Here’s the real reason we have a supply chain crisis in North America today — a reason that hardly anyone ever mentions: we don’t make anything here anymore.
Over the past twenty years, we’ve turned our factories into warehouses, importing more and more of the products we buy — everything from cars and washing machines to TVs and lawn mowers. When you drive through the suburbs of Toronto — Vaughan and Pickering and Newmarket — many of the new buildings nowadays in our industrial parks are giant warehouses and logistics centres filled with goods from Amazon and other major overseas distributors.
In the face of intensified global competition and investor demands for higher quarterly profits, a lot of Canadian manufacturers have taken the easy way out by offshoring production to low-wage, low-cost countries like China, where manufacturing costs are a fraction of what they are here in Canada and where environmental and labour regulations are lax or non-existent.
I’ve been concerned for many years now that Canada is abandoning its manufacturing heritage, one that saw our country produce great corporations like Massey Ferguson and Bombardier. We’ve drifted away from a real economy, where we manufacture products, to a predominantly financial economy — in other words, an economy where you have more and more people managing and transferring wealth rather than creating it.
You can see how far we’ve drifted away from a real economy by simply walking down the aisles of a Walmart or Canadian Tire store and picking up any of the products on the shelves: you’ll quickly discover that hardly any are made in North America, let alone Canada.
We need to be careful that we don’t dismantle our manufacturing base and end up importing everything from abroad. If we continue down that road, we’ll lose a lot of good-paying jobs — jobs that will never return. We’ll also lose some of our economic independence. But most importantly, our once high standard of living will start to erode.
Once the manufacturing base begins to erode, there are major ripple effects throughout the supply chain and within our skilled labour force. One of the reasons Magna International Inc. is so successful is that it has one of the largest skilled labour pools of any company in the world: thousands and thousands of tool and die makers, mould makers, millwrights, and robotics engineers.
When I was CEO and Chair of Magna, whenever Ford or GM called us with a last-minute change to a bumper or door panel, and told us they needed the new part yesterday, we jumped on it and delivered the modified product in no time because we had the in-house expertise that could get the job done. But even Magna has trouble finding enough skilled tradespeople today.
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Canada’s manufacturers are also one of our chief engines of technological innovation. Our economy grew strong over the years by making and inventing the kind of products the rest of the world wanted — products that improved people’s lives and helped increase productivity. We need to return to that once-proud manufacturing tradition.
So how can we revive and restore our manufacturing base? I believe we should use our tax levers to stimulate renewed investments in manufacturing operations. What I would propose is that manufacturing businesses that invest a portion of their net profit in Canada should be exempt from paying any tax whatsoever on the amount invested — a reward for helping to grow our economy. If we did this, there would also be a tremendous spinoff effect that would result in money being spent on new equipment, new buildings and new technologies. We would create good-paying blue-collar jobs and high-quality products that we could export to other countries.
I’ve always thought it was gross negligence on the part of our country for not having a clear and well-thought-out industrial strategy. One country that does have such a strategy is China, which has emerged as one of the world’s new industrial giants. China is strategically targeting a wide number of key industries and sectors where they want to become the dominant players — everything from pharmaceuticals and telecommunications to automobiles and steel. That’s smart of them. But it’s not so good for us, especially when we have no plan or no strategy whatsoever and our competitors are running roughshod over the few manufacturers and producers we have left.
We’d better wake up soon before everything is gone.
We’ve got to get back to making things.
Frank Stronach is the founder of Magna International Inc., one of the world’s largest automotive parts suppliers, and a freelance contributing columnist for the Star’s Business section. Reach him via email:
fstronachstar@gmail.com