Reduce barriers to entry for both domestic and foreign suppliers, and enhance competition in network and service sectors. Regulatory barriers to competition in network and service sectors weaken pressures to innovate and adopt new technologies.
Actions taken: No action taken.
Recommendations: Reduce foreign ownership restrictions in telecoms and broadcasting, and, on a reciprocal basis, in air transportation. Move towards more integrated and competitive electricity markets. Privatise Canada Post and eliminate its legally protected monopoly. Ease entry regulations and reduce discrimination against foreign suppliers in professional services, air and road transport. Reduce licensing requirements in retail trade.
Reduce barriers to internal trade. Non-tariff interprovincial barriers lower efficiency, particularly by reducing the market size. Supply management regimes distort markets for dairy, poultry and eggs through production quotas, minimum prices and high import tariffs. This weakens relationships with trading partners and contributes to inequality by supporting producers at the expense of consumers.
Actions taken: The Agreement on Internal Trade was replaced by the Canadian Free Trade Agreement (CFTA) in 2017, which automatically covers sectors unless exceptions are identified. Energy is covered for government procurement, while agriculture is not covered. A Regulatory Reconciliation and Cooperation Table was created, and maximum fines for non-compliance were increased.
Recommendations: Make the sectoral coverage of the CFTA as broad as possible, notably by including energy fully. Eliminate agricultural supply management regimes. Reconcile remaining regulatory differences (possibly via mutual recognition) and expedite dispute resolution.
Enhance access to post-secondary education and its responsiveness to skills demand. Better access to education for disadvantaged groups and the acquisition of skills in demand would boost incomes and reduce inequalities.
Actions taken: Federal government transfers to provinces to support employment and skills training programs were expanded by around 15% in 2017. The government has provided additional funding of just under CAD 90 million per year for the Youth Employment Strategy (part of which will support a doubling of jobs funded under the Canada Summer Jobs programme) and launched the Student Work-Integrated Learning Program. The Future Skills Centre and Council were launched in 2018 to identify emerging skills needs and innovative approaches to help Canadians gain the skills they need. Apprenticeship training requirements have been harmonised in 20 of the 30 Red Seal trades. The cross-jurisdictional Labour Market Information Council was created in April 2017 to identify and implement Canadian policy priorities for the collection, analysis and distribution of labour market information. Statistics Canada is developing a new longitudinal data set tracking labour market outcomes of post-secondary students.
Recommendations: Work with provinces and territories to harmonise training and certification requirements for all apprenticeship programmes, thereby facilitating access to post-secondary qualifications for disadvantaged groups. Improve the accessibility and reputation of apprenticeship and vocational education systems through increasing funding certainty for pre-apprenticeship training and encouraging further development of pathways to advanced diplomas and degrees. Publish nationally consistent data on student labour market outcomes by post-secondary education institution and course.
1Increase labour market inclusion of women. Increasing women’s labour force participation and productivity and shrinking the large gender earnings gap would serve economic and inclusiveness goals.
Recommendations: Further increase federal and provincial funding of childcare with a goal of making access to affordable, high-quality childcare available to all parents of children aged three and under. Extend kindergarten to all four year-old children. Support take-up of paid parental leave by fathers, as introduced in 2018, through information provision and, if necessary, increasing payment rates. Take further steps to address financial, mentorship and support-programme barriers to female entrepreneurship through a comprehensive national strategy for women’s enterprises, underpinned by more gender-disaggregated data.
Reform the tax system. Reliance on taxes with high efficiency costs, low environmental taxes and the maintenance of unwarranted tax expenditures distort resource allocation, reducing productivity.
Actions taken: The small business tax rate was reduced by half a percentage point from January 2018 and will be reduced by a further percentage point in 2019. Following completion of a tax expenditure review, the government announced measures in October 2017 – restrictions on taxable income splitting between household members (income sprinkling) and the allowable amount of passive investment income – to reduce misuse of the small business tax regime by high-income households.
Recommendations: Review the tax system as a whole to ensure that it remains efficient, equitable and supports the competitiveness of the Canadian economy. Encourage green growth by increasing environmental taxes and reducing taxes with high efficiency costs, notably corporate and personal income tax rates. Eliminate tax expenditures, such as lower rates and enhanced R&D tax credits for small businesses, where they are not warranted either by clear market failures or by clear equity objectives.
