Will Canada's manufacturing sector make a comeback?
By Peter Diekmeyer • Bankrate.com
According to Jacques, many commentators focus too
much on sectors such as clothing and footwear, which lost jobs as
companies moved production into lower cost jurisdictions. Less talked
about is the fact that many of these jobs were replaced with postings
in technology-intensive industries with far higher value.
In fact, according to a BMO Capital Markets study
of Canada's manufacturing sector released early last year, the country
retains significant competitive advantages. "(These) include extensive
experience in key industries e.g. motor vehicles, aerospace, telecom,
pharmaceuticals, forest products, skilled labour, good synergies
between university and industry research, close access to natural
resources and proximity to huge markets."
Rising transport costs are reducing the benefits from trade
However, if CIBC World Markets' Rubin and Tal are to be believed,
more good news for manufacturers may be on the way. "In a world
of triple-digit oil prices, soaring transport costs, not tariff
barriers, pose the greatest challenge to world trade," they say
in the report. "Shipping a standard 40-foot container from Shanghai
to the eastern US seaboard now costs $8,000. In 2000, when oil prices
were $20 per barrel, it only cost $3,000."
The two economists have already noted some changes in capital-intensive manufacturing, such as in the steel industry, where products
carry a high ratio of freight costs to final selling prices. Although Rubin and Tal focused mostly on the effect these trends would have in the US,
in many sectors, the results would be broadly similar in Canada.
That trend could one day prove to be advantageous
to Canada's automotive companies, many of which are subject to intensive
competition from parts and vehicle manufacturers in Asia. True,
with the North American economy slumping right now, the effects
of those changes may not take effect in time to be of much help
to those Oshawa workers who will be laid off. But it is a structural
trend that could yield big benefits down the line.
Peter Diekmeyer is Bankrate.ca's economics columnist.
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