Robert Berger is working on something deeply futuristic: a hybrid of window shade and solar panel. It not only lets light in or out, it also powers your household gadgets.
But Mr. Berger, president of MW Canada Ltd., is not toiling in a hothouse tech firm. He's a third-generation champion of an industry most Canadians think of as a metaphor for the decline of Canadian manufacturing: textiles. But if it can negotiate an ever-shifting maze of trade rules, particularly in the United States, the battered industry stands to surprise Canadians with a value-added comeback.
"Imagine your window covering storing enough energy from the sun daily to power all your rechargeable home electronics," Mr. Berger says. His firm, based in Cambridge, Ont., is collaborating with universities on nanotechnology that makes textiles into powerful performers, from the solar blinds to materials that promise to replace car batteries, to construction materials that rival steel in strength.
"We need to be at the leading edge of all these technologies," Mr. Berger says. The new generation of textiles will be on the market in less than five years, he adds.
MW Canada was founded in Montreal by Mr. Berger's grandfather as Montreal Woollens in 1963. In a process of continual reinvention, the company has evolved from making fabrics for the clothing industry to supplying upholstery textiles, airplane blankets, health-care materials and water-filtration products.
Innovation by firms like Mr. Berger's helps explain why reports of the death of Canada's textile industry are greatly exaggerated.
The industry, it's true, has been clobbered by unfettered foreign competition, a high Canadian dollar and eroding free-trade benefits for much of the past decade. Between 2005 and 2009, for instance, textile shipments plummeted 43.5 per cent, while manufacturing as a whole only sank 18.1 per cent, according to Statistics Canada.
The firms that have survived this dramatic contraction are generally smaller and more nimble than in the industry of old. Many, like MW Canada, have ditched their old business models, which focused on high-volume commodity products, to become high-tech pioneers.
Having invested hundreds of millions of dollars in state-of-the-art machinery, plants and retraining for staff, these manufacturers are increasingly focused on products with specific applications - known, as a group, as technical textiles. These short-run, cutting-edge products are in demand for numerous industries, including defence, health care, energy, mining, construction and transportation.
While the commodity side of the business has turned into a race to the bottom that legacy companies cannot win, the new wave of technical textiles allows firms in Europe, the United States and Canada to compete again - in a value-added race to the top. The fast-growing market for technical textiles is already estimated to be worth $128-billion (U.S.) in annual sales.
The Conference Board of Canada is forecasting that the country's textiles and apparel industry will see a "modest profit" of $13-million in 2011 after recording losses for the past two years. The board sees profits reaching $97-million by 2015, even factoring in a higher loonie and climbing energy and raw material costs. Output and exports are also trending up after years of declines.
As for employment in the sector, the industry agrees that the figure of 43,526 direct and indirect jobs, recently computed for the Textiles Human Resources Council, is a reasonable estimate. But discrepancies in statistics gathered by the industry and government make it difficult to establish how much employment has fallen since the industry's heyday.
Despite the recovering profit and production numbers, the industry is having a hard time shaking its reputation as a hopeless case. The view of some, like Kathryn From, is that Canadian textile manufacturers never fully recover.
"They didn't change with the times, and frankly I think it is too late," says Ms. From, managing director of Bravado Designs Ltd., a Toronto-based maker of nursing bras. The company selects textiles purchased by the overseas factories that make its products. "I don't know why anybody would put money into the textile business in Canada unless it is a very, very niche opportunity."
Patrick Riga, a Montreal-based commercial account manager with Bank of Montreal who has worked with Quebec's textile industry since 1993, has heard about immigrant families dissuading their children from working in the business.
"A lot people were working for 30, 35 years at the same corporation and ended up the next day with nothing - no pension from the company," Mr. Riga says. "It created a hardship on a mainly immigrant community, especially in Quebec."
In an industry with a looming talent shortage and an aging work force, the image problem is making it difficult to attract skilled workers, says David Kelly, executive director of the Textiles Human Resources Council.
Mr. Berger of MW Canada thinks the industry's past-it public image is simply out of date. "When you say the word 'textile' to the average person, they think of a sweatshop or T-shirts. You know, the old Norma Rae movie. That's really not what we are," he says.
"It is an old image problem," agrees Ronald Audet, chairman of FilSpec Inc., a Sherbrooke, Quebec-based producer of specialty yarns. "The industry is stronger than we've been." Like MW Canada, FilSpec has jumped up the value ladder, illustrating the hopeful trend in the industry. But its bumpy ride also speaks to how easily firms' prospects can by capsized by the changing tides of trade rules.
