GUEST COLUMN: Lessons From Canada
Subscribe today for Free Enterprise Updates
- Latest business trends and best practices
- News about legislation and regulation impacting business
- Business how-to articles from industry experts
- Commentary and interviews with newsmakers in business and politics
In many respects, Canada’s economy is the envy of the world. Not only did we weather the global economic and financial crisis better than most industrialized countries, but we staged an impressive turnaround. Canada was the first of the G7 countries to recover all the output lost during the recession. Our labour market bounced back, too, recovering all of the jobs lost through the downturn as of early last year.
We did so largely because of the strength of our financial sector and healthy household and corporate balance sheets. Additionally, highly credible monetary policy and the strongest fiscal position in the G7 enabled Canadian policymakers to take unprecedented actions to swiftly and effectively stimulate the economy.
Canada continues to be successful for a number of reasons:
Sound financial institutions: Canada is in a fortunate position that its financial system is mature, sophisticated, and well-managed, underpinned by strong prudential regulation and supervision. The financial system makes an important contribution to the welfare of all Canadians, since the ability of households and businesses to hold and transfer financial assets with confidence is one of the fundamental building blocks of our economy. A stable financial system contributes to broader economic growth and rising living standards.
Superior fiscal position: Canada’s net debt-to-GDP ratio is still the lowest among G7 nations enabling the government to implement growth-enhancing measures without jeopardizing Canada's long-term fiscal position and causing uncertainty about future tax increases.
Competitive business taxes. By 2013, Canada’s effective tax rate on capital will be 18.4%, less than one half of what it was in 2005. Canada will have the most tax-competitive regime in the G7, which is far better than seven years ago, when we had the least competitive regime.
Trade openness. Since 2006, Canada has concluded new trade agreements with nine countries and has launched free trade negotiations with over 60 others. This includes current trade negotiations with the European Union. Canada’s interest in joining the Trans-Pacific Partnership (TPP) free trade agreement is consistent with its active and ongoing engagement in the Asia-Pacific region and its commitment to free and open trade.
Better returns on fixed-income assets: Canadian short-term securities offer better returns than most other advanced economies. This has made Canada a more attractive destination for foreign capital and has been positive for Canadian businesses seeking financing to grow and invest.
A strong currency: The dramatic rise in the dollar unquestionably creates challenges for our manufacturing sector and for importers. However, it has also forced us to focus on becoming more competitive and has made the machinery and equipment we need to become more efficient more affordable.
Despite Canada’s successes and advantages, we must remain vigilant.
In Davos, Switzerland, earlier this year, our Prime Minister asked whether industrialized countries had become complacent about their prosperity, taking their wealth as a given. In his words, “The wealth of western economies is no more inevitable than the poverty of emerging ones.”
The answer to his question is clearly yes. While we in Canada has been congratulating ourselves for emerging from the recession less damaged than others, we’re not noticing that emerging-market economies grew through the recession and are growing at three or four times our rate today, even in this highly uncertain global environment. This is why the Canadian Chamber of Commerce launched the Top Ten barriers to competitiveness initiative - a project that has become the central focus of our work.
With our competitiveness agenda, we are calling on our own membership, on governments, on labour organizations, on educators, other business associations and Canadians from all walks of life to work together to attack the barriers that stand in the way of Canada’s economic success, instead of tolerating them.
We recognize that rebuilding our economic house on more solid foundations cannot be achieved by government alone. We have to tackle the challenges we face as a society, by identifying specific, tangible actions to boost our competitiveness. The public policies we choose determine the kind of country and the level of living standards we will enjoy in the decades ahead. Government can help create an advantage but it’s up to businesses to stay on top of their game, refine their strategies and invest in innovative products and technologies. The government can’t do that part for us. We have to do it for ourselves.
Perrin Beatty is the President and CEO of the Canadian Chamber of Commerce. You can watch our video interview of him below. Beatty also appeared in a joint television interview with U.S. Chamber President and CEO Tom Donohue on Fox News. It can be viewed here.