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How Canadian Manufacturers Can Compete Like Our Olympians

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MANUFACTURING SALES DOWN CANADA
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National pride can be a good thing, which is why Canadian businesses can learn a lot from our Olympic athletes. After all, as Conference Board economist Glen Hodgson recently noted, the "Own the Podium" program behind Canada's stellar performance in Rio shows just how important it is for any organization to have a road map supported by adequate financing, not to mention the right leadership dedicated to ensuring a level playing. But the Rio Olympics also shows why we need to be wary of pride.

As Globe and Mail sports writer Cathal Kelly observed, the humble behaviour of our athletes in Brazil proved that in order to claim an overall win in Olympian competitions, "prizes must be combined with a larger sense that we showed well." And when it comes to the raging global competition for foreign direct investment, Canada has not been doing great on the showing-well front.

This is particularly true for the manufacturing sector because pride has focused our collective attention on the controversial need to help attract FDI via taxpayer-funded financial support.

As Ivey Business Journal highlights in a new feature entitled "Manufacturing Investment," Canada anti-subsidy crowd has long been insulted when companies demand government support for local investment, especially when the demands in question are bluntly stated.

In 2003, for example, the Canadian Taxpayers Federation was outraged after German auto executive Wolfgang Bernhard told me at the Detroit auto show: "When I go to Mexico, I get some government support in 30 seconds. Why would I go to Canada without getting government support?" But Bernhard, who was chief operating officer of Daimler-Chrysler at the time, was actually posing a relatively fair question, one that is even more relevant today as Canada continues to lose the competition for new manufacturing facilities.

As Ivey Business School professor Paul Boothe noted in a blog earlier this year, Canadian manufacturers do indeed need to follow the example set by our world class athletes because our nation has become a laggard when it comes to attracting investments to service global trade - despite being a trading nation with all the talent and tools required. Why? According to Boothe, who heads Ivey's Lawrence National Centre for Policy and Management, a superficial analysis might lay most of the blame on our nation's labour costs and the level of government incentives offered to support manufacturing investments. But a real look at the big picture shows the major issue is the fact that nobody in Canada has ever really seriously tried to effectively answer the all-important why-invest-in-Canada question.

Believe it or not, after examining how other nations go about attracting FDI, Lawrence Centre researchers concluded "Canada's approach to FDI attraction today falls well short of ensuring that reliable, timely and tailored information on key investment decision parameters is both widely available and communicated to targeted decision-makers as part of coordinated, ongoing strategic engagements, and that organized, end-to-end assistance is proactively provided throughout prospective investors' processes of due diligence, approvals and applications."

Simply put, the Lawrence Centre research calls for Canada to better coordinate the efforts of provinces, municipalities, and the federal government so that our nation can provide one-window investment attraction services that highlight our strengths and offer detailed knowledge of coming opportunities. While the amount of our financial support was seen as broadly competitive, there is also a need to simplify the related terms and conditions while speeding up the process so it operates in private-sector timeframes rather than those of public-sector processes.

Today, Canada may indeed have no choice when it comes to offering government support. But keep in mind the bigger issue is that takers are now few and far between even when we play the incentive game. Indeed, as Chrysler's current Italian leadership pointed out in 2014 when seeking taxpayer support for investing in Canadian operations, Canada had attracted only $2.2 billion of $42 billion worth of automotive investments made in North America over the previous five years. And believe it or not, virtually all of the automotive companies who invested more than $40 billion in Mexico and the United States in that period "never even bothered to ask Canada if it was interested in helping to bring these investments and jobs to Canada."

And that's why Canada needs to spend the time and energy required to put our best foot forward and effectively answer the all-important question posed by Bernhard years ago.

Thomas Watson is an award-winning business journalist and editor of the Ivey Business School's Ivey Business Journal.

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