Canada up on competitiveness index
Toronto Star
By Steven Theobald
Canada may not be the world’s most competitive economy — that title belongs again to Finland — but our 14th-place rank doesn’t look so bad compared with Italy, tied with Botswana for the 47th position.
In the latest World Economic Forum report on global competitiveness, Canada showed signs it may be turning around its 6-year slide.
In the growth competitiveness index, which relies on data as well as surveys of business leaders to gauge the health of a country’s public institutions, level of technology and overall macro-economic environment, Canada climbed one spot, from 15th place last year. It was ranked 6th in 1998.
As for the business competitive index, a measure of underlying productivity of firms, Canada rose two spots, to 13th out of 117.
Canada’s conservative economists can’t blame taxes or government spending on the countries middle-of-the-road showing.
Perhaps the most interesting conclusion of the report is that high-tax countries with abundant spending on social programs are among the leaders in productivity and competitiveness.
Finland, praised for its institutional climate that stresses the rule of law and transparency, is joined by Sweden and Denmark in the top four most competitive economies, despite ranking among the most heavily taxed nations.
“There is no evidence that relatively high tax rates are preventing these countries from competing effectively in world markets, or from delivering to their respective populations some of the highest standards of living in the world,” wrote the Geneva-based WEF.
Indeed, five of the 10 most competitive countries are the Nordic Europeans know for their generous welfare states and high taxes.
“It’s not a question of how much but how,” said James Milway, executive director of the Toronto-based Institute for Competitiveness & Prosperity.
Sweden, for example, got it right by lowering taxes in business investment and relying more on value-added consumption taxes, like Canada’s GST, to raise revenues, said Milway, whose group is the report’s Canadian partner.
“You get more business investment, which means you get more productivity and you get higher wages.”
The United States was again ranked second in the global competitiveness, thanks to its edge in leadership in technology and spending on research and development. However, the massive federal government budget deficits are raising concerns, the report noted.
When it comes to the competitiveness of a country’s businesses, the U.S. led the field, with Finland in second place.
If Canada wants to move up the list, it must open up markets to more competition, said Milway, citing the telecommunications, transportation and financial services sectors as prime examples.
“We worry too much about disruptive forces to our markets in Canada. The effect is some kind of insulation from competitive forces.”
The strong Canadian dollar is hurting the economy by making exporters nervous about the future, resulting in lower-than-needed investment spending, Milway said.
But the petro-loonie can’t be used as an excuse, he added, noting that his group’s research shows that the exchange rate doesn’t have a direct relationship with Canada’s competitiveness.
“It’s kind of a side issue,” Milway said.
“It does force our companies to become more competitive.”
