Commentary

The Crisis in the Canadian Auto Industry

The Canadian auto industry is facing a crisis fuelled by a global oversupply of automobiles and growing competition from other countries, combined with the elimination of the Canada-U.S. Auto Pact. The Auto Pact, which was negotiated in the 1960s, guaranteed Canada auto production levels equal to the number of vehicles sold in Canada. In return, Canada had preferential tariffs on automobiles produced by the Big Four (later Big Three) U.S. multinational auto companies. This system was declared illegal by the World Trade Organization (WTO) and scrapped by the Chretien government.

These factors have led to the closure or downsizing of several Canadian auto plants during the past several years, resulting in the loss of over 15,000 jobs. Canada went from a fourth-place ranking in automobile production in 1999 (assembling 3.1 million new vehicles) to seventh place in 2001 (assembling 2.5 million vehicles). It is expected to fall to ninth place by 2005, with both Mexico and China producing more vehicles.

The decline of the Canadian auto industry in both relative and absolute terms has led to calls from the auto manufacturers for increased financial incentives from the Canadian government to entice them to keep their plants in Canada. These calls have been echoed recently by the president of the Canadian Auto Workers (CAW), Buzz Hargrove. In a May 21 column in The Globe and Mail, Hargrove called for a combination of investment incentives (which he calls a carrot) and sales tax incentives (which he calls a stick) to encourage auto companies to locate or maintain production in Canada. Hargrove claims that such a strategy would "hold corporations accountable to the communities where they earn their profits". He goes on to propose such a strategy for the whole economy, referring to this approach as "breaking out of the box".

Hargrove's proposal has nothing to do with holding corporations accountable. Instead, it is a proposal for the Canadian government to submit to the blackmail of the auto monopolies and get into a bidding war with other governments to keep production in Canada. Since workers also pay the vast majority of taxes in Canada, it amounts to a proposal that Canadian workers pay multinational corporations for the "privilege" of being exploited by them.

This is not a serious solution to the problems created by the growing concentration and freedom of movement of finance capital. At best, it is a stopgap measure to slow the rate of job losses in Canada, and even that is by no means guaranteed.

Playing the blackmail game of the monopolies does not constitute "breaking out of the box". "Breaking out of the box" would be challenging the right of capitalists to disrupt the lives of workers and communities and challenging their right to control the wealth created by workers. In other words, "breaking out of the box" means challenging the capitalist system itself and proposing alternative models of organization of the economy.