Feds expect challenges ahead for manufacturing

Internal federal documents warn that the Canadian manufacturing sector is facing “significant” structural obstacles.

As reported by The Canadian Press, a recent memo addressed to Economic Development Minister Navdeep Bains written by his advisers points to industry hurdles that include low productivity, poor innovation, a failure to scale up, and weak participation in global value chains.

The fate of Canadian manufacturing will have consequences that reach beyond the industry, the briefing note says.

As quoted by The Canadian Press, the notes says that “the manufacturing sector is a cornerstone of the economy and a catalyst for broader economic activity,” and also identifyies several “hot issues” for the new minister.

“It is expected to help spur export-led growth in the second half of 2015 and into 2016; however, it also faces significant structural challenges.”

Manufacturing accounts for nearly 11 per cent of Canada’s growth – as measured by gross domestic product – and employs 1.7 million people, the memo says.

The document, labelled “secret,” was prepared for Bains as he took over the cabinet post in November. It was obtained by The Canadian Press under the Access to Information Act.
The memo could help guide Bains’s decisions and also influence the federal budget, expected late next month.

The authors of the briefing note place some of the blame for the lack of a bounce-back on inadequate reinvestment. Canada, like other developed economies, lost a large number of jobs, companies and investment during the global recession, they note.

Moving forward, the document says, the sector must deal with a global manufacturing environment that’s rapidly changing due to technological advances “poised to disrupt many of the sectors that anchor Canada’s economy.”

“This represents both a threat to incumbent business models and an opportunity for those that are able to be on the leading edge of new technology,” the memo says.

Small- and medium-sized manufacturers have struggled to reach the scale of their international competitors, preventing them from competing on the global stage, it adds.