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Public Policy Priorities for Action

Beyond the legal foundations, this report also identifies several other public policy areas where reform is critical to improving Canada’s competitiveness.

Taxation

  • Governments should create a more competitive tax system in order to attract new investment, spur job creation and help Canadian businesses adapt to increased global competition.
  • Economists generally agree that the best approach is to limit taxes that discourage work and investment, and rely more heavily on value-added taxes. To this end, the Panel recommends that governments should continue to reduce corporate income taxes, eliminate capital taxes, harmonize sales taxes, and lower income taxes for lower-and middle-income Canadians.
  • The Panel also recommends that the Advisory Panel on Canada’s System of International Taxation, announced in November 2007, should assess Canadian tax provisions affecting the ability of Canadian firms to better compete at home and abroad with foreign competitors in acquisitions.

Attracting and Developing Talent

  • In order for Canada to attract and develop talent, governments should take steps to create the best educated, highest skilled and most flexible workforce in the world.
  • The Panel recommends that governments continue to invest in education and training in order to enhance quality and improve educational outcomes, while gradually liberalizing provincial tuition policies offset by more student assistance based on income and merit.
  • Post-secondary education institutions should also strive to pursue global excellence through strategic choices, improve partnerships with businesses, create co-op education opportunities where appropriate, support more foreign students and international student exchanges, and publicly report on progress.
  • In order to attract and retain skilled workers and address Canada’s emerging skills shortages, the federal government should retool Canada’s immigration system to better meet labour market needs.
  • Given Canada’s aging population and an increasing reliance on immigration for Canada’s future labour force growth, the Panel recommends that Canada’s immigration procedures should become more responsive to employer needs, develop service standards, and fast-track processing for temporary foreign workers and foreign students.

Head Offices and Cities

  • Head offices are the places where strategic decisions are made by key management personnel, and are a significant source of high-skilled, high-paying jobs. They attract high-value business services, and also benefit local communities through civic involvement and philanthropic activities.
  • The Panel believes that head offices play a critical role in supporting Canada’s prosperity, and is convinced that implementation of the Panel’s recommendations will enhance Canada’s competitiveness as a destination for capital and talent, and will nurture and develop Canadian-based multinational enterprises whose head offices will replace those of companies that are acquired by foreigners.
  • Given the national importance of Canada’s largest urban centres in attracting talent and investment, the federal government should place a priority on addressing urban issues, focusing on infrastructure, immigration, and higher education and training.
  • To develop a more stable, secure and growing revenue source to support municipal needs, the Panel recommends that municipalities should make greater use of alternative funding mechanisms, and that provincial governments should assess the feasibility of allowing municipalities to levy a value-added tax within their jurisdiction, assessed on the harmonized goods and services tax base.

Fostering Growth Businesses

  • While small and medium-sized enterprises are a key part of the Canadian economy and represent the majority of Canadian firms, governments should refocus their policies to support those that demonstrate the desire and capacity to grow to become large enterprises.
  • Governments should also develop options to facilitate the provision of more private venture capital, particularly at the “angel” and late stage.

Strengthening the Role of Directors in Mergers and Acquisitions

  • Large Canadian enterprises and their head offices contribute considerably to the country in terms of career opportunities, community benefits and shareholder value.
  • Accordingly, the oversight of the exercise of their fiduciary duties by directors of such companies with respect to an acquisition proposal has important ramifications for Canada, and must be contemporary and competitive.
  • To this end, the Panel recommends changes that would place the directors of Canadian public companies on a comparable footing to their Delaware counterparts when exercising their fiduciary duties in relation to acquisition proposals.

The Canadian Economic Union

  • Canada’s federal system has not evolved sufficiently to keep pace with Canada’s changing economic context. The result is a misalignment of revenue sources with program responsibilities as well as market fragmentation due to a proliferation of internal barriers to the free movement of goods, services and people that drive up costs and weaken Canada’s competitiveness.
  • The federal government should provide leadership by setting a deadline for the elimination of all internal barriers between the provinces and territories that inhibit the free flow of goods, services and people.
  • As part of efforts to strengthen the economic union, the federal government should also provide leadership regarding national securities regulation, and better harmonize federal environmental assessment procedures with provinces respecting provincial review timelines.

