Death by a Thousand Paper Cuts: The Effect of Barriers to Competition on Canadian Productivity

The Death by a Thousand Paper Cuts: The Effect of Barriers to Competition on Canadian Productivity report examines the extent of barriers to competition in Canada and their impact on productivity. An in-depth inventory of both tariff and non-tariff barriers indicates that while international tariff barriers have been substantially reduced over the past 15 years, tariff rates remain high in a number of sectors. In addition, despite efforts under the auspices of the Agreement on Internal Trade and the Council of the Federation, a daunting number of domestic non-tariff barriers remain in place.

Reflecting the pervasive nature of non-tariff barriers, a majority of the 198 Canadian businesses surveyed for this study indicated that they had experienced problems arising from both federal and provincial barriers to competition. In addition, a unique empirical analysis of the relationship between barriers to competition and Canada–U.S. relative productivity performance indicates that productivity could be enhanced by eliminating barriers to competition in a core group of primary and manufacturing industries. However, for the service sector, differences in regulatory frameworks were not related to relative productivity performance, suggesting that policy-makers must look elsewhere than to barriers to competition for a complete explanation of the Canada–U.S. productivity gap.