Despite Canada's growing involvement in global supply chains, weak links remain



    OTTAWA, March 1 /CNW Telbec/ - Canadian companies have increased their
involvement in global and regional supply chains since 1990, but still may not
be taking full advantage of the opportunities that global supply chains
present, according to a Conference Board study released today that uses a new
approach to go beyond what trade statistics show.
    "To enable businesses to seize the benefits of global supply chains and
for Canada to reap higher living standards, policy-makers need to remove
remaining trade and investment barriers," said Danielle Goldfarb, Principal
Research Associate. "And Canadian businesses need to constantly reassess their
business activities to determine where they can be carried out most
efficiently, so they are able to compete globally."
    Companies are increasingly breaking production into smaller parts, making
or buying each part where it is produced most efficiently. This study,
Canada's Changing Role in Global Supply Chains, shows how Canadian goods trade
fits into this picture of production aligned along global or regional, rather
than strictly national, supply chains. Despite more trade in parts, most
studies examine trade as if it were all in final goods. This analysis is the
first to break down Canada's trade based on how it is used in the buyer's
supply chain.
    After the Canada-U.S. free trade agreement eliminated tariffs, Canadian
plants became more specialized. This led to a dramatic growth in Canada-U.S.
trade in parts during the 1990s. But this study found that between 2000 and
2005, Canada-U.S. parts trade stagnated; this could signal either that few
gains remain to be made, or conversely, that non-tariff barriers stand in the
way of business opportunities.
    By contrast, Canada's trade in parts with other major economies,
especially developing countries such as China and Mexico, continued to grow
quickly between 2000 and 2005-although the trade volumes are currently low.
For example, the use of Chinese components in Canadian supply chains grew
significantly. This may mean that Canadian companies are more likely to gain
future efficiencies from trade in parts from countries other than the United
States.
    Still, Canada may have limited involvement in global and regional supply
chains for large parts of its trade. Canada's inputs into other countries'
final goods are far less than their inputs into ours.

    The report calls on policy-makers to:

    
    - Remove remaining trade and investment barriers with the United States
      and other major trading partners, including obstacles to imported
      inputs.
    - Anticipate some short-term worker displacement and the need for
      adjustment support, while recognizing long-term gains.
    - Use domestic policy levers-such as improving infrastructure and
      removing interprovincial barriers-to create conditions for Canadian
      global success.
    - Develop and use trade statistics that better reflect the realities of
      global supply chains.

    The report also calls for businesses to:

    - Examine which parts of its production process are best done in Canada
      and which parts might be produced elsewhere.
    - Look at where future gains from parts trade are likely to occur.
    - Move to higher value-added activities in which they have a comparative
      advantage.
    - Reassess their business model constantly.
    

    Canada's Changing Role in Global Supply Chains is the first publication
of the Conference Board's new International Trade and Investment Centre. Made
up of more than 20 leading public and private sector organizations, it aims to
help Canadian leaders better understand what global economic dynamics mean for
public policies and business strategies. The Centre's next meeting is March 7
in Ottawa.




For further information:

For further information: Brent Dowdall, Media Relations, (613) 526-3090
ext. 448, corpcomm@conferenceboard.ca, The Conference Board of Canada,
www.conferenceboard.ca


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