Skills gap top barrier to Canadian competitiveness: Chamber of Commerce

Canada’s growing skills gap is the greatest impediment to business success, according to a new report from The Canadian Chamber of Commerce.

Launched in 2012, the chamber’s annual Top 10 Barriers to Competitiveness list is meant to draw attention to barriers holding back Canada’s progress and to urge swift action by the government to improve the country’s ability to compete globally, the organization said.

“The federal government and several provincial and territorial governments have also named the skills gap as the country’s biggest challenge,” Perrin Beatty, Canadian Chamber of Commerce president and CEO, said in a statement. “We have a choice. Either we act urgently to improve our competitiveness or we will pay a high price in lost jobs and prosperity. The challenge for 2014 is to build on any progress and start closing the gap between Canadian businesses and our international competitors.”

Here, in its own words, are the Chamber of Commerce’s 2014 Top 10 Barriers to Competitiveness:

Skills shortages

Canada’s labor market is affected by a demographic shift resulting in retirements and a growing gap between the skills needed and those available. Business, governments and academia must work together to address the current and future skills needs of the workplace, concentrating particularly on four key areas: upskilling; education and employment connections; immigration; and Aboriginal workforce development. To better address skills shortages, Canada also needs improved data on the skills gap and the mobility of individuals.

Insufficient support for innovation in Canadian manufacturing

Manufacturing, the largest sector of the Canadian economy, has not yet fully recovered from the 2008 recession and remains significantly reduced from its pre-recession size. Canadian companies can no longer rely on traditional manufacturing processes to solve this problem. They must innovate to capitalize on new technology and processes that improve productivity in order to remain competitive. Businesses also need a policy framework that reflects the importance of the innovation ecosystem imperative.

Inconsistent regulatory policies between Canada and the U.S.

Inconsistencies between regulatory standards in Canada and the U.S. cost unnecessary time and money as these minor differences result in additional verification, inspection or testing of goods once they cross the border. Given the integrated nature of the two countries’ economies, greater alignment and better mutual reliance in their regulatory approaches would lower costs for businesses and consumers, create more efficient supply chains, facilitate cross-border trade, reduce regulatory administrative costs for government and make Canada a more attractive location for foreign investment.

Barriers to success in global markets

Faced with a small domestic market, Canada’s ability to compete depends on reliable access to foreign customers and production capabilities. But due largely to policy and regulatory barriers and operating challenges in foreign markets, Canadian businesses are not globalizing as quickly as their OECD peers. Canada must successfully negotiate trade agreements with key markets, renew its commitments to trade promotion and commercial diplomacy and update its tariff and customs policies.

Internal barriers to trade

The lack of a single domestic market in Canada is a serious and self-imposed weakness in the Canadian economy. Tariff barriers between provinces are banned by the Canadian constitution, yet the national economy is fractured by a host of non-tariff barriers, particularly in procurement, energy, agriculture and transportation, and in the mobility of labour. The federal government must promote more meaningful sanctions against jurisdictions that practice protectionism against other Canadians while supporting those that embrace free internal trade.

A complex and costly tax system

Canada over-relies on income and profit taxes rather than on taxes on consumption, which are relatively easy to collect and are least harmful to growth. Canada’s tax code is also overly complex and imposes significant compliance costs on businesses and consumers while governments spend billions of dollars each year administering and enforcing convoluted tax laws. Canada must undertake a comprehensive review of its tax system with the aim of reducing its complexity and improving the way it raises tax revenue.

Lack of clear sustainability policies

Public concerns over Canada’s ability to responsibly develop its natural resources has led to project delays, constrained investment and limited access to some markets. International concerns have also overshadowed Canada’s diplomatic and trade initiatives on occasion. For Canada to claim its rightful place as the world leader in responsible resource development, it must establish a credible climate policy, clarify businesses’ duty to consult with Aboriginal peoples and aggressively contest unfounded allegations about its environmental stewardship.

The severe shortage of economic development tools for businesses in Canada’s territories

The federal government has a critical decision to make regarding Canada’s territories if it is to fully leverage their economic potential. That decision is whether or not to provide them with tools to become more financially independent in the belief that doing so will unleash their ability to help the entire country be more competitive. Businesses see themselves as the means for the territories to achieve more financial independence from the federal government if they are provided with additional tools to enable them to do so.

Uncompetitive travel and tourism strategies

Canada has slid from the seventh largest tourist destination in the world to the 18th. Today, it is too often a high-cost, high-hassle destination with aging attractions infrastructure and inadequate marketing. Canada’s travel and tourism sector is critical to its economy, and the government must both invest in national marketing initiatives and address Canada’s inefficient visa system, the very high cost of air travel in Canada and its layers of regulations, fees and taxes.

Inadequate plans for addressing deficiencies in public infrastructure

Public investment in infrastructure has not kept up with Canada’s economic needs. Now Canada’s investment needs far exceed the availability of public funds. Bringing infrastructure in Canada back to the level needed to support prosperity will require an ongoing commitment by all levels of government, an active engagement with private sector stakeholders and a greater appreciation of the opportunities that exist for Canada to be more competitive through more modern public infrastructure.