For Canada, tackling the problem means finding levers it controls and can pull, such as removing trade issues between provinces and speeding up the regulatory review process for major developments
Canada has a productivity headache that’s turning into a fierce migraine — but there are a few tonics we should take.
The country can adopt some “no-brainer” solutions to reverse the country’s sluggish productivity performance — get major investment projects approved faster, and tear down interprovincial trade barriers.
At the opening day of Canada’s Productivity Summit, both issues were discussed — along with other potential ideas — as the country’s productivity levels are falling and policymakers, business leaders and academics search for answers.
“The best way a business can boost its productivity is to invest in itself. And so the surest way society can fix its productivity problem is to encourage investment,” Premier Danielle Smith said Wednesday at the forum.
“Canada is increasingly seen as a risky investment . . . It’s virtually impossible to get anything built in Canada these days.”
The two-day conference, held by the University of Calgary’s School of Public Policy, is dissecting the problems plaguing the country’s weak business productivity levels, which have slipped in recent years.
Labour productivity measures how much an economy produces for each hour worked. Increasing it means finding ways for people to create more value during the time they’re at work, Bank of Canada senior deputy governor Carolyn Rogers said in a speech this spring.
The United States is on track to produce almost 50 per cent more per person than Canada this year, noted University of Calgary economist Trevor Tombe.
“We haven’t seen this gap as persistently wide at any point since the 1890s,” he said.
For Canada, tackling the problem means finding levers it controls and can pull, such as removing trade issues between provinces and speeding up the regulatory review process for major developments.
“This is a country that, I often say, likes to put the puck in its own net,” Business Council of Canada CEO Goldy Hyder said in an interview.
“Interprovincial trade barriers, regulatory burdens, the taxation system, are all examples of things that we can make ourselves more competitive on, but we’re slow to do it.”
Smith told the conference the scope of the productivity issue was driven home by a steady stream of major resource projects sidetracked or killed over the past decade.
Think about the time and money spent on the Energy East, Northern Gateway and Keystone XL pipelines, or the Frontier oilsands mine.
“It’s those kinds of big, major, multibillion-dollar investments that we’re in danger of not being able to continue to attract,” the premier added.
Those failed projects represented potential investment and jobs that never materialized. They also highlight concerns about the uncertain regulatory path to see major infrastructure constructed.
“If you can’t get your product to market, it doesn’t make a whole lot of sense to invest in increased production of your product,” Martha Hall Findlay, director of the University of Calgary’s School of Public Policy, told reporters.
There are plenty of signs Canada needs to address its productivity issues. Canadians’ standard of living was lower in 2023 than nine years earlier, according to a recent TD Economics report.
Canadian business productivity dropped by 0.6 per cent in the past five years, states a new study by economist Tim Sargent, director of domestic policy at the Macdonald-Laurier Institute.
And while oil-producing provinces such as Alberta, Saskatchewan and Newfoundland and Labrador have the highest productivity levels, the biggest declines in recent years have been reported in Ontario and Alberta.
Sargent’s report also pointed out that Canadian investment dropped from 2.1 per cent annually (between 1998 and 2019) down to only 0.5 per cent between 2020 and last year.
During the opening session of the summit, he referenced the difficulty of getting projects across the finish line, citing slow progress following changes made with the federal Impact Assessment Act in 2019.
“We seem to have created a system that just can’t get things done,” Sargent told the conference.
“The reality for companies is they go into this process and it could be 10 years before they come out the other side. And they still might have the project turned down.”
Yet, large infrastructure projects create economic value for the country and can improve productivity, said Deborah Yedlin, CEO of the Calgary Chamber of Commerce.
And if companies are stuck in regulatory limbo for years, investment remains stranded.
“It’s a no-brainer,” Yedlin said in an interview about fixing the project review process.
“Think about where our strengths are — agriculture, energy, forestry, and now we want to do critical minerals. All of those require regulatory approvals, and we cannot afford to be taking this long to get things done.”
Smith and others at the conference also spoke about the need to reduce trade and labour hurdles between provinces and territories.
Tombe said his research indicates removing trade barriers between provinces, such as recognizing each other’s product standards and professional accreditations, would provide a tangible benefit to the economy.
“Interprovincial trade, I think, is absolutely a no-brainer,” Tombe said in an interview, noting fixing it could boost productivity in Canada by four to five per cent.
“What it requires is to simply ease the burden of complying with different rules and regulations across the country.”
In 2019, then-premier Jason Kenney announced the province would unilaterally reduce many of the exemptions Alberta has within the Canadian Free Trade Agreement.
“We didn’t really see the pickup on the other side,” said Alberta Finance Minister Nate Horner, noting it is complicated trying to negotiate wide-ranging deals with all provinces.
“It should be the easiest. It should be achievable.”
Chris Varcoe is a Calgary Herald columnist.