Canadian competitiveness continues to fall against G7 benchmark

by Canadian Shipper

Canadian industry continues to face increasing global competition and, while our ranking compared to G7 countries has improved, our Excellence Gap has increased significantly since before 9-11, according to Canadian Manufacturers and Exporters (CME) Chief Economist Jayson Myers.

CME’s Excellence Gap Analysis benchmarks the performance of Canadian industry against other G7 nations United States, Japan, Germany, France, Italy and United Kingdom over the past five years, explained Mr. Myers. "Our last analysis, performed in the summer of 2001, showed Canadian industry performing at 62% of the G7 best practice. This most recent analysis shows a dramatic drop in that number to 50%," he said.

The Excellence Gap Analysis looks at annual averages over five years for key competitive indicators, including:

Growth in manufacturing production;
Growth in the volume of goods and services exports;
Changes in manufacturers’ selling prices;
The rate of improvement in labour productivity;
Changes in unit labour costs;
After-tax gross profit margins (% of GDP);
Business investment in new technology (% of GDP);
Business investment in research and technology (% of GDP);
Business investment in skills training as a percent of payroll costs; and
The rate of new product commercialization, measured in terms of the growth in the number of patents files per country in the United States Trademark and Patent Office.

An overall performance rating is calculated as an average across all benchmarks. The Excellence Gap is then the difference between this rating and a perfect score of 100 percent.

"Canadian manufacturers and exporters are relatively competitive when it comes to production and export growth, but less so when looking at productivity, profitability and investment. And, when we look at innovation related factors — training, R&D, and commercialization of new products Canada’s gap is significant.

"The news is not all bad, however," continued Myers. "After four years in last place, Canada’s ranking compared to other nations has improved leaving Italy and the United Kingdom in sixth and seventh place. Having said that, our percentage ranking as compared to the United States has remained unchanged."

The United States continued to lead the G7, but its performance also dropped significantly from 94 percent of the benchmark prior to 9-11 to 75 percent. France was the only country to any real improvement in competitive performance over the past five years. Manufacturers in that country saw their production levels grow faster than any other major economy.

The challenge facing Canadian manufacturers and exporters, according to CME President & CEO, Perrin Beatty, "is to close the excellence gap before competitors close them. And to do this requires a new way of thinking. Canadian Industry can no longer take a business as usual approach relying on a low dollar and low labour costs. In the end, Canadian manufacturers and exporters will succeed or fail based on their ability to innovate, to drive up value and to reduce costs through the use of new materials, new processes, and new information systems."

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