Studies show Canada's manufacturing woes aren't easily solved

Time for the campaign to get serious on economic policy

Is Canada is doing enough to hold its own as manufacturing jobs are shed around the world?



If there’s one notion about Stephen Harper’s economic policy that’s taken firm hold as conventional wisdom, it’s that he’s been monomaniacal about oil. His rivals play off it on the campaign trail, with the NDP’s Thomas Mulcair bemoaning billions in subsidies to the fossil fuel sector and Liberal Leader Justin Trudeau saying Harper “bet everything on the price of oil.”

That’s looked like an awfully bad bet since the oil-price plunge of 2014, although the winnings sure were rolling in for a few years there. Harper undeniably came into office in 2006 talking up Canada’s future as an “energy superpower.” But has his economic strategy amounted to wagering all the federal policy chips on the black of Alberta crude, while neglecting, as his critics particularly charge, the Ontario manufacturing sector?

If oil is all that really matters in the economic story of the Harper years, I’m not sure how to fit certain staggering sums into the narrative. He presided over the creation of a $950-million fund to subsidize auto industry innovation, plus another $100 million for the sector’s suppliers. A cool billion went into something called the Strategic Aerospace and Defence Initiative. The Tories even set up a regional development agency for southern Ontario—paralleling those long-established distributors of largess in Atlantic Canada and the West—with $920 million to dole out, including $200 for “advanced manufacturing.”

The wisdom of any or all of this is wide open for debate, but it doesn’t support the notion that oil has monopolized the Tories’ attention. Still, the opposition parties have some damning stats to toss around, starting with the frequently cited one that 400,000 good Canadian manufacturing jobs have been lost.

The number isn’t wrong. Total manufacturing employment declined in Canada to 1.7 million in 2014 from 2.1 million in 2006. It’s troubling, but not easily traceable to Harper’s policies. When he took over in 2006, his government inherited a trend line. According to Statistics Canada, manufacturing employment in Canada grew in the late 1990s, then stagnated from 2001 to 2004, before a “clear downward trend” began around 2005.

Yet laying blame at the feet of the former Liberal government doesn’t work, either. Manufacturing employment is declining in many countries. An Organization for Economic Cooperation and Development report a few years ago concluded that “a key cause of the underlying fall in manufacturing employment everywhere is rapid productivity growth, whether by restructuring inefficient plants or deploying skills, knowledge, technology and new processes to boost efficiency.”

So the fair question is whether Canada is doing enough to hold its own as manufacturing jobs are shed around the world. Western University’s Lawrence National Centre for Policy and Management conducted a study for which executives at export-oriented firms in agri-foods, auto parts and diversified manufacturing were interviewed in depth about their situation in Canada. They saw a lot to like about the policy environment here.

“Canada was identified as a best-practice jurisdiction,” the report, called The Future of Canadian Manufacturing: Learning From Leading Firms, “because of its low corporate tax rates, research and development tax credits, accelerated capital cost allowance and duty-free imports of capital equipment. Canada received high marks for its high-quality labour force and its immigration system that has historically attracted skilled and industrious workers.”

That makes the situation sound great. It’s not, though. The Conference Board of Canada released a study just last week (reported here by my colleague Chris Sorensen) ranking Canada a lacklustre ninth out of 16 comparable developed countries on innovation. “Insulation from competition, high resource prices, generally good trade with the U.S., and other conditions have meant that Canadian businesses have not had to innovate as much as businesses in other countries in order to be profitable,” the board found.

That sense of a troubling complacency among Canadian business owners turns up again and again in research into Canada’s unimpressive overall productivity. Bill Currie, vice-chairman and Americas managing director at the professional services giant Deloitte, which has studied the problem, says governments can’t be faulted on any fundamental level. “Other than literally going out and buying machinery and equipment for Canadian businesses, they’ve certainly made it attractive for Canadian business, and business hasn’t really stood up,” Currie says.

So the problem of Canadian manufacturing seems to amount to a mix of a long-term decline in jobs globally and an indigenous lack of risk-taking verve among Canada’s business owners. It’s hard to see how the ideas proposed so far on the campaign trail directly address these deep challenges. For instance, all three parties emphasize infrastructure (with Trudeau even saying it’s worth going into deficit to pay for public works). That might be sound policy in its own right, but infrastructure doesn’t pop up in the reports I’ve read as the core concern when it comes to lacklustre Canadian competitiveness.

The experts I have asked about this don’t propose any convenient silver bullets. Still, Paul Boothe, director of Western’s Lawrence Centre, points to some intriguing ongoing research he’s overseeing into Ontario’s manufacturing sector, which strongly suggests Canada could be making it far easier for foreign companies to sort out the wide range of federal and provincial programs and policies that might lure their investments.

Boothe admires ProMexico, the Mexican government’s export industry promotion agency, which he says offers “one-stop shopping for investment in Mexico.” By comparison, he says a company looking at setting up a plant in Ontario has to navigate an often confusing array of federal and provincial departments and agencies, assessing everything from what tax breaks and subsidies are on offer, to what potential workers and sites might be available.

