– Perrin Beatty, Canadian Chamber of Commerce President and CEO
February 18, 2015 – Either we act urgently to improve our competitiveness or we will pay a high price in lost jobs and prosperity. Three years ago, the Canadian Chamber of Commerce launched its Top 10 Barriers to Competitiveness. In collaboration with its network of chambers of commerce and boards of trade, the Canadian Chamber has been drawing attention to the barriers that are holding back Canada’s progress and has been urging all levels of government to act more swiftly to improve our country’s ability to compete globally.Since launching this initiative, we have made great progress in furthering our competitiveness agenda on a number of issues. However, the barrier our members continue to identify as being the greatest impediment to the success of Canadian business is the skills gap. There is a lot of work ahead. The federal government and several provincial and territorial governments have also named this issue as the country’s biggest challenge. We need to work together and make real progress in 2015.
On February 5th, the Canadian Chamber of Commerce unveiled its Top 10 Barriers to Competitiveness for 2015. Some of the issues are new while others have been on the list since the beginning.
Addressing the Top 10 Barriers to Competitiveness will go a long way towards restoring Canada’s competitiveness. The Canadian Chamber is calling on its own membership, on governments, on educators, on labour organizations and others to tackle and overcome these barriers. We must act urgently to improve our competitiveness or we will pay a high price in lost jobs and prosperity. Effectively addressing these 10 barriers will sharpen Canada’s competitive edge and allow us to prosper in the global economy.
Tolerating these barriers, or self-inflicted wounds as we call them, is not an option. The challenge for 2015 is to build on this progress and start closing the gap between Canadian businesses and our international competitors.
2015 Top 10 Barriers to Competitiveness
Silos in skills development
Canada is not producing enough graduates with the skills needed for its economy. There are shortages and high demand forecast in a wide range of occupations. As a result of dramatic restrictions, the Temporary Foreign Worker Program no longer presents an effective path to meet short-term labour shortages. In the medium to long term, our education and training systems play a pivotal role in equipping us with people with the right skills. With a demographic reality about to hit our labour market, we need stronger efforts to coordinate between the silos of education and employers. Improving the links between education and employment is not the responsibility of educators and governments alone. Employers are directly implicated. We need to break the silos.
Entrepreneurs lack capital for Canada’s fastest growing companies
One of the most critical determinants of competitiveness is access to capital, especially for start-ups and companies moving from innovation to commercialization. These fast-growing companies often depend upon venture capital (VC) as the lifeblood needed to take a company from idea to market. Canada’s VC industry is still small and punching below its weight, particularly when compared to much larger VC industries in the U.S. During the course of 2014, the Canadian Chamber spoke with dozens of entrepreneurs leading fast-growing companies who say one of the biggest hurdles they face is securing capital to take their companies to the next level. In 2015, the Canadian Chamber will advocate a number of initiatives to boost incentives to expand the overall pool of capital and to attract more angel investors and international funds to Canada.
Lack of clarity regarding duty to consult with Aboriginal peoples
Canadian governments have a duty to consult and accommodate Aboriginal peoples when proposed developments have the potential to impact their constitutionally protected rights.
However, governments are increasingly relying on project developers to assume responsibility for large parts of community consultation and accommodation. This has led to situations where proponents have no clear direction on the extent of the consultation and accommodation required. This year, the Canadian Chamber will explore alternatives to the current scenario for resolution of the development consultation process, which currently seems headed towards lengthy court challenges to produce jurisprudence that guides proponents, opponents and governments.
Internal barriers to trade
The lack of a single domestic market in Canada is a serious and self-imposed weakness in the Canadian economy. Tariff barriers between provinces are banned by the Canadian constitution, yet the national economy is fractured by a host of non-tariff barriers, particularly in procurement, energy, agriculture and transportation, and in the mobility of labour. The federal government must promote more meaningful sanctions against jurisdictions that practice protectionism against other Canadians while supporting those that embrace free internal trade.
Canada’s tax system is too costly and complex
Canada over-relies on income and profit taxes rather than on taxes on consumption, which are relatively easy to collect and are least harmful to growth. Canada’s tax code is also overly complex and imposes significant compliance costs on businesses and consumers while governments spend billions of dollars each year administering and enforcing convoluted tax laws. Canada must undertake a comprehensive review of its tax system with the aim of reducing its complexity and improving the way it raises tax revenue.
Canada’s export infrastructure is not meeting our needs
Public investment in infrastructure has not kept up with Canada’s economic needs. Now Canada’s investment needs far exceed the availability of public funds. Bringing infrastructure in Canada back to the level needed to support prosperity will require an ongoing commitment by all levels of government, an active engagement with private sector stakeholders and a greater appreciation of the opportunities that exist for Canada to be more competitive through more modern public infrastructure.
Canada is uncompetitive in the world’s tourism sector
Canada has slid from the seventh largest tourist destination in the world to the 18th. Today, it is too often a high-cost, high-hassle destination with aging attractions infrastructure and inadequate marketing. Canada’s travel and tourism sector is critical to its economy, and the government must both invest in national marketing initiatives and address Canada’s inefficient visa system, the very high cost of air travel in Canada and its layers of regulations, fees and taxes.
Innovation rate is not sufficient to help manufacturing rebound
The best way for Canadian companies to compete and win in modern manufacturing is through a strong commitment to innovation. This appears to be a continuing challenge as Canada’s innovation rank, a key component of competitiveness, is troublesome. Canada is ranked 22nd by the World Economic Forum for its capacity for innovation. Canadian manufacturers will need to invest more aggressively in disruptive technologies. However, the innovation policy framework that exists in Canada is not sufficient to overcome a number of serious barriers for the manufacturing sector. The Canadian Chamber of Commerce will explore recommendations to reconcile the disconnect between industry and institutions, find a mechanism to support the commercialization of new technology and look at options to support business in the adoption of new technology.
Territorial businesses don’t have the tools they need
The federal government has a critical decision to make regarding Canada’s territories if it is to fully leverage their economic potential. That decision is whether or not to provide territorial businesses with the tools necessary to increase their economic footprint. The result would be more financial independence for the territories and a more competitive Canada.
Canada is missing out on foreign trade opportunities
Canada’s prosperity depends on access to international customers and participation in global supply chains. Faced with a small domestic market, exporting is often the only way to grow sales and build economies of scale. Moreover, sourcing from and investing abroad allows companies to exploit unique technologies, skill sets and cost advantages. However, Canadian businesses are not globalizing as quickly as their peers. To support the expansion of Canadian companies abroad, the federal government needs to build on recent success and take steps to conclude the next wave of high-quality trade agreements and strengthen Canada’s system of trade promotion and economic diplomacy.
The Canadian Chamber of Commerce is the vital connection between business and the federal government. It helps shape public policy and decision-making to the benefit of businesses, communities and families across Canada with a network of over 450 chambers of commerce and boards of trade, representing 200,000 businesses of all sizes in all sectors of the economy and in all regions. Follow us on Twitter @CdnChamberofCom.