Since 22 years, under NAFTA, the auto industry and their suppliers have worked as if there were no borders between Canada, U.S. and Mexico. If Donald Trump revisits the agreement and if Canadian manufacturers and exporters prioritize the U.S. over Mexico, the auto industry is likely to be significantly affected.
In the event of Donald Trump revisiting NAFTA, Canadian manufacturers have let it be known that access to the U.S. market is critical for their survival. If renegotiations lead to them losing their partnership with Mexico, they are game for that.
To this end, amidst fears that the new U.S. President could tear up the trilateral agreement, Canadian manufacturers and exporters are lobbying their Liberal government to prioritize U.S.-Canada trade relationship over Mexico. The bilateral relationship with Mexico can always be worked out later.
“We spoke to our members, and based on trade stats alone, the priority has to be the U.S. market,” said Mathew Wilson, senior vice president at the CME, which represents some 10,000 manufacturers.
Nearly 75% of Canadian exports end up in the United States.
“Mexico is still an important market for Canadian exporters and bilateral business, but if anything did happen with NAFTA, we expect the Canadian government would be able to, fairly quickly, negotiate a deal with both Mexico and Canada,” said Wilson.
Canada’s manufacturing and exporters groups have reached out to Canadian Prime Minister Justin Trudeau and are in the process of discussing with Canadian trade officials to ensure that U.S. markets remain open to Canada’s exports. After all this has been the arrangement under NAFTA for the last 22 years.
During his election campaign, Trump had rallied against NAFTA and had called it a U.S. Job killer.
Leaders from both Canada and Mexico will hold talks this weekend to sort out Trump’s potential impact on NAFTA.
There are complexities which have to be dealt with. For example, Canada’s auto sector is very deeply integrated with U.S. and Mexican industries. Keeping Mexico out will impact Canadian automakers and part suppliers.
“It (the North American auto industry) really only works if there are no borders,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, which represents Canadian independent parts makers. “A revision of NAFTA for the auto sector – there’s likely zero support for it.”
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