"Small is beautiful," consultant informs development officials.

"Small is beautiful," consultant informs development officials

Small, service-oriented secondary industries hold the most promise for Northern Ontario.

That was the key message delivered by Ron Goswell of Northern Research Associates of Sudbury to delegates at the second-annual Northern Ontario conference on economic development held last month in Sault Ste. Marie.

Goswell made the statement while presenting the results of an in-depth study into Northern Ontario's industrial base and labor force. The study, titled Industry, Science and Technology Canada: Review of Competitiveness of Northern Ontario's Traditional and Selected Non-Traditional Industries, was undertaken by The Coopers and Lybrand Consulting Group and funded by FedNor.

"Small is beautiful," said Goswell.

Using 100 employees as the break-point, he said small firms are moving ahead while larger firms are reducing employment levels.

This trend is occurring in Northern Ontario's traditional resource-based manufacturing sector as well in the non-traditional manufacturing sector which is composed of industries that are export-oriented, automated and flexible, and have fewer than 50 employees.

The report concluded that while Northern Ontario remains a dominant force in its traditional strengths of mining and forestry, its market share in both sectors is eroding due to increased global competition, the over-valued Canadian dollar and excessive labor costs.

In general, because local markets for the north's primary products are limited, the region's economy rises and falls at the mercy of international market conditions.

This factor, according to Goswell, explains Northern Ontario's sluggish recovery from the recession of the early 1980s. He said it will continue to impact heavily on the region's economic fortunes.

The future of Northern Ontario will depend on the region's ability to adapt to and compete in global markets.

"This presents a major challenge for Northern Ontario because the changes that are occuring are so significant that the means by which Northern Ontario has traditionally achieved a competitive advantage will continue to be challenged in the 1990s."

The report includes profiles of Northern Ontario's key industries of gold mining, base metals mining, steel, pulp and paper, forest products and transportation, as well as of its secondary industries. The reports conclusions are that:

* Canada ranks fourth in the world in gold production, and Hemlo's reserves have made Ontario the leading gold producer in Canada, with three of the country's four refineries. In addition to its rich deposits, the Hemlo operation is one of the lowest-cost operations in the world. The region is expected to maintain its strong position in this industry in the foreseeable future.

* The future demand for base metals, including nickel, copper, zinc and uranium, will be determined by the rate of global growth, changes in end-use and development of material substitutions.

Northern Ontario has benefited from relatively large reserves, but these are shrinking, and the region may not be able to maintain its market share without significant investment in exploration and development.

* Nickel is Ontario's largest mineral commodity, but reserves are estimated at 30 years. Except for stainless steel and alloy steel, most end-uses are down.

* Canada is the world's third-largest exporter of copper - behind Chile and the U.S. - with 20 years of reserves remaining. The development of fibre-optics has created a major cloud on the horizon because the major consumers of copper are producers of electrical wire.

* The long-term future of the zinc industry is questionable, although Canada is currently the largest producer of the metal. The country's market share has been decreasing since 1977 due to the growth of zinc exports from developing nations. Demand is declining as changes are made to automobile production methods.

* Gloomiest of all, according to Goswell, is the forecast for the region's uranium industry, which is based on deposits in Elliot Lake. Their relatively low-grade ore costs more to produce than other sources at a time when market prices are dropping. The prospect for uranium as an important part of Northern Ontario's economy is "very bleak."

* The steel industry world-wide is suffering from low demand - due in part to material substitutions - and over-capacity. The 60 leading international steel makers lost a total of $22 billion between 1977 and 1984.

Goswell said the industry must find ways to reduce its debt and employment levels in order to stay in business.

* Although the forest products industry has been a mainstay of Northern Ontario's economy, and will probably continue to play an important role, it is unlikely to experience growth in the foreseeable future.

The industry suffers from its traditional cycle of over-expansion which forces prices and profits down, as well as current government fiscal policies. In addition, it faces high costs of modernization in order to meet those niches where growth may occur - the production of paper from hardwood pulp and the production of higher quality paper products.

Environmental concerns are something of a wild card in this industry as debate continues over the relative advantages of plastics and paper.

However, demand for paper does continue to grow, and productivity will be the key determining the sector's success.

"The government must support the restructuring of this industry to take advantage of some opportunities for growth in a few areas," concluded Goswell.

* The transportation industry in Northern Ontario is dominated by air transport, with trucking a close second. Although air traffic saw a steady decline in the north between 1976 and 1987, the last two years have seen a marked reversal of that trend. The proposed "open sky" policy will probably have a major impact on the industry in Northern Ontario.

Trucking has grown steadily, especially in short-distance haulage, and is very competitive. But, with 20-per-cent higher costs than U.S. competitors, the industry may be threatened by deregulation.

The rail industry has declined by approximately 50 per cent over the past three years. Both Northern Ontario lines, Algoma Central and Ontario Northland, suffer from too much track and too little traffic, said Goswell.

Marine transportation, based on the St. Lawrence Seaway and Great Lakes shipping, has depended on grain. Government policies have favored shipping to west coast ports, resulting in a serious decline of activity in Northern Ontario. At the same time, competitive shipping depends on massive investment in modern, self-loading vessels.