Founded in 2004, FilSpec rose from the ruins of Cavalier Textiles, a commodity supplier. Like many firms in the Canadian textile industry, particularly the large Quebec contingent, Cavalier prospered under the Canada-U.S. free-trade agreement and North American free-trade agreement, which opened up the U.S. and Mexican markets in 1989 and 1994, respectively. Exports by the Canadian industry increased fourfold between 1992 and 2000, according to a report by the Quebec government.
The latter year, however, was the industry's apex. As free trade gave, it also took away, with the admission of China to the World Trade Organization in 2001 and the expiration in 2004 of the Multifibre Arrangement, which had imposed quotas on developing countries' exports of products like yarn, fabrics and clothing.
The Canadian industry was suddenly faced with competition from lower-cost producers, not to mention the dampening affect of the high-flying loonie on exports. But as it has staggered back from those body blows, the industry has also learned that "free trade" is a sometime thing. Although the United States promoted North American free trade at its inception and is a signatory to NAFTA, the country that accounts for 81 per cent of Canada's textile exports has also enacted other measures to protect its domestic industries. New bilateral trade agreements have had the side effect of hip-checking some Canadian products out of the American market, while preferential procurement policies have more explicitly shut the door to Canada.
"Measures that preclude the use of Canadian textiles by U.S. customers, or that favour U.S. textile manufacturers, are proliferating," says Elizabeth Siwicki, president of the Canadian Textile Industry Association. Ms. Siwicki contends that an ongoing reluctance by the federal government to address problems with NAFTA is eroding her membership's access to the U.S. market.
The most aggravating new American trade agreements are a pair signed in 2000 and 2004 that open up the U.S. market to more than a dozen countries in Central America and the Caribbean - the site of much of the offshoring of the commodity side of the textile business from both Canada and the U.S.
With very limited exceptions, the treaties effectively bar the use of yarns and fabrics that are not produced in the U.S. - so if a Canadian input like, say, yarn, is used to make products in the Dominican Republic, the finished goods do not qualify for duty-free entry into the U.S.
"That is a big issue because all of a sudden our customers that we developed and nurtured under NAFTA say to us, 'Sorry, we can't buy from you,'" Ms. Siwicki says.
Canadian products have also been deemed impure by procurement policies. After U.S. stimulus legislation was enacted in 2009, many of MW Canada's stateside customers threatened to cancel orders for its waste water filtration media because the products were destined for use on jobs that suddenly had to be 100-per-cent American-made.
MW Canada scrambled to adjust, eventually finding a U.S. partner that agreed to provide workers if MW supplied the necessary equipment for its North Carolina plant.
"What really burned me is that we did all the development work in Canada and I don't produce it here," Mr. Berger says. "That's so dumb. Isn't that the kind of innovation that we want in Canada?
"It is a crime - we're shipping jobs away from here. You know, I say to our politicians, you are making us do business with one hand tied behind our back."
In February, 2010, the U.S. and Canada signed an agreement that gave relief to Canadian suppliers - but only on contracts in some states, and of those, only contracts over sizable value thresholds.
The new trade agreements and the creeping expansion of existing procurement policies - notable among the latter is the Berry Amendment, which restricts military buying to American suppliers - prompted FilSpec to purchase a U.S. plant in 2009. It employs almost 180 people, slightly more than FilSpec's Canadian work force.
The acquisition enabled the company to continue selling yarns to U.S. customers who make products for the U.S. Army. A larger U.S. presence also allowed FilSpec to hedge against the rising loonie by buying and selling more in U.S. dollars. American sales now account for 70 per cent of FilSpec's business.
With the Canadian dollar regularly trading above parity, FilSpec is mulling making more acquisitions south of the border. Indeed, industry executives say they have ever-fewer reasons to make acquisitions or other investments in Canada because Ottawa has failed to champion their industry at home.
For instance, unlike its U.S. counterpart, the federal government does not compel the Department of National Defence to buy from Canadian manufacturers. "If you haven't got the government procurement, if you haven't got good trade agreements, if you don't have a domestic market, then the industry is not going to invest," Ms. Siwicki says.
Yet another sore spot between the industry and Ottawa is the Least Developed Countries Market Access Initiative, which eliminated quotas and duties on imports from scores of developing countries in 2003. That change by itself touched off a spate of plant closings in Canada, while forcing other manufacturers to move production offshore.
Ottawa, though, has unfurled a number of initiatives to help the industry - it has eliminated tariffs on raw materials and equipment that the industry imports from abroad, and provided a modest amount of funding for industry programs.
The next concern for the industry is, not surprisingly, new rounds of trade talks. There are fears that the industry's rustbelt reputation will taint the perceptions of politicians as Canada negotiates monumental agreements with the European Union and India.
"India as a big market. Europe is a big market," Ms. Siwicki says. "It is important that the Canadian negotiators come back with something that gives us true access to those markets."Report Typo/Error