Canada enjoys tariff-free access to every other G7 market, yet its ability to turn that access into sales keeps eroding.
The culprit is a stubborn productivity gap that leaves workers producing less value per hour than peers abroad and that quietly saps the competitiveness of every container, railcar and data packet that crosses the border.
The Organisation for Economic Co-operation and Development says Canadian workers generated the equivalent of US$74.7 in goods and services per hour in 2023, far below the US$97.0 recorded in the United States and well under France’s US$89.3.
The shortfall is widening, not shrinking. Statistics Canada reported that business-sector labour productivity fell another 1.0 percent in the second quarter of 2025, the sharpest quarterly drop since late 2022.
Behind the numbers lies a climate that makes it tough to scale. The Toronto Region Board of Trade lists “a labyrinth of bureaucratic hurdles” as a top drag, noting Canada’s fall from fourth to 23rd in the World Bank’s Ease of Doing Business ranking between 2006 and 2020. Taxes add to the chill: the combined corporate rate of 26.2 percent ranks 26th among 38 advanced economies.
“We’re working hard, but not smart,” the Toronto Region Board of Trade wrote in a policy paper, urging Ottawa to streamline approvals and modernise the tax code.
Trade impact already visible in data
The Bank of Canada draws a straight line from weak productivity to thinning export performance. “Our competitiveness and resilience depend on our collective productivity,” deputy governor Nicolas Vincent noted. Lower output per hour squeezes margins, discourages capital spending and leaves firms ill-equipped to chase new markets when shocks hit.
Those shocks are coming faster. Manufacturing and wholesale trade, two sectors most exposed to foreign buyers, accounted for much of the 1.0 percent productivity slide this spring, a period marked by renewed tariff threats from Washington. Fewer Canadian companies now have the scale or cash flow to invest in advanced machinery, digital tools or overseas marketing, all precursors to export growth.
Missed opportunities are already measured in billions. A recent agri-food study estimated that Canada forfeited $23 billion in export value last year because competitors such as Brazil boosted yields and cut unit costs faster than Canadian producers. Similar stories are playing out in clean technology and advanced manufacturing, where adoption lags G7 peers.
Ottawa cannot solve the gap alone, but it can remove hurdles. The Board of Trade wants a single electronic window for federal permitting and a firm timeline for decisions. The Bank of Canada adds three levers: a clearer investment climate, more domestic competition and aggressive upskilling of workers. Larger home-grown firms, more fluid inter-provincial trade and smoother project approvals would let companies spread fixed costs and chase volume abroad.
None of the fixes are quick, yet the cost of delay grows. Canadian output per capita has been below its pre-pandemic level for eight straight quarters. Each quarter of drift narrows the margin that lets exporters price aggressively, hire talent and weather currency swings.
Canada still holds enviable cards, from critical minerals to a deep pool of newcomers who bring global networks. Turning those cards into sustained export wins now hinges on grinding out more value per hour at home. Without that step, the country’s prized trade agreements risk becoming empty shelf space, not growth engines.
