May 4, 2020 – Rapid increases in testing and contact tracing are needed to hasten the re-opening of the economy, according to a C.D. Howe Institute working group.
The Working Group on Business Continuity and Trade, co-chaired by Dwight Duncan, Senior Strategic Advisor at McMillan LLP and former Ontario Minister of Finance, and Jeanette Patell, Vice-President of Government Affairs and Policy for GE Canada, also emphasized a need for targeted support to provide liquidity for businesses.
Based on international experience, the group noted widely available testing and effective tracing are essential to manage risks for health system capacity and workplace transmission, as a precursor to re-opening the economy. While balancing individuals’ privacy rights, employers and governments must be able to rapidly identify risks to specific workplaces and public health. Governments should regularly publish granular epidemiological data and modeling so that Canadians can participate in informed discussions about the pace of restart, easing of restrictions and the balance of risks.
The working group recommends that policymakers distinguish between “backstops” and “bailouts.” Providing temporary “bridge” financing for immediate liquidity needs is distinct from government participation in long-term support for the restructuring of distressed companies. While governments must be conscious of taxpayer exposure, ensuring access to near-term credit is essential for businesses to be able to cover fixed costs.
Even with near-term credit support, governments should expect a wave of corporate distress. For certain sectors, the downturn in demand is likely to be protracted. Governments will face political pressure to support specific failing companies and distressed sectors. Although the present crisis is distinct from the 2008-09 “credit crunch,” governments should draw on past experience (e.g., restructuring of major auto-manufacturers) to define rigorous and principled criteria for decision-making and design of long-term, company-specific support.
At this meeting, the working group also emphasized the need for:
- Greater detail in provinces’ restart/recovery playbooks, including clear thresholds and indicators for decision-making about the easing of restrictions;
- Modification of rules for federal wage and commercial rental support to include businesses that may otherwise face layoffs and closure;
- A principled approach for government support for long-term restructuring of key distressed sectors and companies.
For more information, please contact, Grant Bishop, Associate Director, Research, C.D. Howe Institute; David Blackwood, Communications Officer, C.D. Howe Institute. Phone 416-873-6168; email dblackwood@cdhowe.org