Toronto Star's View: Innovation is key if...
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Feb 12, 2016  |  Vote 0    0

Toronto Star's View: Innovation is key if manufacturing is to prosper

An internal memo to federal Economic Development Minister Navdeep Bains argues that Canadian manufacturing won’t be saved by cheap oil and a low dollar

OurWindsor.Ca

Troubled Canadian manufacturers hoping for rescue through cheap oil and a low dollar need to think again. That’s the gist of an internal memo, labelled “secret,” addressed to federal Economic Development Minister Navdeep Bains. And its contents send a clear signal underlining the urgency of boosting productivity and innovation.

Manufacturing is subject to technological advances “poised to disrupt many of the sectors that anchor Canada’s economy,” warn authors of the document.

It was obtained by The Canadian Press, through the access to information process, and was prepared for Bains in preparation for assuming his cabinet post.

As reported by CP’s Andy Blatchford, the memo highlights “significant structural challenges” limiting the ability of Canadian manufacturing to drive economic growth. This goes a long way in explaining the “technical recession” that occurred in the first half of last year, when the country’s gross domestic product dropped by 0.8 per cent between January and March, and fell by another 0.5 per cent from April to June.

Canada’s energy sector was sucked under by plunging oil prices. That submerged the economy because manufacturers, whose exports typically receive a boost from low fuel costs and a cheap dollar, failed to provide necessary lift.

There was some improvement in the last half of the year. And more good news arrived last month, with about 19,800 jobs created in Ontario in “areas like bio-tech, clean-tech, agri-food processing and financial services,” according to provincial Finance Minister Charles Sousa.

Unfortunately, those welcome numbers hide continuing rust in Ontario’s industrial heartland. Windsor has the highest unemployment rate in the country, at 9.3 per cent, and joblessness in St. Catharines-Niagara and in Sudbury rose to 8.6 per cent.

This reflects a long-term decline, with the number of Canadians employed in manufacturing dropping to 1.7 million in 2014 — down from more than 2.1 million eight years earlier.

The memo addressed to Bains indicates there’s no easy turnaround. Canadian industry is burdened by low productivity and failure to innovate, especially when compared to international rivals. That’s especially worrisome given that “the manufacturing sector is a cornerstone of the economy and a catalyst for broader economic activity.”

Canada does have key strengths. The country has a diverse, highly educated labour force. It boasts a welcome tax climate. And, while business may be not be doing its share on innovation, there has been solid public investment in research and development, especially in Ontario.

It’s vital to build on that foundation. The best way forward probably won’t involve attracting mega-factories employing hundreds or thousands of people. Such works appear to be going the way of the dinosaur. But Canada can still build a thriving manufacturing sector by encouraging small, ultra-modern startups.

This doesn’t necessarily require sending a government of Canada cheque to every enterprising operator (as much as they might like it). Rather, the key is to create an environment in which such businesses can thrive.

A good example of this approach was revealed by Toronto Mayor John Tory and Kitchener Mayor Berry Vrbanovic on Thursday. They announced a joint effort to promote their cities and regions as an innovation corridor similar to California’s Silicon Valley. The goal is to foster startups, attract investment, promote talent and cut bureaucratic red tape.

“We have to reach out to innovators and try to anticipate the future,” said Tory. And he’s right.

Giant factories, such as auto plants, are good to have. Indeed, they’ve been the backbone of Ontario’s economy. But progress appears to favour nimble, highly efficient, niche operations serving the 21st-century marketplace. More should be done to promote them.

Toronto Star

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