Event Summary:
The Hon. Tony Clement, Minister of Industry
“The Auto Industry in Canada & the Role of Government on the Road to Recovery”
January 19, 2009
Summary by Jesse Beatson, Trinity College, University of Toronto
Tony Clement, Minister of Industry for the current Canadian government, talked to the Canadian International Council on Monday about the state of the national auto industry and the role of the government in revitalizing this failing sector.
Clearly this talk comes as a critical time as auto assemblers in Canada have halted production through January, freezing the entire industry and in particular effecting smaller companies without the capital or access to credit necessary to get through the economic crisis.
Although critics have dismissed the importance of the auto sector and even gone as far as saying it has no place in Canada, the minister argued that auto production can be economically viable here and that the consequences of doing nothing to aid this failing sector would hurt the whole economy. The North American auto sector has built a multi-billion-dollar integrated industry and supply chain, and with 150 thousand direct jobs, and 343 thousand jobs indirectly relying on this sector, it is not hard to see why a major collapse would have tremendous negative ramifications.
The Minister acknowledged that the industry faces challenges, such as new competition from Asian auto manufacturers such as China, which according to him represents 39 % growth in auto sales. In addition, the general market shift away from the large automobile and an increased demand for smaller more fuel efficient and cost-effective cars against the backdrop of this economic downturn poses a threat to the production of the tradition North American automobile.
However, Canada also has a number of strategic advantages, making it a nation that can ‘renew and restructure’ its auto sector in order to be positioned to succeed in the long term. The minister highlighted Canada’s relatively stable investment climate, the strength of an integrated economy with the US, and the benefits of solid health care infrastructure which lowers the cost of providing first-rate employee benefits for auto workers.
The Hon. Clement also mentioned how the conservative government has made reducing corporate, personal, and sales taxes a priority, and how it has paid down federal debt in order to free up the government budget for strategic investments in the failing auto sector. Furthermore, he noted how his government is actively encouraging banks to make credit more available to encourage borrowing and stimulate the economy.
Above all, the minister stressed the important role of innovation for short and long term success. His speech made mention of the fact that US political leaders have recognized what is at stake in their own failing auto sector and have committed to providing large loans to stimulate innovation.
In order to keep pace with the U.S., foster positive trade relations, and maintain competitiveness for an industry that relies on ‘just-in-time’ delivery, the minister said Canada is committed to mirroring the heavy priority the US has given to its auto industry.
These fiscal commitments, the minister emphasised, are not free hand-outs, but repayable loans with conditions attached to ensure that the money is used with maximum efficiency to reduce the risk of losses to the taxpayer.
After the minister established reasons why the Canadian auto manufacturers should be bailed out by the government of Canada, he went more into details about the conservative 4-pronged auto strategy, including sustaining a strong economy which attracts investment, maintaining positive trade relations with the U.S, investing heavily in research and development, and creating the Auto Innovation Fund (AIF). This fund would support the development and production of greener and more fuel-efficient cars to meet modern demands.
The minister finished off arguing that Canada’s auto sector has some tough decisions to make, but that bold actions are required if the industry is to remain competitive and thrive in the long term. Even if some necessary adjustments are made, he warned, auto sector sales will not likely rebound for a few years due to the deepness of the economic downturn. However, he suggested that this was no reason for pessimism. “If we continue to move forward, this crucial sector can and will become leaner, more efficient, and increasingly competitive. It will require a great deal of hard work, but we will emerge stronger. I am confident we will do just that and that the best days lay ahead.” The last thing he added was that added more auto-sector announcements will be made with the arrival of the federal budget.
View the event flyer: Flyer.
View the speaking points: Speaking Points.
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