and that is globalization. travelling or shipping goods around the world now takes hours, not days. information and ideas are available simultaneously to anyone who has access to the internet. wireless technology has brought telecommunication to places where phone lines cannot reach. in short, technological advances have allowed markets to expand as never before. in many ways, technology is the enabler of many of the trends leading to globalization, by slashing the costs and the time it takes to reach across borders and continents. today, we ’ re all shopping in the same global village market. consumers and businesses around the world have become the target customers of canadian firms. at the same time, our firms are exposed to new sources of competition and new pressures to innovate. perhaps the most preoccupying element of this trend towards globalization is the emergence of china as an economic powerhouse. and india is not far behind. when you consider that china and india account for 40 per cent of the world ’ s population - and that their economies are growing at annual rates of 9 and 7 per cent, respectively - it is not hard to see why they have such an impact on the global economy. china and india are now major global competitors in labour - intensive industries. increasingly, they ’ re also flexing their muscles in skill - intensive industries. asia ’ s highly efficient production capacity is prompting a transformation of manufacturing and distribution processes around the world. and the skills - based software industry in india is transforming that sector globally. so we ’ re seeing tremendous competitive pressure on industries that are the traditional mainstays of the canadian economy in general and of ontario in particular - such as automobiles and parts, steel, and other manufacturing industries. we ’ re also seeing competitive pressures transform canada ’ s high - tech sector, which has only recently emerged as an engine of growth. but the income and wealth created in china and india are increasing the ability of these countries to buy goods and services from abroad. so, their integration into the global economy represents both a competitive challenge and a tremendous opportunity. these emerging markets are just that - markets. china is already one of the world ’ s largest importers. this growing demand can provide a real boost to the canadian economy, if we gear up to meet the challenge. so, how do we meet those challenges? one way is to integrate low - cost components from other regions of the world into our own production processes, through direct investment or joint ventures. this can help to keep costs down and free up our

floating currency gives a country the flexibility it needs to adjust to economic forces that originate from inside and outside its borders. the second lesson we learned is that, for monetary policy to be successful in controlling inflation, a floating exchange rate is not enough. an " anchor " for monetary policy is also needed. canada first floated its dollar in 1950, but returned to a fixed exchange rate for eight years during the 1960s. after the decision to float the dollar again in 1970, the bank spent the 1970s and 1980s searching for an appropriate monetary policy anchor. by this, i mean a clear target for monetary policy, a way to help policy - makers keep policy on track, and a way to tie down or " anchor " expectations about future inflation. the outcome of that search was the eventual adoption of inflation targets as the anchor for canadian monetary policy. in february 1991, the bank and the federal government announced an agreement on a series of inflation - reduction targets. this agreement has been extended three times, and since 1995, it has called for the bank to keep inflation at 2 per cent, the midpoint of a 1 to 3 per cent target range. this inflation - targeting system, supported by a floating exchange rate, has done more than keep inflation low - it has delivered strong and sustained growth in output and employment in canada. let me quickly stress that our inflation - targeting framework operates in a symmetric way - we care just as much about inflation falling below target as we do about inflation rising above target. if demand for goods and services pushes the canadian economy against the limits of its capacity, and inflation is poised to rise above the target, the bank will raise interest rates to cool off the economy. and when the economy is operating below its production capacity, and inflation is poised to fall below the target, the bank will lower interest rates to stimulate growth. this symmetric approach helps the canadian economy adjust to changing circumstances, while maintaining strong, sustained growth in output and employment. the bank's commitment to the idea of transparency is another way in which our monetary policy has evolved. there was a time when central bankers kept their actions and thoughts shrouded in secrecy, convinced that their policy would be more effective if implemented with an element of surprise. times have changed, and best practices in monetary policy have evolved. we have found that monetary policy is more effective when people understand what we are doing and why. that's why we communicate regularly with parliamentarians, with markets, and with the public. we do this