Policy Initiatives

Supporting Business Scale-Up and Technology Adoption

Overview

CME is focused on helping companies scale up their operations in Canada and abroad by removing barriers to growth and by lowering the cost and risk of investing in new machinery, equipment and, technology.

Strategic investments in innovation and technology adoption is the starting point of a virtuous cycle that ultimately leads to more output, employment and, economic growth across Canada.

Innovation and investment in new technology improves productivity. That, in turn, helps businesses become more competitive; attracting more production mandates and, capturing greater market share.

This leads to increased profitability and more money to invest in innovation and new technology.

CURRENT LANDSCAPE

Canada ranks near the bottom in both technology adoption and innovation in manufacturing compared to other advanced economies.

Underinvestment in machinery and equipment is a major factor driving Canada’s lagging productivity growth.

Why It Matters

Businesses that invest in digital technologies have a better growth outlook than those who don’t. This results in a wide range of potential benefits:

  1. Lower operating costs. Digitization opens the door to the collection of data that can be mined to identify efficiencies in existing operations, decrease downtime, and monitor and guide production activity.
  2. Increased product quality. Advanced technologies can help to root out errors and deficiencies in production, boost quality control, and lead to overall improvements in the production process.
  3. Higher innovation capacity. Technologies like 3D printing and electronic prototyping lower innovation costs and can unlock new abilities and capacity that were previously unavailable to producers.
  4. Increased customer satisfaction. Digitization and advanced technology use can increase customer satisfaction by decreasing response times, creating more specialization and customization opportunities, and improving product quality.

SOLUTIONS TO IMPROVE TECHNOLOGY ADOPTION

HIGH PURCHASE COSTS & UNCERTAIN ROI

New equipment and technologies are expensive and the way they fit into existing operations is not always obvious.

Recommendations:

  • Introduce a shared 20 per cent investment tax credit on the purchase of new machinery, equipment and technologies, including software.
  • Support the creation and delivery of a nation-wide government-led SMART program that offsets the cost of technology assessment, diagnostic services; and provide support for SMEs.
  • Develop an awareness campaign that demonstrates the benefits of technology adoption

LACK OF INFORMATION & TESTING OPPORTUNITIES

Businesses are not always aware of what technologies are available, what their benefits and capabilities are, and how they would fit into (or disrupt) existing operations.

Recommendations:

  • Provide financial support to facilitate technology demonstration tours and site visits that showcase cutting-edge machinery, equipment and technologies.
  • Fund a series of technology demonstration and testing hubs across Canada that give manufacturers the opportunity to learn about and test new technologies.
  • Develop an online technology adoption roadmap.

LABOUR & SKILL SHORTAGES

When businesses cannot find workers with the specialized skills needed to assess, operate, and maintain that equipment, it limits their ability to adopt technology.

Recommendations:

  • Encourage more youth to choose a manufacturing career.
  • Bring together major employers, their supply chains, and local secondary and post-secondary institutions to discuss workforce needs, and drive curriculum planning
  • Extend and make permanent the Atlantic Immigration Pilot to the rest of Canada.
  • Developing closer business/post-secondary ties for curriculum development and work-integrated learning programs.
  • Improve tax incentives for technology investment;
  • Reform the tax system to incentivize business growth;
  • Reduce project approval timelines and increase investment certainty;
  • Improve access to technology-related training and skills updating; and
  • Modernize and enhance the federal SR&ED program.

SOLUTIONS TO INCREASE GLOBAL EXPORTS

Canadian manufacturers face many obstacles competing in global markets

  • A lack of information about new market opportunities
  • The costs and risks associated with new business development
  • Unfamiliarity with foreign regulatory and legal frameworks
  • Non-tariff barriers of other countries
  • Non-reciprocal access to government procurement markets
  • Dumping and other unfair trading practices from their competitors
  • Transportation costs and bottlenecks that prevent timely a delivery.

This is preventing Canadian manufacturers from exporting to their full potential and undercuts their ability to compete at home and abroad.

On top of that, businesses are having a harder time than ever navigating international waters. Global trade uncertainty has impacted our business relationship with our most important trading partner and is disrupting well-established supply chains.

SOLUTIONS

CME believes we can build on the momentum from the newly agreed upon USMCA and use it as a platform to build a long-term export strategy for future economic growth and market diversification.  CME has identified three pillars for export growth:

  1. Strengthening Canada’s existing export foundations, with a focus on building from existing trade agreements, especially the USMCA, and leveraging our natural and existing strengths and resources
  2. Scaling up small and medium-sized companies to support them going global through stronger support programs for domestic investment as well as international growth opportunities
  3. Attracting foreign direct investment and global production mandates from large  multinational companies

CME REPORTS

ADVOCACY HIGHLIGHTS

SMART Program

ISSUE

Encouraging business investment in new machinery, equipment and technologies is key to unlocking productivity gains, improving global competitiveness and reducing manufacturers’ environmental footprint. CME believes that implementing a pan-Canadian SMART program is an important step in achieving this goal.

