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A National Manufacturing Policy for Canada

Posted on September 18, 2013

Summary

MfgDocSummaryA prosperous Canada needs its workforce to be fully employed in clean, stimulating, safe, well-paying long-term jobs in successful businesses that compete and win on a global scale. A key element to achieving this is an efficient, vigorous and growing manufacturing sector.

This document puts forth a set of bold policies and strategies that will reverse the decline of manufacturing in Canada and transform manufacturing into a major and sustainable element of our economy’s growth.

These are the key elements of the Liberal National Manufacturing Strategy For Canada:

Confidence. A much more ambitious manufacturing sector will be created that has the ability to confidently compete and win against the best, anywhere in the world
Predictability. Stability.  Businesses will have a predictable set of government support initiatives that span years, rather than short government budget cycles
Knowledge. Step-function improvements will be made in the skills of all sectors of the manufacturing workforce including management, administration, supervisors and direct labour. Canada will be transformed from a follower to a recognized leader in all aspects of advanced manufacturing.
Modernization. Fundamental and sustainable modernization throughout the  manufacturing sector will be made in processes, tooling, business practices, facilities, and human resources
Fairness. Arbitrarily applied, short-term, grant programs will be replaced with long-term support available to all businesses based on sensible tax policies
Efficiency. Business overhead costs associated with government programs will be significantly reduced through crystal-clear eligibility criteria and simplified (but auditable and enforceable) reporting
Flexibility These policies will enable manufacturers to easily adapt to regional differences without government intervention.

Background

MfgDocBackgroundConservative government policies have led to a manufacturing sector that is much less competitive than it should be if proper, well thought-out, policies were in place.

The Conservative government assumes that Canadian industry is fundamentally uncompetitive. A thorough understanding of the current state of the manufacturing sector and the effect of Conservative policies is important to the creation of new policies.

 

Manufacturing is vital. Manufacturing-based economies consistently show the most growth and the best employment rates for their population (e.g. Germany, Korea).
Canadian manufacturing is declining.  Current government support initiatives hinder expansion because they are grant-based and tied to short term government budget cycles. Businesses require longer, more predictable, planning horizons.
Conservative policies have led to this decline. The Conservative government’s focus on natural resources has been at the expense of the broad manufacturing sector. For example, the so-called “Action Plan 2013” primarily shifts program funding back to the provinces and industry.Conservative government policies falsely assume that manufacturing costs in low wage economies put Canadian manufacturing at an insurmountable disadvantage.  Such assumptions are simplistic and misleading.
Labour costs are only one factor that affects manufacturing costs. Several factors contribute to low manufacturing costs in low wage-rate countries:

  • very modern and well-managed, factories that minimize waste;
  • very high volume production;
  • modern, newly-developed local infrastructure;
  • products that have been very carefully designed for highly efficient, high-yield, low labour-content, assembly.
Labour costs are often a relatively small manufacturing cost.  In high-tech manufacturing, direct labour costs can be under 8% of total product cost.
We can compete on raw material costs. In many cases raw materials such as plastic resins, steel, and electronic components are commodities and can be purchased at the same costs –in volume– in most places in the world.
Manufacturing requires strong R&D Competitive manufacturing requires high quality, high-yield products that are designed with the minimum of manufacturing steps, the most advanced assembly processes, the optimal materials and the least supply chain costs. Without continuous innovation, Canadian manufactures will not be able to compete.
Supply chain factors are key. Movement of raw materials and finished goods is expensive and operationally complicated.Some companies are beginning to recognize this through the ‘re-shoring’ of production because supply chain savings can offset higher wage rates.Canada’s access to key raw materials and proximity to key markets is an underexploited competitive advantage.
Success requires a global focus A significant portion of Canadian manufacturers’ primary markets are in North America. Consequently, manufacturing management and engineering resources in many organizations have not been exposed to the best global manufacturing and supply chain practices.

