In Trump’s world, Canada’s vulnerable
If there was one brutal lesson that we learned during the NAFTA talks with Donald Trump — and that we were reminded of again this week — it was that Canada should never take access to the U.S. market as a given, regardless of what our hard-won agreements may say.
It’s something Flavio Volpe knows intuitively.
As the head of the Auto Parts Manufacturers of Canada, he worked tirelessly for the past three years to keep the Canada-U.S. border open to the integrated auto trade, arguing that cross-border supply chains are the path to prosperity for Canadians and Americans alike.
But now, he’s boasting about driving the “largest ever peacetime mobilization of Canada’s industrial capacity,” the burgeoning ability of Canadian firms to produce essential goods within our own borders.
There’s no going back — for him or for Canada writ large.
Twigged to the need to rev up Canada’s domestic response in early March when he watched export controls mount in Europe and China, Volpe turned to the sector that he knows so well and started asking about its ability to switch production to medical supplies.
Now he’s become a manufacturing hero of sorts, sourcing locally, using email and Twitter to mobilize his extensive manufacturing network, getting people to think about how to produce what Canada needs — in Canada, using Canadian firms.
For a country like Canada, which has long prospered with, defended and worked hard to expand globalization, it’s jarring to see the accolades coming Volpe’s way. Canada’s longstanding embrace of open borders and global supply chains has turned inward.
But this is not an economic nationalism forced upon us just by the politics of the pandemic. It’s been in the works since the advent of the China-U.S. battle for global trade supremacy. And it will outlast the virus.
We are learning the hard way that global integration has risks so ominous that a huge amount of effort and creativity needs to be invested by government and business alike, right now, to make sure we can get our hands on the very basics that keep us healthy.
Like Volpe, bureaucrats have been pulling apart the makings of ventilators, masks and medical gowns, learning in deep detail where every component comes from, who in Canada can source them, how they get delivered, and what risks loom at every stage of production.
Did you know that ventilators have 1,700 individual parts? Try tracking all of them down in a hurry during a vicious and unscrupulous competition on a global level, and you quickly realize why federal and provincial governments are putting so much faith in domestic engagement.
But it’s not just ventilators or N95 respirator masks. Medical equipment in general is hard to come by right now.
And there are fears that food and agricultural products are next, prompting a public plea from the World Health Organization and the World Trade Organization to maintain open borders.
“All the supply chains are stressed around the world,” Volpe says.
Parts of pandemic-struck
China were shut off from global trade for the first few months of the year, and then export restrictions began popping up in several Asian countries, as well as in the European Union.
One global trade monitor figures that well over 54 countries have imposed export controls so far because of COVID-19, mostly around medical supplies.
But fragile supply chains that rupture under pressure from unexpected events beyond Canada’s borders are something that we have been getting used to for a few years now.
Trump was threatening to tear up NAFTA even before he was elected. That prompted Canadian businesses to reexamine how they trade and produce, and to think hard about alternatives and mitigating risk.
The hypothetical became real when Trump imposed stiff tariffs on steel and aluminum, and frequently mentioned auto and dairy as his next targets. And the new NAFTA loosens Canada’s grip on its data and intellectual property, in favour of the United States.
China, meanwhile, has blocked Canadian canola, and meat products for a while, in its attempts to punish Canada for the detention of a top Huawei executive — again, forcing Canadians to re-examine their supply chains and markets.
Even before the pandemic hit, the push for a more Canadafirst approach to investment, intellectual property and the development of the digital economy was growing, both within federal government circles and from the private sector.
So it’s no surprise that federal officials are looking more closely at an existing model for protection of sensitive, important goods: the munitions supply program.
That program ensures that Canada has the capacity to make its own munitions even during peace time so that if supply chains are ever cut off, we won’t be dependent on anyone else and can be selfsufficient.
There’s a cost to looking inward though. The government pays a premium on those munitions, and the auto parts manufacturers aren’t even close to replacing their previous production volumes despite the demand for medical equipment.
It’s a cost that’s worth paying without question during a pandemic or a war, but one that will feel expensive when the crisis passes and the efficiencies of globalization beckon.
But the memories of oncetrusted allies erecting barriers and blocking trade will be seared in our minds for a long time, and that might make the cost of having a backup plan worthwhile.