Mr. Chairman, I'm going to take a slightly different tack. I agree with Mr. Julian that there is a fundamental issue in globalization. It's the changing shares going to capital and to labour on a global basis. The data in Canada show that family real living standards haven't risen much over the last ten to fifteen years.
That's the problem. The question is, what are the causes and the prospective solutions? It's hard to pin the cause on free trade, NAFTA, or even the WTO. I think the real cause of low income in Canada is low productivity growth rates. There's a gap there between us and the United States that's been growing for twenty years now. Our research indicates that the gap is now to the point that Canadian incomes are 20% below American incomes across the board.
If you compare Canada to the fastest-growing industrial countries in northern Europe, countries with advanced social welfare systems like Sweden, Finland, Denmark, and Norway, the gap's even wider.
A recent report from the World Economic Forum ranked Canada 16th in the world in competiveness. Most of the countries ahead of us were industrial countries in northern Europe with well-developed social welfare systems and high corporate taxes.
The WEF, which is not a socially oriented organization but a business one, pointed out that the massive investment in education in northern Europe is what's giving them the critical advantage. So there clearly is an issue.
The areas we need to examine, which is what we'll put into our report, are things like why we have a punitively high marginal tax rate on the working poor. The marginal tax rate on people who earn less than $40,000 a year in this country is as high as 90%, because they are rolling out of social programs into our tax system. We're taking away the social benefits faster than we're allowing them to earn income. This is from the C.D. Howe Institute, so Jack Mintz and people like Finn Poschman get the credit.
That's a fundamental fix—not a federal fix but a national one. The marginal tax rates are highest in Ontario and Alberta. Why are we punishing these people for going back to work? Why aren't we raising basic exemptions and allowing more of a bridge as we roll them out of EI and other forms of social welfare into the labour force?
I would strongly resist the idea of adding on more baggage directed at social and environmental conditions. We did some of that in NAFTA. There was an environmental sidebar within NAFTA. Perhaps it wasn't adequate; you can judge that for yourselves. I know that in many other cases we're now using that as an excuse to avoid free trade. We're actually using it as another form of trade barrier.
The Europeans are perhaps the most overregulated people in the world. It's hard to sell anything in Europe unless you meet European standards. Perhaps you don't know that Canadian sales from our affiliates in Britain, for example, are eight times our exports to Britain, because the only way we can actually penetrate the barriers around Europe is by becoming European companies. We're having to change our model to cope with that sort of stuff.
I don't see more barriers as a solution. I would much rather see better-designed public policy in Canada. If it's a matter of addressing low incomes, let's think about fundamental reform to our tax system.