Manufacturing in Canada and the United States has declined in terms of its employment and its share of GDP. Between 2000 and 2014, Canada’s manufacturing’s share of GDP dropped from 16 per cent to 11 per cent while that of the U.S. dropped from 15 per cent to 12 per cent.

However, these overall numbers do not reveal what are some important gains in manufacturing in many jurisdictions—especially in the U.S. Indeed, these gains come at a time when additional opportunities may present themselves with the recent signing of the Trans-Pacific Partnership (TPP) trade agreement.

Using data from Statistics Canada, the U.S. Census Bureau and the U.S. Bureau of Economic Analysis, the per cent change in manufacturing’s share of GDP was calculated between the years 2000 and 2014 for 50 U.S. states and 10 Canadian provinces. Of these 60 jurisdictions, fully one-third actually saw an increase in their manufacturing share of GDP while the remainder witnessed a decline. The first chart below plots the top 20 growth jurisdictions while the second chart plots the bottom 20.

The per cent increase in the size of the manufacturing sector ranged from a low of about one per cent for California (from 10.9 to 11 per cent of GDP) to a high of 164 per cent for Oregon (from 10.7 to 28.3 per cent of GDP). Canadian provinces were generally absent from these areas of growing manufacturing output with the exception of only one province, Saskatchewan, which saw its modest manufacturing share of GDP grow from 6.2 to 6.5 per cent—an increase of about five per cent between 2000 and 2014.

Of the 20 jurisdictions that saw the largest decline in manufacturing sector size, six were Canadian with Newfoundland, British Columbia, Quebec and Ontario in the bottom 10. Indeed, after New Jersey and Delaware, Ontario and Quebec saw the next largest losses in the manufacturing share of GDP. Ontario’s manufacturing sector went from 20.3 to 13.0 per cent of GDP (a 36 per cent drop) while Quebec went from 20.8 to 14.3 per cent—a drop of 31 per cent.

Despite the constant angst about the decline of manufacturing, it would appear that a manufacturing rebound is indeed underway in some parts of the U.S. Indeed, a recent study has highlighted the performance of the so-called Rust Belt states compared to Ontario and Quebec. The rebound is being led by rising labour productivity and an expansion of advanced manufacturing opportunities. Oregon is in the forefront of this trend with computer and electronic manufacturing and exports of electronic integrated circuits, processors and controllers. Moreover, the new manufacturing is less labour intensive and higher productivity. While manufacturing employment has grown in Oregon in recent years, fewer people are producing more manufacturing output than in 2000.

The good news here is that manufacturing decline in North America is not inevitable, and opportunities and growth in manufacturing are possible. While there are concerns that the coming of the TPP may threaten these gains, the truth of the matter is that American manufacturing is more nimble and efficient and able to better compete internationally. The strength of American manufacturing is evident from the recent “onshoring” trend, which has seen companies move manufacturing production back to the States. Part of the onshoring trend has been driven by lower energy costs in American manufacturing—especially cheaper natural gas—as well as activities that are less labour intensive and activities that have seen growing domestic demand.

The unfortunate part of this story is that Canada has generally not been part of this rebound in manufacturing. The industrial heartland of Ontario and Quebec in particular are among the worst performers with little indication of this trend abating. This lack of competitiveness will put Canadian manufacturing in a poor position when it comes to taking advantage of manufacturing opportunities from the expanded markets of the TPP.