LETTER

As CANADA'S MINISTER OF INTERNATIONAL TRADE, I can tell you with confidence that Canada means business: We are ready for global investment. Canada's stable and competitive financial sector, world-class communications and transportation infrastructure, and abundance of energy resources are just a few

Recently, the Economic Intelligence Unit ranked Canada first in its global business rankings, finding Canada the best country in the world in which to conduct business over the next five years. Elimination of the deficit, debt reduction, low-cost R&D, highly skilled employees, technical expertise, and proximity to the U.S. market all contribute to Canada's excellent business environment.

Recent reforms to our tax regime have also made Canada a very attractive place for starting and growing a business. As of 2004, the average federal-provincial corporate tax rate, including capital taxes, is 2.3 percentage points lower than the average U.S. federal-state rate. By 2008, the federal capital tax will be eliminated. And, Canada provides a 20 percent tax credit for all R&D expenditures, compared to the U.S. 20 percent credit for incremental R&D only.

In addition to offering generous R&D tax credits, we are doubling investment in research and development, with the goal of being among the top five countries in R&D performance by 2010. Since 1999, the government of Canada has increased annual funding for research from $400 million to $2.1 billion.

We have also committed to investing in our people, our greatest source of creativity and economic strength. Canada leads the world in the percentage of citizens with a university or college education. Surveys also show that Canada has North America's most impressive record for workplace stability and company loyalty.

All of this comes with a surprisingly low price tag. In 2004, KPMG conducted a study of comparative business costs in the major industrialized countries of North America and Europe, and Japan. For the fifth consecutive time, Canada emerged as the most cost-competitive country.

Whether you're considering your own Canadian operation, working with a Canadian partner, or gaining a Canadian base for access to North American markets, we invite you to read this issue of Location Canada and discover why Canada is a low-cost, extremely competitive place to do business.