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Bringing back the business

The Toronto chapter of the Society of Manufacturing Engineers (SME) says the time has come to rebalance what should be done offshore and what should be made here.


December 28, 2011
by Joe Terrett, Editor

Some would say Canada’s manufacturers are in a long decline, perhaps to irrelevancy. Plants have been closing and jobs disappearing at a brisk pace, hastened in part by an outflow of work from North America to China where wages are far below western levels. Manufacturers have in the past proved to be resilient when facing challenges, but the fight to secure global business won’t be easily won.

First, let us acknowledge that manufacturing is experiencing a decline. In 1999, it was responsible for 19.2% of the country’s GDP and was the biggest employer. Today it’s responsible for about 13% of GDP and has slipped to third-largest employer.

Apparently we’re having a great deal of difficulty getting away from the view of Canada as a hewer of wood and drawer of water. We export natural resources to countries where someone else profits from adding the value, then we buy back those resources as finished products. Ironically, our bountiful commodities are also driving up the value of the dollar and impeding our value-added exports. As a result, Canada has been pricing itself out of manufacturing, which bodes ill. Manufacturing jobs are key to Canada’s prosperity. In the automotive industry, for example, one job at an assembly plant supports 7,500 other jobs, and yet we’re losing a lot of them:  322,000 between 2004 and 2008.

No one pretends developed countries like Canada can back out of the globalized economy, but the Toronto chapter of the Society of Manufacturing Engineers (SME) says the time has come to rebalance what should be done offshore and what should be made here. Its Take Back Manufacturing (or TBM) campaign so far has attracted 25 technical associations, three trade associations and representatives from education, government, media and business who feel the same.

The SME plan is to raise awareness and prepare for the return of jobs. Phase 2 will involve working with governments on tax, trade and education policies that will enhance manufacturing’s competitiveness.

Canadian Manufacturers & Exporters has already given this topic some thought and says we need lower taxes for those investing in new products, technologies and skills; an extended capital cost allowance for investments in machinery and equipment; better innovation and commercialization of new products and technologies; help for businesses to develop and take advantage of international opportunities; and to enhance the competitiveness of North America’s integrated supply chains.

The third phase involves ensuring manufacturers have the resources to improve technology development, productivity and innovation; and creating a strong infrastructure for apprenticeships, professional training and career development. This second point is of particular importance. Canada suffers from a chronic shortage of skilled people and so far the government plan is to fill the gaps by bringing workers in from abroad. The SME offers a better way: making the education/training stream more flexible and responsive by growing talent at home through a process that takes candidates along an integrated career path that starts with a trade and progresses to technician, then technologist to engineer.

TBM’s timing is uncanny. The Boston Consulting Group predicts China is approaching a tipping point where the cost advantage is shrinking because of rising wages, high energy costs and logistics challenges, prompting companies to rethink where they produce goods for the North American market. BCG forecasts up to 3 million jobs will come back to the US by 2015.

How we respond to these evolving global conditions will determine just how relevant Canadian manufacturing is destined to be in the 21st century.