December 3, 2024 – Even with protectionism on the rise, the importance of complex international supply chains is not going anywhere, according to a new report by the C.D. Howe Institute – and that means Canada needs a strategy in place to make sure its supply chains are strong and resilient in the face of future global shocks.
In “The Reconfiguration of Global Supply Chains: Threats, Opportunities and Policy Options for Canada,” Ari Van Assche and Daniel Schwanen write that the ability of supply chains to operate efficiently remains key to raising standards of living.
But while other countries have enacted national supply chain strategies, Canada has yet to do so – even though Canada’s supply chains face continued risks on top of protectionist trends: Strikes and blockades, natural disasters, outbreaks of disease, cybercrime, sabotage, and wars.
“The fact we don’t have a strategy will hurt Canadians,” Schwanen says.
Van Assche and Schwanen argue a successful supply chain strategy will involve both defensive strategies, such as minimizing the risks of domestic supply-chain disruption, and offensive strategies, such as boosting our contribution to our trading partners’ security.
Van Assche and Schwanen list three essential goals for a national supply chain strategy that enhances security, promotes affordability, and boosts growth:
- Maintain the economy’s ability to supply essential goods and services, notably food, medical and health, energy, and other essential supplies in the face of plausible geopolitical, climate-related, health-related or other disruptions.
- Ensure that, in the ordinary course of business, both our exports (including exports between Canadian jurisdictions) and imports can move competitively and safely to markets, including finding ways to “de-risk” Canadian trade against trade partners’ policies that might impede Canadian production and trade.
- Ensure that firms located in Canada play a role consistent with Canada’s comparative advantage within supply chains that support emerging global and Canadian public needs and objectives – including the needs for goods, technologies and services that can help counter growing security and environmental threats.
Further, they outline five elements towards achieving these strategic goals:
- Building competitive, resilient, and safe infrastructure: Canada lags many other peer countries when it comes to investing in infrastructure and creating the regulatory environment that speeds its construction and operations.
- Do not assume domestic production is a sufficient – or even good – defence against shortages: Localized production does not mean certainty of supplies, and indeed it may simply mean more vulnerability to local events, such as a natural disaster.
- Reinforce trade alliances and economic diplomacy with trusted partners: The countries who weathered the pandemic best did so in large part through smart cooperation with their international counterparts.
- Make Canada an essential partner for security: Canada must show its value to trade allies by investing more in defence and also by identifying products considered essential by other countries where Canadian production is a critical part of the value chain.
- Respond more selectively to pressures for “strategic” industrial interventions: While there is growing affection for industrial policies around the world, Canada must temper the temptation to subsidize key industries with a strict cost-benefit analysis.
“We need to be thinking about supply chains front and centre,” Van Assche says. “We need to have a supply-chain mindset.”
For more information contact: Ari Van Assche, Fellow-in-Residence, C.D. Howe Institute; Daniel Schwanen, Senior Vice-President, C.D. Howe Institute; and Daniel Kitts, Communications Officer, C.D. Howe Institute, 416-220-8470, dkitts@cdhowe.org
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.