While Canada may not be the primary target of any NAFTA renegotiation between the U.S. and its North American trade partners, it\u2019s possible we could still get caught in the crosshairs.<\/p>\n
That\u2019s the gist of an in-depth feature by the UK-based international publication, Automotive Logistics. The centerpiece of the article is CTA\u2019s CEO David Bradley, whose \u201ccautious but confident optimism on NAFTA is reassuring,\u201d states the magazine. \u00a0\u201cBradley points to potential silver linings on the clouds of uncertainty.\u201d<\/p>\n
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\u201cWhile we can\u2019t 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,\u201d Bradley says.<\/p>\n
CTA members have raised concerns, however, and the protectionist rhetoric from Trump and many of his advisers is worrying for Canada\u2019s 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.<\/p>\n
\u201cTruckers are pretty tough and competitive people \u2013 and the auto sector is not an easy sector to begin with,\u201d says Bradley. \u201cIt\u2019s very competitive and there\u2019s a lot of pressure on suppliers across the supply chain, including the trucking industry. They will see what comes and they won\u2019t panic unless there\u2019s a need to do that.\u201d<\/p>\n
Perhaps such anxiety, especially the kind derived from endless speculation, just isn\u2019t very Canadian. Bradley prefers to focus on the existing strength of US-Canada trade, especially the well-established automotive supply chain between the two.<\/p>\n
\u201cIt is perhaps the best example of integrated or synchronous manufacturing on the planet,\u201d 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 \u2013 home to virtually all Canadian automotive manufacturing \u2013 and the US Midwest.<\/p>\n
Nevertheless, this calm and collected trade partnership could get caught in the crosshairs of the Trump administration\u2019s 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 \u2013 such as tariffs, changes in local content requirements, or a potential \u2018border adjustment tax\u2019 \u2013 could impact on investment and trading conditions across North America.<\/p>\n
Indeed, Bradley estimates that Michigan would be likely to lose out even more than Ontario in the event of border restrictions.<\/p>\n
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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).<\/p>\n
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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. \u201cYou have to have your eye on the long view of what\u2019s the most efficient way to run the business with this footprint,\u201d she says.<\/p>\n
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\u2019s 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.<\/p>\n
The trade agreement with Canada also served as a template for Nafta itself, with the value to turn North America into a value chain. \u201cIt\u2019s 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 \u2013 not in competition with each other,\u201d says Frierson.<\/p>\n
The mouse and the elephant<\/strong><\/p>\n Canadians are calm and tough by necessity \u2013 their weather and geography demand it, but so too do Canada\u2019s relations with its giant southern neighbour, whom it must avoid riling.<\/p>\n \u201cWe 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,\u201d says Bradley.<\/p>\n Nafta\u2019s future is still undecided, with supply chain participants in Canada watching closely. They are doing so calmly and pragmatically, as ever \u2013 but not without hope for the best. \u201cThere are always opportunities where there are challenges. We don\u2019t rule out anything,\u201d explains Bradley.<\/p>\n [\/otaTextBox]<\/p>\n