"Outside the context of this study, the Canadian dollar is generally regarded globally as being a currency that's fairly closely linked to resource prices," he notes. "Resource prices, particularly energy, have been high in recent years. Most economists would say that's a major reason we're seeing the Canadian dollar rise." But is that factor alone behind Canada's business costs structure?
   "We are noting better results for Canada at this point in time than was the case back in the mid and late 1990s when the Canadian dollar was at similar levels," says Mair. "That tells us that there are structural changes in underlying costs over that time and that the results are not simply a case of some exchange rates fluctuating."
   Federal and provincial corporate tax cuts over the last 10 years have reduced significantly the effective tax rate in most regions across Canada, for example. Average tax rates for manufacturing operations across Canada in the mid-1990s were in the neighborhood of 45 percent. Today, the average is in the mid-30s, which is comparable to that of the U.S.
   "We looked at statistics on wage inflation rates in various countries, and that tends to be marginally higher in the U.S. than in Canada," notes Mair. "That has made for some ongoing slight change in terms of labor costs between the two countries in Canada's favor. And in terms of electricity prices, two provinces have deregulated – Alberta and Ontario – and have seen significant increases, whereas in the other provinces, prices haven't changed all that dramatically over the last 10 years. In the U.S., significant electricity price increases are the case in a lot of areas over recent years."
   Mair says he plans to explore these structural changes in more detail in order to quantify their impact on locations and industries.
   "But if I were to draw some general conclusions about why Canada is managing to maintain a 5.5-percent advantage relative to the U.S. even given the strength of the dollar today, those are the factors I would point to."