Manufacturing & Industrial Location Theory – Chapter 10 Questions –Directions for Future Research? 4 lectures left! Location Theory Space-cost curve Tariff and NAFTA High Technology Cycle Theory Fordism-Flexible Specialization

Alfred Weber, 1909 Labour costs - Isodapanes Isodapane Line of total transport costs Determined by summing the value of all isotims at a point And joining all points of equal total transport costs Caution: As some hawk-eyed students have pointed out, there are a number of errors in this diagram! As you can see for yourself, the $8 isodapane is really the $9 isodapane. The isodapanes are wrongly interpolated to the left of M and to the right of S

Derivation of Space Cost Curve

Spatial Margins to Profitability Contemporary interpretation Slopes of curves could be very gradual Noneconomic factors may prompt nonoptimum location within margins Firms may not have data to determine the optimum and are content with any location within margins of profitability Satisficing behaviour

Manufacturing: Regional Patterns and Issues – Chapter 11 Tariff on manufactured imports Tariff on manufactured imports –Import substitution –Protect infant industries –Foster industrialization and create industrial jobs –Linkages with other Canadian manufacturers –3 rd Plank of the National Policy of 1869

Implications of the Tariff for Canadian Manufacturing Industrialization benefits for southern Ontario and Quebec, rapid urban –industrial growth Industrialization benefits for southern Ontario and Quebec, rapid urban –industrial growth Deindustrialization of Maritimes 1870s and 1880s Deindustrialization of Maritimes 1870s and 1880s Higher costs due to tariff and low Canadian productivity were a small price to pay for Ontario & Quebec Higher costs due to tariff and low Canadian productivity were a small price to pay for Ontario & Quebec The seeds of The seeds of –Western alienation –Sir John A. & –Conservatives!

Implications of the Tariff for Canadian Manufacturing Foreign ownership Foreign ownership Tariff factories Tariff factories Branch plant economy Branch plant economy –Technological dependency –High costs, low productivity –Not competitive on world markets  No mandate to export –Main links to U.S. not Canada! By 1980s, NTBs more significant By 1980s, NTBs more significant

‘Free Trade’ Agreements CUSFTA – 1 Jan 1989 CUSFTA – 1 Jan 1989 NAFTA – 1 Jan 1994 NAFTA – 1 Jan 1994 Foreign location no longer a condition of market entry Foreign location no longer a condition of market entry Rationalization/specialization Rationalization/specialization Canada maintains positive balance of trade Canada maintains positive balance of trade Dispute resolution mechanism Dispute resolution mechanism

It’s Not Really ‘Free Trade’ U.S. government procurement U.S. government procurement Canada’s cultural industries Canada’s cultural industries Dispute resolution: softwood lumber, durum wheat, beef are conspicuous failings Dispute resolution: softwood lumber, durum wheat, beef are conspicuous failings Loss of sovereignty ? Loss of sovereignty ?

Canada’s International Trade Balance, 2001 ($ 000,000) Source: Statistics Canada 2003, Cansim II Table 228

Costs and Benefits of ‘Free Trade’ “Giant sucking sound" of jobs and investment heading south – irony! “Giant sucking sound" of jobs and investment heading south – irony! Growth in trade and investment, inbound and outbound. See DFAIT Growth in trade and investment, inbound and outbound. See DFAITDFAIT Growth in dependence Growth in dependence Canada’s low dollar has been vital to strong trade performance under NAFTA Canada’s low dollar has been vital to strong trade performance under NAFTA Impact is regionalized Impact is regionalized