Subsidies no solution

The Ontario economy remains in a perfect storm.
Yesterday, auto suppliers asked the provincial government for an aid package of $400 million. Last year, the McGuinty government offered a 14 percent reduction in hydro costs to Ontario’s manufacturing industries.
That was in addition to $220 million given to offset the forest industry’s cost of building and maintaining roads, and the $350 million in loan guarantees to it.
While the forest aid packages have been put in place, the U.S. economy and housing market have been in a downhill slide for the past 12 months, with housing prices dropping and advertising lineage declining.
This again has led to shutdowns of sawmills and paper mills across Northern Ontario. Few forestry companies have the resources to find the matching funds to reduce their costs through technology improvements.
We have seen the consolidation of Abitibi and Bowater. Other consolidation will take place in the industry—and with that will come the additional closing of mills across Canada and the U.S. as the paper industry rationalizes demand and supply.
The bright spot in the industry are paper sales to developing nations. However, the growth in those sales is not keeping up with the decline in North America.
In the auto manufacturing industry, the loss of market share by the traditional “big three” is reverberating through industry suppliers. The auto manufacturers have spent millions on plants in Canada, making them the most modern in North America generating savings.
But that, in itself, has not been enough to maintain market share.
At the same time, the rise of the Canadian dollar vis-à-vis the U.S. greenback has Canadian consumers jumping for joy at their increased buying power on goods purchased from U.S., Chinese, Indian, Malaysian, and Vietnamese manufacturers.
Those countries now set the price for most consumer products sold in North America. North Americans, turning to those Far East countries for goods, are spelling the doom to their own home-grown manufacturing plants.
The global business world is changing. The new big consuming markets are China and India, and expanding trade with those countries will become more important to Canadians.
But to trade successfully, Canadian industry must develop and use technology to increase productivity while reducing manufacturing costs. Modernizing and technological advances to increase productivity also will retain customers in North America.
Loans or aid to manufacturing and forestry industries must be tied to enhancing manufacturing, not subsidizing it.