Amortization 68,050 29,515

3,069,840 2,617,360

EXCESS OF REVENUE OVER EXPENSES FROM OPERATIONS 12,952 28,455

UNREALIZED FOREIGN EXCHANGE LOSS FROM MARKETABLE SECURITIES (2,150) (8,621)

EXCESS OF REVENUE OVER EXPENSES 10,802 19,834

ACCUMULATED NET REVENUE, BEGINNING OF YEAR 732,866 713,032

ACCUMULATED NET REVENUE, END OF YEAR $ 743,668 $ 732,866

SUMMARIZED STATEMENT OF REVENUE, EXPENSES AND ACCUMULATED NET REVENUE

annual report 2005

Documents

executive chairman

chief executive officer

chief executive officer

chief financial officer

hill president

belkin president

hawkins president

lowry president