2014 Index of Economic Freedom

Canada

overall score80.2
world rank6
Rule of Law

Property Rights90.0

Freedom From Corruption87.7

Limited Government

Government Spending47.3

Fiscal Freedom79.7

Regulatory Efficiency

Business Freedom89.3

Labor Freedom83.1

Monetary Freedom76.3

Open Markets

Trade Freedom88.3

Investment Freedom80.0

Financial Freedom80.0

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Quick Facts
  • Population:
    • 34.8 million
  • GDP (PPP):
    • $1.5 trillion
    • 1.8% growth
    • 1.2% 5-year compound annual growth
    • $42,734 per capita
  • Unemployment:
    • 7.3%
  • Inflation (CPI):
    • 1.5%
  • FDI Inflow:
    • $45.4 billion
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Canada’s economic freedom score is 80.2, making its economy the 6th freest in the 2014 Index. Its overall score is 0.8 point better than last year, reflecting improvements in investment freedom, the management of government spending, and monetary freedom. Canada continues to be the freest economy 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. Openness 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.

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Background

Prime Minister Stephen Harper governs with a solid Conservative Party majority in Parliament. The Liberal 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 Justin Trudeau, son of former Prime Minister Pierre Trudeau. Canada’s large and diverse land mass is reflected in a democratic 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.

Rule of LawView Methodology

Property Rights 90.0 Create a Graph using this measurement

Freedom From Corruption 87.7 Create a Graph using this measurement

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 system 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. Protection of intellectual property rights is consistent with world standards.

Limited GovernmentView Methodology

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.

Regulatory EfficiencyView Methodology

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 burdensome. The labor market remains relatively flexible, and labor costs are moderate. The government provides extensive energy and agricultural subsidies and controls virtually all prices for health care through a mandatory “single-payer” nationalized program.

Open MarketsView Methodology

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 services and remains dynamic. The six main banks continue to dominate the sector, although it has become easier for foreign banks to enter the market.

Country's Score Over Time

Bar Graph of Canada Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Canada to other economic country groups

Regional Ranking

rank country overall change
1Canada80.20.8
2United States75.5-0.5
3Mexico66.8-0.2


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