Canada should take a look at charting Mexico’s path
In terms of automotive manufacturing, Mexico is currently the envy of the world.
Our NAFTA partner has attracted $23 billion in investment from global car and parts companies in the last two to three years. Its production is expected to jump 56 per cent by 2020.
Well, let’s admit it, Mexico is the new Detroit, or Ontario.
Canada’s fortunes, on the other hand, have been the exact opposite. It’s no news that we are falling behind in automotive manufacturing, so I won’t go into it in much detail.
All I will say is that our governments seemed to have just about woken up at the right time (although some would argue that it’s already too late). With the help of former Toyota executive, Ray Tanguay, our province is trying to put together a game plan to stop the production bleed.
It makes sense that we are looking at Mexico for a business development template, particularly the country’s ProMexico initiative — a centralized, investment information and support platform that made it easy for companies to evaluate the opportunities available for moving into the country.
But a study released last month by the Automotive Policy Research Centre at McMaster University is urging caution about charting the Mexican path.
No one from the government has explicitly stated a similar strategy, but the study references a letter from Prime Minister Justin Trudeau to Federal Minister of International Trade Chrystia Freeland that indicates the Liberals may be hinting at that direction — that is, “develop a new Canadian trade and export strategy . . . so that potential investors will have a one-window shop to make investing in Canada simpler and more attractive.”
The multi-expert report’s key reservation against pursuing the Mexico template is that we are not the same country and do not have the same issues.
For instance, ProMexico managed to separate Mexico “the businessfriendly nation” from Mexico “the socio-political minefield.”
For many potential investors, the country was an unknown, unstable entity.
They needed the touch of a dedicated agency to handhold them through the decision-making process.
Canada does not have those issues, but it has other problems. The study’s authors state that unlike Mexico, where the federal government largely calls the shots, Canada’s business development happens at both federal and provincial levels.
Therefore, a single investment body might get into a bureaucratic tug of war, and may even end up being nearly impossible to pull off.
Despite their reservations, the study authors do recommend certain elements of ProMexico. They also call for a pilot that involves just the Canadian and Ontario governments.
I generally agree with the authors. In automotive, only Ontario has any real shot at getting new plants and production. Why bring in too many cooks when only one of them knows the menu?
The study makes other suggestions as well, such as site pre-approvals and shorter incentive approvals processes.
Some might say that we can’t compete with Mexico because of difference in wages, geographical position (its proximity to South America) and sheer business momentum; another government initiative won’t help much.
Yes, there are hurdles, but a new way of promoting automotive business in the province — it would be stupid to shoot that down. Kumar Saha is a Toronto-based automotive analyst with the global research firm Frost & Sullivan. For feedback, email wheels@thestar.ca.