Canadians should set their sights on achieving Canada's future prosperity potential



    Institute for Competitiveness & Prosperity urges governments in Canada
    and all Canadians to become active partners in implementing the 2020
    Prosperity Agenda

    TORONTO, April 1 /CNW/ - Despite some concerns about an economic
slowdown, Canadians have excellent opportunities to redouble their efforts at
tackling a long-term Prosperity Agenda to reach our economic potential by
2020.
    Canada has one of the most prosperous and competitive economies in the
world. But we are not living up to our full economic potential that would
increase well being for ourselves and future generations. The Institute for
Competitiveness & Prosperity, in its fifth Report on Canada, Setting our
sights on Canada's 2020 Prosperity Agenda, released today, proposes the 2020
Prosperity Agenda as a way of contributing to the national discussion on
realizing our prosperity potential.
    The Institute, chaired by Roger Martin, Dean of the Rotman School of
Management, was established by the Ontario Government in 2001 to stimulate
businesses, governments, educational institutions, and individuals to increase
the pace of innovation and competitiveness. The goal is to continue to
increase our standard of living.
    The Institute's research confirms that Canada's economy is one of the
world's most successful, especially when compared to countries outside North
America. Canada's Gross Domestic Product (GDP) per capita ranks second among
countries with a population greater than 10 million. GDP measures the value
created by workers and firms from the human, physical, and natural resources
in Canada. But against the United States, Canada continues to fall further
behind. In 1981, Canada's GDP per capita was $3,000, or less than 10 percent
behind US GDP. Over the intervening years, the gap has widened and now Canada
trails the US by $8,800, or 17 percent, per person.
    This gap represents lost prosperity, which matters to all Canadians. In
its Report on Canada last year, the Institute set out its Agenda for achieving
this potential by 2020. This year, the Institute reviews progress and
identifies the key next steps to put Canada on the path to achieving this
Agenda.
    It urges Canadians to reduce the GDP gap with the United States to $3000.
"This gap represents unmet potential prosperity for Canadians at all income
levels. At the same time, our governments have been less able to make the
necessary expenditures in social programs and investments in future
prosperity," said Roger Martin.
    The Institute concludes that Canada's competitiveness is important for
the average Canadian family. Its research shows that, if we met our prosperity
potential, families would gain $8,800 in disposable, after tax income - every
year. It also indicates that families across the income spectrum are affected
by our unfulfilled prosperity potential. As the prosperity gap widened through
the 1990s, Canada's upper- and middle-income families fell behind their US
counterparts. Traditionally, lower income Canadians have out performed their
US counterparts - but this advantage is fading as we fall further behind the
US in overall prosperity. And governments at all levels across Canada would
also generate an additional $68 billion in tax revenue, an amount that could
fund important social and capital investments.
    Lagging productivity continues to be the biggest barrier to closing the
gap. The Institute points out that productivity growth comes from innovation,
not just efficiency improvements. According to Martin, "we need to create more
value that customers want in our products and services. That requires
innovation and upgrading - such as has occurred in the Ontario and BC wine
industries with the development of high value Icewine and its consumer
acceptance around the world."
    The Institute is proposing a wide range of initiatives to encourage and
support innovation. Among them is the high priority for Canadians to shift
their attitude from a collective complacency to a shared determination to
achieve this potential. The appointment of the Competition Policy Review Panel
headed by Lynton "Red" Wilson is a step in the right direction. The Panel's
mandate is to review key elements of Canada's competition and investment
policies to ensure that they are working effectively in encouraging even
greater foreign investment and creating more and better jobs for Canadians.
    Another priority is to build a smarter tax system to raise motivations
for businesses to invest. Currently, Canada has among the highest tax rates on
business investment in the world. The Federal Government is taking dramatic
action to give Canada an environment more conducive to business investment.
Its fall 2007 economic statement puts in place significant reductions in
corporate income tax rates. Ontario - and other provinces - need to follow
suit. "At the federal level, we've been disappointed by the reduction in the
GST, as it is one of the best ways to raise revenue without harming business
investment," said Martin. "But this creates an opportunity for five provinces
to replace their provincial sales tax with a value added tax and then
harmonize its collection with the federal GST. This move would stimulate
investment and create jobs better than any other tax reform."
    Tax changes would help lift Canada's anemic business investment in
productivity- and wage-enhancing machinery, equipment, and software. But we
also need initiatives to welcome more robust business competition and ways to
ensure highly capable managers are leading the pace.
    The Institute continues to urge governments to increase their investment
in education and points out that this is starting to occur, especially in
Ontario. Its research in the area of poverty points to the importance of a
high school diploma and other formal skills. At the post secondary level, the
Institute urges an examination of the balance between research and student
experience in our universities. "We're building a solid research capability in
Canada's universities," said Martin. "But there's evidence that the day-to-day
student experience may be suffering from crowded classrooms and unavailable
professors. We need to understand the tradeoff better."
    In summary, Martin said, "We are calling for Canadians to keep their
sights focused on the Prosperity Agenda. Let's take pride in what we have
accomplished; but let's acknowledge we could do better and put ourselves on a
path to achieving our long-term prosperity potential."

    
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    Setting our sights on the 2020 Prosperity Agenda

    Attitudes: Accept the challenge; overcome complacency
    -   Government, business, labour, and community leaders need to turn up
        the volume on the importance of prosperity and productivity

    Investment: Focus on people and technology
    -   Invest in focused and innovative ways to fight poverty
    -   Raise awareness among all Canadians of the benefits of education
    -   Continue investments in post secondary education
    -   Assess the tradeoff between research and the student experience in
        our universities
    -   Step up business investments in information and communication
        technology

    Motivations: Pursue smarter taxation
    -   Remove capital taxes immediately
    -   Reduce corporate income tax rates
    -   Convert provincial retail sales tax to a value added tax harmonized
        with the GST
    -   Continue attacking high marginal tax rates for lower income Canadians

    Structures: Place a premium on creativity and innovation
    -   Focus venture capital efforts on quality, not quantity
    -   Continue to expand innovation policy to include building management
        capabilities
    -   Pursue the reduction of barriers to investment and trade

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    The complete report can be downloaded directly from:
    www.competeprosper.ca/download.php?file=ICAP_RoC2008_Final.pdf

    About the Institute for Competitiveness & Prosperity

    The Institute is an independent not-for-profit organization established
in 2001 to serve as the research arm of Ontario's Task Force on
Competitiveness, Productivity, and Economic Progress. The Institute and the
Task Force are supported through the Ministry of Economic Development and
Trade.





For further information:

For further information: James Milway, Executive Director of the
Institute for Competitiveness & Prosperity at (416) 920-1921 ext. 222

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INSTITUTE FOR COMPETITIVENESS AND PROSPERITY

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