OTTAWA - Canada just overtook the United States as the most economically free country in North America, according to the 2011 Index of Economic Freedom released by the Heritage Foundation and The Wall Street Journal. Canada has leapt ahead to become the 6th most economically free nation on Earth, beating out our American cousins who fell hard to 9th place. But don't get too excited yet. According to concurrent research by the Fraser Institute in its 2011 report on Economic Freedom in North America, Canadian success may not be attributable to changes in domestic public policy. Even despite a national gain, new data gleaned from Canada's provinces paint a picture of a nation that has a long way to go yet to maximize the productive power of a truly free market.

Economic freedom, according to the Fraser Institute, can be defined as such:

"Individuals have economic freedom when (a) property they acquire without the use of force, fraud, or theft is protected from physical invasions by others and (b) they are free to use, exchange, or give their property as long as their actions do not violate the identical rights of others. Thus, an index of economic freedom should measure the extent to which rightly acquired property is protected and individuals are engaged in voluntary transactions."

If the Institute's research is any indication, measuring economic freedom reveals the productive power unleashed by a free market economy. The Institute's analysis reveals that an increase of one point of economic freedom in a Canadian province will increase its per-capita GDP by $7235. From this conclusion there is clear motivation for legislators to closely consider the importance of enhancing, and not stymying, economic freedom.

Now, I usually hate to start a column on a bad note. The gains that Canada has made, in both of these reports, is something to be proud of. In particular, British Columbia and Saskatchewan have leapt ahead and outshine their fellow provinces in gains made. But Canada's gains also serve as a notice of caution. In its analysis, the Institute notes that most of Canada's progress is not based on domestic improvement. The reason Canadian provinces have been doing so well is that, fundamentally, the Fraser Institute's rankings are comparative. In lieu of any genuine improvement in Canadian provinces, instead US states have been falling behind.

It should be taken as a missed opportunity that the economic problems posed by the recession were not solved using methods to widen free market principles. While this seems to be the case at the national level, provincial governments have fallen behind in this regard. Reducing economic freedom slightly less than most US states may be something, but it is hardly anything to be proud of.

An area where particular improvement is needed is labour market freedom. Canadian provinces would have done much better relative to their US counterparts had their labour market scores been higher. Canadian labour laws in all provinces are terribly inflexible, allowing for little worker's choice. Some labour groups are given special favour, by law, over others. Worse still, Canadian unionization rates remain much higher than US unionization rates, presenting a serious handicap to innovation and growth. The size of the public sector in all provinces also remains abnormally high.

While the report highlights challenges, it also highlights ways forward. We are fortunate in Canada to live on the most economically free continent on Earth. On the other hand, we still have a long way to go. While provinces must improve in all areas of economic freedom, clear priorities do exist, particularly in the area of labour market freedom.

If anything, this report highlights for Canadians the overwhelming importance of enhancing economic freedom in the context of domestic public policy. With the ongoing difficulties of an economic crisis, we must expand market opportunities for Canadians. We can only do that through a significant enhancement of economic freedom.