Vulnerability to Trade Disruptions

Trade disruptions represent a second area of potential vulnerability. The Canadian, Ontarian, and GGH economies have become increasingly integrated with those of other countries, including through negotiated trade agreements, global supply chain management, and e-commerce. Although Canada has entered into new trade agreements, most recently the United States Mexico Canada (USMCA) agreement,[1] an integrated, global economy remains vulnerable to disruptions and crises around the world. Threats include possible trade wars, industry-specific tariff increases, political instability, or disruptions to transportation due to major climate change events.

As with automation, the impacts of potential trade disruptions will be uneven on the economy and the GGH's economic landscape. Not only would trade disruptions directly affect traded goods and services, but there would also be knock-on effects in other sectors. For example, shifting trade patterns could cause realignments of the geography of supply chains, with implications for warehousing and logistics facilities. And as with automation, any potential upside has not been quantified - for example, increasing trade uncertainty may lead to the reshoring of manufacturing, as producers reduce uncertainty by locating production closer to final markets.

Method

We drew on a 2017 analysis by Daniel Schwanen and Aaron Jacobs of the C.D. Howe Institute, The NAFTA constellation: Which Canadian industries are most vulnerable? Their analysis identified industries that would be most affected by a collapse of Canada-United States free trade. The analysis assumes that the higher the current level of trade, the greater the potential impacts.

We used the same indicator that they did to identify the industries that are most trade-dependent and therefore most vulnerable to trade disruptions: the share of an industry's jobs that rely directly on exports. In our case, we considered global exports, not just exports to the U.S., as trade disruptions could occur with any trading partners. We applied this indicator to Ontario data to identify the most vulnerable industries in the province,[2] and then quantified and mapped employment in those industries in the GGH.

Results

The industries identified as most vulnerable to trade disruptions, and their employment levels in the GGH are presented in Table 23.[3] We used a cut-off of 50 percent, that is, selecting those industries in which the share of employment directly relying on exports was 50 percent or greater.[4] We then mapped employment in these industries (Map 35).

Total employment in the most vulnerable industries in the GGH amounts to almost 200,000 jobs. Many are in manufacturing industries, especially the auto sector. Other vulnerable sectors are advanced manufacturing industries producing semi-conductors, computers and communications devices, and aerospace equipment. Disruption to trade would impact some of our most advanced, productive industries. Of service sector employment, only office administration and lessors of non-financial intangible assets (such as holders of patents, trademarks, brand names, etc.) are included.

Because vulnerability strongly affects manufacturing, the geography of employment vulnerable to trade disruptions reflects the manufacturing districts in the GGH. Auto manufacturing locations figure prominently, such as those in Guelph, Oakville, Alliston, Cambridge, and Oshawa. The three megazones are also highlighted, along with areas in Burlington and Scarborough. Other concentrated areas appear in the Meadowvale SKID and in Downsview, with its concentration of aerospace employment.

Table 23: Employment in industries with the highest share of jobs relying directly on exports, GGH, 2016

Sorted from highest to lowest vulnerability, based on share of jobs directly relying on exports

NAICS 2012

Industry

Direct/

all (%)

Employment 2016

3344

Semiconductor and other electronic component manufacturing

91.0

5,845

3341

Computer and peripheral equipment manufacturing

82.2

2,795

3342

Communications equipment manufacturing

80.9

4,145

3361

Motor vehicle manufacturing

80.7

31,985

3364

Aerospace product and parts manufacturing

79.1

13,150

315

316

Clothing manufacturing

Leather and allied product manufacturing

77.5

7,530

3262

Rubber product manufacturing

76.1

2,700

3339

Other general-purpose machinery manufacturing

72.0

9,425

3314

Non-ferrous metal (except aluminum) production and processing

71.6

850

3343

3345

3346

Audio and video equipment manufacturing

Navigational, measuring, medical, and control instruments manufacturing

Manufacturing and reproducing magnetic and optical media

71.0

6,910

3399

Other miscellaneous manufacturing

65.6

14,280

3333

Commercial and service industry machinery manufacturing

65.0

3,610

3332

Industrial machinery manufacturing

63.2

4,280

3326

Spring and wire product manufacturing

62.7

885

3366

Ship and boat building

62.0

360

3256

Soap, cleaning compound, and toilet preparation manufacturing

61.2

5,430

313

314

Textile mills

Textile product mills

60.9

4,115

3221

Pulp, paper and paperboard mills

58.5

1,765

3313

Alumina and aluminum production and processing

58.1

1,665

3352

Household appliance manufacturing

57.2

1,280

5611

Office administrative services

57.0

3,985

3252

Resin, synthetic rubber, artificial and synthetic fibres, and filaments manufacturing

