There was a time, not so long ago, when Canada’s pitch to foreign corporations was compelling. Canada had public health care, all the better to bring down the cost of employment. Its dollar was cheap compared with the U.S. dollar. The work force was educated, the unions pleasingly weak and the industrial zones were smack next to the world’s biggest market.
Then came Donald Trump and his pledge to make America great again – MAGA. Suddenly, all of Canada’s industrial advantages didn’t add up to much.
I have zero evidence that General Motors Co.’s decision to end auto production next year at its Oshawa, Ont., factory – the Canadian sacrifice in GM’s plans kill off five North American plants – was in any way influenced by Mr. Trump’s America-First policy and his effort to repatriate manufacturing jobs. But I do believe GM boss Mary Barra knows what’s good for her and her company, politically speaking.
If her global restructuring, which will eliminate 10,000 or more jobs, were to leave the Oshawa operation fully intact, or even enhanced, while at least four GM factories south of the border turn into echo chambers, the White House certainly would not have been amused. Imagine the Twitter storm from Mr. Trump if GM’s Canadian operations, dominated by the Oshawa site, had dodged the bullet.
Certainly, the Oshawa operations, with some 2,800 employees, did not seem an obvious candidate for closing. The plant was flexible – it was the only GM site that could build both cars and trucks together on the same line. Its products were selling well and the Chevy Silverado and GMC Sierra, whose finishing work was done in Oshawa, were among the hottest trucks on the market.
Two years ago, a new four-year labour contract with Unifor came with a pledge from GM to invest $400-million to upgrade Oshawa’s wondrous flexible assembly line. As late as last year, there was optimistic talk that the Silverado and the Sierra in their entirety, along with other truck models, would roll off the Oshawa assembly line. The Canadian plant could obviously not compete on costs – the Mexican plants are winning the cheapo game – but it could compete on efficiency and quality.
And Oshawa wasn’t only about pumping out cars and trucks. The site was also home to GM’s Canadian Engineering Centre, which was full of smart engineers and technicians working on chassis systems, alternative fuels and connected-car technology. In 2015, GM announced it would hire an additional 100 software and controls engineers.
If anything, Oshawa seemed a candidate for expansion as GM and its rivals devoted more resources to electric and autonomous vehicles (while still pumping out popular SUVs and trucks).
What happened? Mr. Trump happened, it appears.
The President is all about job “reshoring,” the opposite of the “offshoring” wave that delivered millions of manufacturing jobs to Mexico, China and southeast Asia over the decades. His effort to coax back jobs has included lower corporate taxes and high tariffs on imported steel, aluminum, appliances, solar panels and a range of Chinese products. He also insisted on the overhaul of the North American free-trade agreement, which came with the threat of cutting Canada out of any new deal if Canada made too many demands.
In effect, Mr. Trump launched a trade war, one that shows little sign of abating. GM, of course, will deny that killing off Oshawa is in any way politically inspired, but there is no doubt the cynical political economy is alive and well in the era of Mr. Trump.
If Canada needed any more evidence that competing with Mr. Trump’s MAGA campaign is getting more difficult by the day, this is it. Canada’s traditional selling points, such as government-run health care, are no longer enough to provide a competitive advantage, which is not to say that assets like health care should be killed off; that would be suicidal for what little is left of Canada’s manufacturing sector – the U.S. auto makers are still fairly big in Canada.
What it does mean is that industrial and corporate Canada have to come up with a new plan and covering the map with oil pipelines may not be the answer, especially as the planet heats up. The oil industry seems close to peaking out and, because of automation, is no longer a steady job creator. The industry could even go into rapid decline if electric vehicles come on strong, a scenario that the global car makers like GM are gearing up for.
It has become a cliché to suggest that technology is the answer to Canada’s industrial woes, but Canada has a lot of untapped tech potential. It could, for example, end the absurdity of not offering flow-through shares to biotech companies; instead, they are offered to mining companies, another sector in decline (a flow-through share passes the tax deduction for exploration and development expenses to shareholders).
What seems certain is that no amount of government subsidies, union settlements that please employers, benign tax treatment and the like is going to save Canada’s manufacturing sector from steady decline as Mr. Trump puts up the walls. Oshawa is a big wake-up call for a new Canadian industrial strategy, one that invents the future instead of trying to prop up the past.
Eric Reguly