Friday, November 27, 2009

Canada must build on rich manufacturing history

(A shorter version of this was published as Root Issues in the Barrie Examiner, November 26, 2009.)

Ontario’s job situation is hurting, especially in the manufacturing sector. This doesn’t just reflect the current recession; Barrie has watched manufacturing jobs and companies go bankrupt or leave the city for the past decade, including Allow Wheels, Molson, and Faurecia. This is a long-term trend needing long-term solutions.

Recently I attended a conference at Ted Rogers School of Management (Ryerson) dedicated to examining this problem and finding solutions. The morning panel featured a wide variety of expert voices. Moderator Buzz Hargrove, now a Ryerson professor, hosted CAW economist Jim Stanford speaking from a left/labour perspective, Green Party of Canada leader Elizabeth May from a policy view, and Jayson Meyers, President & CEO of Canadian Manufacturers & Exporters, representing industry.

What was most amazing is that these diverse voices substantially agreed on virtually all aspects of the problem and most of the solutions. May immediately established that Canada lacks a national manufacturing strategy. (Sadly, we also lack national energy and transportation strategies – the only developed nation to have this triple gap.) Myers noted that we can’t create value by spinning debt – we have to make products or services people need.

Right now, profit rates and share values in Canada are higher than in the US due to our resource and financial sectors – this is not just accepted, but encouraged by Harper government policies, simultaneously weakening our manufacturing sector. May reminded attendees that last year’s OECD report warned Canada that tar sands exports are skewing our economy, hurting the rest of Canada and even the other energy industries, like natural gas. Oil companies can’t afford to build refineries here, so we export crude oil south. Our east coast offshore oil & gas platforms are being built in Dubai, rather than in our own shipyards. In general, we produce or extract raw resources which we export to other countries, who turn them into products they sell back to us for profit. The OECD recommended using carbon pricing and tax shifting to help address this, but this wise economic advice has yet to gain traction in our minority Parliament.

The effects of this tar sands-first stance are not simply theoretical. Growing oil exports have boosted our real exchange rate, hurting other sectors. Greenbriar shut down the TrentonWorks railcar plant in Nova Scotia last year moving production to Mexico due to the high Canadian dollar. Manufacturers across Ontario are in dire straits. If this continues, I envision a future where we will go to Wal-mart to buy cheap electric cars – made in China.

Stanford noted there is much talk of “moving up the value chain,” which China is doing now via macroeconomic policy, mandatory foreign-domestic partnerships, government procurement, and targeted investment. Meanwhile, Canada is moving down the value chain to export more raw resources (including to China).

This need not be our destiny. After WW2, Canada continually raised labour productivity, eventually reaching 90% of US levels. Then, in the two decades of free trade and NAFTA, it slipped back to 80%, as we returned to a resource-based export focus. We are losing our labour gains in our relapse to being hewers of wood and drawers of water.

As Stanford related, Finlanders transformed their economy from resources to manufacturing rather quickly, and now enjoy higher wages than Canadians. We could use our advantages to do the same. For example, we are good at integrating immigrants, who bring more diverse ideas into play and offer links to potential trade partners. But all players – government, academia, and business – need to strategize together to leverage our assets.

Myers explained that our government policies are still geared towards yesterday’s mass production model, yet the future of manufacturing in Canada is not mass production, but specialization and customized products and services. We need to shift from more volume to more value, making more money with less resources & energy by using more labour.

Ontario and Canada have a proud manufacturing history, and the potential for a strong new future, as well. But this will unfold only if our leaders take their heads out of the tar sands to develop and enact balanced national plans. The Ryerson panel showed we have the bright minds to lead the way, if only our representatives will listen.

Erich Jacoby-Hawkins is a teacher, father, volunteer, and politician.

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