Canada's auto strategy: Grovelling for crumbs in NAFTA's grim reality

Please chip in to support more articles like this. Support in its summer fundraiser today for as little as $5 per month!

You could hear jaws dropping onto factory floors right across Ontario's auto belt last month. Export Development Canada (EDC) announced a $525-million loan to Volkswagen. The money was not to lure the company -- the world's largest automaker -- to Canada. To the contrary, we're helping finance Volkswagen's growth 4,000 kilometers away: with expanded factories in Mexico and Tennessee, and a new plant in Mexico (producing luxury Audis).

EDC is a federally owned agency, offering loans and other supports to Canadian exporters. Why on earth would it concern itself with helping Volkswagen expand in Mexico and Tennessee? It's not as if Volkswagen needs our help: with revenues last year of 200 billion euros, and profits of 12.7 billion euros, it can easily raise all the commercial capital it needs.

And EDC officials emphasize its support for Volkswagen is not contingent on buying anything from Canada. That, it seems, would violate the rules of "free trade." The only requirement is that Volkswagen network with Canadian suppliers to discuss business opportunities in Mexico and Tennessee. For $525 million, that better be one heck of a "meet and greet."

Even if Canadian suppliers did win a contract or two from Volkswagen, it's unlikely the resulting work would occur in Canada anyway. Canadian parts suppliers have opened dozens of factories in Mexico and the Deep South -- often required by their customers to locate near the final assembly plants. But EDC doesn't mind: helping Canadian-owned firms open plants in Mexico is part of its strategy.

Mexico's auto industry, powered by ultra-cheap labour, a growing supply base, and lucrative government subsidies, is scooping up virtually all new greenfield auto investment in North America. Eight new assembly plants have been built or announced there since 2009 (including the Audi plant). The "giant sucking sound" predicted by Ross Perot in the debate over NAFTA has become a reality. That's bad enough. But watching a Canadian government agency actually assist that southward migration is incredible.

There's an ugly human story behind Mexico's industrial boom. Contrary to promises of prosperity and democracy, Mexican workers remain desperate and insecure. Real manufacturing wages have not grown; labour costs are now cheaper than in China. Independent trade unionism and other political activity is suppressed, often violently -- evidenced most horrifically by the quasi-governmental assassination of 43 student protesters last year. The normal institutional forces that, in a free society, would allow Mexicans to win a fairer share of the wealth they produce (thus narrowing the gap with Canada) have been short-circuited.

Mexico produced 3.4 million vehicles last year, worth around $100 billion. Canada exported $484 million in parts to Mexico last year -- and our exports are shrinking (down 30 per cent since 2001). Each dollar of Mexican output now embodies less than one half-cent of Canadian content. Our automotive deficit with Mexico exceeded $10 billion last year; our total deficit with Mexico was $23 billion.

EDC claims its loans will help us capture a few more crumbs from the auto industry's southward migration. Its convoluted logic highlights the painful contradictions of Canada's whole approach to autos (and other strategic industries) under NAFTA's lopsided rules. We aren't allowed to "subsidize" purchases of Canadian products. So why must we bribe private companies just to look at our own products -- something that should be automatic under true competition?

Volkswagen sold $4 billion worth of vehicles in Canada last year. Shouldn't we actually demand some Canadian purchases from the company, in return for all that business, instead of begging for it?

Meanwhile, back home in Germany, Volkswagen is 20 per cent state-owned, and benefits from various public technology, training and capital supports. German wages are significantly higher than Canada, yet Volkswagen hasn't closed a German factory in decades.

Ottawa could try the same thing. Instead, it sold off its own shares in General Motors this month (for the short-term political optics of balancing its budget). It has a fund to entice auto investment to Canada, but can't seem to spend it (automakers don't like its unwieldy rules, and they're infatuated with Mexico anyway). We could use other government levers (including EDC itself) to attract automakers here. Instead, Ottawa signs more trade agreements with places (like Korea) that have no more interest in Canadian cars than Mexico does.

The fatalism of EDC's strategy is stunning. But the incoherence of Canada's overall auto strategy is even worse.

Jim Stanford is an economist with Unifor. A version of this commentary was originally published in the Globe and Mail.

Photo: BUICK REGAL/flickr

Related Items

Thank you for reading this story…

More people are reading than ever and unlike many news organizations, we have never put up a paywall – at rabble we’ve always believed in making our reporting and analysis free to all, while striving to make it sustainable as well. Media isn’t free to produce. rabble’s total budget is likely less than what big corporate media spend on photocopying (we kid you not!) and we do not have any major foundation, sponsor or angel investor. Our main supporters are people and organizations -- like you. This is why we need your help. You are what keep us sustainable. has staked its existence on you. We live or die on community support -- your support! We get hundreds of thousands of visitors and we believe in them. We believe in you. We believe people will put in what they can for the greater good. We call that sustainable.

So what is the easy answer for us? Depend on a community of visitors who care passionately about media that amplifies the voices of people struggling for change and justice. It really is that simple. When the people who visit rabble care enough to contribute a bit then it works for everyone.

And so we’re asking you if you could make a donation, right now, to help us carry forward on our mission. Make a donation today.


We welcome your comments! embraces a pro-human rights, pro-feminist, anti-racist, queer-positive, anti-imperialist and pro-labour stance, and encourages discussions which develop progressive thought. Our full comment policy can be found here. Learn more about Disqus on and your privacy here. Please keep in mind:


  • Tell the truth and avoid rumours.
  • Add context and background.
  • Report typos and logical fallacies.
  • Be respectful.
  • Respect copyright - link to articles.
  • Stay focused. Bring in-depth commentary to our discussion forum, babble.


  • Use oppressive/offensive language.
  • Libel or defame.
  • Bully or troll.
  • Post spam.
  • Engage trolls. Flag suspect activity instead.