It’s about value

There are those who will cite shrinking job numbers and share of GDP starting before the recession and beyond as signs that the sun is setting on manufacturing in Canada.

Clearly they have lost site of the value proposition.

October is Manufacturing Month and as Canadian Manufacturers & Exporters (CME) leads the celebration across the country, it’s a good time to declare that making things is here is still cool, lucrative and yes, challenging, but key to creating wealth. Post economic apocalypse, manufacturers are not the walking dead. There have been setbacks yet companies, most of them SMEs, are adapting to this century’s global reality and making headway, although there’s plenty of work to do.

Manufacturing continues to have a huge impact on the economy: it’s a $590 billion affair accounting for 62% of all exports, 10% to 11% of GDP, and it employs 1.7 million Canadians (that’s 10% of employment); the pay is good, averaging $1,020 weekly; and Industry Canada reports sales are up more than 25% since the recession.

Also significant is the resurgence of US manufacturing, which accounts for a $2.08 trillion share of the country’s economy, 12 % of GDP, and employs 17.4 million Americans (or 12 million depending on who you ask), who average about $77,000 a year. Add to this positive mix the growing number of jobs coming back from overseas as companies recognize cheap labour is becoming less so when other factors are also taken into account.

Since much of Canada’s manufactured products (78% in 2012) are destined for US markets, growth south of the border will be very good for business. However, this also points to a weakness. It’s much easier to deal with a market that’s next door with similar laws and language than to venture too far abroad, but it’s obviously a “too many eggs in one basket” scenario.

Canadian companies need to broaden their participation in export markets. More of them are taking the plunge and some are exploring truly exotic locales. For example, INKAS Armoured Vehicle Manufacturing in Toronto is carving out a growing business in the Middle East, Asia, Africa and elsewhere, with a much smaller sales footprint in North America.

SMEs lacking the heft of their peers in the US could use support to explore and enter new markets that trade deals such as CETA are opening up. Those interested in Europe will get some of that assistance through the Coalition for Canada EU-trade, and the Enterprise Canada Network launched by CME and Export Development Canada, which connects companies to more than 30,000 opportunities posted through the European Commission’s Enterprise Europe Network.

One of the factors that drives manufacturing’s success in the US is the investment made in R&D. More than 70% of all private sector R&D investment comes from manufacturers, compared to 47% in Canada. Both countries will cite challenges transitioning R&D to commercialization, but Canadian companies continue to complain they have very limited access to adequate financing for any kind of investment. They need more diverse sources of venture capital, and tax support for commercialization efforts.
So why should Canadians care about manufacturing? It’s key to our prosperity.

Peng-Sang Cau, CEO of Transformix Engineering Inc., a Kingston, Ont.-based manufacturer of automation machinery and active exporter who was recently profiled in the Globe and Mail, warns against “blithely” relying on natural resources for economic strength. She says creating wealth comes from ensuring there is manufacturing, and that new companies are starting up and growing.

“Manufacturing is what creates value in an economy. It is what brings all these materials, which are nothing, and makes them into something.”

Convey this succinct message to the unenlightened during Manufacturing Month.

Comments? E-mail jterrett@plant.ca.