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Calling for a concerted effort by exporting firms and the various levels of government, L. Jacques Ménard, President of BMO Financial Group, Quebec, and Chairman of BMO Nesbitt Burns, today described productivity growth as key to maintaining Canada’s exceptional performance in the export field.

“We already export nearly 43% of our GDP, the highest percentage among the major industrialized countries,” Mr. Ménard said. “Maintaining this exceptional performance poses significant individual and collective challenges for us, in particular as companies the world over tap into our markets and the U.S. economy exhibits some worrisome signs, especially in the area of jobs.”

Speaking to members of Quebec Manufacturers and Exporters, Mr. Ménard discussed the conclusions of a study prepared by BMO Financial Group experts regarding the economic integration of Canada and the United States, the dominant forces underpinning the integration and its main impacts on the Canadian economy.

According to the study, the integration of the two countries’ economies has accelerated since the free trade agreement was signed. Exports to the United States now constitute 37% of our GDP, double what they were a decade ago. Even more significantly, the integration in certain industries has reached extremely high levels, indicating a better allocation of resources among companies on both sides of the border.

However, according to Mr. Ménard, Canadian manufacturers will have to overcome significant challenges if they are to maintain and enhance their ability to compete in North America and worldwide, particularly as the rising Canadian dollar highlights our shortcomings in the area of productivity. According to the latest OECD study on the Canadian economy, the approximately 15% gap between the real incomes of Americans and Canadians is due to our low productivity rate. “A dollar that stabilizes around 73 to 74 U.S. cents, as BMO Financial Group is forecasting for next year, will cause us considerable pain if we are not able to compensate for it with significant gains in productivity,” Mr. Ménard said.

“In Quebec, the challenges concern everyone because our productivity rate is held down by our extremely restrictive labour laws, a punishing burden of red tape for companies and significant underinvestment, in particular in training and new production equipment.”

As an example, Mr. Ménard mentioned Article 45 of the Quebec Labour Code, whose effect on subcontracting is especially disadvantageous for our companies, all the more so in that Quebec has a very high unionization rate, namely 40.4% versus 28.1% in Ontario.

Employee training and investment in production facilities also rank high among the challenges facing our exporting firms. Canada invests less in modernizing its manufacturing equipment than do the United States and several other industrialized countries. In some industries the gap is as great as 30% according to the OECD. With respect to labour-force training, one exporting firm in two invests 1% or less. Fortunately, as the President of BMO Financial Group, Quebec, noted, surveys of manufacturing and exporting firms reveal that one in three plans to invest more in training and in modernizing their production facilities in the coming years.

Mr. Ménard concluded his speech by reminding the manufacturers and exporters of the importance of working closely with financial partners that are well established in the United States in the very locations where their companies do business. In this regard, BMO Financial Group is the largest Canadian financial group active in the United States, where some 6,000 of its 34,000 employees work in 22 of the largest markets in the East, Midwest, South and West.

Founded in 1817, BMO Financial Group  (NYSE, TSX: BMO) is one of the largest financial services providers in North America. With average assets of $268 billion as at July 31, 2003 and  more than 34,000 employees, BMO provides a broad range of retail banking, wealth management and investment banking products and solutions. BMO serves Canadian clients through its Canadian retail arm BMO Bank of Montreal and  BMO Nesbitt Burns, one of Canada's largest full-service investment firms. In the United States, clients are served through Chicago-based Harris Bank, major midwest financial services organization which also has wealth management offices and branches across the U.S., and Harris Nesbitt, a leading mid-market investment bank.

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