What Solutions exist to the manufacturing crisis in Ontario?By: Eric Li









http://www.youtube.com/watch?feature=player_embedded&v=vvDyHcSx3Nw

Introduction
For a long time, Manufacturing in Ontario has been a main economic contributor and source of economic prosperity. However, recently, in light of the recession Ontario’s manufacturing has declined in what people are calling a crisis. Our economy is facing tough competition from emerging markets with cheap labour forces, and a high Canadian dollar makes it harder to export it to other countries (this phenomenon is called the "Dutch Disease) (Whittington, 2007). From 2005-2010, Ontario has lost about three hundred thousand workers (Labour Market Information, 2012). This is a major Canadian issue because manufacturing has accounted for about 14% of Canada’s total economic output (Beaudoin, 2012).If this issue is not resolved soon, our nation could face a major economic and employment crisis.This wiki will delve further into the intriguing world of many different facets of Ontario's Manufacturing Crisis and what choices we have if we want to solve the problem.


manufacturing graph.jpeg
http://www.hrsdc.gc.ca/eng/workplaceskills/labour_market_information/bulletins/on/on-lmb-2011fall.pdf



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http://www.fin.gov.on.ca/en/budget/fallstatement/2007/images/annex1_chart2.gif

What is the overall issue and why is it a Canadian issue?
Ever since 2004, the Ontario's manufacturing sector has been declining. For years, manufacturing has provided over a million jobs in Ontario alone. Recently, this number has dwindled to become 781,100 jobs in 2010 (Labour Market Information, 2012). The main problem in Ontario's manufacturing crisis is the rising loonie. Because the value of our dollar has risen, exporting to other global countries has become more expensive, while importing materials has become cheaper. Due to the high purchasing rates, other countries will opt to buy from cheaper exporters such as India or China. The result is an effect called "Dutch Disease," which states that if a country finds a large amount of resources and sells them, their dollar value will rise, which will actually cause exports to become more pricey for other nations, thus reducing their industry output (Investopedia, 2012). Some think that the oil sands are to blame for this "outbreak" of Dutch Disease (Gollom,2012) is because of the Alberta oil sands raising the value of the dollar. Canada also faces tough competition from nations such as China and India where the products are being sold for a very low price. This is a major Canadian issue because if not resolved, this problem could cause huge unemployment throughout Canada as well as lower Canada's GDP.



The Stakeholders
There are many stakeholders in this issue. For example, a manufacturing business such as Bombardier Inc. is a stakeholder because they rely on sales from manufactured goods to make a good revenue. However, a high exchange rate makes this harder. Workers are also a stakeholder in this issue because they rely on their company to pay them and if their company cannot sell as many products, then they are in danger of being fired. The provincial and federal governments are stakeholders too because manufacturing is a important contributor to the economy and if it declines, the government will receive less money for their budgets. This will result in less funding for many government funded institutions (hospitals, public schools, libraries, etc.). More stakeholders are countries such as the USA that would like to purchase manufactured goods from Ontario, but cannot because of the high prices (in US dollars). Also, many emerging markets that sell cheap manufactured goods, such as India, China and Brazil are stakeholders because they have capitalized on the situation. Since the recession, emerging markets have contributed for two-thirds of the global economic growth (Carney, 2012).

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Even during the recession, the emerging markets have not declined as much as the advanced economies. http://www.voxeu.org/sites/default/files/image/FromMar2011/kose_fig1.gif

http://www.miraeasset.com/images/why-em/definition-of-emerging-markets/en/01.jpg
http://www.miraeasset.com/images/why-em/definition-of-emerging-markets/en/01.jpg





Advantages and Disadvantages
There are many advantages and disadvantages to this issue. Our exports would be harder to sell due to the high prices of buying, but our imports would be cheaper due to the high value of our dollar. An advantage is that buying international goods would be cheaper so you could make an investment in stocks, real estate, etc. and sell your investment if the dollar becomes lower (Borzykowski, 2010). However, in this case there are far more disadvantages that advantages. A big disadvantage is that our exports would be more expensive, therefore they would be bought less, and many workers would have to get fired because there would be insufficient funds to pay them. Many factories would have to close, which would also result in workers getting fired (Walkom, 2008). From 2004 to 2010, there have been around three hundred thousand workers who have lost their jobs as a result of this crisis (Labour Market Information, 2012). Due to this major job loss rate, the government will have to use more money to support these unemployed citizens and will have less money for other things, such as education, medical, and many more.

A high Canadian dollar makes exports to other countries more pricey. http://www.cbc.ca/news/pointofview/Loonie-parity-to-US-dollar.jpg
A high Canadian dollar makes exports to other countries more pricey. http://www.cbc.ca/news/pointofview/Loonie-parity-to-US-dollar.jpg


The Four Spheres of Issue Analysis
  • Economic - The economic problems that are caused by this issue are very severe. Canada's GDP will decrease significantly. Our economy will get worse and worse as time progresses and it will have a hard time recovering without internal and external support.
  • Environmental - The Canadian environment actually benefits from this crisis. This is because we are using less natural resources, burning less fuels, and making less goods, which is taxing on the environment. However, the environment in nations with emerging economies has gotten worse because they need to produce more manufactured goods to fill the hole made by the Canadian crisis.
  • Social - The main social problem that is caused by this issue is the unemployment rates. This crisis has caused Canada's unemployment rate to soar to a rate of 8.3%, an eleven year high (Human Resources and Skills Development Canada, 2012). The unemployed workers may have to move to another place or rely on the government to give them monthly support. However, the unemployment rate has declined to a 7.3% as of 2012 due to a job boom from March to April created over 140,000 jobs and 7,700 more jobs were created in May (Flavelle, 2012).
  • Political - A political problem caused by this crisis is that people will start to blame the government if the issue continues for a long time, and people might actually have a large protest. Also, many potential immigrants who are looking for jobs would choose not to come to Canada because of the current deficit in jobs.


