Most wish that Canadian manufacturing will drive economic growth in a country reeling from low petroleum costs, internal national documents warn the sector’s metempsychosis is staring at “essential” structural impediments.
In a recent memo addressed to Economic Development Minister Navdeep Bains, advisors point to business hurdles that include weak involvement in international value chains and low productivity, poor invention, a failure to scale up.
The fortune of Canadian production will have effects that reach past the industry, the briefing note says.
“The manufacturing sector is a cornerstone of the economy and also a catalyst for more comprehensive economic activity,” it notes, identifying several “hot issues” for the brand new minister.
“It’s anticipated to help spur export-led growth in the 2nd half of 2015 and into 2016; nonetheless, it also faces significant structural challenges.”
The memo also affect the federal budget, expected late next month and could help guide Jones’s conclusions.
The Liberal government has been investigating methods to respond to the economic shock of falling commodity prices, which have hit the market hard — especially in the oil sector.
The recession forced the market to contract over the first half of 2015 — in substantial part because non-energy sectors were quite slow in picking up the slack.
Many experts had been anticipating the exchange rate, which has dropped together with oil prices, to help restore the manufacturing industry as well as exports.
The writers of the briefing note put some of the blame for the lack of a bounce-back on inadequate reinvestment. Canada, during the global recession, lost a high number of jobs, companies, and investment like other developed economies, they note.
Going forwards, the record says, the sector must cope with a global manufacturing environment that is quickly changing due to technical advances “poised to interrupt lots of the sectors that anchor Canada’s economy.”
“This represents both a threat to incumbent business models and an opportunity for those which are able to be on the leading edge of new technology.”
Reasons for confidence
Small- and medium-sized manufacturing companies have fought to reach the scale of their international competitors, keeping them from competing on the global period, it adds.
The news is not all bad, yet. The advisers say Canada packs highly knowledgeable work force and the potential required to stay informed about the business that is changing, thanks to a sound science foundation.
“Canada’s rich manufacturing tradition and recognized presence across the country is a solid basis for future success.”
Alexander said that while the lower loonie helps raise the competitive advantage for Canadian companies, the falling exchange rate also discourages investment because it raise the expense of imported equipment.
The shadow of uncertainty over the economic prognosis acts as another hindrance to investment, included Alexander, C.D. Howe’s vice president of economic investigation.
“This is in fact one of the things I am deeply worried about, because Canada’s competitiveness is extremely poor, especially when you look at Canada’s productivity performance.”