Canada, the United States and Australia provide the lowest-cost locations for business among established industrialized countries, according to a survey by KPMG.
The survey articulates the erosion of Canada's longtime advantage against the U.S. because of the strength of the loonie.
"Business costs in these three countries are virtually equivalent, with less than one per cent separating these countries," the international consultancy's study says.
The cost advantage of Canada and Australia declined in the past year while the United States improved to third from seventh in the 10-country survey.
"Currency change is a central theme," said Glenn Mair of MMK Consulting, which partnered with KPMG in the study.
The result was "an effective dead heat" in terms of costs - though all three countries were about one-quarter more expensive than Mexico, which was added to the study for the first time and was the cost leader among the countries scrutinized.
Within Canada, Vancouver still holds the No. 1 spot as the most costly city. Previously, Toronto was No. 2, but has been supplanted by Calgary, followed by Chilliwack, B.C.
Among major Canadian cities, Montreal and Halifax have the greatest cost advantage relative to comparable U.S. cities.
The study measured 27 significant cost components that are most likely to vary by location, including labour, taxes, real estate, and utilities, as they are applied to 17 business operations, over a 10-year planning horizon.
The study also compared data on a variety of non-cost competitiveness factors. The six-month research program covered 136 cities in Australia, Canada, France, Germany, Italy, Japan, Mexico, the Netherlands, the United Kingdom and the U.S.
The survey noted that while Canada has lost its previous cost advantage over the U.S., it has gained ground against Europe.
And it says Canada retains a strong position in so-called non-cost components of business-location decisions, which "may be equally or more significant than cost factors."
It found Canada ranks first in education outcome, based on international testing of high school science skills, while the United States spends the most on schooling but ranks only fifth in those tests.
Canada's overall cost index, which bottomed out at 85.5 per cent of U.S. levels in 2002, is now 99.4 per cent of the average American level, compared with 79.5 per cent for Mexico and 100.2 per cent in Australia.
Among large cities, Montreal is 1.5 per cent below the American average while Toronto is 1.5 per cent above. Vancouver is 4.2 per cent over the U.S. level - though "relatively in line with San Diego, Denver and Seattle," Mair told a conference call.
New York City is 9.2 per cent costlier for business than the U.S. average, while the expense premium is 29.3 per cent in London, 7.1 per cent in Paris, 21 per cent in Frankfurt, 2.7 per cent in Sydney, Australia, and 14.8 per cent in Yokohama, Japan.
France is the least costly big European country, about 3.5 per cent above the United States, with its position improved by recent business tax breaks.
Britain and the Netherlands were next, with costs about seven per cent above U.S. levels.
