Mark Carney’s wildly unworkable plan for an all-in-Canada auto sector

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TOP STORY

In the face of U.S. President Donald Trump imposing 25 per cent tariffs on the Canadian auto sector, Liberal Leader Mark Carney proposed on Wednesday to simply construct an “all-in-Canada” auto sector.

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Steel from Canadian foundries would supply Canadian factories to build Canadian vehicles for Canadians. “We will build an All-In-Canada auto manufacturing network,” declared Carney in a statement.

There’s just one problem: Anyone with even a peripheral connection to the Canadian auto sector is saying this makes zero sense whatsoever.

Last month, CBC Windsor surveyed auto industry experts on the then-hypothetical notion of an “all-in-Canada” auto sector, and responses ranged from “highly inefficient” to “a cute idea.”

“It’s just not practical to build a car company from scratch,” Dennis Darby, president and CEO of Canadian Manufacturers and Exporters, told the broadcaster.

Canada’s $14-billion auto manufacturing sector is oriented entirely around the idea of working with U.S. carmakers. Building “all-in-Canada” vehicles would require a complete retooling of almost everything.

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“The business case in my view would not be there to do that,” said Peter Frise, director of the Centre for Automotive Research and Education at the University of Windsor, in an interview with National Post on Thursday.

Frise said the entire North American auto sector is “optimized” around efficiency: Every auto part manufactured in Canada got that way because a Canadian company was able to do it better than either a U.S. or Mexican company — and vice versa.

The classic example are the dies and molds used to make plastic automotive parts, a disproportionate number of which are made in Windsor. Conversely, the exterior design for cars is almost entirely centred in the U.S.

“Industry isn’t doing this for fun. In general, things are the way they are because that’s what makes sense,” said Frise.

A recent fact sheet released by the Canadian Vehicle Manufacturers’ Association said that even in cars that are assembled in Canada, “more than half” of the parts originate in the U.S.

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Of those completed cars, meanwhile, 90 per cent of them are exported to the United States. Most of the cars purchased by Canadian buyers, meanwhile, are rolled out of U.S. factories.

Any shift to an “all-in-Canada” model would require the creation of whole new auto parts sectors of which Canada has no experience — and it would detonate supply chains that have been streamlined over decades.

“If you try to change the supply chain, something’s going to suffer. Quality could go down. Delivery could go down,” Frise said.

Cost, too, would almost certainly suffer. Even in the U.S. — where Trump has similarly talked of propping up an “all-in-America” auto sector — insiders estimate that it would add thousands of dollars to the cost of a new vehicle.

The Detroit-based think tank Anderson Economic Group was warning this week that if Trump’s auto sector tariffs remain in place, it could spike U.S. car prices by between US$3,500 and US$12,000 per vehicle.

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An “all-in-Canada” auto sector has actually been tried before, and loosely describes the state of the industry prior to the 1965 Canada-U.S. Auto Pact, the free trade agreement that first precipitated the intense integration of the two markets.

Prior to the 1965 pact, Canada slapped tariffs on U.S.-made vehicles of up to 25 per cent. This frequently precipitated the bizarre situation of carmakers maintaining Canadian and U.S. factories manufacturing identical vehicles almost within sight of one another — with the smaller and less efficient Canadian factory kept open purely as a tariff dodge.

“By doing the auto pact, we were able to move towards a much more rational, much more optimized system,” said Frise.

The sector is also much larger. Pre-1965, Canada could only claim about five per cent of the North American auto sector. Now, it’s doubled to about 10 per cent.

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A similar cautionary example of the perils of pursuing an “all-in” auto sector can be found in Australia. For decades, Australia was home to four carmakers serving the domestic market, including the uniquely Australian Holden automotive brand.

This, too, was maintained entirely through tariffs that, according to Frise, resulted in Australian cars being “beastly expensive.”

“Quality was so poor that if Australia had instituted ‘lemon laws’, many models would have been withdrawn from the market … Exports were minuscule, and the level of automation and productivity in the sector was among the lowest in the world,” reads an analysis published in the Australian Financial Review.

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The whole industry was so uncompetitive, that when Australia dropped its auto tariff regime in 2010, the sector evaporated within months.

Carney himself used to acknowledge that the Canadian auto sector only worked effectively in a global context. When he was Bank of Canada governor, he gave a 2012 speech to the Canadian Auto Workers telling members that their future lay in producing specialized components better than anyone else, rather than in building whole airplanes or cars.

“With companies increasingly part of global supply chains, competitive advantage will increasingly be concentrated in stages of production (such as engineering and design or fabrication) rather than specific sectors (such as aerospace or automobiles),” he said.

SEPARATISM ON HIATUS

In the face of U.S. President Donald Trump’s repeated threats to destroy Canada, the separatist Bloc Québécois has promised to suspend their own destroy-Canada efforts for a little while. Specifically, party leader Yves-François Blanchet has promised to be an “ally” of Canada until the trade war blows over, after which they’ll get back to their usual program of attempting to secede. “We must be an ally with Canadians and Mexicans and Europeans … afterwards, we will again have to think about the very good idea of making choices of our own, and that’s making Quebec a country,” he told reporters in English this week.

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The Bloc is probably not doing this due to any sudden federalist fervour, but because the trade war has sent Quebec separatist sympathies into a tailspin. Last month, an Angus Reid Institute poll found that 58 per cent of Quebecers now say they were proud to be Canadian — way up from the 45 per cent who had said so as recently as December.

DEFUND (PART OF) THE CBC

Conservative Leader Pierre Poilievre has been pledging to defund the CBC for quite some time; it’s been one of his most consistent political promises since becoming leader. But in a Quebec-specific platform this week, the Conservatives confirmed that this would not include Radio-Canada, the broadcaster’s French-language arm. Radio-Canada differs quite sharply from CBC in that viewership is still high. As one example, the Radio-Canada talk show Tout le monde en parle is consistently one of the most popular shows in Quebec.

However, this is only the most official incarnation of the Conservative pledge to demolish English CBC while leaving French CBC unscathed. As far back as 2023, Poilievre was accompanying his “defund the CBC” chants with reassurances that Radio-Canada would be fine.

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