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Preliminary Working Group Report: A National Supply Chain Action Plan for Canada
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Page Title: | Preliminary Working Group Report: A National Supply Chain Action Plan for Canada – C.D. Howe Institute |
Article Title: | Preliminary Working Group Report: A National Supply Chain Action Plan for Canada |
URL: | https://cdhowe.org/publication/preliminary-working-group-report-a-national-supply-chain-action-plan-for-canada/ |
Published Date: | December 19, 2024 |
Accessed Date: | February 16, 2025 |
An Overview:
From early 2023 through mid-2024, the C.D. Howe Institute convened a Supply Chain Working Group comprised of experts and stakeholders across Canada. Stemming from the presentations and discussions at the group’s four meetings and associated research, this preliminary report identifies six key action areas requiring collaboration between governments, industry, and labour to enhance supply chain resilience, affordability for consumers, and business competitiveness while maintaining high safety and security standards. The proposed national supply chain strategy spans a decade, with short-, medium-, and long-term goals, emphasizing investments in infrastructure, regulatory reform, and supply chain security to ensure Canada’s economic prosperity and crisis preparedness. To monitor progress, the Institute plans to establish a Supply Chain Policy Council that will convene regularly to evaluate and adjust the strategy as needed. A separate document will underscore how moving ahead with this strategy would support the quest to keep barriers to mutually beneficial North American trade from rising, despite the threats from the incoming US Administration to raise tariffs.
Rapporteur’s Report:
A Canadian supply chain strategy is needed to make the goods and services Canadians purchase more affordable, improve the resiliency of essential supplies in the face of crises, and support the competitiveness of Canadian exports on which so many goods jobs depend.
Implementing this strategy requires actions in six areas, as identified below. Many require cooperation between different levels of government, industry, and labour in a way that respects the jurisdictions, rights, and relative strengths of each and maintains high safety and security standards within supply chains. The basis for this cooperation would be an agreed-upon vision of a more prosperous and secure common future, as laid out here.
The strategy would unfold over a decade or so, involving short-, medium- and long-term action items. It would require regular monitoring and follow-up regarding its progress, with the possibility of revisions as external circumstances or knowledge evolve.
The C.D. Howe Institute plans to institute a Supply Chain Policy Council, which will meet three times a year to survey and report on progress under each of these action items.
Key Action Items
1. Invest in trade and related infrastructure to minimize the risks of bottlenecks and support exports.
Public infrastructure funding should be directed to projects that can relieve current bottlenecks over the medium-term along Canada’s trade corridors, as is the case of Canada’s National Trade Corridors Fund (NCTF). It would additionally focus on other public or private investments that can help expand or diversify trade or reduce the risk of future strangleholds on the passage of goods and people across the country. These factors, and Canada’s economic security more generally, should become a key criterion in government approval of large business-led projects.
Key action items under this rubric are:
a) Extend and expand the NCTF, including in support of compatible provincial corridor initiatives and more fluid and secure international borders.
b) Add to the NCTF’s mandate, which already includes addressing supply chains’ vulnerability to climate disruptions, projects that can reduce Canada’s vulnerability to human-induced disruptions, to structural factors such as lack of competition, or other to natural factors at specific points in a chain, for example by supporting alternative routes.
c) Make faster decisions on major projects, as the C.D. Howe Institute recommends.
d) Provide more opportunities for institutional investments in infrastructure, as we also recommend.
e) Review other policies that make private investments in transportation, communications, or digital infrastructure that support supply chains harder to attract, including barriers to foreign investment.
f) Support the private sector’s investments in state-of-the-art tracing and logistics technology, including fostering the development of best-in-class and globally competitive technology in Canada.
2. Identify and address other significant domestic regulatory barriers to moving or offering goods and services across the country.
Canadians live in a time of heightened uncertainty regarding the impact of global forces, be they geopolitical, technological, environmental, or simply protectionist. In the face of this uncertainty, strengthening Canadians’ access to opportunities presented by our domestic market makes more sense than ever before, not only as a way of increasing incomes but as a risk reduction strategy.
Key action items under this rubric are:
a) Renew efforts at reconciling diverse standards across the country through the Regulatory Reconciliation and Cooperation Table under the aegis of the Canadian Free Trade Agreement (CFTA).
b) Explicitly follow up and eventually give full effect to the approaches to support the efficient movement of trucks across Canada, as recommended by transport officials from across the country.
c) Add focus on reconciling licensing and training, labour and workplace standards for inter-jurisdictionally mobile workforce in specific areas, such as mining or transportation, including licensing/specific training; and work with professional bodies to institute the equivalent of the successful Red Seal Program for professionals as we recommend.
d) Use technology to reduce barriers without affecting provincial governments’ ability to regulate or tax in areas under their jurisdictions, as is done for example with trucking licenses across multiple Canadian provinces and US states.
