| A Leader of the New Economy |
 By Mark Crawford
Its dedication to innovation, its pro-business climate, and its strategic trade relationships have placed Canada at the forefront of the New Economy.
Becoming a world leader takes a great deal of planning, commitment, innovation, and courage — but it doesn’t stop there. Developing and maintaining the long-term vision to compete effectively in the global marketplace, with knowledge, foresight, and compassion, is an ongoing, but tremendously rewarding, process. By forging creative partnerships, Canada’s federal and provincial governments, academic institutions, and private sector have created one of the most innovative and cost-effective business climates in the world. Combine this with loyal, highly educated, and multiskilled workers and it’s no surprise Canada is building long-lasting and prosperous trade relationships with the United States, Europe, Asia, and the rest of the world, as well as achieving its own meaningful social and economic goals.
Canada is anchored by a strong, diverse economy famous for traditional industries such as timber, fisheries, minerals, oil and gas, and other natural resources. But its rapidly growing high-tech sectors — information and communications technology (ICT), advanced manufacturing, plastics, electronics, aeronautics, nanotechnology, photonics, pharmaceuticals, biotech/biomed, and agri-food among others — have formed internationally recognized clusters that attract billions of investment dollars every year as well as some of the best talent in the world. And top international companies come to Canada to tap this highly skilled work force and conduct cutting-edge research because the R&D environment is so cost-effective.
“Canada is the most efficient and effective location in the world to carry out market-based technology development,” says Ron Zelonka, vice president of technology and innovation for DuPont Canada. “It has a bank of trained professionals, government support for R&D, and is highly connected to the global business-operating infrastructure. This is the formula for business innovation.”
Fiscal Responsibility
In fiscal 2006–2007, for the tenth consecutive year, the Canadian government posted an annual budget surplus. Another surplus is predicted for the 2007–2008 period. Canada’s inflation rate is also one of the lowest in the world, with a targeted inflation rate locked between 1 percent and 3 percent through 2011.
Unlike the U.S. dollar, Canadian currency has maintained its stability against the Euro for nearly a decade. Despite a stronger Canadian dollar, the operating profit margin (operating profit as a proportion of total revenue) of Canadian corporations increased for a fifth straight year in 2006 to an all-time high of 8.5 percent, according to Statistics Canada. At the end of the first half of 2007, the operating profit margin stood at 8.4 percent.
Foreign direct investment (FDI) in Canada has more than doubled since 1990, with high-tech research and development, manufacturing, finance, insurance, and energy being the most popular sectors. Over the past two decades, Canada has seen significant growth in both inward and outward FDI. Canada’s inward FDI stock reached C$449 billion in 2006; its outbound FDI has steadily risen from C$28 billion in 1980 to C$523 billion in 2006, almost a 19-fold increase.
A Very Special Relationship
Canada and the United States have the world’s largest trade partnership, with two-way trade in goods and services amounting to more than C$700 billion in 2006 — an average of about C$1.3 million in trade per minute across the border. The combined Canada-U.S. market represents more than 425 million consumers with a combined GDP of more than US$11.4 trillion.
Seventeen of Canada’s 20 largest cities are within a 90-minute drive of the U.S. border, especially the huge consumer markets centered on New York, Boston, and Chicago. Canada and the United States work closely together to ensure the safety, security, and speed of border commerce, instituting FAST (rapid movement of pre-approved truckloads), NEXUS (special program for frequent travelers), and streamlined procedures and tools for advanced electronic cargo-reporting and automated risk-assessment systems. These improvements make this border system one of the best in the world, with wait times that are usually less than 10 minutes.
Business Competitiveness
According to the Economist Intelligence Unit’s global business rankings, Canada is ranked first in the G7 and fourth out of 82 countries for the 2008–2012 forecast period, up from second in the G7 behind the United States and fifth out of the 82 countries for the 2003–2007 period. Due to its rapidly growing reputation as an outsourcing destination, Canada placed second in the G7 and sixth among 62 countries according to the 2006 A.T. Kearney Globalization Index.
Canada also scores high marks for low labor costs, low taxes, and efficient foreign trade and exchange controls. It also invests heavily in maintaining and expanding its modern transportation system of roads, highways, airports, and seaports.
“Success in the twenty-first century means being engaged with the world,” says Lawrence Cannon, Canadian Minister of Transport, Infrastructure, and Communities. “Canada’s new government is working toward creating a seamless, secure, and efficient movement of people and goods.”
