In his recent article, Craig Alexander, the senior Vice President and chief economist for TD Bank Group, voiced his concern about Canada’s slow growth as it struggles with artifacts from the recent financial crisis, unsustainable fiscal balances, and aging populations. The Canadian government is actively seeking out global free-trade agreements, such as the Trans-Pacific Partnership, to create more trade opportunities. However, are Canadian businesses really well-positioned to take advantage of global opportunities?
During the recovery from the financial crisis, exports have rebounded, but exports as a share of the economy have fallen down to 34 percent, from 42 percent in 2002. Imports are above their pre-recession levels which suggests that Canadian businesses are facing increased foreign competition in the Canadian market. Canadian productivity has been rising at an average annual pace of approximately1 percent in the past decade, which is one of the slowest rates in the industrialized world just above Italy and below Spain.
Government needs to continue to provide sound policy- low and stable inflation, competitive tax rates, good infrastructure, reduced barriers for new business, trade, and investment, and access to education and health care. However, in order to reverse Canada’s productivity decline, businesses will need to be more innovative in order to compete in the global market. In a global market, any competitive advantage will be lost within a short period of time. This is why businesses must take advantage of programs such as SR&ED, in order to constantly look for new ways to improve production or performance.
