The competitiveness provided by Canadian research and development gives our chemical industry a true advantage in the world of technical innovation. How can your business and the Canadian chemical industry benefit?
The major business opportunity today for Canada's chemical industry is technical innovation. Just as cost-effective transportation led to the industrial development of Canada and attractive and competitive energy resources led to the growth of the petrochemical sector in the west and the inorganic sector in the east, the cost-competitiveness of Canadian research and development (R&D) provides a similar opportunity. Across all sectors of the chemical industry, technical innovation gives Canada a competitive advantage.
Canada's technical innovation environment is attractive, positive and cost-competitive. The cost per researcher, on a common currencybasis, is the lowest among the G-7 countries. In addition, Canada's tax treatment of R&D is more favourable than that of the U.S. and the other major industrial countries [ILLUSTRATION FOR FIGURE 1 OMITTED]. Taking the U.S. as an example, tax credits apply only to incremental increases in operating costs, whereas Canadian Scientific Research & Experimental Development (SR&ED) tax credits apply to all capital and current operating costs in every year incurred. The benefits of Canadian tax policy accrue directly to Canadian companies. Canadian R&D projects carried out by Canadian subsidiaries, who can potentially benefit from the research, qualify even if the project is part of the global research effort of the parent company.
Canada's Competitive Advantage is Sustainable
Furthermore, this Canadian competitive advantage is sustainable. The evaluation of SR&ED tax credits over the last few years by Industry Canada and the Department of Finance masked the fact that Canada's cost advantage arises from several solid factors. Six of these are discussed below and are seen in Figure 2.
The first of these factors is exchange. While the Canadian dollar may move closer to purchasing power parity, very few forecasters envisage dollar-dollar parity.
Technical salaries in Canada in equal number terms have fallen below the U.S. due to lesser demand. As technical innovation in Canada increases, this is one competitive factor likely to decrease as companies compete for particular expertise.
