• You Are Here: Home > News
  • > Bradley: Sky Not Falling on NAFTA … For Now?
Bradley: Sky Not Falling on NAFTA … For Now?

While Canada may not be the primary target of any NAFTA renegotiation between the U.S. and its North American trade partners, it’s possible we could still get caught in the crosshairs.

That’s the gist of an in-depth feature by the UK-based international publication, Automotive Logistics. The centerpiece of the article is CTA’s CEO David Bradley, whose “cautious but confident optimism on NAFTA is reassuring,” states the magazine.  “Bradley points to potential silver linings on the clouds of uncertainty.”

“While we can’t place too much emphasis on the first and a very short meeting, the tone and comments from the president [at the joint press conference] give us some solace that [Nafta] can and should be modernised,” Bradley says.

CTA members have raised concerns, however, and the protectionist rhetoric from Trump and many of his advisers is worrying for Canada’s automotive industry, which is closely tied to the US and is important for Canadian logistics providers. However, carriers have not reached a state of anxiety, Bradley insists.

“Truckers are pretty tough and competitive people – and the auto sector is not an easy sector to begin with,” says Bradley. “It’s very competitive and there’s a lot of pressure on suppliers across the supply chain, including the trucking industry. They will see what comes and they won’t panic unless there’s a need to do that.”

Perhaps such anxiety, especially the kind derived from endless speculation, just isn’t very Canadian. Bradley prefers to focus on the existing strength of US-Canada trade, especially the well-established automotive supply chain between the two.

“It is perhaps the best example of integrated or synchronous manufacturing on the planet,” he says. Parts and components cross the border up to eight times before a vehicle is complete, with minimal customs controls and smooth crossing by truck and rail, especially between the province of Ontario – home to virtually all Canadian automotive manufacturing – and the US Midwest.

Nevertheless, this calm and collected trade partnership could get caught in the crosshairs of the Trump administration’s wider economic nationalism, says Automotive Logistics. Even if Canada is not the main target of Nafta renegotiations, other policies aimed at increasing US domestic manufacturing – such as tariffs, changes in local content requirements, or a potential ‘border adjustment tax’ – could impact on investment and trading conditions across North America.

Indeed, Bradley estimates that Michigan would be likely to lose out even more than Ontario in the event of border restrictions.

Even with tariffs, automotive production would not necessarily pour back to the US from Mexico or Canada, says Kristin Dziczek, director of industry, labor and economics at the Center For Automotive Research (CAR).

Dziczek also points out that plant investments are recouped over decades. A change in policy toward protectionism in the US is unlikely to spur carmakers or tier suppliers to focus all their North American capacity in the US, especially as policies may change again after four or eight years. “You have to have your eye on the long view of what’s the most efficient way to run the business with this footprint,” she says.

From the perspective of supply chain exchange and logistics for automotive, NAFTA is a global model worth emulating, according to James Frierson, who served during the Reagan Administration as chief of staff to the Office of the US Trade Representative, the country’s top trade negotiator. Frierson was part of the team that negotiated the US-Canada Free Trade Agreement that preceded Nafta, which used the automotive supply chain between Michigan and Ontario as a model for the possibilities that could be realised within other markets.

The trade agreement with Canada also served as a template for Nafta itself, with the value to turn North America into a value chain. “It’s taken us decades to make the supply chain this tight and this competitive. The whole idea of Nafta was to use the entire North American continent as a production platform in competition with the rest of the world – not in competition with each other,” says Frierson.

The mouse and the elephant

Canadians are calm and tough by necessity – their weather and geography demand it, but so too do Canada’s relations with its giant southern neighbour, whom it must avoid riling.

“We are a very small economy in comparison to the US, with 75% of our exports going there. We always live under a shadow of protectionism, but that just makes us have to be better and stronger,” says Bradley.

Nafta’s future is still undecided, with supply chain participants in Canada watching closely. They are doing so calmly and pragmatically, as ever – but not without hope for the best. “There are always opportunities where there are challenges. We don’t rule out anything,” explains Bradley.

Read the full wide-ranging article as well as more comments from CTA here


Share This Story