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<title>CANADA COMPARES WELL WITH U.S. IN BUSINESS COSTS, SAYS STUDY</title>
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<p><font face="Courier"></font><font face="Univers" size="+2"></font><font face="Univers" size="+2">November 12, 1996 No. 205</font></p>
<p><font face="Univers" size="+2">CANADA COMPARES WELL WITH U.S.</font></p>
<p><font face="Univers" size="+2"> IN BUSINESS COSTS, SAYS STUDY</font></p>
<p><font face="Courier">The Honourable Art Eggleton, Minister for International Trade, today released in
New York City the findings of an independent study of 23 Canadian and American
cities which shows that business operating costs, particularly total labour costs,
are significantly lower in Canada than in the United States.</font></p>
<p><font face="Courier">"This study by the Canadian consulting firm, KPMG, shows that cities right across
Canada are excellent sites for investment by U.S. firms," said Mr. Eggleton.
"Canada is a very competitive place in which to locate."</font></p>
<p><font face="Courier">Based on a detailed analysis of key cost factors, KPMG found that after-tax costs
average 6.7 per cent less in Canadian than in U.S. cities.</font></p>
<p><font face="Courier">The study, entitled <em>The Competitive Alternative: A Comparison of Business Costs in
Canada and the United States</em>, was sponsored by the Department of Foreign Affairs
and International Trade, the Royal Bank of Canada, and the Economic Developers
Association of Canada. It compared the costs of establishing and operating
industrial facilities across seven industries in suburban sites in 13 Canadian and
10 U.S. jurisdictions. All of the most location-specific costs were taken into
account, including land and building costs.</font></p>
<p><font face="Courier">KPMG developed a computer-based model to compare start-up and operating costs for
10 years of operation, assuming comparable sales and distribution patterns for
each location. Each company was assumed to have sales of more than $10 million
and a minimum of 100 employees.</font></p>
<p><font face="Courier">Stuart MacKay, partner in KPMG's Vancouver office and director of the study, said
that the strong Canadian results are primarily due to total labour costs,
including wages, employer-sponsored benefits, and employer-sponsored statutory
benefits.</font></p>
<p><font face="Courier">"The image of Canada as having higher labour costs is simply not accurate," Mr.
MacKay said. "When all the costs of U.S. labour costs are factored in and
converted to Canadian dollars, the net advantage to Canada is significant."</font></p>
<p><font face="Courier">"This study is part of our effort to provide key information to U.S. investors
considering locating in Canada," said</font></p>
<p><font face="Courier">Mr. Eggleton. "We know that investment contributes to economic growth and more
jobs for Canadians."</font></p>
<p><font face="Courier">Among key findings:</font></p>
<p><font face="Courier">• For every industry examined, overall costs are lower in Canada than in the U.S.</font></p>
<p><font face="Courier">• Costs related to 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;</font></p>
<p><font face="Courier">• The size of the Canadian advantage varies by industry, ranging from 5.5 per cent
for telecommunications to</font></p>
<p><font face="Courier">10.5 per cent for software production;</font></p>
<p><font face="Courier">• Industrial land, construction and electricity costs are lower in Canada;</font></p>
<p><font face="Courier">• Income-tax credits for research and development currently favour Canadian
locations;</font></p>
<p><font face="Courier">• Even the largest Canadian centres are less costly than all of the U.S. locations
examined; and</font></p>
<p><font face="Courier">• Canada's overall cost advantage remains as long as the Canadian dollar exchange
rate is under US$0.87.</font></p>
<p><font face="Courier">The Canadian cities studied were Vancouver; Calgary; Saskatoon; Winnipeg; Toronto;
Ottawa; London, Ont.; Montreal; Quebec City; Moncton, N.B.; Charlottetown, P.E.I.;
Halifax; and St. John's, Nfld. 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, Cal.; and Scranton, Pa.</font></p>
<p><font face="Courier">The KPMG study is published by Prospectus Inc. of Ottawa.</font></p>
<p><font face="Courier">While in New York, Mr. Eggleton will address the Americas Society on the North
American Free Trade Agreement and the future of free trade.</font></p>
<p><font face="Courier">- 30 -</font></p>
<p><font face="Courier">For further information, media representatives may contact:</font></p>
<p><font face="Courier">Nicole Bourget,</font></p>
<p><font face="Courier">Director of Communications</font></p>
<p><font face="Courier">Office of the Minister for International Trade</font></p>
<p><font face="Courier">(613) 996-6271</font></p>
<p><font face="Courier">Media Relations Office</font></p>
<p><font face="Courier">Department of Foreign Affairs and International Trade</font></p>
<p><font face="Courier">(613) 995-1874</font></p>
<p><font face="Courier">Stuart MacKay</font></p>
<p><font face="Courier">KPMG</font></p>
<p><font face="Courier">Vancouver, B.C.</font></p>
<p><font face="Courier">(604) 691-3410</font></p>
<p><font face="Courier">This document is also available on the Department's Internet site:
http://www.dfait-maeci.gc.ca</font></p>
<p><font face="Courier">A limited number of copies are available for the media from the Department of
Foreign Affairs and International Trade. Additional copies can be purchased from:</font></p>
<p><font face="Courier">Prospectus Inc., 180 Elgin Street, Suite 900, Ottawa, ON K2P 2K3</font></p>
<p><font face="Courier">(613) 231-2727</font></p>
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