1. Canada Think Dynamic Think Competitive Think Bottom Line Think Canada!

2. Canada Canada: a Dynamic, Competitive Economy — Open for Global Business 2 Canada's economic fundamentals and relative cost advantages provide a first-rate business environment. Canada provides: Excellent economic fundamentals Report Card Overall government budget in surplus. Low inflation and low interest rates. Easy access to markets Geography and NAFTA provide easy access to the world's most prosperous market. A cost-competitive business environment Large stock of skilled workers; low start-up costs; competitive tax system (particularly for R&D); strong technological environment; positive business climate. An excellent place to live Superb overall quality of life.

3. Excellent economic fundamentals Easy access to markets A cost-competitive business environment An excellent place to live and work Excellent economic fundamentals Canada Provides: 3 Canada 3

4. Canada’s strong fiscal situation C Canada's fiscal situation has turned around dramatically: -In 1994, Canada’s deficit (as a percentage of GDP) was 6.7%, the third highest in the G-7. -However, by 1997, Canada became the first G-7 country to post a surplus in the 1990s, and is the only G-7 nation expected by the OECD to post two straight financial surpluses from 2002 to 2003. -Federal government spending (as a % of GDP) reached a 50-year low in the 2000-01 fiscal year, the key source of the Canadian fiscal turnaround. * Includes federal, provincial/state and local ** Projections Source: OECD Economic Outlook, June 2002 Total Government Surplus* The Institute for Management Development ranked Canada as the best fiscally managed country in the G-7 in 2000 Federal Budgetary Balance Public Accounts Basis Canada 4 Source: Finance Canada 0.0 -3.0 -6.0 % of GDP 1992-931993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-012001-02 Surplus Deficit + Federal Program Spending Public Accounts Basis 1993-94 1994-95 1995-96 1996-97 1997-981998-89 1999-00 2000-012001-02 2002-03 2003-04 10 12 14 16 % of GDP Projected 1994199519961997199819992000 2001 2002** 2003** 0 2 4 6 8 10 -2 -4 -6 -8 % of GDP

5. Canada A Strong Fiscal Surplus 5 Canada had the highest general government surplus as a percentage of GDP in the G-7 in 2001. The OECD expects Canada to be the only G-7 country with fiscal surpluses in 2002 and 2003. Total G-7 Government Fiscal Balance (% of GDP) 2001-2003 Source: OECD Economic Outlook, June 2002 2002 2001 2003 Canada France Germany Italy Japan U.K. U.S. 0 2 4 -2 -4 -6 -8 -10

6. Canada Low Inflation and Low Interest Rates 6 Canada’s targeted inflation rate is locked between 1% to 3%. -Over the past five years, Canadian inflation averaged 1.9% Sources: Statistics Canada and the Federal Reserve Bank of St. Louis Inflation Long-Term Interest Rates 1994 1995 1996 1997 1998 1999 20002001 0 1 2 3 4 Year-Over-Year % Change Canada's excellent fiscal situation and low inflation are reflected in low domestic interest rates. Source: Bank of Canada, Government long-term bond. U.S. Treasury, Constant Maturity long-term bond. Last data points plotted: Canada – August 2, 2002; U.S. – August 12, 2002 199419951996199719981999200020012002 3 5 8 10 %

7. Canada A Growing Domestic Economy 7 Canada’s GDP grew at an annual rate of 6.0% in the first quarter, similar to U.S. growth but much stronger than growth in other G-7 countries. -The OECD and IMF both forecast Canada to lead the G-7 in economic growth in 2002 and 2003. Real GDP Growth Projections 2002-2003 (%) 2003 2002 2.5 1.4 2.0 2.3 1.4 0.9 3.6 3.0 2.8 3.4 2.9 2.7 0.8 U.S. Canada France Italy Germany U.K. Japan 0 2 4 2003 2002 3.2 1.4 1.9 2.5 1.5 0.7 -0.7 4.0 3.0 2.8 3.5 2.8 2.5 0.3 U.S. Canada France Italy Germany U.K. Japan 0 2 4 Source: International Monetary Fund, May 2002 Source: OECD Economic Outlook, June 2002

8. Easy access to markets Canada Canada Provides: 8 Easy access to markets A cost-competitive business environment An excellent place to live Excellent economic fundamentals

