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At Issue
The Real Reason Navistar is Mexico Bound
Tuesday, October 22, 2002
You shouldn't be too surprised by Navistar's closing. The hard part is knowing the real reason why it happened. The answer isn't on the surface. You have to dig deep. You have to think hard. It all started back in 1988.That was the year of the free trade election. In the election debate, Liberal leader John Turner looked at Prime Minister Brian Mulroney and said, "I believe you have sold us out". Turner swamped Mulroney that night, even though eventually, Mulroney went on to a second straight majority government. For a moment, John Turner was Captain Canada, defending us against our nemesis from the south. Fourteen years later the Navistar closing is the latest manifestation of the western world's movement toward globalization. Say hello to Mexico.
John Turner might have been right, but if the shoe was on the other foot, how do we know he would have been different than Mulroney if he won office? His Liberal successors who took over in 1993 were won over by free trade and became their biggest defenders in the years since. So I think we can throw the politics out of it. Navistar was caught in the big wave of globalization.
Unfortunately, that doesn't give much solace to the 2200 employees who will be out of a job come next summer. The work is moving to Mexico. Navistar cited cost cutting as the measurement for moving. The plant was also the location of a bitter strike this past summer. When you add the soft demand for big trucks into the mix, the globalization winds were blowing strong. Huge wage concessions and strong armed government policy would have been the only things to keep the plant in Canada.
But those two things don't go hand in hand. An argument can be made that the loss of the Canada/US auto pact was the death knell for plants like Navistar. Under the 1965 auto pact, Navistar would have been unable to close the plant. It required vehicle makers to assemble one vehicle in Canada for every one they sold here, plus meet Canadian value-added requirements. The auto pact was declared illegal under world trade laws by the World Trade Organization in 1999 and eliminated by Canada in 2000.
It's a darn shame for the employees of Navistar and the people in Chatham-Kent. You don't take 2200 jobs out of the small economy in Chatham-Kent (pop.110,000) and not lose wealth. If you multiplied 2200 times a mean figure of $55,000/year (a stab in the dark) you get an annual loss to the Chatham-Kent economy of over $121,000,000. It is staggering especially when you consider the additional small service jobs which are needed to supply the plant. The municipality will surely feel the tax hit. That could mean municipal layoffs might be in the future.
So what's we gonna do now? I'm sure that's the question many people are asking themselves, including the mayor and members of municipal council. Their work is surely cut out for them. But the more salient question might be, "so what's going to happen now?" Is the Ontario economy resilient enough to fill the economic void in Chatham-Kent? Or what do the forces of globalization have for us next?
That's a tough one to answer, because the overall economic numbers for Ontario have been pretty good. It is unfortunate most of it is landing in the greater Toronto area.(GTA) That's the problem with globalization. It doesn't necessarily work for everybody. Even some government leaders are waking up to that.
Globalization generally refers to moving toward a "market economy" free of trade barriers. The market economy entices people to work hard and take risks allowing them to keep much of their earnings. Free trading encourages countries to maximize their wealth by specializing in what they do best. It has worked to a large extent in Asia. According to World Bank Statistics, from 1980 to 2000, the number of extreme poor (those with inflation-adjusted incomes under $1.50 a day) dropped by 727 million in China and 207 million in India.
Unfortunately, the ball hasn't kept rolling to other areas of the world like Africa and South America. Globalization doesn't take into account cultural differences. Different regions and countries don't necessarily react the same way to market forces. This coming weekend in Brazil, the people are expected to elect the leftist forces of Lula da Silva, a foe of globalization. He's promising a "made in Brazil" economic solution, one which might even see a default on Brazil's huge debt.
But here in Canada, our leaders have bought in to globalization. It is one reason that plants like Navistar are leaving Chatham-Kent. And surely there will be a lot of finger pointing. But at the end of the day, the forces which unleashed the departure of this and other plants in Ontario were put in place many years ago. Chatham-Kent loses and Mexico gains. There is nothing right about that.
Philip Shaw, farms 830 acres near Dresden, Ontario. He holds a Masters of Agricultural Economics and Business Degree from the University of Guelph and is a well-known commentator on agricultural issues in print, on radio and over satellite in Canada and the United States. In the Chatham-Kent Times, Phil will use his frank and forthright writing style to address political and economic issues from the local to the international stage. He is a keen observer of political life at all levels, reads widely and has travelled the world to gather fodder for his column. See what's At Issue this week.
