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“The demand for routine skills versus cognitive skills has been falling regardless of globalization”


“It was the 1965 auto pact that rationalized much of the indus- try between Canada and the US, not NAFTA. A lot of people don’t get that,” says Wolf. “The Big Three [automakers] realized that producing a few of many models is stupid and the Can- adian government saw it, too. It’s much more efficient to produce many of a few, most of them for export to the US, and thus gain the benefits of mass production while importing the majority of models.” The imme- diate result of rationalization: a substantial reduction in the price of vehicles to Canadian consumers and a much more competitive Canadian industry. Fast-forward to NAFTA and now there is a three-way market.


Labour-intensive automotive parts are produced in Mexico because labour is cheap there (autoworkers in Mexico earn about $6 an hour in total wages and benefits versus $60 an hour for autoworkers in Canada, plus Mexico has lower elec- tricity and operating expenses). Some of those parts are then imported into Canada and the US. There is now an integrated market with goods going back and forth, and parts for a vehicle crossing borders several times. Right now, about 85% of the vehicles assembled in Canada


and more than 80% of the auto parts made here are shipped to the US and Mexico. “Soon we’ll see Chinese and Indian auto- makers building in North America. Canada will benefit because we will be supplying all these new auto assembly plants,” says Tony Faria, director of the office of automotive and vehicle research at the Odette School of Business at the University of Windsor in Ontario. As for all those jobs going to Mexico, cost is a big factor, but


it’s not the only reason nonautomated manufacturing has migrated. Brands also want to be close to their customers and build support. Manufacturing in the markets they sell to makes companies less foreign and their products more


32 | CPA MAGAZINE | FEBRUARY/MARCH 2018


attractive. Plus, Mexico has year-round open-water ports on the Atlantic and Pacific oceans, as well as free-trade agreements with every country in South America and many in Europe that Canada does not have such agreements with. Still, globalization isn’t just


about jobs. “With globaliza- tion we are getting more and better products more cheaply,” says Faria. “Not every benefit is going to be a job benefit. Many will be consumer driven. For example, right now, the cost of parts going into a vehicle is about $19,000. Some sources


estimate that would go up at least 30% if all the parts were made in Canada,” says Faria. “Retail prices would go up, pushing some people into the used-car market.”


The elephant in the room: automation “If you look at the data for the last 50 years, the demand for routine skills versus cognitive skills has been falling regard- less of globalization,” says Hejazi. “Any routine skill that can be automated is being automated. Canada Post was hit with a massive backlash when the postal-code system was intro- duced in the 1970s. That was independent of globalization but globalization has accelerated it and taken it to the extreme.” For those pointing to NAFTA and globalization for lost manu-


facturing jobs, there are about 140,000 workers employed directly in parts and assembly today. That’s roughly the same number employed in the sector before the economic down- turn. That said, it does take fewer workers to produce the same output — a reality that will only continue because of automa- tion and robotics. “The Chrysler minivan assembly plant in Windsor makes 350,000 vehicles a year and has for several years. At one time in the 1960s it employed 11,000 workers to achieve that output. Now it employs just more than 5,000 people,” says Faria. “This would have happened regardless of


Armstrong Roberts/ClassicStock/Getty Images


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