Due to tariff cuts in Canada, the competition to export out of America has intensified.
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It was a tough week for the Canadian economy.
GM laid off 500 workers at a plant in Oshawa, Ontario. New threats from the White House target Canada’s aerospace industry. And Statistics Canada announced its preliminary estimates show gross domestic product Contracted in the fourth quarter of last year.
Amidst all this bad news, the question looms over how much, and how fast, Canada can expect to diversify its exports.
The federal government has announced plans to rapidly expand its trade with countries around the world, boost internal trade and increase investment in this country by one trillion dollars over the next five years.
The problem is that those changes take time. And Canada’s economy is under pressure right now. Can the new plans really deliver benefits fast enough to offset losses?
Consider the Canadian auto industry.
Hundreds of workers in Oshawa have finished their last shift at a General Motors plant Friday morning. CBC’s Christian D’Avino has been there since some of the night workers finished their last shifts.
Despite the trade war, the region is one of the worst affected. Thousands of jobs were lost. Shifts have been deactivated. Windsor, Ontario had the highest unemployment rate in the country.
“The share of manufacturing jobs in Ontario’s total employment has fallen below 10 per cent for the first time since record-keeping began in 1976,” the Ontario government’s fiscal accountability officer wrote in a report last year.
As part of its diversification efforts, TThe federal government signed a memorandum of understanding with South KoreaLast week. It added that the deal “includes the intention to cooperate in further growing the Korean automotive industrial footprint in Canada.”
Right now, no Korean automakers have a production facility in Canada. And the move was seen by many as a small glimmer of hope for an industry that has had such a difficult year.
“Canada is an auto nation – today, tomorrow and in the future – so our government is making strategic investments to protect jobs and strengthen the auto sector across the country,” the government wrote in a release.
But the reality may be less promising than first anticipated.
“There are no current plans for Hyundai Motor Group or Hyundai Auto Canada to establish vehicle manufacturing operations in Canada,” the company wrote in a statement to CBC News.
“We are reviewing a number of opportunities for collaboration, including potential collaboration in the hydrogen energy sector to support Canada’s clean energy transition.”
Hyundai has invested heavily in hydrogen-fueled cars. They have a longer range and can refuel faster than electric vehicles. But they lack the infrastructure needed for widespread adoption.
supply chain disruptions
One of the biggest challenges facing Canadian businesses and policy makers this year will be combining the potential for diversification with the reality of finding new partners.
The Bank of Canada says that companies in this country are trying to diversify.
“This shift is likely to be gradual. Finding new markets and building new export supply chains will take time and be costly,” the central bank wrote in its recent Business Outlook survey.
RBC economist Claire Fan says the companies that have managed to pivot are those that were already exporting to non-US markets.
“In other words, companies with established trade channels and infrastructure in non-U.S. markets were able to take advantage of them to increase their exports to those markets, while those without access were left behind.”
At a recent panel discussion hosted by the Canadian Club of Toronto, industry experts touted efforts to grow Canada’s export markets.
Tracy Robinson, president and CEO of rail company CN, said expanding business requires expanding supply chains.
“If you think about 50 percent of our trade going to global markets in the future, that means we will need port capacity and terminals at the ports. That means we will need rail capacity,” he said.
Canada has struggled to approve and build large infrastructure projects. For example, the recent Trans Mountain Pipeline expansion took 14 years to approve and construct. The cost increased after the federal government bought it to complete the project.
Sean Strickland of the Building Trades Unions of Canada says ports need to be dredged to ensure ships can move to capacity.
“To dig a channel, it takes four years of permission for four months of work. So that’s a problem we have in Canada,” he said at the luncheon.
CUSMA ‘Job Number One’
Panel also agreedNote that maintaining the benefits of the Canada-U.S.-Mexico trade agreement must be a top priority. CUSMA AG ReviewRemodeling is scheduled to take place this summer.
strickland Says Canada needs to be careful and no deal is better than a bad deal. But CUSMA has been good for Canadian workers and Canadian businesses, he says.
Diversification may help some industries cushion the blow of the trade war. That could help negotiators reach a deal with the U.S., but Canada’s business community has made it clear that priority must remain intact. The best deal possible with Canada’s largest trading partner.
“So, we definitely need to get a good deal on CUSMA. That should be job number one,” Strickland said.