e) Compile instances of federal, provincial and foreign regulatory forbearance decisions aimed at facilitating the production and delivery of goods and services during the 2020-21 pandemic to draw lessons not only for how to facilitate them during future crises but also to further identify unnecessary regulatory barriers to commerce.
f) Similarly, compile instances of cooperation between Canadian jurisdictions at times of crisis and identify best practices under current inter-provincial agreements affecting trade to create a forward-looking regulatory response and cooperation agenda.
g) Create a compendium of regulations affecting the movements of goods and people and trade in services across the country not yet covered by the CFTA or otherwise addressed by Canadian trade ministers, including those affecting trade in agricultural and food products, and submit them to a “Good, Bad and Unnecessary” analysis as done here for financial regulations and commit to a process to at least remove the unnecessary ones.
h) Where it is not possible to remove significant internal barriers cooperatively, the federal government should consider further testing the scope of its trade and commerce powers under Canada’s constitution to deal with these matters.
i) Identify and remove barriers to supply-chain-related technology adoption and development, including harmonizing the patchwork of approaches to the impact of AI and other new technologies.
3. Ensure the security and resiliency of supplies and supply chains.
A national supply chain strategy needs to ensure that Canada will be able to respond in times of crisis such that essential goods remain available during such periods and that Canada can exercise leverage to procure those goods by contributing, in turn, to our trade partners’ economic security.
Key action items under this rubric are:
a) Create a pan-Canadian list of essential goods and periodically stress-test (using AI and business surveys addressing potential crisis scenarios) our ability to provide them over the short- and medium-term.
b) Develop a pan-Canadian stockpiling policy for such essential goods (including rules for accessing stockpiles), where stockpiling is feasible at non-prohibitive costs.
c) Accelerate current efforts to secure Canada’s supply chains and supporting infrastructure (e.g. telecommunications and other digital infrastructure) against cyber- and other attacks by hostile powers and against potential supply chokeholds by hostile powers.
d) Build mutual assistance arrangements with like-minded foreign governments, including agreements for Canada and like-minded partners to assist each other in times of crisis once their domestic needs are met.
e) Identify what our partners may need in times of crisis, assess Canada’s capabilities to provide such goods, and reinforce or build those capabilities where it is compatible with our comparative advantages to fulfill obligations under the above agreements and reinforce our leverage in times of crisis.
f) Ensure no harm will come to our partners through Canada and direct Canada’s increased military spending toward protecting maritime and other trade routes subject to potential chokeholds or other misuse by hostile powers.
g) Ensure Canadian data required to respond effectively to emergencies are always available to Canadian governments, organizations, and individuals.
4. Modernize labour arrangements and facilitate the use of technology and more skilled personnel at key points in supply chains.
Labour actions by federal employees and employers in recent months have resulted in or threatened considerable disruptions to supply chains, at a cost to the public – and to Canada’s future competitiveness – far exceeding the economic “pie” normally at stake between parties to labour negotiations. A revised labour negotiation framework is needed to reflect the public interest. As well, permanent over-reliance on low-skilled temporary foreign workers in several plants across the country signals a possible avoidance of investments in technology or skills that could boost supply chains’ efficiency and reliability and needs to be addressed. Looking forward, a more systematic and longer-term view of the technology and capabilities needed to support this supply chain strategy would also help avoid sudden mismatches between available skilled personnel and the people required to build, operate or protect efficient, safe and secure supply chains.
Key actions under this rubric are:
a) Modernize labour arrangements in federally-regulated networked industries to reflect the need for both safety and wage security, and the adoption of new technologies and practices that increase competitiveness at key points of the supply chain, as elaborated on here.
b) Further revise the Temporary Foreign Worker Program to favour employers accessing the program who also provide a medium-term plan to, as far as possible, employ more local labour force or replace low-skilled workers with technology, and provide one-off incentives to execute those plans.
c) Strengthen the link between publicly funded programs that subsidize industry-specific skills acquisition by individuals – to remedy industry-wide or regional shortages – and individual commitments to seek employment in these industries or regions.
d) Produce regular surveys on technological and structural trends, such as international best practices, that boost the efficiency and reliability of supplies but may impact long-term employment prospects for lower-skilled workers in key industries like trucking, ports, and construction. Develop strategies to transition the current workforce to future workforce demands, ensuring the transition maximizes opportunities while minimizing disruptions for individuals – such as by maintaining benefits or wages – and businesses.
e) Plan to minimize fluctuations in the employment of trained personnel needed to execute the supply chain strategy over the long run, including military, engineering, and other industrial capabilities. In turn, this item requires a more thoughtful and deliberate procurement and large public projects strategy, to avoid both sudden shortages and long periods of skills idleness or deterioration.