IMPACT ON MANUFACTURERS

The CME SMART program was a provincial economic development initiative run with support from FedDevOntario. It provided direct funding to over 1,400 manufacturing projects in Ontario and assisted manufacturers in the following ways:

  • Improving their day-to-day operations;
  • Making process improvements, such as the process to install production equipment;
  • Reducing their GHG emissions;
  • Improving their energy efficiency practices; and,
  • Supporting investments in new technology and process and productivity improvements.

CME’S POSITION

CME is advocating for a pan-Canadian version of the former Ontario SMART program. Its goal would be to improve the competitiveness of the manufacturing supply chain, achieve cost savings and enable new investments for Canada’s manufacturing sector.

As the federal and provincial governments unroll their plans to price on carbon emissions, CME believes that the revenues collected from manufacturers should be returned to the sector through incentive programs to invest in new machinery, equipment and technologies. Based on its success in Ontario, a national SMART program would be an important step in that direction.

CUSMA RATIFICATION

OVERVIEW

After initial review of the CUSMA, it is apparent that the Canadian government consulted with CME’s and our members.

The government tightly negotiated for, perhaps at the expense of another sector, and implemented many of  CME’s core recommendations to strengthen and improve the trading relationship for manufacturers across North America.

From the start, the NAFTA renegotiation was never an exercise in modernizing the agreement – it was a fight to maintain Canada’s access to the world’s biggest market. Given this context, maintaining status quo is, in fact, a win.

CME’s top priority was that no harm should be done to the integrated manufacturing sector.

In almost all areas where CME made recommendations, the USMCA maintains or improves on previous NAFTA commitments.

10 OF 11 CME RECOMMENDATION ADOPTED

  • Ensure NAFTA renegotiation results in maintaining at least the same degree of access into and from the Mexican and US markets that Canadian manufacturers currently enjoy.
  • Update, modernize and coordinate customs procedures to reflect current business realities; and better leverage technology to reduce administrative burdens, increase security and speed border crossing times.
  • Strengthen regulatory cooperation to allow products to be designed, tested and produced once and sold across the region without additional regulatory approvals.
  • Expand NAFTA’s Trade in Services chapter by using the framework TPP agreement to broaden and deepen Canada’s commitments to eliminate existing and potentially future exclusions.
  • Using the TPP agreement’s Digital Trade chapter as a model, create a new chapter within NAFTA to support growth in the digital economy and manufacturing.
  • Work with the US and Mexico to develop a common North American approach to addressing unfair trading practices from outside the region – an approach that specifically addresses industry concerns about currency manipulation, illegal substitution and dumping.
  • Work with the US and Mexico to develop a common approach to eliminating non-tariff barriers in non-NAFTA countries. In addition, develop a unified approach to raising regulatory, environmental and labour standards outside NAFTA to North American standards.

CME RECOMMENDATIONS PARTIALLY INCLUDED IN USMCA

•Expand and update the range of business professionals, including skilled workers, permitted to move freely within NAFTA without administrative reporting requirements. > Canada fully supported CME position, but the US wanted this chapter eliminated. It was maintained exactly as in the NAFTA
•Enhance Chapter 19 dispute resolution processes by eliminating Article 1902 and replacing it with a common North American approach to defining what constitutes an actionable trade offence. > Canada fully supported CME’s position, but US wanted this chapter eliminated. It was maintained exactly as in the NAFTA

•Except in cases that fall under existing national security exemptions, completely eliminate all national and sub-national government procurement restrictions under NAFTA to allow for the free flow of goods, services and technologies. > Canada fully supported CME’s position, but US wanted very a restrictive procurement chapter. USMCA puts in place WTO GPA rules, which is an improvement over NAFTA.

In many areas championed by CME, the US was looking to take significant steps backwards, which Canada ultimately did not agree to.

So, while CME’s  initial recommendation may have not been met,  CME’s overall objective to do no harm and strengthen integrated manufacturing base within a global context is reached. These areas include most notably government procurement and dispute settlement.

Diversifying Canadian Trade

ISSUE

The Government of Canada has shifted its trade policy to focus more on export diversification.

This has resulted in the rebranding of the Minister of International Trade into the Minister of International Trade Diversification and the adoption of a formal trade diversification strategy.

IMPACT ON MANUFACTURERS

Canadian manufacturers are part of regional as well as global supply chains. Trade diversification is positive for businesses if it:

  • generates new production mandates;
  • opens new markets access gains; and
  • results in incremental export growth.

A diversification strategy offers little benefit if it comes at the expense of integrated North American supply chains, or merely substitutes one export destination for another.

CME'S POSITION

CME supports free trade and trade diversification. We are working to ensure that new free trade agreements meet the following three standards:

  • They create a fair and level playing field for Canadian manufacturers and exporters and result in reciprocal access to foreign markets;
  • They expand Canadian exports of value-added goods and not just natural resources; and
  • They do not undermine the existing integrated manufacturing supply chains developed through previous FTAs, especially the NAFTA/USMCA.

We are also working with governments to ensure that SMEs can benefit from these agreements by: improving access to market intelligence; creating better export-readiness programs; and simplifying government supports.

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