Canada Seen Slipping in Global Supply Chains

(Globe & Mail via CSCB)

Canadian businesses are falling behind on participation in the global supply chains that are becoming key drivers of international trade and national economies, a new report from the Conference Board of Canada says.

The Conference Board study found Canadian businesses did a generally good job of integrating into the continental economy in the 1990s under the North American free-trade agreement, but supply chain participation has stagnated since. The performance is even worse with the rest of the world, the 20-page report “Stuck in Neutral” says, finding that Canada has mostly failed to take advantage of the quickly expanding economies in Asia and South America.

Although volumes of commodity exports to Asia have accelerated in recent years, Canada's share in the faster-growing “parts and final goods” segments of the production chain to the region have fallen back since 2000.

“This suggests that Canada may not have been taking sufficient advantage of opportunities to supply inputs into Asian supply chains, despite the rapid growth in this region post-2000,” the report concludes.

Report authors Danielle Goldfarb and Doris Chu explain that supply chains are the result of splicing the development, production and assembly of any product into tiny segments that could emanate from many different countries. They cite Toronto-based Samco Machinery Ltd. supplying India's Tata Motors with steel-bending machines for the new Nano car as entering the supply chain at an early or medium stage.

The Conference Board concludes that Canada is falling behind in integrating into global chains, particularly the fastest-growing chains in Asia, and that the failure will have implications on the country's future prosperity.

“Canadian leaders need to do a better job of seizing opportunities, adapting to rapid change and attracting high-value mobile activities,” the authors write.

Related: The Conference Board report (subscription required).