Geoff Russ: The myth of Ontario manufacturing

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A healthy powerhouse can go through its ups and downs, but if Ontario’s auto sector were a man, he’d be getting backslapped by politicians while a nurse checked his pulse. The same patient would also have a long history of being injected with expensive medications, paid for by the taxpayer, of course.

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The EV supply chain alone has been stuffed full of taxpayer money in a way that would outrage even the most corrupt rail barons of Confederation. Up to $52.5 billion in federal and provincial support has been tied to $46.1 billion in electric vehicle (EV) supply-chain investments. Some of this could be defensible, as these subsidies emerged partly in response to former U.S. president Joe Biden’s industrial-policy push to reshore American auto manufacturing with subsidies of his own. Canada does not make the rules of the auto sector, and defending a strategic industry was a necessity.

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However, subsidies are not evidence of market strength. Essentially bribing automakers is an unsustainable model. Ontario needs far more industrial independence and real productive capability.

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Regarding energy, the world’s nuclear energy industry is approaching a renaissance, and Ontario is well placed to capitalize on that. The province has longstanding nuclear plants, a skilled nuclear workforce, and public demand for reliable power.

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At Darlington, Ontario Power Generation’s small modular reactor (SMR) project has a federal construction licence for one BWRX-300, a type of SMR designed for repeat deployment. If it chooses to, Ontario could use Darlington as the first step in a domestic SMR supply chain, exporting components, engineering expertise, and deployment services tied to the BWRX-300 platform.

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If Canada is forced into heavier industrial policy, defence and dual-use manufacturing should be a priority. Canada’s Defence Industrial Strategy points to $180 billion in defence procurement and $290 billion in defence-related infrastructure investment over 10 years. Ontario firms can bid for more communications, aerospace, and electronics contracts, provided procurement protects Canadian control and security in sensitive industries.

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Where appropriate, AI should not be shied away from. In the second quarter of 2026, 19.2 per cent of Canadian businesses reported using AI to produce goods or deliver services, more than triple the 6.1 per cent reported in the second quarter of 2024. It can be used for scheduling, tooling, robotics, quality control, and more, so long as it raises output per worker.

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For all the uproar about the loss of industry and lost or outsourced factory jobs in the American Midwest, the South was one of the beneficiaries of northern industrial decline. In the United States, the Sunbelt’s growth in factories and production lines offers lessons for Ontario.

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The Sunbelt’s looser labour market conditions are key as well, but Ontario’s well-entrenched and politically protected unions will not stand for a copy-and-paste version of Alabama-style open-shop, deregulated labour laws. However, if jobs continue to disappear, skilled workers may face the choice between reform that preserves their livelihoods and no livelihoods at all.

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Even so, the Sunbelt offers faster permitting, well-serviced industrial land, tax advantages for industry, and worker training. It is a very commercially aggressive region as well. Ontario, and indeed Canada, should invest more heavily in different R&D, industrial sites, and productivity-enhancing infrastructure rather than relying so heavily on direct firm-specific subsidies, while modernizing its labour laws to make the province more attractive to investors. True, Justin Trudeau’s government’s R&D funding was substantial, but largely put into ineffective and ideological industries like “clean tech.” There will always be a need for R&D, whatever the failures of past governments.

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Ontario manufacturing should have a future. Without it, Canada will move closer to a British-style model: a globally important financial hub in London, a large welfare state, and a thinning industrial base.

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Subsidized vulnerability should be neither Ontario’s model nor Canada’s.

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National Post

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