Thank you, Mr. Chair, and thanks to the committee for the invitation to appear before you to discuss manufacturing in Canada.
The committee is undertaking a very important and timely examination of the Canadian manufacturing sector.
We've prepared a document that was distributed to you, I believe. That document presents what we think are the essential statistics on recent developments in the Canadian manufacturing sector.
Since our reading is consistent with that of a number of witnesses you've heard in recent weeks, I'll be brief.
Essentially, as Mr. Chair was saying, the manufacturing sector has faced three major challenges: the sharp depreciation of the dollar that began over three years ago, an increase in commodity prices, particularly in energy and metals--and the two are not unrelated, as you've heard from previous witnesses--and finally, more competition from emerging economies, notably China.
Overall, it's fair to say that the sector has shown remarkable resilience in the face of these challenges. Total manufacturing output has continued to grow, thanks to very strong growth in world demand, and particularly strong U.S. demand. This said, manufacturing output has been growing more slowly than the rest of the economy and more slowly than its historical average.
Manufacturing employment, as you've heard before as well, has fallen by some 8% since December 2002, with a net loss of some 187,000 jobs. And losing one's job can be one of life's most disruptive and upsetting experiences. The only silver lining we can point to is that the economy has been creating employment in other sectors at quite a fast pace. Well over 900,000 new jobs have appeared since December 2002. That was about the point when the dollar started taking off. The majority of these jobs are in sectors such as construction, financial services, and resource industries, which pay wages that are just as high, or even higher, than manufacturing wages.
Having the right training and skills is vital for those who have lost manufacturing jobs and are looking for employment in these expanding sectors. I'm sure our colleagues from Human Resources and Social Development will have more to say to you about this critical ingredient on the people side of adjustment.
Some manufacturing industries have faced challenges on all three fronts: the higher dollar, higher energy costs, and competition from emerging economies. The pulp and paper sector is a case in point. Its production is priced in U.S. dollars, the market for pulp and paper is global, and the sector uses lots of energy and faces competition from Brazil and Indonesia, where wood fibre is fast-growing and thus cheaper.
Competition from emerging economies, notably China, has been the major long-term challenge for other industries. This is illustrated on the chart that you have on page 6 of the handout in front of you. Among the most exposed among those are textiles and clothing, leather, computers, and appliances.
Now, an indicator of financial health is profit margins, which we show on page 7 of the handout. Again, exposure to international trade seems to be the deciding factor in whether profit margins are normal or lower than normal, and the manufacturing industries most exposed to trade have experienced lower than normal profitability. In some cases, it has been much lower than historical norms. For their part, industries less exposed to international competition have fared quite well on the profit front.
Manufacturers have been adjusting to remain competitive, as other witnesses have pointed out to you. They have boosted their investments in machinery and equipment, and that is true across the manufacturing sector, with both trade- and domestic-oriented industries having increased their investments. That's shown on page 8 of your handout.
Manufacturing industries are leaders in labour productivity growth in Canada, as shown on page 9 of your handout. These two developments, investments and productivity growth, bode well for the competitiveness of Canadian manufacturers in the future.
So to sum up, manufacturing is undergoing a transformation and a very significant adjustment. Overall, it is demonstrating remarkable resilience and capacity to adapt. But some industries and manufacturers are faring less well, and we recognize that, and those are mostly industries that are facing competition from emerging markets, both in Canada and in their traditional export markets.
Finally, adjustment for workers has been eased somewhat by strong employment growth in other areas of the economy, and these new jobs, more often than not, are paying wages that are as high or higher than manufacturing wages.
I will stop here, thank you, and my colleague Sara and I will be happy to answer any questions you may have.