Thank you very much, Mr. Chair. Thank you, everyone, for the invitation to speak to you today.
Canada needs manufacturing as a strategic economic sector because, as an advanced country, we need to create and produce things. The ability to create new value is a key indicator of the technological progress of a country. More important, manufacturing has an enormous ripple effect on the other industries, especially transportation, finance, trade, and services, which employ large proportions of our society.
As we have also seen in the United States, Canada's manufacturing sector has dropped in the last 20 years from 25% of the nation's GDP to 10% today, mainly due to external forces, and most significantly because of globalization. We did not anticipate how quickly global competitors would be able to build up the infrastructure to compete on pricing and delivery. In the mix, business is facing growing challenges, including electricity pricing, pension programs, and environmental policies such as cap and trade.
Regardless of the source of challenges, it is no longer enough to develop new products; we need to also develop new markets.
The future lies in high-value production, embedding cutting-edge technology in our products. In an era of clean energy technologies, self-driving cars, and digital infrastructure, Canada can define its place in the global marketplace through quality, safety, and dependability. Above all, we need a continuum of resources and infrastructure to enable Canadians to design, make, and market new products. This will require a coordinated effort, a national effort across education, infrastructure, procurement, and trade policy. What can Canada's universities do to help?
First, education's impact is direct. We need to develop a real talent pipeline for high-level skills and creativity, so our students are equipped to impact the world from the day they graduate, or sooner.
At Waterloo, for example, all 12 of our engineering programs are co-op, so every student graduates with at least 20 months of hands-on work experience. In 2015, our students earned $120 million, working with 1,700 employers. Where our students work also indicates the dynamism of the sector. Every year about one-quarter of the 8,200 positions are in manufacturing, providing continual injection of new ideas and energy. Meanwhile, our students become experienced, job-ready engineers. Their employment rate post-graduation is over 95%.
Skills and education must reach further than just students and entry-level workers, however. The pace of technology innovation and adoption is ever accelerating. Existing workers and management in both SMEs and major industry need opportunities to explore new ideas and retool for new skills. We need an initiative that would allow industries into our education and research programs so that they can get hands-on experience of new technologies for themselves—a reverse co-op model, of a sort.
As Harvard business professor Michael Porter has stated, “innovation is the central issue in economic prosperity”, and the competitiveness of a country is directly tied to the ability of its industrial complex to “innovate and upgrade”.
To make this a reality, academia needs to engage more effectively with the manufacturing sector. Universities have already begun to do so. Half of Waterloo engineering research, for example, is funded via partnership programs. We have over 1,000 private sector partners, and we have translated hundreds of new technologies to industry.
While successful and important, however, these projects cannot transform private sector R and D by themselves. Many are funded for a limited duration, for work with a single partner toward a particular objective. Opportunities for networking and wider collaboration are restricted. On the other hand, funding for more ambitious programs can take years to assemble, making partners reluctant to invest and leading to missed opportunities.
In contrast, some of the most successful initiatives are much broader and more inclusive. We have a number of research centres, but I will use the automotive area as an example, since it is the most organized in the field of manufacturing.
The Waterloo Centre for Automotive Research, or WatCAR, has grown to become Canada's largest automotive academic enterprise. It acts as a magnet not just for car manufacturers like GM, Magna, Ford, Toyota, and Honda, but also for assemblers, parts suppliers, and regulators. With programs in connected and autonomous vehicles, lightweight materials, vehicle safety, green energy, and more, it allows all partners, big and small, to access a spectrum of expertise and know-how to help them adapt for tomorrow's automotive sector.
The upfront costs of development in producing a new product or manufacturing processes are large. Equipment can be highly specialized, and validation and certification expensive. This is a huge barrier for small business and it's why large corporations like BlackBerry, Bombardier, and Magna dominate R and D in Canada. Nevertheless, more than 95% of Canada's manufacturing firms are SMEs. They will need to adapt and innovate. We need to create innovation anchors, and also hubs like WatCAR, for world-class product development and validation where research infrastructure and expertise are open to all Canadian companies. These centres can be test beds for developing new platform technologies that are adapted for partners' needs. They welcome established technicians, engineers, regulators, and managers looking to explore and practice state-of-the-art technologies.
Innovation hubs should bring everyone to the table for networking, exchanging ideas, and seizing opportunities for integration and collaboration for large corporations that can invest strategically in Canada, SMEs that need to innovate and secure new customers, startups and entrepreneurs looking to scale up, regulators and the public sector seeking insight into tomorrow's industries and products, and researchers and students looking for new challenges with a real-world impact. Government can play a crucial role by seeding this kind of innovation.
We, as a country, cannot excel in everything, but some platform technologies will be vital for protecting Canadian companies and jobs in the global marketplace. Examples include advanced sensing and digital manufacturing, sustainable materials, flexible electronics, and the visualization and computational modelling of manufacturing processes. Autonomous vehicles and connected cars will revolutionize our established automotive and transportation sectors.
I'd like to quickly highlight two newcomers.
Mobile and autonomous robotics are expanding rapidly. McKinsey estimates the market will be worth $200 billion within 10 years. In Waterloo, mechatronics research has spawned some of the country’s most promising new robotics companies. Clearpath Robotics and Aeryon Labs, for example, have created hundreds of jobs in just a few years of operation. Aeryon drones helped firefighters scout the recent forest fires in Alberta, and Clearpath is expanding into industrial markets with their autonomous warehouse robots. They are investing in research to build a new generation of products, and they're being joined by many start-up companies in an emerging robotics innovation cluster.
Additive manufacturing and 3D printing meanwhile are just approaching the mainstream. International companies like EOS, GE Aviation, Rio Tinto, and Rockwell are lining up to partner with Waterloo engineering on research and development. At least five other Canadian universities are developing this capability. In the years to come, hundreds, if not thousands, of SMEs will need to incorporate 3D printing into their workflow.
The innovation index of the World Intellectual Property Organization, or WIPO, shows Canada slipping from 11th place in 2013 to 16th place in 2015. Germany, and now the United States, is leading the way in merging information technologies on the Internet of things and manufacturing process technologies that drive the next generation manufacturing enterprises.
While there are pockets of strength within Canadian industry and academia, we need a big “I” consolidated national initiative. We need a strategy for developing, demonstrating, and deploying select platform technologies, so they can be accessible to SMEs and large Canadian companies for commercialization. This is a vision that the manufacturing sector has been seeking and one that universities like Waterloo are eager to embrace.
Thank you very much.