The unemployment rate has increased drastically due to the crisis. http://www.statcan.gc.ca/daily-quotidien/101008/c101008b.gif
The unemployment rate has increased drastically due to the crisis. http://www.statcan.gc.ca/daily-quotidien/101008/c101008b.gif




Conclusion
"Most Canadians would likely prefer Ontario’s manufacturing sector to become more efficient, rather than have everything they owned be devalued by a lower dollar" (The Calgary Herald, 2012). http://www.calgaryherald.com/opinion/6224027.bin?size=620x400s
"Most Canadians would likely prefer Ontario’s manufacturing sector to become more efficient, rather than have everything they owned be devalued by a lower dollar" (The Calgary Herald, 2012). http://www.calgaryherald.com/opinion/6224027.bin?size=620x400s

The manufacturing crisis is one of the toughest problems Ontario has had to face in many years. This problems extends to many levels. Hundreds of thousands of jobs are being lost, and with it, billions of dollars. Canada's economy has been dramatically affected by this crisis and should it continue, it will get even worse. There are a few solutions to a problem like this. Ontario could focus their resources on different sectors such as biotechnology or digital information, and leave the manufacturing to emerging markets such as China, India, and Mexico. However, wages in those emerging markets could rise in the near future and it would be no longer as cheap to purchase their goods. Exporting digital technology is a good premise because whereas exporting manufactured goods costs money for the shipping, exporting digital technology is pretty much free. Another option is free trade. Free trade is trade "free of such government interference as import quotas, export subsidies, protective tariffs, etc." (Dictionary.com, 2012). However this is easier said than done, due to many security and health concerns at the border (Walkom, 2012). The premier of Ontario, Dalton McGuinty, wants to lower the value of the Canadian dollar and make it a "Canadian Peso" (The Calgary Herald, 2012). This would make exports a lot more but imports would be more expensive as a result. However, I would prefer for Canadian manufacturing enterprises to be more efficient rather than have a "Canadian Peso" (The Calgary Herald, 2012) because instead of devaluing our dollar, we could increase our GDP if we were more efficient. However, being efficient is much harder to achieve than raising the value of the dollar. But whatever the government chooses to do, they will have to step up and take action very quickly before this crisis becomes worse.


Works Cited
  1. Beaudoin, Pierre. "Building for the future: Manufacturing excellence in Ontario." Canadian Manufacturers and Exporters. N.p., 29 May 2012. Web. 6 June 2012. <www.cme-mec.ca/download.php?file=h2uj3z9d.pdf>.
  2. Borzykowski, Bryan. "5 ways to take advantage of a high dollar - moneyville.ca Blogs." Moneyville - Welcome to Financial Possibility. N.p., 19 Oct. 2010. Web. 11 June 2012. <http://www.moneyville.ca/blog/post/877686--5-ways-to-take-advantage-of-a-high-dollar>.Gollom, Mark.
  3. Flavelle, Dana. "Canada's jobless rate stuck at 7.3 per cent as economy as 7,700 jobs in May - thestar.com." News, Toronto, GTA, Sports, Business, Entertainment, Canada, World, Breaking - thestar.com. N.p., 8 Feb. 2012. Web. 13 June 2012. <http://www.thestar.com/business/article/1208050--canada-s-jobless-rate-stays-at-7-3-as-7-700-jobs-added-in-may>.
  4. "Free Trade." dictionary.com. N.p., n.d. Web. 12 June 2012. <dictionary.reference.com/browse/free+trade>.
  5. Gollom, Mark "Is Canada suffering from 'Dutch disease'? - Canada - CBC News." CBC.ca - Canadian News Sports Entertainment Kids Docs Radio TV. N.p., 18 May 2012. Web. 13 June 2012. <http://www.cbc.ca/news/canada/story/2012/05/18/f-dutch-disease-mulcair.html>.
  6. Investopedia. "Dutch Disease." Investopedia. N.p., n.d. Web. 12 June 2012. <www.investopedia.com/terms/d/dutchdisease.asp>.
  7. The Calgary Herald. "Editorial: McGuinty's simplistic solution for Ontario is a weak currency." Calgary Herald Breaking news, business, sports, video and classifieds. N.p., 29 Feb. 2012. Web. 13 June 2012. <http://www.calgaryherald.com/opinion/Editorial+McGuinty+simplistic+solution+Ontario+weak+currency/6224026/story.html>.
  8. Walkom, Thomas. "Factories in Ontario's future - thestar.com." News, Toronto, GTA, Sports, Business, Entertainment, Canada, World, Breaking - thestar.com. N.p., 21 May 2008. Web. 13 June 2012. <http://www.thestar.com/article/427980--factories-in-ontario-s-future>.
  9. Whittington, Les . "Manufacturing in crisis, McGuinty told - thestar.com." News, Toronto, GTA, Sports, Business, Entertainment, Canada, World, Breaking - thestar.com. N.p., 7 Aug. 2007. Web. 13 June 2012. <http://www.thestar.com/Business/article/243711>.
  10. "Work - Unemployment Rate." Human Resources and Skills Development Canada. N.p., n.d. Web. 13 June 2012. <www.hrsdc.gc.ca/.3ndic.1t.4r@-eng.jsp?iid=16>.


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By: Eric Li