This progressive thinking launched the Asia-Pacific Gateway and Corridor Initiative as well as the Atlantic Gateway, both of which will help to develop a highly efficient transportation network for facilitating global supply chains between Canada and the world. Plans call for the installation of new technologies and infrastructure upgrades at key ports, highway and rail lines, border crossings, and airports across the country. (See “Gateways to Canada & North America” in this issue.)
The World Competitiveness Yearbook (2006) ranks Canada as one of the top countries in the world for technology infrastructures. CANARIE, Canada’s advanced Internet development organization, operates CA*net4, the world’s longest, fastest, and most advanced fiberoptic research and education network. Researchers use CA*net4 for testing advanced Internet applications, often in collaboration with foreign research and education networks. Because of these infrastructure advantages, Canada’s high-tech industries have enjoyed rapid growth over the last decade.
Pro-Business Tax Structure
By 2010 Canadian-based firms are expected to average a corporate tax that is 4.5 percent lower than that imposed on U.S.-based firms. The overall impact of the business tax system can be represented by the marginal effective tax rate (METR). With new tax changes coming into play at the federal and provincial levels, over the next five years Canada’s METR will become the lowest in the G7. Additionally, Canada’s system of tax credits and accelerated tax deductions for a wide range of R&D expenditures make it one of the best places in the world to conduct research and development.
Regulations for establishing new businesses are considerably more flexible in Canada compared to those in other G7 countries. As a result, Canada ranks first among the G7 and OECD countries for the lowest number of procedures required to establish a new business, according to “Doing Business in 2008,” The World Bank Group, 2007.
Talented Work Force
The overall loyalty and skill level of Canada’s work force ranks high when compared to that in competing countries. Canada’s percentage of individuals achieving at least college or university education (53 percent) is highest among OECD member countries (World Competitiveness Yearbook, 2006).
Canada believes in its people and welcomes talent from around the world. Its share of GDP that is invested in public education is one of the highest in the G7. More than $3 billion has been invested in universities, hospitals, and other research institutions so that they are better equipped to attract top-notch faculty, students, and leading-edge research projects. In fact, because of its diversified economy, FDI investment, and R&D reputation, Canada’s 2.1 percent employment growth from 1997 to 2005 was the best in the G7.
Innovation Strategy
The Canadian government’s Science and Technology Program’s innovation strategy focuses on creating and commercializing new technologies, developing highly skilled workers, supporting industry-government-university partnerships, and helping communities develop the infrastructure they need to attract new technology companies. Federal agencies also fund a variety of research programs in areas of national interest, such as agriculture, health, industrial development, defense, aeronautics, natural resources, and the environment. The Science and Technology Program also oversees the C$390 million Going Global Fund, which supports critical research programs.
Because of this synergy, as well as the generous tax incentives provided by the federal and provincial governments, Canada leads the G7 in public-sector R&D investment as a share of GDP. Currently the public sector finances 85 percent of the primary research in Canada. International bilateral science and technology agreements are already in place with the United States, China, the European Union, France, Germany, India, Israel, and Japan, and other agreements are in progress.
Enviable Quality of Life
Canada is a land of immense natural beauty. Canadians are also friendly folks who appreciate multicultural diversity and welcome immigrants from around the world — nearly all of the world’s ethnic groups are represented here. Canada also has some of the world’s most famous cosmopolitan cities, such as Vancouver and Toronto.
In a recent quality-of-life survey of 215 world cities conducted by Mercer Human Resources Consulting Group, five Canadian cities placed among the top 25. Quality of life is all about educational and work opportunities, good salaries and benefits, safe neighborhoods, affordable housing, high-quality healthcare, access to entertainment and culture, and fair laws. Canada has all these and more, which is why the United Nations Human Development Report ranked Canada first among the G7 countries and sixth among 177 countries surveyed.
Excellence in Action
Canada is committed to becoming an even stronger leader in knowledge-based industries. With programs such as Technology Partnerships Canada and the Canadian Network for the Advancement of Research, Industry, and Education, Canada’s “National System of Innovation” is developing creative partnerships and utilizing best practices from around the world to make Canada a location of choice for research and development.
The financial commitment is sizeable — every year the Canadian government spends more than $2 billion on its own research programs. During 2006–2007 it planned to invest another $3 billion to support research conducted at postsecondary institutions. In addition, the Canada Foundation for Innovation has invested $3.5 billion over the last decade on thousands of research projects in Canadian universities, colleges, research hospitals, and research institutions. With its unwavering dedication to innovation, its pro-business climate, and the facilitation of strategic partnerships that really work, Canada will continue to make important advances on the global scale and remain at the forefront of the New Economy. |
