Canada’s chief trade negotiator with the United States says she believes this country’s auto manufacturing sector will survive the current trade upheaval with its long-time partner.
“There’s some simple math that isn’t getting through,” Janice Charette said on Thursday at the Auto Parts Manufacturers’ Association’s automotive conference in Vaughan, Ont. “Like we have a surplus, the United States has a surplus in terms of our auto trade with them. There’s a lot of powerful arguments that we could make.”
Her remarks provided an upbeat note at a conference dominated by reports that Canada’s auto sector is at a hinge moment and faces pressures that could lead to severe decline if not corrected.
Her team, along with Minister of International Trade Dominic LeBlanc , is focused on eliminating the sectoral tariffs that U.S. President Donald Trump has enacted on finished vehicles as well as on key inputs such as steel and aluminum .
She said her team is also dealing with the upcoming Canada-U.S.-Mexico Agreement ( CUSMA ) negotiations. On July 1, the three countries must decide whether to renew the agreement and extend it for an additional six years to 2042.
Leblanc has publicly indicated this would be in Canada’s best interest, but the U.S. has not yet made its position clear.
If CUSMA is not extended, it remains in place until 2036, but under the pressure of annual reviews.
Charette said the best-case scenario is that the parties come together in July and agree to remove tariffs and renew the agreement to 2042.
She also said the integrated North American auto sector represents the “coal face” or “ground zero” of Canada’s relationship with the U.S. because both countries have benefitted.
The U.S. benefits because Canada represents the largest export market for vehicles made in the U.S. and Canada benefits because auto manufacturing represents a cornerstone of the economy.
Charette’s optimism contrasted with some of the other speakers at the summit.
Honda Canada Inc. chief executive Dave Jamieson blamed domestic policies for weakening the country’s auto sector at a time when it is already dealing with trade tensions with its main export market and a “once-in-a-generation” electric vehicle (EV) transition.
Too often, he said, environmental policies in Canada are not aligned with industrial policy, pointing to Quebec and British Columbia requiring automakers to meet escalating sales of zero-emission vehicles and not placing enough emphasis on hybrid vehicle sales.
Honda Canada in April indefinitely suspended its planned $15-billion investment in an EV and battery manufacturing complex in Alliston, Ont. Jamieson said it’s not a “cancellation,” but cited three long-term threats to the future of Canadian auto manufacturing.
The first is maintaining predictable access to the U.S. market, without which, he said, it is difficult to justify the scale of investment needed to manufacture vehicles.
Jamison also warned that trade tensions with the U.S. may rise in the short term.
“We’re in for a very difficult 90-day period,” he said at the conference. “I hope Canadians have a stomach for it. It’s going to get nasty.”
Secondly, he said Canada needs to put guardrails in around new entrants. Although he did not specifically mention China, he said “low-cost, state-subsidized non-market” competitors would create market imbalances.
“We didn’t arrive on Canadian shores with kits from Japan, using Japanese workers and parts from Japan,” he said. “In contrast, Honda very quickly integrated itself into the fabric of Canada.”
Jamieson also called for changes to the regulatory environment to encourage investment.
He said hybrid vehicles are the best path forward since they cost less, perform well in Canadian winters and still reduce emissions by 25 per cent to 30 per cent.
Last year, Honda produced 400,000 of the 1.2 million vehicles in this country, but Jamieson said both of the vehicles the company produces here, the Civic and the CRV, are also produced in the U.S. and allocation could shift if Canada becomes more expensive or less competitive.
“We stand to lose future production allocation to another more favourable place,” he said. “This loss rarely happens all at once. It unfolds gradually.”
• Email: gfriedman@postmedia.com