NEWS RELEASES
STUDY SHOWS CANADA HAS LOWEST BUSINESS COSTS AMONG G-7 COUNTRIES
March 11, 1999 (1:00 p.m. EST) No. 55
STUDY SHOWS CANADA HAS LOWEST BUSINESS COSTS AMONG G-7 COUNTRIES
International Trade Minister Sergio Marchi said today that a new study, The Competitive Alternatives: A Comparison of Business Costs in North
America, Europe and Japan, by the international consulting firm KPMG, removes any remaining myths that Canada is a high-cost business
location.
"Any business leader thinking about expansion -- especially in the North American market -- should take a serious look at this report," said Mr.
Marchi. "It provides hard facts to show there are clear cost advantages to setting up or expanding an international business in Canada."
The report contains comparative data on typical costs of doing business in eight countries (the G-7 plus Austria) for nine mainstream industrial
sectors, in both manufacturing and service industries. Cost factors include labour, real estate, transportation, utilities, interest and taxes. The
research found that overall Canadian costs are consistently among the lowest, while in leading-edge, high value-added sectors such as
software, the Canadian advantage is quite significant.
With corporate support from the Royal Bank of Canada, Ontario Power Generation and Bell Canada, the study was also sponsored by economic
development agencies from every part of Canada, as well as the Government of Austria. It was released today at the Royal Bank of Canada in
Ottawa, which hosted the event.
"This study shows the outstanding cost advantage that Canada offers to foreign investors," said Chief Economist of the Royal Bank John
McCallum. "Canada's cost advantage compared with the U.S. is robust."
"Our report offers a wealth of independently developed business cost information," said KPMG Project Director Stuart MacKay. "The evidence
that Canada offers the lowest-cost alternative clearly refutes many of the myths that exist in the minds of decision makers and investors in other
countries."
Twenty-five cities across Canada are included in the study; consistently, they all ranked among the lowest-cost locations when compared with
cities in the United States, Europe and Japan.
A summary of the KPMG study is at: <http://www.dfait-maeci.gc.ca/investcan>.
- 30 -
A backgrounder on the study is attached.
For further information, media representatives may contact:
Leslie Swartman
Office of the Minister for International Trade
(613) 992-7332
Judy Dobbs
Royal Bank of Canada (Toronto)
(416) 974-1755
Steve Heipel
KPMG (Toronto)
(416) 777-3562
Media Relations Office
Department of Foreign Affairs and International Trade
(613) 995-1874
Backgrounder
KPMG STUDY: COMPARISON OF BUSINESS COSTS
In October 1997, KPMG released a study that showed Canada had the lowest costs of doing business when compared with the United States
and several European countries. Since then KPMG has undertaken further research on the international business environment and has
produced a new study that broadens the industrial focus and extends the geographical focus to include Japan. This year's study, entitled The
Competitive Alternatives: A Comparison of Business Costs in North America, Europe and Japan, identifies and compares the major cost factors
that influence the site location decisions of foreign investors.
Eight countries -- the G-7 and Austria -- and nine industry sectors are analysed. Overall, Canadian locations have a 7.8 percent cost advantage
over comparative locations in the United States. Each of the 25 Canadian cities in the study shows lower costs of operating a comparable
business than all of the U.S. cities studied.
Canada leads all the countries studied in important cost components such as labour and electricity and features the lowest overall cost in eight of
the nine industries studied. Canada is first in electronics, medical devices, metal fabrication, pharmaceuticals, plastic products,
telecommunications equipment, packaged software, and advanced software, and is a close second in food processing.
This year's study was supported by a number of sponsors, including the Royal Bank of Canada, Bell Canada, Ontario Power Generation, the
Government of Austria and many provincial, regional and local economic development agencies in Canada.
This study is important because it models real costs in actual business situations. It presents a scorecard for international cost comparisons now
and offers a historical benchmark for the future. The KPMG study will function as an international scorecard that will grow each year.
Key Findings
The KPMG study illustrates Canada's favourable position as the lowest-cost business location when compared with other countries.
By country: Canada is the lowest-cost country, as follows (index of U.S.=100):
Country Cost Index Canada's % Advantage
Canada 92.2 --
United Kingdom 94.8 2.7
United States 100.0 7.8
Austria, France, Italy 104.0 11.5
Germany 108.0 14.6
Japan 121.9 24.4
By industry sector: Canada ranks at the top in eight of the sectors and is a close second in the ninth, as shown below (index of U.S.=100):
Industry Cost Index for Canada Rank
Electronics 91.5 1
Food Processing 94.3 2 (U.K. is no. 1)
Medical Devices 92.4 1
Metal Fabrication 92.1 1
Pharmaceuticals 93.4 1
Plastic Products 92.2 1
Telecom Equipment 94.9 1
Packaged Software 86.0 1
Advanced Software 85.5 1
Overall 92.2 1
Other significant findings include the following:
Over the nine sectors examined, costs in Canada are 7.8 percent below the U.S. average; the United Kingdom comes second with a 5.2
percent cost advantage over the United States.
Canada's overall labour costs are the lowest in all of the countries studied. Compared with the United States, for example, the cost of Canadian
labour is 32 percent less.
Canada offers the most cost-competitive locations for technology- and capital-intensive industries.
In manufacturing, Canada has a 7 percent advantage over the United States.
In the software industries, the Canadian cost advantage is 14.3 percent. (On this basis, running a 110-employee software firm in Canada
instead of the United States will save the average company about US$1.6 million a year.)
Other Observations and Conclusions
Canada has a clear cost advantage in business sectors requiring a highly skilled labour force or where research and development constitutes a
significant part of business.
Canada has a cost advantage as long as the dollar stays below US$0.79.
Exchange rates no longer affect the relative competitiveness of the European countries in the study because of the introduction of the euro in
January 1999.
The 25 Canadian cities in the study ranked consistently among the lowest-cost locations in all eight countries. Every Canadian city was less
expensive than the U.S. cities studied.
Canada's position as the lowest-cost business investment alternative of the eight countries assessed, combined with its United Nations
designation as the best place in the world to live, creates a very positive economic and social outlook for Canadians and an attractive climate for
foreign investors.
| 
