The Ontario Liberal government’s strategy to attract auto investment to the province has been comprised of a multi-pronged strategy. First,Canadahas begun shifting the locus of economic gain from pure production to other forms of income-generating activity, such as providing technical assistance and equipment to resource-poor countries that are receiving preference as production locations due to their dense labor pool and their low wage structures (Barrows & Costomitis, 2001b). While this may seem to some to be a capitulation to the extent that Canada’s auto production activity will actually decrease, it is viewed by others as a necessary—and perhaps the only—way of maintaining a foothold in the auto industry at all, given the competitive incursions being made by other countries, namely Mexico and China. The rationale for this strategy is thatCanadahas valuable expertise that it can share, for a price, to those countries which are now the new production and supply centers.
The Liberal government has also been supportive of bilateral trade agreements, such as NAFTA, which have facilitated the elimination of tariffs and which have created through “increased trade and competition” the conditions which have lead to the development of a “powerful instrument for restructuring the Canadian economy and making it more efficient and competitive” (Jarkowski, p. 380). Although NAFTA and the other trade agreements are controversial because their opponents claim that they benefit theU.S.far more than they benefit the other partners, the benefit forCanadais that the burdensome tariff scheme, which has always hobbled commerce, has been slowly dismantled.
Third, in order to retain and even increase production capacities to some extent, the government has instituted incentives package programs for automobile manufacturers (Jarkowski, ). Those manufacturers which agree to locate production facilities in Canada, especially in resource-poor areas, enjoy a range of tax benefits and other economic incentives as a way of attracting them to do business in some of Canada’s economically underdeveloped regions (Jarkowski, ). These additional incentives consist of “low interest loans, grants, tax credits, seed money, and consulting services” (Jarkowski, p. 385). When companies do locate in such resource-poor areas, the government directs its attention to ensuring or developing adequate local infrastructures, both industrial and human, which can support manufacturing outfits (Jarkowski, ). Furthermore, the government serves as a liaison with local residents, facilitating their access to the jobs that are made available by the new corporation (Jarkowski, ).
B. What is the ideological underpinning of this strategy?
The ideological underpinning of the strategy described above is that it addresses some of the structural problems impactingCanada’s automobile industry by taking a multi-faceted approach to remedying those problems. At the heart of the strategy, writes Jarkowski ( ), is the “basic theme” of “job creation” (p. 386). Clearly, no country can sustain itself or remain competitive in international markets if its internal employment opportunities are limited, for the country will be burdened by ancillary economic problems, such as unemployment. The varied nature of this approach is, perhaps, the key to its success, for it posits that if one “leg” of the strategy fails,Canadawill still have at least one more leg left on which to stand. In other words,Canadais not solely dependent upon winning contracts to provide technical assistance in resource-poor countries; it can also generate income by providing the high-incentive packages to foreign corporations, which, in turn, will inject local and national economies with a much-needed cash infusion. Finally, the unstated benefit of this multi-faceted approach is that it requires little capital investment onCanada’s part. Rather than attempt to modernize auto production facilities, for example,Canadahas decided to sell its technical expertise, a good which requires no equipment updating. Strategically, this is an intelligent approach.
C. Citing a specific example, assess the effectiveness of this government strategy.
According to Jarkowski ( ), ChryslerCanadawould not exist today without having benefited from the multi-faceted government strategy for attracting automotive industries to locate facilities inCanada. When Chrysler Canada appealed to the federal government for financial aid for the purpose of avoiding bankruptcy, the government responded immediately, preventing the company from packing up and leaving the country (Jarkowski, ). While ChryslerCanadaremains in existence today and is a significant source of jobs and economic stimulus in the local and national sectors, as compared to the defunct General Motors,Canada’s Department of Industry, Trade, and Commerce (1982) reflected that the bail-out strategy might not have been an effective approach used for achieving overall national economic and production goals. According to the Department of Industry, Trade, and Commerce (1982),
The analysis and examination carried out on them [Chrysler and similar corporations that appealed to the Canadian federal government for assistance] focused on events of the moment, such as preventing a company from going bankrupt, rather than on placing the current crisis in the context of continuing poor performance and possibly recommending termination. (para 33)
It is difficult to assess the overall effectiveness ofCanada’s multi-pronged approach to attracting automobile manufacturers, because it is all but impossible to determine what alternative strategies might have resulted in by comparison. Despite the Department of Industry, Trade, and Commerce’s cautious re-evaluation of its past decisions, it fails to address what alternative strategies might have caused, and it does not attach any performance-based criteria, such as job retention, profit, and local infrastructure development, to analyze the short- and long-term outcomes of its decision.