9. Canada Streamlined Border Flows 9 Since the enactment of the North American Free Trade Agreement (NAFTA) in 1994, Canada provides long-term assured access to the North American market — nearly 400 million people with a combined GDP of over $9.4 trillion ($U.S.). In addition to eliminating tariffs, NAFTA provides procedures for: -border facilitation; -movement of personnel; -investment and intellectual property protection; and -product certification. The North American market is serviced through a well integrated transportation system which is among world’s best. - Automated permit ports, transponder identification systems and joint processing centres are being tested and deployed. Source: Transport Canada and Statistics Canada, 2001 Annual Transborder Crossings - Total Number of Trucks and Canada-US Air Passengers Entering Canada Truck Air 808284868890929496982000 0 5 10 15 20

10. Canada Smarter Borders 10 Efficient border crossing was restored within a week of the tragic events of Sept 11th –today, border wait times average less than 10 minutes In December, Canada and the USA signed a declaration to build a Smart Border for the 21st Century to accommodate the growth in trade and commerce –initiatives focus on improving existing border processes through the use of new technologies and infrastructure The December Budget also allocated $1.6 billion over the next five years for border initiatives

11. Canada …and Short Distances to Markets 11 Almost half of the U.S. population lives within a 10 hour drive of Toronto, and over 60 percent within a two hour flight. Business travel between Canada and the U.S. has increased considerably since the inception of the “Open Skies*” Agreement (February, 1995) Direct air service between major cities in Canada and the U.S. has nearly doubled in 6 years. *Under “Open Skies” Canadian Air Carriers gained unlimited rights to establish routes from any point in Canada to any point in the United States. Similarly, U.S. carriers also gained unlimited access to the Canadian market (with a phase in period for up to three years)

12. 199519961997199819992000 0 100 200 300 400 500 600 700 800 $ Billions Canada - U.S. Trade $700 Billion Source: Statistics Canada Canada Canada Is by Far the Largest U.S. Trading Partner 12 Canada and the U.S. have the world’s largest trade partnership, with two-way trade amounting to $700 billion in 2000. In fact, this averages to more than $1.3 million dollars a minute in trade. Between 1995 and 2000, trade between Canada and the U.S. grew at a compound average annual rate of 10.4%. The U.S. trades more with Canada than with any other country - the U.S. trades more with Canada than with all of the countries of the E.U. combined! Canada 20.3% Mexico 12.4% Japan 10.6% China 5.8% Germany 4.4% All Others 46.5% Distribution of U.S. Trade* — 2000 * Merchandise trade Source: World Trade Atlas

13. Canada Canada Welcomes Foreign Investment Source: Statistics Canada 2001 13 Foreign direct investment in Canada has more than doubled since 1990. Increasingly more investment goes to knowledge-based industries in high-tech manufacturing and services sectors. The U.S. is the dominant source of foreign capital. - In 2001, the U.S. share of foreign direct investment (FDI) in Canada was 67%. Machinery & Transportation $321 Billion Distribution of Foreign Direct Investment by Industry 1990 $131 Billion Distribution of Foreign Direct Investment by Region/Country Source: Statistics Canada 2001

14. $340 Billion Canada 14 19901991199219931994199519961997199819992000 0 50 100 150 200 250 300 350 $ Billions Canada - U.S. Direct Investment Stock United States 57.4% U.K. 7.5% France 5.5% Netherlands3.5% Barbados 3.3% Japan 2.4% All Others 20.4% Source: Statistics Canada Distribution of Canadian Total Direct Investment Stock Canada and the U.S. have one of the world’s largest direct investment partnerships, with the stock of investment between the two countries totaling $340 billion in 2000. Between 1990 and 2000, U.S. foreign direct investment in Canada grew at an average annual rate of 6.9%. Over this period, Canadian direct investment abroad grew at an average annual rate of 8.2%. The United States is Canada’s Largest Source of FDI

15. A cost-competitive business environment Canada Canada Provides: 15 Easy access to markets A cost-competitive business environment An excellent place to live and work Excellent economic fundamentals

16. Superior Quality Workforce Canada The overall skill level of Canada's workforce ranks high among competing countries. According to the World Competitiveness Yearbook, Canada has the highest percentage of individuals achieving at least college or university education. * Percentage of the population that has attained at least tertiary education among 49 countries considered in the World Competitiveness Yearbook, 2002. 16

