Canadian manufacturers’ low productivity affects their competitiveness

CME asks government to reduce the cost of doing business

OTTAWA (October 1, 2019) – Canadian Manufacturers and Exporters (CME) asks all federal parties to commit to reduce the cost of doing business. Canadian manufacturers have a low productivity rate, which affects their global competitiveness, an issue that could be solved by reforming the Canadian tax system.

Canadian manufacturers are investing less than their international counterparts because taxes and regulations make it more expensive to operate in Canada compared to other jurisdictions. This means Canadian manufacturers have lower productivity and this makes it harder for them to compete on international markets. Regrettably, in our 2018 survey of the industry, the majority of manufacturers said they did not feel the current business conditions in Canada were conducive to investment.

According to OECD, business capital investment in Canada grew by 6 per cent over the last 10 years, one of the worst performances of OEDC countries, which averaged around 25 per cent. As a result, labour productivity in Canadian manufacturing has increased by only 20 per cent over the last 15 years. Meanwhile, productivity in the US has grown by nearly 50 per cent, and it has more than doubled in locations like South Korea, Taiwan, and Eastern Europe. Since 2002, Canada has the poorest record in manufacturing productivity growth of any country in the G-7, save Italy.

“Businesses that invest in digital technologies have a considerably better growth outlook than their non-adopting counterparts, at home and on global markets,” said Dennis Darby, President & CEO of Canadian Manufacturers & Exporters. “New technologies can lead to a wide range of potential benefits like lower operating costs, increased product quality, higher innovation capacity and, increased customer satisfaction.”

“If the political parties are serious about wanting to grow Canada’s economy, they must consider solutions to improve business competitiveness in Canada and incentivize manufacturers to invest in new technology by reducing the costs of doing business. We suggested the government conduct comprehensive tax reform to reduce the tax burden and encourage investments.”

CME made 10 recommendations to help the new government grow Canada’s economy.