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Canada’s first free-trade agreement with the United States took effect in 1989, followed by trade deals with 51 other countries, creating a massive opportunity for Canadian manufacturers to seize upon by investing in their businesses.

So much for that. Canadian manufacturing’s net stock of capital – things like machinery, equipment, buildings and research and development – is actually lower now than when that first trade deal came into effect, according to a new report by Stéfane Marion, chief economist for National Bank Financial.

Every year companies invest in new stuff to make sure their businesses operate as productively as possible. But each year, their existing capital assets lose value, either through wear and tear or because better stuff comes along to replace it.

The problem in Canada’s manufacturing sector, Mr. Marion notes, is that new equipment isn’t being added to factories fast enough to make up for the deterioration of the old equipment. Indeed, the latest capital investment numbers released by Statistics Canada this week for 2022 show spending has effectively flatlined over the past 15 years, after adjusting for inflation.

That’s not a recipe for a competitive manufacturing sector, especially when compared to the situation in the U.S., where net capital stock now stands at its highest historic level. “The Canadian situation is troubling, to say the least,” Mr. Marion wrote.

Decoder is a weekly feature that unpacks an important economic chart.