The Future of Manufacturing - Reading and Watching List

At 1PM today I am doing a chat on "The Future of Manufacturing in Canada", which my former students know is a favourite issue of mine.  You can access the chat here. Hope you all can make it!

I am certain I'll be referencing a number of reports and resources in the chat.  In the interest of having them all in one place, I have decided to link to them here.  I will be adding to this list from time to time.

 Ivey's Lawrence Centre held a Transportation Policy Workshop in 2008 which addressed the issue of infrastructure and trade.   The background materials are particularly useful.  A number of recommendations came out of the workshop - a summarized press release (PDF) is available here and a longer report (PDF) is available here.  One particularly interesting point: 48% of Canadian exports and 69% of Canadian imports to the U.S. cross the border through Ontario, which illustrates the importance of trade to the province.

A number of my Ivey colleagues are doing fascinating research on regulatory issues and regulatory risk.  Guy Holburn discusses regulatory issues in the electricity market in this video:

 

Another colleague, David Sparling, discusses challenges faced by the food processing industry in Canada:

 

A big issue is manufacturing is regulatory harmonization.  I discuss the issue of Hazard Communication regulations around the world in this video from a year ago:

 

(As an aside, I'm *very* glad I've taken media training since this video.  Ouch)

The chat is part of a larger series at the Globe: Remade in Canada.  In particular, I recommend: Canadians score lower on risk tolerance and What government can do to help Canadian manufacturers excel globally. In the latter we asked a number of manufacturers with either ties to Ivey and/or are clients of Nexreg what the government can do to assist the manufacturing sector in Canada.  One issue that comes up again and again is the high and fluctuating loonie, which is an issue, unfortunately, that the government can do very little about. 

Guy Holburn sent along some excerpts from the research his group is doing on location decisions for solar manufacturing.  Here are some of the key points:

In order to empirically assess the ability of the government to stimulate investment in Ontario’s solar PV sector, we conducted two online surveys in September and October of 2008. The objective of the surveys was to quantify private sector opinions about the attractiveness of Ontario as a location for investment in solar PV energy. The first survey (termed the ‘Developer survey’) was sent to 12 developers, utilities, and independent power producers active in the Ontario or Canadian solar PV markets. The second survey (the ‘Manufacturer survey’) was sent to 36 technology manufacturers of solar PV and wind power equipment. Firms were selected on the basis of at least one of the following three criteria: 1) member of the Canadian Solar Industries Association or Canadian Wind Energy Association; 2) recipient of a solar PV PPA in Ontario; 3) technology manufacturer for solar or wind energy industry. For the Developer survey, we received eight complete responses, equating to a response rate of 67%. For the Manufacturer survey, we received 15 responses in total, equating to a response rate of 42%. While the number of companies surveyed, and who responded, are limited, this reflects the fact that the Canadian solar PV developer and renewable energy manufacturer markets are comparatively small. Accordingly, we are cautious in our interpretation of the survey results.

We asked firms two questions that provide the data for our discussion here: first, to score the level of importance of 17 different factors in their decision to invest in a particular jurisdiction; and second, to score their assessment of these factors in Ontario. The 17 factors consist of specific aspects of (1) the operational environment, (2) regulatory policies for solar energy, and (3) regulatory governance

 b. Technology manufacturer survey

 i.                    Factors affecting the attractiveness of jurisdictions for technology manufacturers

Consistent with the results from the Developer survey, technology manufacturers also ranked regulatory policy factors, on average, as being more important in their location choice decisions than operational environment factors (see Table 3). Two of the top 3 importance factors (Table 5) are concerned with the regulatory environment – “Stability of public policy for renewable energy generation” (3^rd ) and “Presence of a hard long-term government target for renewable energy capacity” (=1^st). This suggests that technology manufacturers are sophisticated in their analysis of alternative markets since they are just as concerned with the policy environment downstream in the supply-chain – i.e. for their potential customers, renewable energy developers and generators – as they are with the magnitude of manufacturing incentives which they would directly benefit from. Unstable and unpredictable policy for renewable power generation thus appears to deter not just investment by developers but also by technology manufacturers.

Also of significance is the relatively low importance score received by “Local content requirements for developers”. Although governments in both Quebec and Ontario have imposed local content requirements for green energy developers, the results here suggest that such policies may well not jumpstart provincial investment by manufacturers, especially if there are fundamental weaknesses on more important dimensions, such as regulatory credibility. If manufacturers failed to invest in the province then a local content requirement would actually have a negative impact on developer investment decisions – making it harder for the government to achieve its green energy objectives.

 ii.                  Attractiveness of Ontario as a jurisdiction for technology manufacturers

The survey results did not reveal large differences in how Ontario performs on each factor (Table 5). Most scores were on average close to a value of ‘3’, implying that Ontario rates as a relatively typical jurisdiction in terms of attractiveness from a manufacturer’s perspective, However, we note that “Stability of public policy for generation” and “Presence of a hard long-term government target” ranked amongst the lowest performing dimensions in Ontario, again standing in stark contrast to the substantial weight manufacturers place on these factors when making location decisions.

 

Comments

[Mark]

Just read the chat dialogue. Quality questions and quality answers. thanks!

[Widget]

Reminds me of Onion article: 'Economists Gently Suggest American Manufacturing Maybe Start Again With Something Simple Like A Ball' http://www.theonion.com/articles/economists-gently-suggest-american-manufacturing-m,20529/

[btg]

"One issue that comes up again and again is the high and fluctuating loonie, which is an issue, unfortunately, that the government can do very little about"

I would disagree - the high and fluctuating loony is mainly because of energy exports, and the fluctating price of oil. our albertan PM obviously is quite happy to see us become even more dependent on energy exports.

the bank of canada could act to do something about this by printing money and buying foreign currency/bonds - but they are far more paranoid about inflation than i am. similarly, if we had large sovereign wealth funds, instead of the puny alberta heritage funds, then they could offset some of the high oil revenue by simulateously making investments outside of canada - selling $Canadian in effect to buy assets.