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Economy, Manufacturing

Canadian manufacturing, manufacturing output, Canadian economy, international competitiveness, consumer spending

Manufacturing is a key component of the Canadian economy, employing 15.3 percent of the country’s workforce and accounting for 19 percent of the GDP and 57.5 percent of goods exported. Manufacturing supports many other sectors of the economy by purchasing their outputs and supplying them with products. Manufacturing is highly sensitive to broader economic trends, especially changes in the level of consumer spending. For example, manufacturing output shrank and the workforce declined by 400,000 jobs or 20 percent during the recession of the early 1990s. Since then output has rebounded, but the number of jobs has grown more slowly.

Early manufacturing in Canada, before the mid-19th century, was localized and was in support of resource production. Boats were built in Atlantic Canada, for example, and farm machinery in southern Ontario. Modern industrialization, in the form of mass production, began on a small scale in mid-19th-century Montreal and gathered momentum in the 1870s. Canadian manufacturing was spurred by rapidly increasing resource production, the introduction of electrical generating capacity, population expansion, and the two world wars. The greatest growth in facilities and output, however, occurred after World War II (1939-1945) as consumer spending increased and most countries reduced their tariffs.

In the late 1990s Canada’s manufacturing sector was in the midst of profound technological change. Investment in machinery and equipment was increasing: Some C$14 billion was invested in 1995, C$3.6 billion in the paper industry alone. This was a marked improvement over the previous few years and was seen as a further indicator of economic recovery. The introduction of new, more advanced machines was expected to improve productivity and reduce the number of workers in the manufacturing sector. The tradeoffs between international competitiveness and employment were the cause of much concern, especially for the labor movement. The impact of the North American Free Trade Agreement (NAFTA), which eliminated tariffs among Canada, the United States, and Mexico as of 1994, was also a matter of much debate. Many Canadians believed that tariff-free access to a larger market was a positive development, while others worried that it might cause American investment, and the branch plants associated with it, to shift southward to Mexico, where wages and other production costs were lower.

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