How does Canada’s regulatory environment compare to other countries?

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The Global Competitiveness Index is an annual exercise by the World Economic Forum to track the performance of 137 countries on 12 pillars of competitiveness, measured by productivity improvements. 


In the 2017–2018 index, Canada ranks 14th overall.

 

While that could be considered an enviable position, it is less impressive considering Canada ranked as high as ninth in 2009–2010 — and governments have invested significant policy and fiscal resources into improving Canada’s low productivity growth over the past two decades.


In the 2017–2018 index, Canada performs well in a number of sub-categories, including labour market efficiency, quality of education and the soundness of Canadian banks. 


One area of clear weakness is the sub-category of burden of government regulation, in which Canada ranks 38th. Canada is bested in this category by developed economies including Germany (7th) and the United States (12th), and developing markets including China (18th) and India (20th). Canada’s high burden of government regulation compared to other countries is reinforced by a survey of business leaders for global competitiveness. 


Canada’s regulatory systems have a history of good governance, strong institutions, science-based systems, and consultation with stakeholders and Canadians. Despite these strengths, the advantages of these systems are becoming less apparent.


Canada’s complex network of overlapping regulations from all levels of government – federal, provincial and territorial – has created a costly and uncertain environment to operate a business.


This high burden of government regulation compared to other countries is reinforced by a survey of business leaders for the Global Competitiveness Index that identified ‘inefficient government bureaucracy’ as the single most problematic factor for doing business in Canada.


In 2018, Canada ranked 18th out of of 190 OECD economies, driven by high rankings in the ease of starting a business (2nd) and protecting minority investors (8th). Canada’s ranking was pulled down by low rankings in the categories of dealing with construction permits (54th) and trading across borders (46th). Despite having efficient border processing times between Canada and the United States, Canada’s poor ranking for trading across borders comes from high documentary compliance costs (obtaining, preparing and submitting documents for border, customs and inspection procedures), which are nearly five times higher than the average of high-income OECD countries.


Canada’s middling performance vis-à-vis its peers is worrying in the context of financial headwinds facing the country. Between 2015 and 2017, business investment in Canada as a share of GDP stood at 15th out of 17 OECD economies. In 2017, direct investment in Canada amounted to $33.8 billion, the lowest level of investment since 2010 and a decline of 18 per cent since 2014.


“Eliminating interprovincial regulatory barriers to trade is one of the most powerful actions our governments could take to increase long-term growth and prosperity in Canada. The benefits to businesses and consumers… across the country would be significant,” said Rocco Rossi, President/CEO of the Ontario Chamber of Commerce.

— with files

Posted on:
Monday, June 25, 2018