17. An Excellent Post Secondary System Canada 1998 U.S. Gourman report scored 10 Canadian electrical engineering programs in the top 22, and 18 in the top 40 Canada’s 67 universities and colleges produce more than 25,000 graduates per year in math, engineering and pure and applied sciences 17 Institution Score U.S. Cdn. Rank Rank M.I.T.4.92 1 Stanford4.91 2 Berkeley4.88 3 Illinois4.86 4 Toronto4.86 1 UCLA4.82 5 McGill4.82 2 Cornell4.81 6 U.B.C.4.81 3 McMaster4.80 4 Purdue4.79 7 Southern California4.77 8 Princeton4.76 9 Michigan4.7510 Carnegie Mellon4.7411 Polytechnic-Brooklyn4.7312 Queen’s4.72 5 Alberta4.72 6 Calgary4.71 7 Polytechnique, Mtl.4.70 8 Saskatchewan4.70 9 Manitoba4.70 10 RANKING OF ELECTRICAL ENGINEERING UNIVERSITY PROGRAMS

18. Canada Skilled Management 18 * Standing among 75 countries. Index based on the availability of Management education in first-class business schools. Source: Global Competitiveness Report, 2001-2002 Management Education* World Rank U.S. France Canada U.K Germany Japan Italy Index 1st 2nd 4th 6th 21st 31st 49th Canada ranks third among the G-7 and fourth overall in a 75-country study of locally available Management education in first-class business schools. - Eight Canadian business schools are ranked among the top 100 Management Schools in the world according to a January 2001 survey by the Financial Times (UK).

19. Canada Low Labour Costs Occupational Wages — Knowledge Workers, 1999 * Canadian data have been converted to full-year assuming a 52-week work year. ** Purchasing power parity for 1999 *** date for computer programmers based on average for 1997, 1998, 1999 Source: IC calculations based on Statistics Canada Labour Force Survey and U.S. Bureau of Labour Statistics Occupational Employment and Wage Estimates 19 According to the U.S. Bureau of Labor Statistics, labour costs in Canadian manufacturing (wage and non-wage) are the lowest in the G-7. Occupational wages are also lower in Canada for knowledge workers. * Figures are for 1999. Source: U.S. Bureau of Labor Statistics Life Science Professionals Physical Science Professionals Computer Programmers*** Electrical and Electronic Engineers Chief Executives $49,469 $52,423 $54,960 $62,309 $101,240 Full-time, full-year wages* ($U.S. PPP**) $42,097 $46,348 $36,467 $48,945 $59,608 U.S.=100

20. Canada Plenty of Natural Resources * Measured in terms of thousands U.S.$ per capita. Standing among 92 countries. Source: World Bank, 1997 20 Canada is extremely well endowed with natural resources. Canada ranks 3 rd in the world in natural resource endowments, well ahead of other G-7 countries. Natural Resource Endowments — World Rank* Canada U.S. France U.K. Germany Italy Japan 3rd 8th 20th 45th 50th 59th 72nd Index * Includes: crude fertilizers and crude minerals; metalliferous ores and metal scrap; iron and steel; and non-ferrous metals. Source: World Competitiveness Yearbook, 2002. Canada is the only G-7 country with a per capita trade surplus in non-energy raw materials.

21. Canada 21 A Tax Advantage for Firms to Expand in Canada Corporate Income Tax Rates including capital tax equivalents 44.9% 41.5% 38.6% 35.6% 34.6% 40.0% 46.6% 2000 2001 2002 20032004 2005 Source: Finance Canada, December 2001 Canadian locations compare well internationally in terms of statutory corporate income tax rates. The federal government and some provinces have announced sharp cuts in corporate taxes, to take effect over a five- year period. The Economic Statement and Budget Update accelerated the pace of this tax relief. By 2005, firms in Canada will have a 5.0% corporate income tax rate advantage over U.S. firms (including capital tax).

