The export of manufactured goods enables Canadians to earn foreign currencies for travel and vacations and to purchase imported goods. In 1987, about one-third of the total production of Canadian factories was exported. Manufacturing is a major purchaser of raw materials and services; Statistics Canada data show that, for every 3 new jobs created in manufacturing, about 3 more jobs are created, ie, one each in the service sector, the resource sector and in a related manufacturing industry. To illustrate this point, steel is manufactured from iron ore, coal and other materials, which are mined and transported by railways, ships, trucks and conveyors (all manufactured goods). Executives, salespeople, engineers and others in the steel companies use all modes of transportation and types of accommodation and purchase many services (eg, data processing, communications, legal, accounting).
Manufacturing in Canada began with flour mills. The first gristmills were built in New France in the 17th century and, by 1840, there were 400 in UPPER CANADA and LOWER CANADA producing flour for domestic and foreign sale (see FLOUR MILLING INDUSTRY). Iron smelting began in the 1730s at the FORGES ST-MAURICE near Trois-Rivières, Québec. By the mid-1740s, this foundry supplied some of New France's armament requirements as well as stoves and household utensils. The first steamboat made in Canada, the ACCOMMODATION, was built in 1809 by the Eagle Foundry of Montréal, which made all of the more than 100 parts for its engines. The engines of the ROYAL WILLIAM, which was, in 1833, the first ship to cross the Atlantic almost continuously under steam power, were manufactured by St Mary's Foundry in Montréal.
Several events in the last half of the 19th century stimulated substantial growth in Canada's manufacturing industries. The first was CONFEDERATION in 1867. With political unification and self-government came geographic expansion, construction of the CANADIAN PACIFIC RAILWAY, and new settlement bringing population increases, skills and capital. In 1871 a group of businessmen founded the CANADIAN MANUFACTURERS' ASSOCIATION (CMA) dedicated to promoting the growth of manufacturing. Eight years later, John A. Macdonald's NATIONAL POLICY established protective tariffs to encourage domestic processing of Canadian materials. Newly established factories, processing products for domestic consumption (eg, lumber, grains, animal products), survived and prospered even during the economic depression of the late 1870s and early 1880s. During this period, the discovery of electricity and the subsequent harnessing of some of Canada's vast hydro resource provided industry with an efficient, low-cost source of electrical energy (see HYDROELECTRICITY). At the same time the extent of the mineral wealth beneath the Canadian Shield began to be realized, stimulating great interest in Canada's growth potential. WWI stimulated industrial development and diversification, especially in such industries as steel, shipbuilding, nonferrous metals and pulp and paper.
By 1920 manufacturing directly employed 600 000 workers, about 17% of the total labour force at that time. The worldwide depression of the 1930s reduced economic activity and stifled industrial progress in Canada as in other countries, but Canadian industry expanded and diversified dramatically during WWII. There was swift growth in heavy industries (vehicles, aircraft, armaments, shipbuilding and steel) and spectacular development in aluminum, electrical apparatus, communications equipment, toolmaking and chemicals. By the end of the war, manufacturing directly employed over 1 million workers, more than 25% of the labour force.
Between 1945 and the 1990s, manufacturing has accounted for 22-24% of Canada's total real output of goods and services. Employment has roughly doubled, from 1 to 2 million, but this represents a decline in the proportion of total employment because output per worker in manufacturing has risen about two-thirds again as fast as national productivity. Manufacturing productivity gains have, in fact, contributed about one-third of the gains in real per capita income since WWII. In this period Canada's manufacturing industry has been strongly affected by developments in ELECTRONICS, energy-price escalation (especially in the mid-1970s) and trade liberalization resulting from renegotiation of parts of the General Agreement on Tariffs and Trade (GATT) and from the drastic changes in the state of international competition.
The first industrial computer was introduced in Canada in 1957, and since then computer TECHNOLOGY has found widespread use in manufacturing - for production and sales planning, inventory control, accounting and payroll, personnel records, market analysis, business planning, evaluating strategies, etc. The use of computer-aided design (CAD), computer-aided manufacturing (CAM) and ROBOTICS technologies has increased rapidly. Electronics spurred the explosive growth of Canada's TELECOMMUNICATIONS industry, which reached worldwide stature by the 1980s. Canadian manufacturers participated in the AEROSPACE INDUSTRY by designing and producing communication satellites and components for spacecraft and aircraft (see SPACE TECHNOLOGY).
