OPINION: Smart policy will bolster business environment for manufacturing

The stark and growing disparity in manufacturing investment in the two countries is troubling. It’s also somewhat puzzling. Over the last three decades, both Canada and the U.S. have struggled to sustain economically viable manufacturing sectors amid an onslaught of competition from China and other low-cost jurisdictions. The investment data suggest the U.S. has been successful in this quest, whereas Canada has come up short.

Why does it matter? After all, manufacturing occupies a smaller place in the economies of affluent countries than it did 30 or 40 years ago. As of 2022, more than three-quarters of all jobs in Canada and the U.S. were in service industries — everything from health and education to finance, real estate, professional services, retail trade, restaurants, tourism, transportation, and digital and other technology services. Manufacturing provides a smaller proportion of jobs than in the past.

So, Canadian policymakers should be worried about the erosion of the manufacturing capital stock and sluggish pace of investment in the sector. Unfortunately, the attention of governments seems mainly directed at supporting a handful of specific manufacturing industries — notably electric vehicles and “clean” technologies — rather than on enhancing the business environment for manufacturing in general.

Manufacturing is diverse, consisting of about 20 industry sub-sectors that encompass the processing of natural resources , the production of transportation equipment, metal fabrication, information technology goods, refining and chemicals, machinery manufacturing, plus a mix of consumer goods such as food and beverages, clothing and textiles, furniture and plastics.

Government policies, including energy taxes that are much higher here than in the U.S., have contributed to the problems besetting Canadian manufacturing. Smart policy can help to bolster Canada’s competitive position in manufacturing broadly. This calls for a focus on educating and training a modern manufacturing workforce, reducing the burden of regulation, and tweaking tax policies to attract more investment and accelerate the adoption of advanced process technologies across the sector.

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