OP-ED – Canada lags America’s manufacturing strategy

March 2023

Whatever one may think of Joe Biden’s impact as the 46th President of the United States, one fact is undisputable: his economic plan has generated a manufacturing boom across America. Biden understands that the manufacturing sector is a symbol of U.S. strength, he gets that it fuels innovation, and can prove that it provides millions of stable jobs which in turn fuel and foster stable communities.

Prime Minister Justin Trudeau and his cabinet might want to keep this in mind as they prepare for the president’s first official visit to Canada later this month. Not only is manufacturing and exporting crucial to strong economies, but it is also an area where the two leaders could make important inroads.

An assertive and comprehensive Canadian industrial strategy that is harmonized in its approach to industrial investment and environmental transition with our partners in the U.S.—Mexico— Canada trade agreement is the right place to begin with the president. It’s also the right path toward a more prosperous Canada.

Biden’s ability to connect with middle-class voters — especially those in key midwestern industrial states — was key to his victory. And manufacturing is the driving force behind the president’s rust-belt revival plan because he understands that repatriating good-paying manufacturing jobs is the country’s path to economic renewal and resilience. And it’s not at the expense of the environment.

Massive subsidies for manufacturing production, clean energy generation, and carbon capture tech, in addition to building up domestic battery supply chains, are foundational elements of his “all-carrots” approach to industrial net-zero transition.

Fostering a domestic manufacturing renaissance has also helped the United States accomplish major international goals, such as wrestling critical supply chains back to American soil and securing critical minerals, thereby reducing the country’s economic dependence on China. The CHIPS and Science Act and other laws passed by the Biden administration are strategic plays designed to ensure America is more self-reliant. Strengthening that self-reliance should and must include its closest neighbour and most important trading partner, Canada.

It couldn’t come at a more important juncture. Manufacturing has historically been a pillar of the Canadian economy but has been under pressure for some time. Manufacturing investment in Canada has been so weak it is at historic lows, whereas it continues to climb solidly in the U.S and is at an all-time high.

Canada isn’t adopting the levels of technology and automation that we need to compete. Our share of global goods exports, a key wealth generation metric, has fallen year after year despite opening markets through numerous trade deals. Labour shortages continue to drag down production even though manufacturing jobs are among the most high-paying and stable. Amid these issues, we have not had an over-arching industrial plan for decades, despite commissioning countless reports and studies, which have all concluded that we desperately need one.

To make matters worse, the U.S. is making big moves in manufacturing without consulting Canada. When we signed NAFTA in 1993, we committed to integrating and harmonizing manufacturing production across North America, and over the years we accomplished exactly that. But now our key trading partner is increasingly signalling that it is going its own way. We had better catch up quickly.

Trudeau has an opportunity to stop this slide. He must remind the president of the massive economic benefits of integrated North American manufacturing. He must forcefully push back on Buy American rhetoric by explaining that it hurts Americans and Canadians alike when one country goes down the protectionism road. And his government must match the incentives of the Inflation Reduction Act to stop the potential hollowing out of Canadian manufacturing.

If the prime minister wants to find common ground with the president, bonding over manufacturing is the right approach. Not only would it help build on the strong relationship we have with Biden, but it is also of grave importance to Canada’s future and prosperity.

Dennis A. Darby, P.Eng., ICD.D
President & CEO
Canadian Manufacturers & Exporters