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December 22, 2023

To: Canadians concerned about small business growth amidst reconfiguration of supply chains

From: Daniel Schwanen

Re: Preparing Ontario SMEs for supply chains of the future – getting the big picture right

Date: December 22, 2023

While supply chain challenges of the pandemic era and its immediate aftermath seem to have abated at the global level, a recent survey shows that forty percent of Ontario’s private businesses still expect worsening supply chain challenges. This compares with fewer than thirty percent of businesses in Canada as a whole expecting such worsening. This discrepancy in vulnerability between Ontario and the rest of the country cuts across almost all goods-producing or selling sectors, including construction, and is almost entirely accounted for by businesses with fewer than 100 employees.

Businesses and governments certainly have awakened to the heightened risk of crises stemming from health, geo-political, and/or environmental events. In general, we live in a world where “know your supplier” has become at least as important a mantra as “know you customer”, and where reputational risk stemming from suppliers’ lack of enforcement of environmental or labour standards can run rampant.

In this world, there are both threats and opportunities for Ontario’s small- and medium-sized businesses (SMEs). These stem from Ontario’s unique geographical position as a Canadian internal and external trade hub. Reliable and cost-efficient supplies go hand-in-hand with maintaining an indispensable presence within global, national and regional supply chains, which in turn is vital to the existence of good jobs and entrepreneurial opportunities. Indeed, it is key to our ability to reverse our vexing and costly relative difficulty to grow SMEs into larger and globally competitive businesses.

While Canada as a whole is behind other jurisdictions such as the United States, the European Union, the United Kingdom and Australia in developing and implementing a national supply chain strategy, it has recently stepped up efforts in that direction, notably with the launch this month of a National Supply Chain Office. The federal government can and should deal with “big picture” issues, such as port and other maritime infrastructure, cross-country rail and transport regulations, modern communications and payments infrastructure, stockpiles of critical goods, continued access to both international supplies and markets through trade policies and diplomacy, removing impediments to internal trade, and immigration that address labour shortages. It should also try to ensure that Canada at least does not fall behind in critical capabilities required to maintain our energy supplies and the security of Canada and its allies, without which the resiliency of supply chains on which Canadians depend is in doubt.

This role is obviously crucial in ensuring that businesses have access to the inputs they need, in a secure and timely way, and to secure as wide and fair access to global markets for Canadian products.

The role of provincial governments will overlap or complement that of the federal government in many respect, notably on the labour supply and removal of internal trade barriers. But large provinces such as Ontario – indeed Ontario in particular given that it is the province in which the largest percentage of businesses are export-oriented (see Table 9 here) – also play a major role in developing markets and supporting businesses, which I will explore in a subsequent memo.

Daniel Schwanen is Vice-President Research at the C.D. Howe Institute.

To send a comment or leave feedback, email us at blog@cdhowe.org.

The views expressed here are those of the author. The C.D. Howe Institute does not take corporate positions on policy matters.