5. Enhance Canada’s competitive position within global supply chains based on its comparative advantages.
Canada often needs to compete against large countries that seek to “pull the cover their way” in terms of investments in economic activities that support key or emerging supply chains – such as for environmental, military, and other high-technology goods and services – often in the name of national or economic security and preserving “good jobs.” Yet Canadian governments’ own proclivity to subsidize (“spray and pray”) or mandate activities that may not be viable in the long run needs to be examined if the country is to focus its resources on what it can do best and more sustainably within highly competitive global value chains.
Key action items under this rubric are:
a) A rationale for responding to foreign subsidies and protectionism, which rests on subsidizing production that would be competitive and in line with Canada’s comparative advantages, but for the foreign subsidy or protection.
b) A rationale for subsidizing economic activity which, while costly, may be necessary as a defensive posture against a potential hostile chokehold on key supplies, as reviewed here.
c) Support the development and commercialization of Canadian technologies that have a strong potential to address societal or business needs or deliver essential goods and services to trading partners and remain competitive. This can be achieved through tools like outcomes-based public procurement and other innovation-promoting strategies, as described here.
d) Reduce the emphasis on procurement and business subsidies as support for regional economic activity or technological bets that may not be economically sustainable. Instead, as a decision-making tool, increase the emphasis on the net outcomes for the public overall from the procurement or subsidy and align them more with existing relative regional or national economic strengths.
e) In general, submit all business subsidies to a more rigorous public interest test, as advocated for here, taking the above considerations, including economic security and competitiveness, into account.
f) Ensure that product or technology mandates, performance standards regulations, and local content requirements are assessed for their impact on the affordability of goods and services, on Canada’s economic security more broadly, and for the ability of supply chains to deliver on these mandates or to meet these standards.
g) As host of the G7 in 2025 and on an ongoing basis, seek to address global subsidy wars and other tools that distort global production and investment choices – which should be in all countries’ interests.
6. Integrate supply chain strategy into a growth strategy for smaller Canadian businesses, in turn making supply chains more resilient.
Canada is not a strong performer among peer countries regarding the growth of small businesses into medium-sized ones and beyond, which are generally more productive and can pay higher wages. Smaller businesses are also more exposed to supply chain disruptions, given they may depend on a less diversifiable supplier base. Yet, the pandemic shows that a robust ecosystem of smaller manufacturing, services and technology firms can be central to economic resilience, notably as a source of innovative solutions at a time of crisis and an alternative source of supplies in the event of international disruptions. A supply chain strategy should integrate and foster this ecosystem – by focusing on firms with the potential to offer innovative supply chain solutions at scale.
Key action items under this rubric are:
a) Identify a portfolio of smaller businesses that have either already made or are prepared to make investments in technology and high standards – such as cybersecurity protections – that are necessary to become trusted suppliers in North American and global supply chains. Focus on businesses with growth-oriented and financially sustainable plans, such as through acquisitions or international expansion, and provide targeted support for their investments and commercialization efforts beyond standard R&D assistance.
b) Match these firms with larger ones, such as the Ontario Global 100, that can benefit from their products or support their growth by providing them with advanced technology and expertise.
c) Make temporary financing facilities available for those firms in the event of serious supply chain disruptions, ensuring business continuity.
d) Ensure that public procurement entities not only tilt toward outcomes-based procurement (that is, procurement that does not presume which product or service is best for the task at hand) but also help advise in the management of supply chains that underpin the goods and services being purchased, as Supply Ontario currently seeks to do.
e) To foster outcomes-based procurement, establish a pan-Canadian innovation online marketplace that gives firms an opportunity to pitch products and solutions addressing needs or problems that public entities or large firms seek to address.
f) Beyond existing CFTA obligations, create a national framework that provides as much as possible equivalent and balanced access to firms from across the country to procurement opportunities in other provinces, for example, by providing disciplines around local preferences where they would result in much higher procurement costs.
g) Ensure that recipients of federal subsidies to large new investments actively seek suppliers from across Canada on a competitive basis.
h) Ensure that these subsidies are preferentially directed toward investments whose needs are well aligned with the existing comparative advantages (geography, infrastructure, skills set, specialized businesses) of the area where they take place so as not to reduce these advantages (e.g. by taking labour away from smaller businesses when the latter can employ it more productively).
The C.D. Howe Institute Supply Chain Working Group
From early 2023 through mid-2024, the C.D. Howe Institute convened a Supply Chain Working Group comprised of experts and stakeholders across Canada. The working group met four times to listen to informative presentations and engage in discussions around supply chain issues affecting Canada. It also supported the Institute's research and publications on supply chains and related questions.
While the above action plan is meant to reflect the results of these deliberations and associated research, it is not meant to be interpreted as a plan endorsed in all its details by members of the working group.
Working Group Meeting Dates:
• March 3, 2023
• May 29, 2023
• October 2, 2023
• June 6, 2024
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