“Without NAFTA, all of a sudden all those efficiencies are lost.


If Trump has his way and cars and cellphones are made in the US, the price goes up


significantly, exports collapse and people lose their jobs”


Comparative advantage 101 The law of comparative advantage dates back to at least 1817, when it was described by English political economist David Ricardo in his book Principles of Political Economy and Taxation. Essentially, a country has a comparative advantage if it can produce goods and services relatively more efficiently and at a lower cost than another country. The theory goes on to state that by specializing and trading according to their comparative advantage, all countries can benefit from international trade. For example, Canada has an abundance of high-skilled


labour. Mexico has an abundance of low-skilled labour. Therefore, Canada has a comparative advantage over Mexico in the production of goods that require high-skilled labour. It’s because countries have been playing to their strengths and specializing in what they do better relative to other countries that we now have an integrated global economy and labour has been segmented or divided to reflect those strengths.


1991 Toyota Corolla Of course, any discussion about globalization and its eco-


nomic impact is layered and multifaceted. “When we think of globalization, it involves the movement of goods, services, capital, people, technology and ideas across international borders,” says Walid Hejazi, associate professor at the Rotman School of Management at the University of Toronto. “If we were to consider the impact of all these dimensions on the Canadian economy and on the incomes of Canadians, that would be a really complex analysis, but it would no doubt show that glo- balization has increased the number of jobs in Canada enor- mously, along with average incomes.” That’s certainly been the argument made by Canadian


Foreign Affairs Minister Chrystia Freeland as she works to modernize/save NAFTA. Her go-to statistics: Canada’s trade with Mexico and the US accounts for more than 75% of our merchandise exports. Ten percent (1.9 million) of all jobs in Canada are linked to exports. Canada’s economy is 2.5% larger


Made-in-Canada Parts


Before the Canada-US Auto Pact took effect, Canada had a 5% share of the North American auto industry. This increased to 18% of a much bigger sector in 1987. In 1999, nearly three million vehicles were produced in Ontario and Toyota’s Cambridge, Ont., plant was the most productive car factory in North America. Eight major global car and truck manufacturers had plants in Ontario, more than any other province or US state. In 2001, the Big Three automakers spent $30 billion on Canadian-made parts.


30 | CPA MAGAZINE | FEBRUARY/MARCH 2018


Courtesy of Toyota Canada Inc.


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