EDITORIAL PAGE Opportunity for equipment manufacturers

Canada’s mining industry is coming off a period that has been one of the most prosperous ever. It will be tough during the 1990s to match the combination of strong demand, rising prices and improved productivity that we enjoyed during the late 1980s. Not surprisingly, that period has also been good to Canadian mining equipment manufacturers, a sector of Canadian manufacturing which benefited as the domestic mining industry prospered.

But the future of Canada’s mining equipment manufacturers lies less with selling to mining operations here in Canada than with export markets.

The most recent figures available indicate that Canada exports almost as much mining equipment as it imports. That’s a far cry from the widely held view that Canada doesn’t manufacture any mining equipment. “Although we are one of the largest producers of minerals in the world, we produce no mining machinery. We import it,” says an article written by a professor at one of Canada’s prestigious business schools and recently published in a leading daily newspaper.

In fact, shipments of Canadian manufactured mining equipment came to $449 million in 1986 (the latest figures available) and 3-quarters of that were exported. The only kind of mining equipment we don’t manufacture is a limited number of highly specialized equipment — power shovels larger than 15 cubic yards, for example.

Exports of Canadian mining equipment have been growing, too. Exports grew to $327 million in 1986 from $24 million in 1973 (in current dollars). During that period, however, high interest rates and a strong dollar conspired to erode the domestic market such that imports captured 75% of sales here in 1986 compared with 58% in 1973.

There are about 185 firms involved in the business providing about 8,200 direct jobs. Some of those firms are branch warehouse operations primarily involved in pre-assembly and only export when financing is tied to supply from Canada. But more than half of the companies accounting for virtually all exports are Canadian owned.

Government involvement could help improve the prospects for these exporters. The best model for a successful industrial strategy is probably Japan, whose Ministry of International Trade and Industry wields tremendous influence to ensure that any government initiative is consistent with the goal of promoting trade.

If Canada wants to follow a similarly logical, comprehensive industrial strategy, it would do well to support manufacturers that are based on our traditional strength in resource industries — mining equipment manufacturers, for example.

Support need not mean protectionist measures such as tariffs on incoming products. That would simply increase costs for mining operations here without any assurance that domestic manufacturers would fill the void.

Support should take the form of helping Canadian manufacturers develop export markets. It is here that flexibility in manufacture is more important than economies of scale, putting innovative Canadian manufacturers in a competitive position. Mining is essentially the same the world over, but if a Canadian manufacturer can provide some small specialization for an operation that needs something slightly different, it will likely get the job.

There are markets for mining equipment, particularly in the U.S. and South America. It would be a wise economic policy for the Canadian government to find ways to help manufacturers here capture a greater share of that market.