Canada Productivity: ‘No-Brainer’ Fixes to Boost Output Seen
Canada is grappling with a significant productivity challenge, a “migraine” requiring immediate attention and targeted solutions. The nation’s economic performance is lagging behind its global competitors, and efforts to address this issue are underway. The core of the problem lies in a lack of investment and a deeply flawed regulatory environment that is stifling economic growth.
Addressing Investment and Regulatory Hurdles
The urgency of the situation was recognized at Canada’s Productivity Summit, where key stakeholders – policymakers, business leaders, and academics – convened to discuss potential remedies. A central theme was the need to encourage investment, with several participants emphasizing that “the surest way to fix society’s productivity problem is to encourage investment,” as Premier Danielle Smith stated. The country’s productivity levels have fallen substantially, with the United States consistently outperforming Canada by nearly 50% in terms of output per worker. This gap has persisted for well over a century, highlighting a systemic issue.
Breaking Down Interprovincial Barriers
A crucial element of the solution involves dismantling trade and regulatory barriers between Canada’s provinces. The outdated and fragmented regulatory landscape is significantly hindering economic activity. Trevor Tombe, an economist at the University of Calgary, notes this gap has been consistent since the late 1890s. Simply removing unnecessary trade barriers, such as aligning product standards and professional accreditations across provinces, could boost Canadian productivity by four to five percent. The province of Alberta, for example, attempted to address this through unilateral reductions in exemptions within the Canadian Free Trade Agreement in 2019, but achieved no discernible improvement on the other side.
Streamlining the Regulatory Review Process
The protracted and often unpredictable regulatory review process is frequently cited as a major impediment to investment. Companies routinely face delays of ten years or more while projects navigate complex approval processes, often resulting in projects being abandoned. As economist Sargent observed, “We seem to have created a system that just can’t get things done,” highlighting the urgent need for reform. The key is to eliminate bottlenecks and reduce uncertainty, allowing businesses to operate with confidence.
The Impact of Failed Investment Projects
The recent history of stalled infrastructure projects underscores the severity of the issue. Multi-billion dollar investments in ventures like Energy East, Northern Gateway, Keystone XL, and Frontier Oilsands have been sidelined or canceled entirely. These failures represent a significant loss of potential investment and job creation, and they serve as a stark reminder of the risks associated with an inefficient regulatory environment. As Deborah Yedlin of the Calgary Chamber of Commerce pointed out, "It’s a no-brainer,” emphasizing the need for swift action.
Towards a More Productive Future
Ultimately, resolving Canada’s productivity challenge demands a fundamental shift in approach. It requires a commitment to streamlining the regulatory review process, removing trade barriers between provinces, and fostering a more business-friendly environment. By addressing these core issues, Canada can unlock its economic potential and achieve sustainable growth, building a future where investment thrives and productivity soars.