Policy Directions

MfgDocPolicyDirections

Policy:

A Liberal Government will:

Establish a long-term, predictable planning horizon for industry
  • Implement a ten year manufacturing plan that will provide stability and predictability for business and industry to make multi-year investments in research, product development, plant modernization, job creation and expansion of markets in Canada and around the world.
  • Replace high-overhead, uncertain, short term award programs with long term programs based on tax credits.
  • Establish targets for job creation, quality of work environment, fairness of salaries and wages and the growth of exports.
Create the world’s most modern manufacturing facilities 
  • Provide accelerated capital cost allowances on capital equipment for plant modernization and related business process improvements from the outside wall in. The objective is to create the most efficient, cost-effective, high-yield manufacturing facilities in the world.
Create an unique global manufacturing secondment program
  • Create incentives for management, supervisory, and technical staff to have extended internships at the best factories and plants throughout in the world through an innovative “manufacturing secondment” program.
  • This program would enable key manufacturing decision-makers to work for 6-12 months in advanced manufacturing businesses in other countries. This will expose Canadian decision-makers to new practices and increase their focus on global opportunities.
  • Government would fund and facilitate the organizational components of the plan. Business and Industry would pay the salaries and travel costs of the secondments and would be incentivized through tax-credits.

 

Policy

A Liberal Government will:

Make Research and Development  central to the renewal of Canadian manufacturing
  • Provide SR&ED (Scientific Research and Experimental Development) tax credits for research and development that explicitly includes manufacturing operational and process advances that can be carried forward against future profits.
  • Establish four university-based National Centres of Advanced Manufacturing across Canada that focus on research in advancing all aspects of manufacturing.
  • use these centres to attract the best manufacturing minds in the world and to train the best manufacturing experts in the world
Minimize business overheads. Free  businesses to make their own decisions
  • Implement tax credit based programs to replace grant-based programs. This will ensure all businesses are able to qualify for programs through the establishment of clear qualification rules for government programs and incentives. Benefits of this policy include:
    • businesses will be able to choose the risks they wish to take without the arbitrary constraints of grant-based programs.
    • reduced overhead for those applying for the programs.
    • reduced government bureaucracy
    • potential for patronage will be eliminated associated with grant-based incentives.
Protect taxpayers money through simple, transparent processes
  • Use Canada Revenue Agency audits to ensure that the tax credit claims have followed the established rules. This provides accountability to the tax payer for the use of government funds.
  • Conduct biennial policy reviews to validate that burden on business and industry has been minimized and policy goals have been achieved in a measureable, accountable way.

 

Policy

A Liberal Government will:

Create the world’s best manufacturing workforce
  • Coordinate skills development at all levels of government through:
    • Work with Provincial and Territorial Governments, Manufacturing and Business organizations to identify short and long term labour, training and skill requirements and adjust programs to meet these needs.
  • Fund programs that provided academic upgrading to the grade 12 levels and specific skill training to meet current need of the employment market.
  • Modernization and streamlining of apprenticeship and skills training
  • Ensure that foreign professional and skills/trades qualifications can be quickly assessed prior to immigration and ensure adequate and efficient upgrade processes are in place when they arrive in Canada.


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The Policy

WHEREAS a prosperous and competitive Canada now needs a world-class innovative manufacturing strategy to develop products for global demand and provide well-paying, long-term jobs in successful businesses;

WHEREAS this strategy should provide all new and existing manufacturers with predictable government support that spans years and enables them to adapt to regional differences without the need for selective grants based upon effective tax policies, clear eligibility criteria, simplified auditing, and enforceable reporting;

WHEREAS competitive manufacturing requires high quality, high-yield products, designed with; innovative Research Development; minimum manufacturing steps, advanced assembly processes, optimal materials and the lowest supply chain costs, thus, this strategy must focus upon the best global manufacturing and supply chain practices;

BE IT RESOLVED THAT a Liberal government will establish a long-term, predictable planning policy creating; the world’s most modern manufacturing facilities, a unique global Manufacturing Secondment Program and, university-based National Centres of Advanced Manufacturing; (The Policy in Full is attached)

BE IT FURTHER RESOLVED THAT a Liberal government will make Research and Development central to the renewal of Canadian manufacturing and will minimize business costs while protecting taxpayers’ money through transparent processes using the Canada Revenue Agency to ensure tax credit compliance;

BE IT FURTHER RESOLVED THAT a Liberal government will create the world’s best manufacturing workforce by; coordinating skills development with all levels of government, streamlining apprenticeships and skills training and, simplifying foreign professional and skills/trades qualification to be quickly assessed prior to immigration or effectively upgraded in Canada.