Canada has the potential to develop itself as an automotive superpower on the world stage. Expanded production capacity in vehicle assembly and parts production can fuel growth in creating good union jobs, expanding workers’ skills as well as securing investments in technological advancements and innovations. More than that, Canada can strategically position itself as a global leader at every stage of the supply chain. This leadership includes capitalizing on internal combustion engine (ICE) vehicles that still dominate the market as well as rapidly rising alternative propulsion zero emission vehicles (ZEV) – from the mining and refining of critical minerals, of which Canada maintains significant stores, all the way through to recycling. From an economic development perspective, Canada is the envy of the world.
Canada's Dominance in Minerals Needed for EV Production
However, this expansion, and the economic benefits that go along with it, will not come to Canada by chance. Governments cannot simply cheerlead their way to product commitments, industrial expansion efforts and job creation by blaring the ideological trumpets of “low taxes” and “flexible labour standards.” Instead, countries the world over, such as the United States, China, Germany, France, Japan, Korea, Brazil and others, approach auto sector development as a strategic priority by using a range of trade, investment and economic oversight tools to achieve broader national objectives in areas of job creation or decarbonization.
Canada’s federal and provincial governments clearly understand the strategic potential of auto sector growth. Investment attraction tools, particularly the federal Strategic Innovation Fund and its associated Net Zero Accelerator Fund, are proving effective. For instance, SIF monies, that were matched dollar-for-dollar by the Ontario government helped leverage nearly $2 billion for retooling Ford’s Oakville Assembly Plant as well as financial supports for GM plants in Oshawa and Ingersoll as well as Stellantis facilities in Windsor and Brampton. The bulk of these commitments were negotiated in conjunction with Unifor-Detroit 3 collective bargaining in 2020.23 Additionally, governments continue to assign internal resources to lead strategy tables, stakeholder dialogue and other initiatives to better understand and activate this shift.
Major Canadian EV investment in Canada September 2020-July 2022
However, solidifying and growing the auto sector and its associated supply chain requires more than subsidy commitments. It also requires a more cohesive whole-of-government approach to sector development, underpinned by a comprehensive and goal-oriented industrial strategy.
2 See CBC News (October 8, 2020): https://www.cbc.ca/news/business/ford-oakville-government-1.5754974
3 See CBC News (April 4, 2022): https://www.cbc.ca/news/canada/london/gm-plants-government-funding-1.6407621
Of all manufactured goods in Canada, cars and car parts are the country’s most valuable export commodity. Even in its early days, the auto industry has always relied heavily on cross-border trade, mostly in North America. Unfortunately, Canada’s relentless pursuit of so-called free trade agreements, including with low-wage, low-cost and import-resistant jurisdictions, contributes to a competitive imbalance for the domestic auto sector. Consider that Canada for much of its history exported more vehicles and parts to the world than it imported. In 2005, Canada reported its last annual trade surplus in automotive trade of $4.5 billion. Since then, Canada’s automotive trade deficit has risen to more than $37 billion in 2021, a new record.4
Canada's Automotive Trade Balance (2002-2021)
Source: Trade Data Online (accessed April 29, 2022)
For many years, Canada dangled access to its vehicle market and, by extension, the North American market, as a carrot to secure new free trade agreements including with Mexico, Korea and the European Union, among others. This approach has put added pressure on Canadian autoworkers to have wages cut and other costs, under threat of offshoring and job loss. Stronger auto trade and labour provisions in the new North American trade agreement that replaced NAFTA, the Canada-US-Mexico Agreement (CUSMA), are a shift in the right direction, but leaves room to do more. Canada must advocate for trade policies that expand, not harm, the domestic auto industry and its workers, by renegotiating or withdrawing from trade treaties that fail to meet this objective.
4 Statistics Canada, accessed through Government of Canada Trade Data Online portal, April 5, 2022.