55.8

845

3254

Pharmaceutical and medicine manufacturing

55.3

14,070

3362

Motor vehicle body and trailer manufacturing

54.2

2,295

3353

Electrical equipment manufacturing

54.2

5,325

1114

Greenhouse, nursery, and floriculture production

53.5

6,445

3363

Motor vehicle parts manufacturing

52.9

38,955

533

Lessors of non-financial intangible assets (except copyrighted works)

51.3

465

3336

Engine, turbine, and power transmission equipment manufacturing

50.4

1,595

3117

Seafood product preparation and packaging

50.3

370

TOTAL OF ABOVE

 

197,355

ALL GTA INDUSTRIES

 

3,710,915

     

 

 

Overall, vulnerable employment is distributed across the region. Some municipalities have higher concentrations of vulnerable industries, including Cambridge, Guelph, Milton, Oakville, Caledon, Newmarket, and Vaughan (see Table 24).

Some industries appear in both of the most-vulnerable lists, notably auto-related manufacturing and assembly. This industry also has a high level of employment in the GGH. Similarly, some municipalities are at the top of both lists, suggesting heightened vulnerability - including New Tecumseth, Cambridge, Guelph, Caledon, and Vaughan. In the following chapter we turn to land use strategies to address these vulnerabilities.

 

Table 24: Employment in industries most vulnerable to trade disruption as a share of total industry employment, municipalities with over 10,000 jobs, GGH, 2016

Employment in industries in which >50% of jobs rely directly on exports,

sorted from highest to lowest vulnerability

 

Employment in Most Vulnerable Industries

Total Employment

% of Total Employment

Greater Golden Horseshoe

197,355

3,710,915

5.3

New Tecumseth

6,660

16,515

40.3

Cambridge

11,705

62,130

18.8

Guelph

12,770

69,670

18.3

Milton

3,180

30,490

10.4

Oakville

8,295

81,240

10.2

Caledon

1,910

19,770

9.7

Newmarket

2,915

35,220

8.3

Vaughan

12,845

158,280

8.1

Ajax

2,045

25,500

8.0

Burlington

5,865

78,665

7.5

Oshawa

3,465

48,340

7.2

Brampton

10,915

156,125

7.0

Woolwich

860

12,540

6.9

Halton Hills

1,205

17,845

6.8

Aurora

1,455

22,355

6.5

Markham

7,535

127,400

5.9

St. Catharines

2,970

51,275

5.8

Brantford

2,100

36,910

5.7

Brant

595

10,820

5.5

Mississauga

20,955

394,660

5.3

Whitby

1,900

37,060

5.1

Niagara-on-the-Lake

520

10,240

5.1

Pickering

1,475

29,515

5.0

Richmond Hill

2,620

54,890

4.8

Kitchener

3,345

83,365

4.0

Haldimand County

500

12,955

3.9

Waterloo

2,180

59,025

3.7

Peterborough

1,385

38,435

3.6

Clarington

715

20,295

3.5

Whitchurch-Stouffville

350

10,155

3.4

Hamilton

5,985

187,500

3.2

Barrie

1,660

56,110

3.0

Toronto

38,930

1,342,435

2.9

Welland

390

14,780

2.6

Kawartha Lakes

450

17,425

2.6

Orangeville

250

10,930

2.3

Niagara Falls

720

35,560

2.0

Orillia

270

15,015

1.8

 

Map 35:  Employment in Industries with Highest Vulnerability to Trade Disruption, GGH, 2016

 


[1] At the time of publication (late October 2018), this agreement had not been ratified.

[2] Data for this indicator not available sub-provincially or for the GGH.

[3] In the Table, the share of jobs relying directly on exports is calculated based on Ontario data; these data are not available at the sub-provincial level. In some cases there is a single percentage number for a single or group of 3-digit industries; this is because the source data uses a different industry classification that treats these as one group and it is not possible to break out the shares at the 4-digit NAICS level. In some cases, the source data were available only at a 5-digit level equivalent, so we have aggregated to obtain a percentage value at the 4-digit level. This is the case for NAICS 3361 and 3363, but all of the 5-digit categories are captured in the 4-digit data. Employment figures are for the GGH.

[4] The aim of both automation and trade vulnerability analyses was to identify the most vulnerable industries and jobs. We used a cut-off of 50 percent or more for trade, resulting in almost 200,000 jobs. Using a cut-off of 60 percent or more for automation resulted in close to 700,000 jobs identified. So the vulnerability scale differs between the two factors. Had we used a 50 percent cut-off for automation, we would be including over 300,000 additional jobs, for a total of in excess of 1,00,000; a total that would not highlight the most vulnerable jobs.