Canada’s productivity problem is often described as a puzzle. It is not. It is a math problem, and the math has stopped working. When Canadian firms invest half as much per worker as U.S. competitors, when businesses spend more than 51 billion dollars a year just meeting regulatory requirements, and when more than half of the food and consumer goods on our shelves now come from somewhere else, the outcome is predictable: slower growth, weaker supply chains, and declining competitiveness.
That was the core of my message yesterday when I appeared before the House of Commons Industry Committee. What is less discussed is that this erosion is not inevitable. It is the result of policy and structural choices that can be changed.
The Bank of Canada recently outlined the three pillars of productivity: capital intensity, skills, and innovation. All three are being weighed down by systems that no longer match the pace of modern manufacturing.
We see the impact clearly in the products Canadians rely on every day. About 55 percent of center-store grocery items are now imported. A generation ago, many of those products were made here. Domestic plants continue to be among the most efficient in their global networks, but increasing costs, slower approvals, and inconsistent regulations have shifted new investment to the United States. In consumer health products, the gap is even wider. Canada produces only a small fraction of the toothpaste, deodorant, and personal-care items Canadians rely on. The capability exists, but the investment environment does not reward expansion.
Medium-sized manufacturers face their own challenges. They carry enterprise-level regulatory burdens but do not have enterprise-level access to capital. Meanwhile, global competitors are scaling automation and advanced manufacturing far faster. International analyses now show mid-sized Canadian agri-food firms losing ground on technology adoption because public investment support has not kept pace.
Infrastructure is another critical factor. Canada’s ports, rail corridors, and logistics systems remain chokepoints for manufacturers. Budget 2025 makes important commitments to trade and transport infrastructure, but the gains will depend on execution. Faster port throughput, a more responsive rail system, and better national logistics alignment are essential if Canada is to convert investment dollars into productivity outcomes.
Tax policy is one area where progress is being made. The Productivity Super-Deduction and enhanced Capital Cost Allowance announced in Budget 2025 are significant steps forward. They make Canada’s cumulative manufacturing tax incentives more competitive than those in the United States. These changes respond directly to years of advocacy from Canadian manufacturers, including FHCP. But we must go further. A nationwide manufacturing investment tax credit, a modernized SR and ED program, and a federal patent-box regime would ensure Canada not only attracts investment, but also anchors intellectual property and commercialization here at home.
Regulatory modernization is equally important. Canada needs systems that reward innovation rather than duplication. Better national coordination on plastics reporting, modernized data and labelling rules, and adoption of digital labelling for food and consumer health products would reduce cost, improve agility, and help Canadian plants compete at scale.
The good news is that none of this requires reinventing the wheel. Other countries have shown what works: invest in the tools that boost productivity, clear the path for mid-sized firms to grow, modernize approval systems, build agile infrastructure, and create tax environments that reward both innovation and production.
Canada has the talent, the technology, and the market access to compete globally. What we need now is a system that converts those strengths into results.
If we treat productivity as the math problem it is, and fix the variables that are holding Canada back, we can grow faster, make more of what Canadians buy right here at home, and build a stronger, more competitive economy for the long term.
This op-ed was originally published on Linkedin.