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It is hardly news, but the scale of the manufacturing crisis in Canada continues to astound.

Between 2002 and 2013, manufacturing employment fell by 557,000 jobs, meaning that one in four (24 per cent) of the jobs that existed in 2002 have disappeared. As a share of all jobs, manufacturing fell to 9.8 per cent from 15.0 per cent over this period.

There has been no meaningful or sustained recovery from the Great Recession for the manufacturing sector. Total employment in 2013 was no greater than in the recession year of 2009.

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Over the same period, manufacturing as a share of gross domestic product has fallen to 10.6 per cent from 14.8 per cent, with the vast majority of that decline concentrated in Ontario and Quebec. Total output has fallen by 9.7 per cent.

Sophisticated manufactured exports (industrial and electrical machinery; aerospace; auto; consumer goods) now make up just 36 per cent of all Canadian exports, down from 54 per cent in 2002.

It is often noted, with reason, that manufacturing has been shrinking in all advanced industrial countries. But the decline in output in Canada from 2002 to 2011 was, according to a database assembled by the U.S. Bureau of Labor Statistics, the worst of thirteen industrial countries.

Output fell 11.5 per cent in Canada, but rose 12.4 per cent in Germany, 22.1 per cent in Japan and 23.2 per cent in the United States.

Manufacturing jobs have been lost in all advanced industrial countries due to higher productivity, technological change and the shift of low value-added production to lower-wage developing countries.

But, Germany, Japan, South Korea and the United States among others have been able to maintain dynamic manufacturing sectors by exporting sophisticated capital goods and related services to the developing world.

Should it matter to Canadians that manufacturing has been shrinking while the resource sector and services have been growing?

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A recent report from the Mowat Centre suggests that we should indeed be concerned.

Direct jobs in manufacturing are significantly more productive and highly paid than the average, and are much more highly skilled than is often assumed. The majority of jobs now require a university or college degree.

And manufacturing remains a key part of the so-called knowledge economy, still accounting for the majority of all business spending on research and development.

Canada has major strengths in communications technologies, aerospace, pharmaceuticals, biotech and the automotive sector, all of which sustain well-paid jobs directly and through close linkages to other sectors such as transportation, finance and business services.

The crisis in Canadian manufacturing has often been attributed to the high Canadian dollar, partly the result of the resource boom over the past decade. This has been the major factor, but a big part of the story has been our absolutely dismal productivity performance.

According to the U.S. Bureau of Labor Statistics database, output per hour in Canadian manufacturing rose by just 10.6 per cent from 2002 to 2011, compared to 20.2 per cent in Germany, 40.4 per cent in Japan and 55.7 per cent in the United States.

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Low productivity growth on top of an overvalued exchange rate has massively eroded Canadian cost competitiveness in both export markets and the domestic market, resulting in lost jobs, lower output and a huge deficit in the trade of manufactured goods.

Our poor productivity performance is the result of many factors, but boils down to too few companies investing in a major way in innovation, in new machinery and equipment, and in worker skills.

Canadian manufacturing will survive and prosper only by producing sophisticated and unique products and related services through high value-added operations.

There is no simple prescription for turning things around. But the Mowat Centre does underline the importance of a strong federal government commitment to the future of Canadian manufacturing and the need for public support for major new investments.

The Harper government has ceaselessly promoted Canada as an "energy superpower." They should pay at least as much attention to the renewal of Canadian industry.

Andrew Jackson is the former Packer Professor at York University and senior policy adviser to the Broadbent Institute.

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