(first published in the Niagara Independent)

The Canadian manufacturing sector has been shrinking for some time. Manufacturing production volumes are currently at their lowest levels in over five years. Since 2018, manufacturing as a percentage of GDP declined by five per cent, while the comparable U.S. number increased by 10 per cent. This is important because the manufacturing sector in any country is a key source of innovation, productivity and well-paid employment. In addition, the manufacturing sector and the energy sector are closely linked, especially in Canada. Many manufacturing companies in Eastern Canada are heavily dependent on the oil and gas sector for their success. Too many Canadians believe that if punitive policies are imposed on the oil and gas sector, that’s Alberta and Saskatchewan’s problem. In reality, it significantly affects the welfare of the entire country. 

Manufacturing used to represent about 20 per cent of Canada’s economy, whereas it now sits around 10 per cent. There are a number of reasons for this, including more intense international trade competition, different rates of technological adoption, the growth of the service sector and the differences in tax and regulatory burdens placed on manufacturers by different countries. The admission of China into the World Trade Organization (WTO) in 2001 is often in hindsight viewed as a huge mistake, as much manufacturing in Western countries went to lower-cost China, which does not observe the same environmental, human rights, fair wage and other policies of Western nations. China also abuses intellectual property rights, dumps good into Canada at unreasonably low prices, does not abide by WTO trade rules and interferes in the elections and other elements of other countries, notably Canada. Our government’s recent moves to bring us closer to China is a mistake for our manufacturing sector and our economy in general, not to mention our sovereignty.  

Much of the decline in manufacturing in Ontario and some other provinces can be linked to the so-called green policies that drastically increased the cost of electricity. Manufacturers are big consumers of electricity and were made much more uncompetitive by these foolish policies. The industrial carbon tax and methane regulations will fall heavily on the manufacturing sector as well as the energy sector, the two most productive sectors of the Canadian economy. It is clear that Canada has a serious productivity problem. To impose an onerous industrial carbon tax on the two sectors that most contribute to our productivity – which is a proxy for our standard of living – is ridiculous. Once again, our businesses are being asked to compete with one hand tied behind their backs as their foreign competitors do not face similar taxes and regulatory constraints. 

When considering what policies would move Canada out of the economic doldrums it currently occupies, increasing energy exports is the best solution. More oil and gas exports would boost manufacturing as the sectors are so closely linked. Building pipelines and other infrastructure to enable increasing energy exports can and should be done in Canada. Unfortunately, some recent energy projects have helped foreign manufacturers more than our own. The Kitimat LNG plant, for example, used modules from China in its first phase, and is slated to use modules from Korea in its second phase. Many of our manufacturing companies have said they would be capable of providing infrastructure for these projects but were never given the opportunity. Even though the Liberal government constantly says it is buying Canadian, its actions suggest otherwise. 

The Liberal government has put much attention on Bill C-5, which permits the government to selectively override various pieces of legislation, supposedly to fast-track major projects. What this bill effectively concedes is that these laws are bad and must be overridden to get anything done. So why not get rid of the bad laws completely? The fact they sit on the books further discourages foreign and domestic investment, which has been fleeing Canada for years. As well, C-5 also facilitates winner-picking by government, which has never been a viable strategy. Just look at the billions of tax dollars that have been wasted on the EV battery sector, at a time Canada has no money to waste. 

Many economists are saying Canada’s economy is in recession and that 2026 is going to be a very difficult year. The federal Liberal government claims to be looking for solutions that could quickly improve our economic prospects. One thing that manufacturers and other businesses are prioritizing is to obtain a trade deal with the U.S. as soon as possible. Implying Canada can significantly replace US trade with other countries is pure fiction. We should always be seeking to diversify our trading relationships. But pretending that we will be able to replace the U.S. as our largest trading partner is just lying to Canadians for Liberal partisan political gain to whip up Canadians’ dislike of President Trump. 

Meanwhile, Canadian businesses and workers suffer, losing jobs and going out of business or moving out of Canada. Uncompetitive conditions in the Canadian economy have driven many manufacturers out of Canada long before Trump came along. Once a country loses its manufacturing sector, it doesn’t come back for a very long time, if ever. Canada badly needs to change direction and rebuild the health of our vital manufacturing sector before it is too late.

Catherine Swift

Catherine Swift is President of the Coalition of Concerned Manufacturers & Businesses of Canada (CCMBC). She was previously President of Working Canadians from 2015-2021 & President & CEO of the Canadian Federation of Independent Business (CFIB) from 1995-2014. She was Chief Economist of the CFIB from 1987-1995, Senior Economist with TD Bank from 1983-1987 & held several positions with the federal government from 1976-1983.

She has published numerous articles in journals, magazines & other media on issues such as free trade, finance, entrepreneurship & women business owners. Ms. Swift is a past President of the Empire Club of Canada, a former Director of the CD Howe Institute, the Canadian Youth Business Foundation, SOS Children’s Villages, past President of the International Small Business Congress and current Director of the Fraser Institute. She was cited in 2003 & 2012 as one of the most powerful women in Canada by the Women’s Executive Network & is a recipient of the Queen’s Silver & Gold Jubilee medals.

She has an Honours BA and MA in Economics.

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