Rethinking Manufacturing in the 21st Century
This full report analyzes the economic factors behind the recent struggles of Ontario’s manufacturing sector, and offers recommendations as to what Ontario can do to cultivate this sector.
Over the past decade, manufacturing in Ontario has been challenged by fundamental changes in the global economy. First, the rise of emerging markets has led to more competition especially with respect to low cost industries such as textiles and leather. Second, increasing global trade resulted in the split of the value added chain in goods production. Where entire products used to be made in one location and subsequently traded in exchange for other goods, the new reality focuses on tasks along the value chain based on a country’s comparative advantage. Third, ongoing structural and technological changes lead to different requirements in talent and skills. Fourth, the rise in the value of the Canadian dollar eroded Ontario’s cost advantages and drove down its exports. Finally, the economic crisis in the United States, Ontario’s single most important export market, contributed to a sharp drop in demand for its manufacturing.
In the context of these challenges, the debate on whether manufacturing is still needed in advanced economies has divided economists in recent years. While some claim that manufacturing in developed countries is simply doomed and those concerned with the sector suffer from a “manufacturing fetish”, others point to manufacturing as an essential source of innovation and job creation.
Read the full report on our Publications page.