149

How Do We Measure Economic Freedom? See page 471 for an explanation of the methodology

or visit the Index Web site at heritage.org/index.2012 data unless otherwise noted.Data compiled as of September 2013.

Quick FactsPopulation: 34.8 millionGDP (PPP): $1.5 trillion1.8% growth in 20125-year compound annual growth 1.2%$42,734 per capitaUnemployment: 7.3%Inflation (CPI): 1.5%FDI Inflow: $45.4 billionPublic Debt: 85.6% of GDP

Economic Freedom Score

Least Mostfree free

5025 75

0 100

0 20 40 60 80 100

Country Comparisons

Freedom Trend

Country

WorldAverage

RegionalAverage

FreeEconomies

2010 2011 2012 20142013

78

79

80

81

82

80.2

60.3

74.1

84.1

80.2

Canada’s economic freedom score is 80.2, making its econo-my the 6th freest in the 2014 Index. Its overall score is 0.8

point better than last year, reflecting improvements in invest-ment freedom, the management of government spending, and monetary freedom. Canada continues to be the freest econo-my in the North America region.

Over the 20-year history of the Index, Canada has advanced its economic freedom score by 10.7 points, the third biggest improvement among developed economies. Substantial score increases in seven of the 10 economic freedoms, including investment freedom, fiscal freedom, and the management of public spending, have enabled Canada to elevate its economic freedom status from “moderately free” 20 years ago to “free” today.

A transparent and stable business climate makes Canada one of the world’s most attractive investment destinations. Open-ness to global trade and commerce is firmly institutionalized, and the economy has rebounded relatively quickly from the global recession. The financial system has remained stable, and prudent regulations have allowed banks to withstand the global financial turmoil with little disruption.

BACKGROUND: Prime Minister Stephen Harper governs with a solid Conservative Party majority in Parliament. The Lib-eral Party, which dominated politics in Canada for decades but suffered a crushing defeat in 2011 in which it lost to the New Democratic Party even the status of official opposition, has achieved renewed popularity under the leadership of Jus-tin Trudeau, son of former Prime Minister Pierre Trudeau. Canada’s large and diverse land mass is reflected in a demo-cratic system that provides substantial autonomy to its 13 provinces and territories. The 20 percent of Canadians for whom French is the native language are heavily concentrated in Quebec. Canada’s economy is closely linked to that of the United States. The country is a major exporter of oil, minerals, automobiles, manufactured goods, and forest products.

World Rank: 6 Regional Rank: 1

CANADA

150 2014 Index of Economic Freedom

Property RightsFreedom from

Corruption

Fiscal FreedomGovernment

Spending

Business FreedomLabor FreedomMonetary Freedom

Trade FreedomInvestment FreedomFinancial Freedom

Business FreedomLabor Freedom

Monetary Freedom

REGULATORY EFFICIENCY

OPENMARKETS

Trade FreedomInvestment Freedom

Financial Freedom

GOVERNMENT SIZE

Fiscal FreedomGovernment Spending

RULE OF LAW

Property RightsFreedom from Corruption

0 20 40 60 80 100

0 20 40 60 80 100

0 20 40 60 80 100

0 20 40 60 80 100

Country World Average Rank Change1–Year

Score

RULE OF LAW GOVERNMENTSIZE

REGULATORY EFFICIENCY OPEN MARKETS

0–2.3

+15.5+32.6

+4.3+0.8–9.6

+13.1+30.0+10.0

2nd10th

89th139th

16th18th

80th

9th23rd4th

90.087.7

79.747.3

89.383.176.3

88.380.080.0

0+0.7

–0.1+2.5

–2.4+0.8+1.1

+0.1+5.0

0

Long-Term Score Change (since 1995)

THE TEN ECONOMIC FREEDOMS

Canada has long had a reputation for honest, responsible, and responsive government that vigorously prosecutes corruption. Its foundations of economic freedom rest on a judicial sys-tem that has an impeccable record of independence and transparency. Private property is well protected. Enforcement of contracts is very reliable, and expropriation is highly unusual. Pro-tection of intellectual property rights is consistent with world standards.

The regulatory framework is efficient. With no minimum capital requirement, incorporating a business takes one procedure and less than one week. Licensing requirements are not burden-some. The labor market remains relatively flexible, and labor costs are moderate. The govern-ment provides extensive energy and agricultural subsidies and controls virtually all prices for health care through a mandatory “single-payer” nationalized program.

Canada’s average tariff rate is a low 0.9 percent. Canada is unilaterally eliminating tariffs on many inputs while negotiating several trade agreements. Foreign investment in some sectors of the economy may be screened. The financial sector provides a full range of competitive ser-vices and remains dynamic. The six main banks continue to dominate the sector, although it has become easier for foreign banks to enter the market.

The top federal income tax has been cut to 29 percent, and the top corporate tax remains at 15 percent. Other taxes include a value-added tax (VAT) and a property tax. The overall tax burden is 31 percent of GDP. Expenditures have continued to fall to 41.9 percent of domestic output as the Conservative-led government attempts to balance the budget by 2015. Public debt is equivalent to 86 percent of GDP.

CANADA (continued)