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INDU Committee Report

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CONCLUSION

The third millennium ushered in a new era of remarkable economic growth, with world economic activity persistently growing at an unprecedented fast pace. China and India have been a large part of the story behind this outstanding world economic performance, as their resource-thirsty economies have boosted worldwide demand for energy and base metals beyond existing supply capacities. This imbalance has set off energy and metal prices on upward trajectories not seen since the commodities boom of the 1970s. For Canada, a commodity export country, rising primary commodity prices have been accompanied by a relentless appreciation of the Canadian dollar which, despite growing demand for manufactured goods, immediately drove down the competitiveness of Canadian manufacturers relative to their foreign rivals. Indeed, the challenges posed by a soaring dollar, spiralling energy prices and intense competition from China on the Canadian manufacturing sector have been called "The Perfect Storm".

Canada is witnessing, not a cyclical change in its economy that will reverse itself sometime soon, but a long-term structural change favouring both the resources and the services sectors at the expense of the manufacturing sector. The economic data indicate that manufacturing shipments plummeted and remained depressed for three years (i.e., 2001 through 2003), taking with them manufacturing sector profits and labour productivity. Subsectors hit particularly hard by these economic shocks are those with a high exposure to trade and international competition: forest products, particularly pulp and paper, textiles, apparel, transportation equipment, particularly automobiles and shipbuilding, chemicals and consumer products to name but a few.

Only after considerable industrial restructuring that included product rationalization, numerous plant shutdowns and closings, and considerable job shedding has the Canadian manufacturing sector been able to stabilize its competitiveness with foreign rivals. Given these actions, Canadian manufacturing shipments in 2005, valued at $611.5 billion, were at its highest level ever, but even still profitability has not yet returned to the sector. Moreover, measured in terms of employment, the Canadian manufacturing sector in 2006 is nine-tenths its size in 2001.

New government policies are required to respond to the challenges of the manufacturing sector. This report offers 22 specific recommendations to the Government of Canada on how it can help the sector adapt to the challenges it is facing. Indeed, the Committee is convinced that the adoption and implementation of these recommendations, within the framework of an industrial strategy, will help revitalize Canada 's manufacturing sector, making it more resilient and competitive for the benefit of all Canadians. The Committee also emphasizes that urgent action on the part of the Government of Canada is required, and that preserving a competitive manufacturing sector in Canada should be a national goal.