22. Canada Low Employee Benefits 22 Among the G-7, Canada has the lowest overall labour costs, including benefits. Lower medical insurance premiums are an important reason for this. Employee Benefits* as a % of wages G-7 Comparison, Average for 12 operations Source: KPMG Management Consulting, 2002 0 20 40 60 80 Germany France Italy Japan U.K U.S.A Canada Other BenefitsStatutory

23. Canada Quality Health Care at Low Cost 23 Canada's health care system is among the best and the cheapest in the industrialized countries: -Employer-paid health benefits as a percentage of workers' gross pay in Canada are about 22 percent of that in the U.S. (2.1% compared with 9.6%). 2.1 9.6 % of Gross Annual Payroll 0.6 0.7 0.1 8.0 0.7 0.5 0.4 Hospital, surgical, medical and major medical insurance premiums* Short term disability, sickness or accident insurance and long term disability or wage continuation Dental insurance premiums Other (vision care, physical and mental fitness, etc.) Employer-Sponsored Health Benefits Canada and the U.S. * U.S. value includes payments for retired employees Source: Employee Benefits, 1995, prepared by the Research Centre, Economic Policy Division, The U.S. Chamber of Commerce and KMPG, Employee Benefits Cost Survey, 1996. Adapted from KPMG report on Corporate Taxation and Employee Benefit Cost Guide for Large Service Firms, prepared for the ICT Branch, Industry Canada, March 2000 Total

24. Canada Low R&D Costs 24 Canada offers the most favorable tax treatment for R&D among the G-7: - Canada’s combined federal and provincial tax credits reduce the after-tax cost of $100 of R&D expenditures to as low as $44. - In Canada, eligible costs include: capital equipment, overhead, process R&D, salaries, and materials. These tax-based incentives permit firms to significantly reduce R&D costs through direct investment or sub-contracting in Canada. Relative Competitiveness of R&D Tax System Canada 0.70 Korea U.S. France U.-K. Japan Mexico Italy Germany 0.88 0.89 0.91 0.92 0.97 1.00 1.01 1.02 1.03 1.05 Australia Sweden The B-index represents a ratio of the after-tax cost of a $1 expenditure on R&D divided by 1 less the corporate tax rate. A lower B-index indicates a more competitive R&D tax system Source: Conference Board of Canada, November 1999.

25. Canada Low Energy Costs and Rates 25 Canada has abundant oil, gas, coal and hydro-electric resources. Electricity costs for industrial users are significantly lower in Canada. Source: KPMG Management Consulting, 2002 Average Electricity Rates Canada France U.K. Germany U.S. Italy Japan G-7 Comparison Average Electricity Costs Canada France U.K. Germany U.S. Italy Japan G-7 Comparison 050100150200250300350400 02468101214 US cents per kWh (12 operations) $US (12 operations)

26. Canada Low Costs for Construction, Land, Office Lease Source: KPMG Management Consulting, 2002 26 Construction Costs Land Costs Canadian office lease costs are highly attractive. Lease costs include office space plus operating, utility, tax and insurance costs. Office Lease Costs Italy Canada France U.S. U.K. Germany Japan G-7 Comparison, Index: U.S. = 100 France U.S. Canada Italy U.K. Germany Japan G-7 Comparison, Index: U.S. = 100 Italy France Germany Canada U.K. U.S. Japan G-7 Comparison, Index: U.S. = 100 +1828 050100150200250300350 0100200300400500 050100150200

27. Canada First-Class Technological Infrastructure 27 Canada's technological infrastructure is second only to the U.S. among the G-7 — we rank above or very close to the U.S. in terms of: -internet users and internet hosts -computers per capita Building a universal, competitive, leading edge "Information Highway" is a government priority. * Standing among 49 countries. Index based on 20 characteristics including investment in telecommunications, computers in use, computer power, internet connections, number of telephone lines, cost of telephone calls and use of robotics. Source: World Competitiveness Yearbook, 2002 Technological Infrastructure* World Rank 1st 5th 12th 22nd 17th 32nd 25th Canada U.S. U.K. Japan Germany Italy France Index

28. Canada First in Internet and Wireless Affordability 28 Canada ranks first among the G-7 in terms of wireless communications costs and second in terms of internet access charges. Internet Access Charges* – 2000 93.10 59.83 56.16 49.22 41.72 35.83 35.40 France U.K. Germany Japan Italy U.S. Canada U.S. $ Based on PPPs Peak Rate 40 hrs. Online/Month * PSTN fixed charges include monthly rental fee and additional monthly charges related to discount plans, if applicable. Includes 40 one-hour calls. In France, ISP and PSTN usage charges are bundled and included under the ISP. Source: OECD, http://www.oecd.org/dsti/sti/it/com/ 0.36 0.32 0.31 0.29 0.18 0.09 Boston Paris London Berlin TokyoRome Toronto Wireless Communication Costs Price per minute, 1999 in U.S. $ PPP Source: Yankee Group, Wireless/Mobile Communications Global Report, Volume 3, No. 16, May 1999

29. Canada First in Telephone Affordability 29 1566 1443 1215 1076 1067 1177 745 Italy U.S. Germany France U.K. Japan Canada Annual Business Telephone Charges U.S. $ PPP Source: OECD Communications Outlook 2001 466 440 433 360 355 349 286 Italy France Germany U.K. Japan U.S. Canada Annual Residential Telephone Charges U.S. $ PPP Source: OECD Communications Outlook 2001 Business telephone charges are lower in Canada than in any other G-7 country.

