The evidence is very clear on the prosperity gap between Canada and the United States. Industry Canada, academics, and policy makers have been trying to understand for the last few decades what underlies this rising prosperity gap, why Canada's productivity continues to lag that of other countries.
There's no silver bullet answer to what underlies this poor productivity performance in Canada, but one of the main factors has to do with R and D spending.
If you look at R and D spending as a share of GDP, Canada lags other G-7 countries significantly. I understand the point you make that if you cut the data differently, maybe the Canadian companies would look better. To that I would respond that if the Canadian companies believe the methodology in the OECD study and other studies is flawed, then that means they believe they're best in class. That means they believe they're as good as telecom companies in other countries, to which I reply: why, then, would they fear the entry of foreign companies? It doesn't add up. The idea here is that if they are internationally competitive, if they're up to international standards, why is it the case that they would be so concerned about foreign entry?
One thing that has been shown to be very clear is that it's not just the dollars spent on R and D that matters. It has to do with the competition that the companies undertaking that R and D are involved in. What the evidence clearly shows is that for industries exposed to more competition, the R and D spending goes a lot further towards leading to innovation.
Thank you.