AIUI labor costs in Canada were pretty much always higher than in the U.S., and the companies only had operations there as a way to gain access to the Canadian market.
But NAFTA was supposed to open up trade barriers between the U.S., Mexico and Canada. So have all Canadian manufacturing jobs left Canada, skipped right past the U.S. and ended up in Mexico?
Keep in mind, the value of Canadian plants varies as a function of the value of the Canadian dollar. In the last 20-plus years its wandered from about 63 cents US at a low to $1.09 at a high, and currently sits at 75 cents. At that rate, a bit of a bargain. And guess what the company does not have to pay as a benefit? Yes, health insurance.
Of course, neither can compete with Mexico.
Initially there was the Auto Pact, which was free trade in cars depending on maintaining facilities in both countries to guarantee tariff-free access. However, that’s superseded now by NAFTA, as I understand.
The Auto Pact was actually one of the forerunners to the Canada - US Free Trade Agreement, which in turn preceded the NAFTA. In the negotiations of the FTA, the principles of the Auto Pact served as an initial template.
And as md2000 points out, even if labour costs were nominally higher in Canada, when the Canadian dollar fluctuates below the US dollar, the actual costs measured in US terms may be lower. Plus no health care payments by the employer. All of that combines at times to make Canada an attractive option for US manufacturers.
We provide health (dental, optical, prescription) to our Ontario employees, because these aren’t provided by the Ontario government.
And although there’s no health insurance, there’s payroll and CPP, employment insurance, fringe, etc.
Ontario isn’t a low-cost country (province) by a long shot, and it fits in nicely with the newly announced strategy in that Oakville cars aren’t cheap and most sell at a premium.
I know of key high-tech manufacturers who have gone to Mexico. Lower labour rates and much, much, cheaper energy rates than Ontario (with the highest electricity rates in North America).
Well, either the American factories offer roughly the same benefits - plus actual health insurance to the tune of thousands a year - or else Canada is a workers’ paradise. Or both.
All the auto manufactures are heading to mexico and south/central america, but your only looking at the smallest part of the pie. More jobs are held by Tier 1 through 3 suppliers, than the final assembly. We simply don’t buy enough of our own product, wether its manufactured in the USA or Canada.
We as a population cannot afford to turn over vehicles every two years, and get the latest car. While there are cars on the road every day, the majority of them are cross over vehicles, suv’s and pick up trucks. We got briefed by Honda, that South America was expected to be the hot new market and they were adjusting.
Wynne has not done manufacturing any favors either, so I would expect that most of those conversations will be give us a good reason to stay, and right off the hop, I would expect to recieve preferential power rates, and no carbon taxes, and thats to start.