The rapid rise in world oil prices in the 1970s had a stimulating effect on the development of Canada's rich energy resources, ie, oil, bitumen, gas, coal, hydro and uranium. Demand increased for machinery and equipment for exploring and developing energy resources, for producing energy in a usable form and distributing it. The increase permitted Canadian manufacturers to achieve internationally competitive scales of operation, and Canadian-manufactured machinery and equipment have been used in energy development and production throughout the world.
Four developments in trade policies and practices in this period affected Canadian manufacturers substantially: the Canada-US Autopact; the GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT); the world competitive environment, particularly the emergence of lesser developed countries; and the bilateral FREE TRADE agreement with the US reached in late 1987 and its expansion in the late 1990s to include Mexico. The 1965 CANADA-US AUTOMOTIVE PRODUCTS AGREEMENT (known as the Autopact) between Canada and the US created a conditional, duty-free environment which has allowed the Canadian and US industries to rationalize according to appropriate economies of scale, resulting in efficient industries that serve an integrated Canada-US market. The Autopact benefited both countries at different times. Canada did gain substantially more production, an increase in trade and productivity, a greater share of North American automotive employment and lower consumer prices.
Canada was one of 23 major trading nations that signed the original GATT treaty in 1947. GATT is a multilateral agreement signed by 85 nations and 30 provisional signees; its rules call for the elimination of discriminatory treatment in international commerce in order to maximize the use of world resources and thereby raise living standards. GATT membership is a national commitment to the principle of "freer trade." There have been 8 rounds of GATT negotiations (1947, 1949, 1951, 1956, 1961, 1967, 1979 and 1986-underway). Between 1966 and 1986 the share of Canadian production exported increased from 18.8% to 39%; increases occurred in almost all product categories. The value of export shipments of manufactured goods in 1986 was $98 billion.
With "freer trade," the volume of manufactured goods imported into Canada has increased. Canada's degree of trade exposure is high by international standards, though it varies from sector to sector. For example, groups of industries that operate on a localized basis (eg, parts of food and beverages, metal-fabricating and nonmetallic mineral products) naturally have low trade exposure, and activity in the domestic economy is more important. Resource-oriented sectors (eg, primary metals, paper and wood products) have a high export orientation and a lower import penetration of the domestic market. Sectors that tend to be more rationalized on a North American basis (eg, the MACHINERY AND EQUIPMENT INDUSTRIES) have offset high import penetration with success in export markets. Sectors such as textiles, leather products and ELECTRICAL APPLIANCES have been facing high import penetration with little offsetting by exports (although exports are increasing in many categories).
The state of international competition has changed drastically since the late 1950s and early 1960s. At that time, Europe and Japan were largely preoccupied with postwar rebuilding and with the development of internal markets; Canada's share of the world's exports of manufactured goods rose from 4.5% to 6%. The emergence of Japan and Europe as industrial powers has meant tougher competition across the board for Canadian manufacturers. But, as these economies have become more advanced and as costs have risen, competition has been based increasingly on product quality and technology rather than on price (see INDUSTRIAL QUALITY CONTROL). This emphasis has meant intensified competition in the domestic and international markets in such sectors as transportation equipment (including automobiles), machinery and electronic equipment. At the same time, industrialization among lesser developed countries (LDCs) has focused on sectors producing labour-intensive, low-technology, highly transportable goods. Therefore, increasing import penetration from LDCs has created significant problems in Canada in such sectors as clothing, certain textiles, the lower range of the footwear market, and consumer electrical products.
Canada's Manufacturing Structure
The value of goods shipped by Canada's 47,000 manufacturing establishments was almost $250 billion in 1986; fuel and electricity costs were $7.3 billion; materials and supplies $136 billion; wages and salaries $43 billion. Despite remarkable expansion in manufacturing in the western provinces, Ontario and Québec still dominate most industries, accounting for over half and just under a quarter of Canada's manufacturing output, respectively. Many consumer goods industries are concentrated in these 2 provinces, which have well over half the country's population.
Among these industries are food and beverages, TOBACCO, shoes and leather products, clothing, FURNITURE AND FIXTURES, transportation equipment, electrical products, and scientific and leisure goods (see SPORTING-GOODS INDUSTRY). Resource-based manufacturing industries are spread more evenly across the country, eg, wood industries, newsprint, pulp and paper, steel and primary metals, nonmetallic minerals, petroleum refineries and chemicals. As resource development continues in the 1990s, resource-based manufacturing will grow in the western and Atlantic provinces. The western provinces now account for a significant and growing proportion of the metal-fabricating and machinery output. The CMA strongly supported the free trade agreement proposed by the Mulroney government, arguing that it will create significant investment and employment opportunities for Canadian manufacturers.
Author LAURENT J. THIBAULT
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