Canada–US Economic Ties

  • In the wake of the North American Free Trade Agreement, Canada restructured much of its economy to integrate with that of the US.
  • Canada would benefit by further strengthening its economic relationship with the US, and should make every effort to capitalize on this unique relationship.
  • The Panel believes that addressing the thickening Canada–US border through direct bilateral engagement at the highest political levels should be the number one trade priority for Canada.

International Trade and Investment

  • Canada derives a considerable portion of its wealth from international trade and investment. However, too few Canadian companies have excelled at exploiting new economic opportunities beyond the US or in countries aside from those where Canadians have long-standing relationships.
  • Canada also has a poor track record of completing key foreign trade and investment protection agreements, falling behind many other countries.
  • To address these concerns, the Panel recommends that the federal government should prioritize Canada’s international market opportunities and set an ambitious timeline to conclude foreign trade and investment agreements with these countries, publicize the potential impacts of prospective agreements and incorporate comprehensive business input.

Regulation

  • Too often, federal, provincial and municipal regulatory requirements and processes constrain Canadian competitiveness.
  • Regulations are rarely designed to minimize their impact on competition.
  • To address the competitiveness issues arising from regulation, the Panel recommends that all governments put in place a process whereby all new regulations are subjected to a rigorous assessment of their impact on competitiveness, and charge a senior minister with responsibility for its effectiveness.
  • Governments should also report on outcomes and harmonize Canada’s product and professional standards with those of the US, unless public policy considerations dictate otherwise.

Innovation and Intellectual Property

  • Innovation drives productivity and competitiveness throughout the entire economy and requires a supportive intellectual property framework.
  • Canada is a top performer in public funding for research and development (R&D), but scores poorly in terms of private investment in R&D as well as in the commercialization of technologically intensive goods and services.
  • Accordingly, the Panel recommends that the federal government should regularly monitor the scientific research and experimental development tax credit in order to encourage business investment in R&D and innovation.
  • The federal government should also retool Canada’s patent law and copyright regimes, and should strengthen counterfeit and piracy laws to ensure that intellectual property rights are effectively protected.
  • Post-secondary educational institutions should also expedite the transfer of intellectual property rights and the commercialization of university-generated intellectual property.

A Canadian Competitiveness Council

The Panel concludes that the absence of an independent institution with a focused mission to advocate for measures to improve the level of competitive intensity in the Canadian economy is the most significant gap in Canadian competition policy.

  • The Panel is proposing the creation of a Canadian Competitiveness Council that would conduct research on competitiveness issues in both the public and private sectors. The Council would also have a public voice to foster national debate and dialogue on competitiveness issues.
  • The proposed Council would serve as the primary Canadian advocate for competition. It would be independent of government, but with a clear reporting relationship to Parliament.
  • The Council would be governed by a Board of Directors, including a majority of representatives from outside government, made up of persons knowledgeable and experienced in matters of economics, business and government affairs pertaining to competition, industry, regulation and consumers, as well as representatives who bring the perspectives of the federal government, the provinces and cities.
  • With political support, sufficient resources and a small, competent staff, the Panel believes that the Canadian Competitiveness Council has the potential to have a positive and lasting impact on the well-being of Canadians.

Going Forward

  • With its national Competitiveness Agenda, the Panel hopes to seize the attention of Canadians from all walks of life and all regions. The questions are how we raise our productivity through greater openness to talent, capital and innovation, through vigorous competition and through a more ambitious mindset.
  • The Panel believes that the key will be to encourage both more competition at home and more exposure to competition from abroad. Competition drives the productivity that ultimately sustains our incomes, jobs and quality of life.
  • This report is the Panel’s best effort to set the agenda for sustained competitiveness. It is a national project, calling on all Canadians to commit to making our country more competitive.

“Our Competitiveness Agenda does not ask Canadians to give up anything, nor to settle for less. On the contrary, we are asking Canadians to raise their sights, and to recognize the challenges and opportunities of economic globalization. We are asking Canadians to take a global perspective.”
— From the Conclusion to Compete to Win