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Why manufacturing hasn’t returned to Canada

A new report from RBC Economics says that although pandemic disruptions led to growing calls to bring some manufacturing back to Canada – a process known as reshoring – “there’s little evidence of supply chains returning to Canadian soil.” The report by senior economist Josh Nye said that factory construction fell to a decade low in Canada, and that domestic production is only surpassing imports in areas in which Canada is already a dominant player.

The Public Policy Forum’s Sean Speer says if Canada wants to get serious about reshoring, governments will have to use policy tools to bring manufacturing back within our borders.

“A reshoring agenda can’t be passive. If left to its own devices, the market will continue to push production to lower cost jurisdictions,” Speer said.

“It’s going to require action on the part of Ottawa and the provinces if that’s something we want, and I happen to think it’s something we should be pursuing.”

If you have any policy-related questions, or feedback about the show, please email alicja@yahoofinance.com.

Video Transcript

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ALICJA SIEKIERSKA: And so, Sean, what do you think it says that as we're in this post-pandemic recovery, we talk so much about global supply chains and building that resiliency, bringing things home, that we seem to be-- that not much has changed so far?

SEAN SPEER: Yeah, it's such an important topic. I'm glad we get to talk about it here today, Alicja. You know, I think it's important to start from a clear understanding of why these domestic productive capacities have left in the first place. These weren't cases of markets malfunctioning. They were a case of markets doing precisely what markets do, which is to allocate investment and production in the most efficient way.

And so a reshoring agenda can't be passive. If left to its own devices, the market will continue to push that kind of production to lower cost jurisdictions. If, in effect, we decide collectively that there are certain types of production, including, as you said, vaccine production, that we want within our borders for strategic reasons or out of a sense of national interest, it's going to require the use of policy levers to push and prod the market to produce that outcome.

And, you know-- and so we haven't really-- we've seen rhetoric from politicians, including the Ontario government, about the need for reshoring, but that hasn't been matched with much of a policy agenda. And so I'm not surprised that we haven't seen a significant change in domestic production. You know, it's going to require action on the part of Ottawa and the provinces if that's something that we want. And I happen to think it's something we should be pursuing.

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