30. Canada Sound Financial Institutions 30 According to Moody’s Financial Strength ratings, Canadian Banks rank 1 st among the G-7 in terms of their intrinsic credit worthiness. EE+DD+CC+B Japan France Italy Germany U.K. U.S. Canada Average Bank Financial-Strength Rating B= strong intrinsic financial strength C= good D= adequate E= very weak Source: The Economist, March 2000

31. Canada 31 Positive Business Climate Canada understands the importance of its business community and has created an environment to encourage its success. Source: The Economist (EIU), August 24th, 2001

32. Canada Solid Microeconomic Policies 32 According to The Economist, Canada ranks 2nd among 21 countries in a Lehman Brothers study pertaining to the effectiveness of microeconomic or structural policies. These rankings are based on three micro-policy categories: policies that increase an economy’s long-term potential growth rate. For example, spending on education and R&D. policies that affect labour market performance or reduce the lowest rate of unemployment at which inflation is stable (NAIRU). policies that increase product market competition. Economic Health* Index of structural policies, 0=worst, 10=best Source: The Economist, March 17th, 2001 *Based on a study of 21 countries.

33. Canada Less Paperwork for New Businesses 33 Canada makes it easier to set up a new business, with less paperwork than any other country. Canada is the most efficient place to pull together worldwide research or production teams. Total Number of Business Start-up Procedures* Source: The World Bank and Harvard University, taken from The Globe and Mail, November 14, 2000 *Procedures divided into five major categories: Safety & Health, Environment, Taxes, Labour, and Screening.

34. Canada Forward-Looking Framework Policies 34 The economic policies of the government of Canada are focused on making Canada a world leader in the global knowledge-based economy of the 21st century. Commitments include: -Making Canada the most connected Government to its citizens by 2004. -Making high-speed broadband access available to Canadians in all communities by 2005. -Becoming one of the top five countries for research and development by 2010. -Shaping a "National System of Innovation“; and -Providing marketplace frameworks/services benchmarked against the best in the world. Government Policies/Programs Aimed at Building the Knowledge Infrastructure  21st Century Chairs for Research Excellence  Networks of Centres of Excellence  Canadian Foundation for Innovation  Canadian Institute for Health Research  Telecommunications Policy  Technology Partnerships Canada  Granting councils (NSERC, MRC, SSHRC)  Communications Research Centre  Industrial Research Assistance Programme (NRC)  Co-operative sectoral research programs (PAPRICAN)  Canadian Network for the Advancement of Research, Industry and Education (CANARIE)  SR&ED (Scientific Research & Experimental Development) tax credit for private sector research and development  Leading edge information systems: Strategis; CISTI (NRC); Cdn. Technology Network; Sector Competitive Frameworks

35. Canada Provides: Easy access to markets A cost-competitive business environment An excellent place to live Excellent economic fundamentals Canada 35

36. Canada …and a Safe and Just Society 36 Canada tops the G-7 as a safe place to live and conduct business. Canada also ranks well in providing equal opportunities for individuals. * Race, gender, family background does not pose a handicap for competitiveness. Rank among 49 countries considered in the 2002 World Competitiveness Yearbook Source: IMD * Confidence that person and property is protected. Rank among 49 countries considered in the 2002 World Competitiveness Yearbook. Source: IMD

37. Canada Offers Much Canada 37 Canada's economic fundamentals are excellent — government policies are geared toward competitiveness. Canada provides assured access to the world's richest economy, in addition to having a large and growing domestic market of its own. Canada provides a cost-competitive and future-oriented environment for business: -quality, productive workers; -a competitive tax system; -prime locations for R&D activities; -abundant energy at low prices; and -an excellent infrastructure. Canada is an outstanding place to live, invest and do business.