, is a vital driver of improvement on the supply side of the economy. at the micro - economic level, that means that particular sectors and individual businesses will continually rise and fall ; and that is why established producers everywhere often see new competition, perhaps especially international competition, as an unwelcome threat. but at the macro - economic level what we have to remember is that every dollar earned is a dollar available to be spent or reinvested back into the economy, whoever earns it. so, at the macroeconomic level, competition – the driver of economic progress – is a positive sum game ; it increases the potentially sustainable growth rate nationally, regionally, and internationally. how far each country individually is able to take advantage of this increased potential depends upon how flexibly it can adapt to changes in comparative productive advantage – which in turn depends upon the supply – side characteristics of our separate economies. but there is no doubt that we all stand to benefit. that is why i have always believed fundamentally in the principle of free trade and open capital markets which enhance competition. it is why i have always welcomed the rapid growth we have seen in the emerging market economies – and why incidentally i look forward to china ’ s accession to the wto. we cannot then sensibly aim to obstruct structural changes. but nor can we realistically hope to avoid all shorter - term fluctuations, associated with the business cycle for example or as a result simply of random shocks. what we are looking for is a stable macro - economic framework for the economy as a whole, which will help to moderate rather than aggravate shorter - term fluctuations, and one within which change can occur in response to longer - term real economic factors, undistorted by unnecessary, erratic, movements particularly in nominal values. in a totally closed, national, economy i suspect that the most effective way of achieving this would be to aim to stabilise the rate of consumer price inflation – at some very low level representing effective price stability. we might, certainly, as an intermediate step aim to stabilise the rate of growth of the money supply, if we were confident that the demand for money was sufficiently stable and predictable, but the reason for targeting the growth of the money supply would ultimately be to stabilise the rate of inflation, so the distinction is operational rather than substantive. but it is important to understand that effective price stability would not be intended simply as an end in itself. in order to maintain price

seed varieties, drove the consolidation of prairie farms to take advantage of the greater ability to cultivate and harvest crops on a larger scale. saskatchewan ’ s farm production and exports expanded massively, even while its population steadily declined. that freed up workers to move into job opportunities opening up elsewhere in the economy, while increasing the productivity and incomes of those who remained ( charts 4a and b ). this is a story that has a personal connection for me : half of my great - grandparents were farmers in the prairies, but none of their descendants is still farming. 4 / 10 bis central bankers'speeches i ’ ve been talking about how innovation drives trade, but the reverse is also true : trade openness drives innovation, too. this happens for two reasons. first, access to foreign markets exposes firms to new technologies and provides incentives for them to invest in producing more efficiently. 11 and second, competition from trade encourages firms to innovate and invent new products to maintain market share. trade is also an important channel for knowledge to spill over across borders : an operation in one country can become competitive by combining its home advantages with the best techniques developed elsewhere. 12 while trade and innovation have always been interconnected, the nature of these interconnections is changing rapidly with recent advances in digital technology, touching virtually all sectors of the economy. we are only beginning to appreciate how new fields, such as artificial intelligence, cloud computing, additive manufacturing and big data, may play out in new trade patterns. even calculating their economic impact is challenging. returns from patented intellectual property ( ip ), such as software, are an increasing part of value added in electronic products, and these are hard to measure. that ’ s also true of trade in ip services, which is becoming increasingly important. google chrome and dropbox — distributed worldwide across the internet — are good examples. since they do not physically cross the border, there is no customs paper trail, and they are difficult to track. they are also provided free to many users, so it ’ s hard to place a value on them. this whole process of expanding two - way trade and technological advancement is playing out in myriad industries. it is one of the most important drivers of canada ’ s growth potential, which, in turn, underpins rising living standards for canadians. while these are basically positive developments, they do pose important challenges for society and for policy - makers. both trade expansion and innovation are by their nature disruptive for firms and individuals