Thank you and good afternoon.
It is my pleasure to be here on behalf of Canada’s 90,000 manufacturers and exporters and our association's 2,500 direct members to discuss the state of our supply chain.
Just to recap, Canada's manufacturing industry represents about 10% of our GDP and about two-thirds of our value-added exports. It employs about 1.7 million people in well-paying jobs across Canada. Our association represents companies of all sizes from all regions and all industrial sectors.
CME has long been an advocate for addressing manufacturers’ supply chain problems. We were at Minister Alghabra’s supply chain summit and we continue to engage across Canada. We are very concerned about the state of Canada’s supply chains, particularly manufacturing supply chains.
In March, we conducted a survey of manufacturers on their problems related to the supply chains. It confirmed what we've been hearing on the ground for months, which is that nine out of 10 manufacturers are encountering supply chain issues, with 60% rating them as severe or major.
As a result, they've lost about $10.5 billion in sales through delays and lost contracts. Eight out of 10 have been forced to increase their prices. Less than 20% have planned on moving their sourcing into Canada in response to disruptions because there are no Canadian suppliers. About 44% said there are no Canadian suppliers. Because of a lack of availability and cost of labour, just 28% of manufacturers said they would likely relocate or even scale up production in Canada to mitigate supply chains. Finally, most manufacturers across Canada think that these disruptions will not end until some time in 2023 or even as late as 2024.
To sum up, the supply chain crisis touches every part of manufacturing, all kinds of products, all kinds of materials and all kinds of ingredients. There's no end in sight. Simply put, it's holding back our recovery and the recovery of the whole economy.
We have some ideas. We know that some of Canada's supply chain problems are beyond our control. We can't magically end everything that happened as a result of the COVID-19 pandemic. We can't end China's zero-COVID policies, which are driving the disruptions to the supply chains over and over again.
That said, most of these are things I mentioned about the survey we can probably address ourselves. I know the federal government and the committee understand this, but we need to take more action to address it.
The supply chain summit that was convened in January as a forum for stakeholders was a great step, but we need action. Here are some solutions that we can suggest.
First, in the short term, we need to provide assistance to manufacturing companies that are still feeling these supply chain disruptions. It doesn't get a lot of press, but because our manufacturing companies are, on average, smaller than our global peers, we are lower on the priority list when it comes to getting short supply parts like microchips. We need to correct for this uniquely Canadian problem by bridging manufacturers through these shortages.
Second, we really have to work on Buy America and other protectionist actions. We know our government and our diplomatic core are hard at work mitigating the protectionist tendencies of the current administration in the U.S. We have to keep up the pressure, as business and government together. We need to approach this as “buy North America”, not Buy America. It's one way for us to continue to be part of its supply chain and help shorten its supply chain.
Third, we have to plug our labour shortages through immigration. Pandemic backlogs really have to be addressed. We encourage the government to dedicate every resource it can to do it. In time, we need to aggressively increase our intake targets to at least 500,000 people per year in the economic stream alone because we need those workers. There are shortages in every aspect of our economy, but certainly in manufacturing.
In the long term, we think we need to have a manufacturing strategy for Canada that maps out our supply chains. As the pandemic showed when manufacturers retooled their operations to produce PPE, we have a very limited knowledge of our own supply chains in Canada. The government is best suited to undertake this mapping project, so we can identify and remedy the weaknesses we have.
We must make sure, as others have said much more eloquently than I, that our transportation infrastructure is protected from disruptions. Blockades and labour disruptions do massive damage to the manufacturing supply chains, but more importantly, they tarnish our reputation abroad, especially with our biggest trading partner. Canada loses every time these happen. These are goals that we're scoring on our own net.
We need to speed up investments in critical trade infrastructure projects, like the ports, the rail and the borders. We have to better leverage government procurement in the areas to support these supply chains. Budget 2022 announced some positive steps. However, we're going to need to spend more aggressively if we're going to catch up with our peers.
Fourth, we need to provide more support to help manufacturers accelerate the adoption of automation technologies. Why am I saying that? By increasing our competitiveness and our scale we can produce more products here and reduce our reliance on foreign suppliers.
In conclusion, we're very worried about the state of the supply chain. The scale of the problem our industry faces requires immediate and bold action. We're committed on behalf of our members to work with the government, and I believe the solutions are a good place to start.
Thank you for allowing us to speak here today and for inviting us to be part of this really important study.