Five things to know about Ontario’s manufacturing exports

Five things to know about Ontario’s manufacturing exports

Despite Ontario’s economic transition to a service-producing economy, manufacturing has a place in Ontario’s future.

Ontario is a strong exporter of manufactured goods. The industry is evolving towards producing more high-value added products using cost effective methods. As the Institute prepares to release Fellow Paul Boothe’s White Paper examining how manufacturers can export successfully, this blog post examines the current state of manufacturing in Ontario.

1. Exports are an important contributor to Ontario’s economy

In 2016, Canadian merchandise exports were valued at $524.1 billion and accounted for approximately 28 percent of all economic activity in the country.[1] Ontario, in particular, contributed 43.8 percent of these exports (Exhibit 1).

In Canada, manufactured products form 70 percent of merchandise exports in 2016 and in Ontario, this share is higher, at 86.4 percent of total merchandise exports. The province accounts for the majority of total manufacturing exports at 54.1 percent of the Canadian manufacturing total or $177 billion.

In 2016, there were 20,892 firms that exported in Ontario. Of those firms, 8,228 (or 39 percent) were manufacturing-focused companies.[2] However, 88 percent of total export value in Ontario stems from the manufacturing industry, reflecting the legacy of heavy manufacturing in the province's history.

Exhibit 1 

2. Ontario’s manufacturing exports largely end up in the United States

Ontario trades with many countries. Not surprisingly, Ontario’s largest manufacturing exporting partner is the United States, who receives almost 87 percent of Ontario’s exports. Within the US, the state of Michigan is the largest receiver of Ontario’s manufacturing exports. However, the amount exported to Michigan has declined over time by $11 billion in exports since 2000. California, conversely, has seen an increase of $13 billion over this time (2000-2016). Outside of the US, the United Kingdom, Mexico, and China are all large receivers of manufacturing exports.

3. Manufacturing exporting in Ontario is significant, but growth has been slow

Despite manufacturing producing a large amount of total export value in Ontario, the export intensity, or ratio of exports to manufacturer's sales, has seen little increase since 2000 (Exhibit 2). During this time, there was substantial restructuring of Ontario manufacturing, where output, hours worked, and productivity all declined.[3] Further, manufacturing’s share of Ontario GDP also declined during this period.[4] These changes can be explained by the dramatic increase in the Canada/US exchange rate, increased global competition, and slower growth in Ontario’s export market.[5]

Exhibit 2

4. The growth of service exports is significant, but data are sparse

Ontario mainly exports goods (Exhibit 3). However, since 2000, the exporting of services from Ontario to other countries has grown by 58 percent while the exporting of goods has decreased by 1 percent. When looking at interprovincial exporting, Ontario largely exports services to other countries and has seen a 45 percent growth in this area since 2000. However, data on what is being exported and the value of these services remain difficult to count and therefore capture. The Institute looks forward to more concrete services exports data.

Exhibit 3

5. Ontario’s top exports are high value add products

Of the manufacturing exports from Ontario, the Transportation Equipment Manufacturing industry produces the largest share of manufacturing exports at 45.6 percent in 2016, with $81 billion in sales. This is not surprising given the number of auto manufacturers in the province. Chemical (10.4 percent), Machinery (8.1 percent), Primary Metal (7.0 percent), and Food (5.1 percent) are the next four largest manufactured exports by value. 

Between 2000 and 2016, chemical manufacturing saw the greatest total change, growing by almost $4.2 billion (76 percent) between 2000 and 2016 (Exhibit 4). The top five manufacturing products exported in Ontario in 2016 made up 41.7 percent of all products exported in Ontario, with motor vehicles being the most exported product in Ontario (Exhibit 5).

Exhibit 4

Exhibit 5

The top manufactured exports are primarily for transportation, followed by medications and bakery products. These are high value add goods and therefore generate more income for companies and employees. This shows that Ontario continues to have strong potential in competing in the future economy.

Written by Philippa French and Dorinda So

Photo credit: VLADGRIN, Getty Images

 

[1] Canadian Manufacturers and Exporters. “Industries 2030: Manufacturing and Exporting in Canada.” 2017.

[2] Data from Statistics Canada, CANSIM Table 228-0077.

[3] Gu, Wulong, and Beatrix Lee. “Productivity and Economic Growth in the Canadian provinces, 1997-2010.” Statistics Canada, The Canadian Productivity Review. 2013.

[4] ibid.

[5] Baldwin, John R., Wulong Gu, and Beiling Yan. “Export Growth, Capacity Utilization and Productivity Growth: Evidence from Canadian Manufacturing Plants.” Statistics Canada Economic Analysis Research Paper Series. 2011.

Category: Economic Progress, Economy, Trade