growth across all canadian regions. canada is not the only economy that has coped better with recent shocks. to varying degrees, other countries have as well - which partly explains why world economic growth has held up better this time around. clearly, many national economies have been able to respond more flexibly than in the past to unexpected developments. and this has helped to mitigate the impact of shocks, advance the adjustment, and support continued strong economic performance. this increased flexibility has been the product of economic policies and structural reforms that many countries, including canada, have undertaken over the years to strengthen their economies and make them more resilient to shocks. but this does not mean that we have nothing to worry about as we look ahead. we live in an era of rapid change, and we operate in a global environment that is constantly shifting. uncertainty, risks, and shocks are a constant feature of the economic landscape. for canada, this is particularly relevant given how open our economy is to international trade and capital flows. at the bank of canada, we believe that world economic prospects remain favourable as we look out over the medium term. but while this reflects our central expectation of how the world will unfold, there are important upside and downside risks around this scenario. on the downside, persistent global imbalances immediately come to mind, as does the lack of success in the doha round of trade talks. these risks could result in significantly slower global economic growth. at the same time, we cannot rule out the possibility of stronger growth, especially in asia. of course, we know that events can turn out very differently from our expectations today. so we must plan accordingly. in terms of potential risks and sudden developments, the best approach is to constantly ask ourselves what steps we can take to make our economy and domestic markets more flexible and thus better able to adapt. and we need to recognize that the pursuit of such an approach is a shared responsibility among firms, workers, and policy - makers. firms and their workers need to be able to respond quickly to technological advances and to various shocks that require significant changes in the way they conduct business, the type of goods and services they produce, and the markets they choose to develop. a well - functioning market - based economy and clear relative price signals are critical in this context. at the same time, policy - makers need to be wary of barriers to adjustment, such as labour regulations that inhibit the movement of workers from one type of job, or from one sector

regulations and standards by early 2009. another example is the agreement, earlier this year, between ontario and quebec to allow some further, albeit limited, movement of construction workers between the two provinces. earlier this month, two temporary " foreign - worker units " started operating in vancouver and calgary to facilitate the entry of skilled foreign workers into canada. and just last week, the committee of ministers responsible for internal trade agreed on an action plan that embraces efforts across a range of internal trade issues. all this is encouraging because considerably more needs to be done to enhance the flexibility and functioning of our internal markets from coast to coast. business regulations and standards, including those for the financial sector, need to be harmonized across canada. dispute resolution and enforcement under the ait need to be strengthened. and, to make our labour markets more flexible, trades and professional designations should be recognized and fully transferable across the country. based on a recent survey, more than one - third of all workers and about half of all foreign - trained workers still have problems getting their credentials recognized across canadian jurisdictions. 1 how flexible is the canadian economy? the good news is that, despite the challenges that we still face, overall, our economy fares well in international comparisons of flexibility and adaptability. in a 2005 study, the international monetary fund ( imf ) concluded that " canada is characterized by a relatively high degree of flexibility, of a magnitude comparable if not larger than many other industrialized countries, with the likely exception of the united states. " 2 for purposes of this study, the imf looked at different indicators of economic flexibility – with uniform results. for example, the reallocation of production resources across sectors, in response to changing economic conditions over the 1980 - 2000 period, was quite high in canada compared with other major industrialized countries ( except the united states ) - indicating a high degree of economic flexibility. the imf also compared rates of firm turnover, and of job creation and destruction, across countries. both of these measures were relatively high for canada - again suggesting a high degree of flexibility. other measures of the way in which our economy responds to macroeconomic disturbances also point in the same direction. as of the first quarter of 2006, interprovincial migration has shown a marked increase over the past two years to 333, 000 individuals, representing over one per cent of the total canadian population. not surprisingly, the two provinces with a net positive inflow over this period are alberta and british columbia. and a