Under duty-free trade provided by the North American Free Trade Agreement (NAFTA), local vehicle assembly and parts jobs and production in both the United States and Canada have been traded to Mexico for higher industry profit margins and lower vehicle prices for North American consumers. US President Donald Trump has pledged to change that basic economic trade-off in favour of repatriating production and restoring the industry’s once sizeable economic footprint in the US economy through resurrecting trade barriers against soaring levels of vehicles and parts production from Mexico, where wages are much lower. While cross-border, value-added supply chains are often said to blur distinctions on where vehicles are actually made, trade, investment, production and employment data all point to a large-scale migration of the industry to Mexico over the last decade. By most industry metrics, Canada’s vehicle and parts industry has been as adversely impacted as that of the United States — and in some cases more so — by the shift in production to Mexico under NAFTA. With the Trump administration serving notice that it will be renegotiating NAFTA and specifically targeting Mexico’s burgeoning assembly and parts industries, what are the best trade policy options for Canada’s largest manufacturing sector and exporter?
How Has Canadian Manufacturing Fared under NAFTA? A Look at the Auto Assembly and Parts Industry
CIGI Paper No. 138