Canada and the United States are each other's largest trading partners, share the longest undefended border in the world, and are traditional staunch allies.

However, economic reality prevails, and the two countries often find themselves competing for business investment in the international arena. One of Canada's latest and most convincing tools in this competitive effort is an independent study of 23 Canadian and American cities that rigorously analyzes and compares business costs in the USA and Canada.

Entitled The Competitive Alternative, this comprehensive, 122-page study was conducted by KPMG, one of the world's leading consulting firms. One of the most dramatic findings is that business operating costs, particularly total labor costs, are significantly lower in Canada than in the United States.

"The image of Canada as having higher labor costs is simply not accurate," observes Stuart MacKay, partner in KPMG's Vancouver office and director of the study. "When all the costs of U.S. labor costs are factored in and converted to Canadian dollars, the net advantage to Canada is significant."

Among the study's key findings are:

• For every industry examined, overall costs are lower in Canada than in the USA.
• Costs related to business location are, on average, 15.7 per cent lower in Canada. These costs amount to about 40 per cent of total operating costs and lead to an after-tax cost advantage of 6.7 per cent.
• The size of the Canadian advantage varies by industry, ranging from 5.5 per cent for telecommunications to 10.5 per cent for software production.
• Industrial land, construction and electricity costs are lower in Canada.
• Income tax credits for research and development currently favor Canadian locations
• Even the largest Canadian centers are less costly than all of the U.S. locations examined.

Canada's overall cost advantage remains as long as the Canadian dollar exchange rate is under US$0.87. (It has been below this level since 1991. In recent months it has hovered in the US$0.74 range.)

Location-Sensitive Costs, by Industry KPMG's study gave Canada a clear cost edge in location-sensitive costs. Courtesy of KPMG's The Competitive Alternative: A Comparison of Business Costs in Canada and the U.S., 1996. Note: Costs are in US$ and are based on the annual average.

Needless to say, economic developers across Canada welcome these findings with open arms. "This study. . . shows that cities right across Canada are excellent sites for investment by U.S. firms," said Art Eggleton, minister for international trade. "Canada is a very competitive place in which to locate." The Canadian cities studied were Vancouver, British Columbia; Calgary, Alberta; Saskatoon, Saskatchewan; Winnipeg, Manitoba; Toronto, Ottawa, and London, Ontario; Montreal and Quebec City, Quebec; Moncton, New Brunswick; Charlottetown, New Brunswick; Halifax, Nova Scotia; and St. John's, Newfoundland. The U.S. cities were Austin, Texas; Bellingham, Wash.; Colorado Springs, Colo.; Columbus, Ohio; Hampton Va.; Manchester, N.H.; Minneapolis, Minn.; Raleigh, N.C.; Sacramento, Calif.; and Scranton, Pa.

Copies of the complete study can be purchased from Prospectus Inc., 180 Elgin Street, Suite 900, Ottawa, ON K2P 2K3.

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Wired for Business

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Canada's Competitive Cost Advantage

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Atlantic Canada

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Quebec

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Ontario

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The West

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