And Boothe says it’s a myth that Mexico’s main edge comes from cheaper labour and bigger handouts. Indeed, he said other jurisdictions, notably Hong Kong and Utah, also offer more streamlined entry points for investors than Canada does—without relying at all on the typical cost advantages of a developing economy. “The first thing they have that we don’t have is a really clear strategy that’s based on a great understanding of what their strengths are,” Booth says. “They don’t sit and wait. They identify firms they want to partner with and they go after them.”

That sounds like a starting point for a strategy that might make a difference, at least when it comes to attracting foreign manufacturing investment. But, as Boothe points out, any serious move in that direction would demand seamless co-operation between Ottawa and the provinces—not historically a source of Canadian competitive advantage.

Proposing an invitingly simplified way for investors to find out about Canada’s advantages doesn’t have quite the same ring as a potential campaign message, as does promising billions for new construction projects or selective tax cuts. Or suggesting all that’s needed is a prime minister who cares about something beyond his home province’s oil business.

Elections tend bring out dumbed-down descriptions of the problems at hand and sound-bite solutions to match. But that doesn’t mean we can’t, in the six long weeks of this campaign still ahead, including an economic policy debate among the leaders next week, demand better.


Time for the campaign to get serious on economic policy

  1. A rather in depth anaylsis, but you forgot the big black hole of Ontario, where most of the manufacturing jobs were. Granted, you did write of some ideas, but the failure to include the impact of the Liberal Governments “GREEN” policies should be there.

    When a company working from Canada suddenly sees its taxes raised, on top of the huge increases of energy costs…it just makes sense that folks will pick up and leave. The way the Liberals have treated businesses in the province is one of the main reasons people are losing jobs. YOu can’t claim to be on the side of workers (as Liberals and NDP are wont to do) while at the same time doing everything you can to ensure that the businesses who actually employ workers are punished for their success. Both McGinty and Wynne have done untold amounts of damage to the Ontario economy, and no matter how many tax cuts or subisdies the feds provide will bring it back any time soon.

    the next big hit of course, will be Wynne bringing in the Ontario Pension plan. Once that happens…watch the exodus of business to the USA.

    • I get a kick out of Wynne’s pension plan greed. Why would people save money that devalues at 35% in just 2.5 years? Is it returning 35% to maintain value or is Wynne looking for another pooled plan scam? If people took the time to do a ROI on CPP, you would find CPP is a lousy pathetic investment.

      It simple does not pay to save, invest or pension up in Canada. Most of my pension is in my name and account, and in USD….so not to take the full hit of a devalued for debt Canada. And in WORLD terms Canada’s GDP and currency were devalued as no one is lending real money to cities, provinces and Ottawa…. Why lend for a value negative return where inflation is larger than the after taxes and pretax returns?

      But hey, politicians are about illusions for your money to feed the greed. And I have zero faith this is going to get fixed soon. This is going to be worse thant he 1970s and 21% interest rates to prevent the collapse of Canadian money.

      No amount of political BS is going to help. Canada is a bankrupt country like Greece. Can’t pay our governemtn bills without the tax greed and thin air money.

  2. It is time for the public to really consider an alternative party that is trustworthy and has sound economic policies based on growing “green” industries that are already growing and expanding and are to become the biggest employers of the future.
    That party, of course, is the Green Party of Canada led by Elizabeth May. Therefore, vote Green Party of Canada. Thank you.

    • Tax greed May, oh make me laugh. She can’t even define in real terms how her pathetic tax greed is going to save the planet. Fact is all of mankin=d is not on a sustainable path at all, I don’t deny it. But I do challenge any of these eco-scare/eco-tax greedy emotional types to define in rational and scientifically sane ways how tax greed solves over populated planet with finite resources?

      Or how taxing us poor helps? Oh wait, if I freeze to death as a homeless as I can’t afford the carbon taxes is that how?

      When the fear movement decides it wants to talk real analytical science, ditch the fleabagger mindset of tax greed, lets talk.

    • Rudy,

      The Green party is the option for those who think George Bush blew up the trade towers…which of course, is what Lizzie also believes. she even put in a petition in the House of Commons saying as much.

      Green party is for those folks even too deluded to support the NDP. Not sure if they have as many anti-semites as the NDP though?

  3. Unionized (or for that matter non-unionized) workers would be insane to vote Liberal or NDP. Are workers in the oil and gas sector not workers too? What about those who build vital infracstructure like pipelines? The NDP and Liberals would toss them out of work for years until a future gov’t realizes the need for these. How do the line workers at Ford and GM know that they are “job worthy” and that some Socialist will not decide that their industry too is evil and must be shut down?

    Canada’s union leaders are a bunch of Jimmy Hoffa types who live a lot better than the middle-class taxpayers that they demonize as “the rich” and they will always live well no matter what happens to the economy. Do you think that the union leaders who drove the North American auto industry to near extinction are poor these days? Of course not! They knew what they were doing when they were choking the auto industry along with numerous other private businesses and they know what they’re doing now when they try to cripple democratically elected gov’ts with increasingly outrageous demands. They want Socialism and they are happy to sacrifice the well-being of their members and of taxpayers to bring it about, They won’t rest until they turn Canada into one big Detroit where large private businesses have been destroyed and gov’ts end up bankrupt as a result of losing their tax base. Meanwhile, thousands of people who used to earn a good living are left unemployed. A Detroit-like future is what Canadians can look forward to if they don’t stand up to bullying from the Liberal/NDP/Union leader alliance and its Socialist agenda.

