Thank you for your question. When I lived in Ottawa, a few years ago, I spoke my second language a lot, but after living here for six years now, I need to practice it more. So I will answer in my first language.
Obviously, the issue of productivity isn't one that has an easy answer, otherwise people would have come up with it already. It's something that Canada has struggled with over a number of years. There are a number of specific challenges, and I think this government has put forward a few good ideas to help out. I mentioned in my presentation the strategic innovation fund being a step in the right direction. Some work on the innovation clusters and the Canada job grant were a step in the right direction because, as I said, we need to have the right people in place to make use of the manufacturing technologies that are available.
In terms of why it is, there are a few challenges which I think we need to overcome. One is that in the manufacturing sector specifically, if you look at the size of the average company in Canada, we skew to the small end. We have a lot of branch plants of large American companies or European companies, and the domestic manufacturing base is smaller than it is in other countries. I think that, in some ways, the smaller organizations have a more difficult time with financing, with understanding what new technologies are, and the costs, both in terms of the dollar-value costs and the costs of potentially getting it wrong, are much higher for smaller companies. I think there are some challenges there that we need to overcome.
One of the others related to the size issue is that.... Excuse me for a second here. I'll have to come back to the size issue in a second. I apologize for that.
You mentioned that Canada only made progress during NAFTA, during that period of time, and I think that is true. The big gap that we saw with productivity growth between Canada and the U.S. in particular took place in the aftermath of the NAFTA period. We had good productivity growth then, but the gap opened up in the late 1990s and early 2000s. I think part of the reason for that was the relative lack of adoption of the new digital technology that took place in the United States, and so we saw a large, widening productivity gap. Since that time it has not really gotten worse, not in the last five or six years at least. Canada has been kind of running parallel to the U.S. In recent years the growth levels have not been as bad, but we're not closing the gap that existed before.
As I said when I started my response, there aren't any easy answers to these questions, but I think that business size.... The other point that I forgot before, and I just remember now, is that I think there's a role for the tax system to play in fixing this problem. Specifically, from the corporate perspective, simply speaking, you have the general corporate tax rate and the small business tax rate. Nobody's arguing against a small business tax rate, but the problem we have is that we effectively encourage companies to be small. We don't encourage them to grow. I think that one of the things that we would like to see as part of the tax reform that I mentioned before is exploring innovative new ways to reward companies for growing and for investing in their labour force and their capital.