The Real Economy, Canada

Workforce, trade, capital: Conference highlights top manufacturing sector issues in Canada

Dec 12, 2023

Key takeaways

Canada’s manufacturers generate 9.5 per cent of the nation’s gross domestic product.

But weak capital investments and stagnant productivity have undermined competitiveness.

There are significant opportunities in partnering with the U.S., including nearshoring supply chains.

Manufacturing The Real Economy

Workforce dynamics, productivity, advanced technology investments and trade policies are some of the critical issues defining the future of Canada’s manufacturing sector, as highlighted at the Canadian Manufacturers & Exporters (CME) 2023 National Manufacturing Conference in early November.

The conference—at which RSM Canada was a sponsor and participant—brought together industry leaders, public relations professionals and policymakers to discuss these and other pressing issues and opportunities for Canadian manufacturers.

The manufacturing sector plays an important role in Canada’s economy; with 90,000 manufacturers, the sector generates 9.5 per cent of the nation’s gross domestic product, is responsible for 60 per cent of the country’s exports and employs 1.8 million workers. Manufacturing also has broader economic ripple effects throughout various supply chains.

At the conference, CME also released a report that zeroes in on how to solve hurdles in the sector and drive growth and prosperity for the industry. The report, called Manufacturing Canada’s Future, lays out 22 key recommendations across four pillars: expanding workforce development, encouraging innovation and technology adoption, boosting domestic production and exports, and accelerating clean technology incentives.

Learn more of RSM Canada’s insights in manufacturing and the middle market.

Below are the key actions suggested at the conference and covered in the report:

1. Fixing lagging Canadian productivity and low capital investments: Weak capital investments and stagnant productivity have undermined the competitiveness of the Canadian manufacturing sector. According to CME, business investment in non-residential structures and machinery and equipment now stands below 2014 levels. Canada lags other industrialized countries in the adoption of advanced manufacturing technologies, business research and development spending, and intellectual property generation and commercialization. Canada ranks poorly in capital investment and productivity growth, according to the Organisation for Economic Co-operation and Development, highlighting the urgent need for a strategic approach to addressing the issue. In addition, current economic conditions of high inflation, rising cost of capital, supply chain disruptions, geopolitical tensions, workforce challenges and environmental concerns make it even more critical to invest in productivity-enhancing technologies, equipment and processes.

2. Strengthening trade relationship with the U.S.: Despite geopolitical uncertainties, shifts in globalization and new U.S. domestic industrial policies, trade relationships between the United States and Canada have growth potential. There are significant opportunities for Canada’s manufacturing sector when it comes to partnering with the United States, including the nearshoring and regionalization of supply chains.

3. Bolstering domestic manufacturing and global trade: Canada’s relatively small domestic market makes international trade and foreign investments critical for economic growth. To achieve this, private businesses and policymakers must focus on the following strategic initiatives:

  • Facilitating global market reach through export incentives and assistance, and leveraging trade agreements and partnerships—especially the Canada-United States-Mexico Agreement—to strengthen North American manufacturing
  • Developing a made-in-Canada plan to support domestic production and access international markets
  • Increasing infrastructure spending and leveraging government procurement
  • Enhancing Canada’s investment appeal by reducing business costs and raising productivity
  • Developing and executing a national natural resource strategy
  • Fostering product and technology innovation and commercialization

4. Addressing workforce dynamics: Labour shortages, skill gaps and an aging workforce remain a key concern for manufacturers, even with a cooling labour market; solutions to these labour challenges were discussed at the conference. Policymakers and the sector will need to collaborate to streamline and align immigration and temporary foreign worker programs with the sector’s needs, to shape training programs and benefits, and attract workers from underrepresented groups. There should also be an educational reform component to make manufacturing jobs appealing to the next generation of workers.

5. Advancing the net-zero strategy: The importance of the manufacturing sector in advancing Canada’s net-zero strategy to reduce emissions by 40 per cent of the 2005 levels by 2030 and achieve net-zero emissions by 2050 was another pressing topic. The U.S. Inflation Reduction Act has spurred a manufacturing construction boom south of the border including significant investments in green economy production, prompting Canada to respond with its own clean technology investment tax credits and initiatives aimed at closing the gap. Governments at both federal and provincial levels offered billions of dollars in incentives and support programs to attract investments from key automotive and battery manufacturers. Still, a more comprehensive industrial policy is necessary to address Canada’s lagging productivity and sluggish business investments, to stay competitive and attract more investments in the clean technology sector.

RSM contributors

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