    • That you, Joe McCarthy? Enjoy your stay in Canada.

    • Sad fact is none of these poltiical liars represent us. Politicians are paracites, lobby bought to lie to us, tax us, then feed the corruption.

      Government can’t solve problems, only make them. Government does not feed people, it taxes people. Tax greed, debt to the kids and uncorn, devalue us for thin air money as no one lends real money to our bankrupt governments.

      Hey, they all talk good, but even Harper lies about taxes, they did go up in several ways. He talks tough on terrorism but can’t keep a murdering IED maker in jail and petitions for early release of a convicted terrorist Egyptian born in Egypt, living in Egypt working and paying taxes in Egypt that happens to have a Canadian passport of convenience. Then does bill C51 to retrict our rights.

      Harper is a liar, and it goes further than (lack of) “Trust”.

      Really, a tax-debt-devalue lobby bought ballot of MP puppets…. none really represnt the people who make Canada work.

    • How many oil and gas pipelines are being built now? the answer is none. So maybe a new approach is needed

      Which of the leaders is supporting infrastructure development as a key plank? The Liberals.

      Fact is that for all the Conservative blustering they can not get the job done.

  4. Even gov’t workers would be insane to vote Liberal or NDP. They will just spend us into another debt crisis like that of the mid-1990’s that forced then Finance Minister Paul Martin to cut thousands of positions from the civil service.

    • I was robocalled last election.
      There is no way in hell I will even consider voting Conservative until Harper is long gone.

    • The deeper into the hole we get, the more civil service will be cut. And Canada is in a spiral debt-devalue cycle. Your advise is good advice. But they didn’t listen in the 70s, and they will not listen now. When they cray like stuck pigs and 45 cet loonies for pensions, well, no sympathies here as a devalued failing Canada is going to get us all, unions included.

      Hey, tax me more for corporate-union bailouts greed so I cant afford a automobile….or spend on other peoples jobs… If GM needs $120k in devlaued CAD for a auto, going to be a lower standard of living as more can’t afford it.

  5. John Geddes – you are staggered by 950 million. That is less than the cost of one 30,000 barrel per day in situ oil sands plant. A billion is chump change and you cannot think you are going to turn anything around with chump change. Fact is, to do anything substantial governments are going to have to be willing to put billions up and run the risk of it failing. Governments don’t like risk, tax payers don’t like it either. Second, why on earth would you expect politicians to come up with an industrial policy for Canada? In times gone by, they would have set up a royal commission and they would have invited clever fellows like Paul Boothe to put together the best ideas they can find and then make some recommendations for politicians to decide on. Now, apparently we don’t need no stinkin experts, our politicians just make it up. I suggest we have got into trouble over the last twenty years because guys like Harper, Chretien, McGuinty et al spend their time making stuff up.

    • Policy in Canada is to see how much hidden and real tax greed you and I will tolerate…then screw us more. Politicians and most of governemtn is parasitical. Low or no value on what makes Canada work. Just a bureaucratic consumption for waste machine to employ a army of voters to support Orwellian Statism.

      And none of that government greed feeds you. But it can tax inflate Canada requiring stupid high wages, so jobs leave. They can devalue your money, wages, investments and pensions as city/prov/Ottawa needs thin air inflation money to pay their bills like Greece does.

      Government can’t solve any of these economic issues as the governments are the problem. Bloat, consumptive waste, no value, tax greedy its like trying to compete in a running race with 338 leaches sucking your blood too fast.

  6. Canada is a devaluing tax inflated economy of pyramid debt and thin air fraud money devaluing us. In a world view, our GDP shrank 35% with our money in just 2.5 years. As why invest ina loser with oil no longer carrying the rest of dysfunctional Canada. Politics and media program the public to think it was oil, but really, oil was jsut the straw that broke the camels back. Dollar and world view GDP decline was well under way long before oil was last at $100.

    Say 2.5 years ago I put $100,000 into a USD account, and the same $100,000 into a CAD account, today I would only have $75,000 in USD in the CAD account, thats a whooping loss of value. And no Canadian company has been making this kind of money.

    Canada punishes people for saving, ivestotrs and pensioners. Why invest to lose value in you own country screwing you?

    Wha-la wonderland economics of thin air pyramid debt, entitlement greed, union greed, political lies don’t work when you do the math in reality mode. Canada isn’t worth investing in.

    Its why 93% of my investments are outside of Canada. And not likely to come back. Tired of being an abused disabled/pension/investor in a dysfunctional country. And with every government in the land as insolvent as Greece, no thin air money loan means bankruptcy…or devaluation. And we will be a devalued country until we fix the corruption of our economic looonacy.

    Hey, tax me more so I can spend less on someone elses job…its the Canadian stupidity… Governemtns can’t fix the problems as governments are the problem. They cost too much, consume too much and do so little of value.