Quebec's free trade growth strategy - Canada

Business America, April 20, 1992 by Julie Snyder

The province of Quebec has critically examined its economic strengths and weaknesses in light of the challenges posed by the U.S.-Canada Free Trade Agreement (CFTA) and the recession in North America. Concluding that future economic benefits can best be derived from targeting key industries, the province recently unveiled a strategic plan for economic development patterned after the concept of competitive industrial clusters. This plan for growth capitalizes on the strengths of Quebec's already globally competitive industries and points to additional industries poised for future development. While these strategic industrial clusters develop over the next decade, opportunities will grow for U.S. firms to enter and expand in the Quebec market through sales of products and services, joint ventures, technology transfers, and licensing agreements.

Industrial Cluster - An industrial cluster is a set of industries in the same sector of activity that interact synergistically and occasionally compete to become more competitive and to accelerate growth. Silicon Valley's computer industry and its spinoffs serve as an example of the vertically integrated, competitive cluster in the formulation of Quebec's provincial growth strategy. The strategy is dependent upon the capabilities of industry leaders in each cluster to generate spinoff manufacturing activity derived from subcontracting and the demand for parts and other industrial inputs. Referred to in francophone Quebec as "Les Grappes Industrielles," the five competitive industrial clusters in Quebec that are already vertically integrated to varying degrees are aerospace, pharmaceuticals, information technologies, electrical power, and metal/minerals processing.

Aerospace - Quebec's $3 billion aerospace industry, accounting for 44 percent of aerospace production in Canada, is the most dynamic and vertically integrated of the five competitive clusters. Fixed-wing aircraft, helicopters, engines, turbines, navigation equipment, communications systems, landing systems, satellites, ground maintenance equipment, ground communications systems, and precision parts are all manufactured in Quebec. Industry leaders, including Bombardier/ Canadair, Bell helicopters, Spar aerospace, and Pratt and whitney, either manufacture or assemble in the Montreal region. Bombardier's recent acquisition of De Havilland in Ontario has established Bombardier as a world leader in the regional jet market.

Attracted by and spawning from Quebec's large aerospace manufacturer are an array of sub-assembly manufacturers, including Heroux, Car, Marconi, and Dowty, as well as a third tier of small sub-contractors and suppliers of specialty equipment. Future growth in Quebec's aerospace industry is forecasted to be especially strong in sub-assembly and specialty manufacturing. The opening of the Canadian space agency's headquarters in the Montreal region later this year will further solidify Quebec's strong position in the aerospace industry.

U.S. suppliers of leading edge technologies and products for the aerospace industry should explore opportunities for sales as well as for technology transfers and joint ventures as Quebec's aerospace cluster continues to develop.

Pharmaceuticals - Pharmaceuticals is the second strategic industrial cluster targeted for growth. Nearly 50 percent of Canada's $4 billion pharmaceutical industry production and the lion's share of research and development in Quebec are carried out by subsidiaries of global industry giants such as Merck Frosst, Brystol-Meyers Squibb, Sandoz, Ciba-Geigy, Abbott Laboratories, Marion Merrell Pow, Burroughs Welcome, and Rhone Poulenc-Rorer. Growth in Quebec's pharmaceutical industry and opportunities for U.S. suppliers will be shaped by pressure to rationalize operations, funds for research and development, and intellectual property laws.

Information Technologies - Quebec's third cluster, its multi-billion-dollar information technologies industry, encompasses telecommunications equipment, electronic components, computer equipment, and software. U.S. suppliers already dominate the import market and the total market in Quebec for information technologies. Growth for this sector is aimed particularly at Quebec's bilingual and multilingual software development industry. In addition to ever-increasing opportunities for sales of state-of-the-hardware, U.S. software firms may take advantage of projected growth in this sector through seeking opportunities for multilingual software development in Quebec to reach not only the Canadian market, but also European markets.

Metals and Minerals Processing - The fourth cluster, Quebec's $1 billion metals and minerals processing industry, has a strategy for growth centered on increasing value-added, downstream processing. Equipment and technology transfers in the areas of processing of light metals, production of structural components derived from powder metallurgy, lost wax casting, composites, advanced ceramics powders and products, superconducting materials, synthetic minerals, and glass processing will be needed to develop value-added capabilities.