Comparing Entrepreneurial Environments Canada vs. USA

The renegotiation of the North American Free Trade Agreement (NAFTA) has been a heated issue for months, highlighting serious trade differences among the three countries.

However, additional investigation reveals that the concerns highlighted on this side of the border may mask a far more important economic issue

the competitiveness of the Canadian economy. NAFTA initially had a good effect on trade with our southern neighbor. In just under seven years since the Agreement went into effect, the value of Canadian exports to the United States has nearly doubled, with more than 85% of Canadian exports bound solely for the US market. Canadian exports to the United States were boosted by both lower trade barriers and a highly beneficial exchange rate. It is worth remembering that in the early 2000s, one US dollar was equivalent to $1.57 in Canada. As a result, Canadian goods and services appeared more competitive to US buyers, with lower effective pricing. Thanks to this enormous advantage, Canadian producers saw a massive increase in exports without having to worry about productivity or competitiveness. Things changed in 2002, when the Canadian dollar began to strengthen. sectors in this region have been reticent to make the necessary investments, resulting in lower productivity compared to US sectors. Their ability to withstand a trade or monetary shock has also declined. As a result, despite the fact that the currency rate is currently beneficial, a number of people from this generation are now facing potential trade barriers.

This report investigates the question in this particular scenario. 

This empirical investigation provides new insights into the competitiveness of the Canadian economy. It provides a thorough evaluation of the current status for 34 major industry groups. Finally, our analysis will assist us acquire a better grasp of the fundamental challenges driving the NAFTA renegotiation process. Emphasizing the significance of being competitive. Competitiveness may appear to be a simple concept at first glance. According to general dictionaries, competitiveness is defined as the ability to survive and prosper in competitive circumstances. A corporation is considered competitive if it successfully sells its products or services in a competitive market, or if it thrives while charging higher costs due to new manufacturing methods or superior quality. Ultimately, competitiveness is defined by a combination of price, quality, and efficiency. When we look at the economic literature on competitiveness, it becomes evident that the issue is more nuanced. It appears that achieving a globally accepted description of the notion is extremely difficult. The definitions are organized around a few primary concepts. Competitiveness is frequently stated in terms of its semantic definition: the ability to tolerate competition. However, there is a strong relationship between competitiveness and productivity, with some economists arguing that the two ideas are inextricably linked, if not synonymous.2Individual firms' competitiveness can be measured very easily. One way to look at it is from an accounting standpoint, where the assumption is that a profitable company in a competitive market is also competitive. 

When attempting to measure it across numerous businesses, the situation becomes more complex. 

Attempting to assess competitiveness across an entire industry necessitates the complicated work of evaluating a diverse range of products and services that differ in price and quality. Furthermore, we are evaluating enterprises of various sizes, thus the impact of the economic environment on competitiveness will vary by industry. Finally, there are several aspects to consider when analyzing industry competitiveness, making it difficult to establish precise assessments. As a result, current measurements are only partially complete. To address these restrictions, the Centre for Productivity and Prosperity - Walter J. Somers Foundation (CPP) suggests an alternative strategy based on unit input costs. This technique allows us to accurately measure the overall influence of the economic environment on competitiveness, rather than depending on a set of indicators designed to compare countries. Simply said, unlike current assessments, this technique assesses competitiveness after industrial processes have occurred. This will provide a more accurate assessment of Canadian industries' actual ability to survive international competition This research, the first in a three-part series, assesses Canada's competitiveness in comparison to the United States. The report is divided into three pieces. The first step is to delve deeper into the concept of competitiveness, laying the groundwork for subsequent study. The second section summarizes the approach used to assess Canada's competitiveness in comparison to other countries. Finally, the final section discusses the findings and provides a detailed overview of the 34-industry analysis. Two additional reports will be released, one to include more countries and the other to assess provincial competitiveness.