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Globe and Mail
23 minutes ago
- Globe and Mail
Lester Pearson, his Buick and the pact that changed the Canadian auto sector
Dumaresq de Pencier is the exhibit and project coordinator for the Canadian Automotive Museum in Oshawa, Ont. Late Prime Minister Lester B. Pearson's 1963 Buick isn't quite the vehicle you'd expect to be used by a former head of state: It's about the size of an upper-end sedan for its time – with a bit of extra chrome here and there – but no bells and whistles such as bulletproof glass or an intercom. It's only when you see the little Canadian coat of arms emblazoned on the inside doors that you realize the Oshawa-made, custom limousine formerly owned by Canada's 14th Prime Minister might be anything beyond a run-of-the-mill model for its day. It's surprisingly understated when you consider Pearson's legacy, including a Nobel Prize for peacekeeping, the iconic Maple Leaf flag, encouraging official bilingualism, improving women's rights, universal health care and the 1965 Auto Pact that shaped the North American auto sector (now under threat by U.S.-driven tariffs). Yet, Pearson was a famously modest person, a diplomat uncomfortable with the public spotlight, which his vehicle – recently restored and now on display at the Canadian Automotive Museum in Oshawa – reflects. Pearson's stamp on the auto industry Pearson was by no means a car buff but, by being born in 1897, he was the first Canadian prime minister to have grown up in and around the creation of the automobile. When he came to office in the mid-1960s, Canada was in the midst of an industrial crisis. Canada's auto industry had long been protected by import tariffs on American industrial goods instituted in the late 19th century. The local market was a walled garden, producing a small range of locally sold vehicles. Canada-only vehicle marques such as Ford's maple-spangled Frontenac, General Motors's successful Acadian and Chrysler's Windsor (which remained in Canadian production for six years after its American counterpart), were usually low to mid-range cars fitted with high-end trim, perfect for Canadian buyers who wanted a fancy-looking car at an affordable price. Pearson's limousine is a classic example of Canadian car-building of the time: It combines the roomy chassis of a Buick LeSabre, the engine of a Wildcat, the trim of a high-end Electra and internal components from that year's Cadillacs to create a luxurious-looking limousine on a not-so-luxurious platform. But as the American car industry grew throughout the 1960s, the quaint local manufacturing style on this side of the border began to fall by the wayside. As prices dropped, more American cars were being imported to Canada as tariffs didn't have much financial impact. With fewer cars being shipped from Canada to Europe, owing to the growth of companies such as Volkswagen, Canada's trade deficit skyrocketed. Canadian governments under Prime Minister John Diefenbaker and then Pearson tried – and failed – to boost industry growth with protective tariffs, triggering genuine fears of a trade war that the U.S. auto manufacturing juggernaut would likely win. In 1964, 90 per cent of the Canadian auto industry was American-owned. Its hundreds of thousands of employees were represented by the United Auto Workers, headquartered in the U.S. Any fixing of the Canadian auto industry would have to be an international collaboration. Pearson's administration eventually came up with the Auto Pact, officially known as the Automotive Products Trade Agreement, signed by Pearson and President Lyndon Johnson in Texas in January, 1965. After a year of wrangling with the Big Three auto manufacturers (Ford, GM and Chrysler) and the unions, the two administrations produced something that was almost, but not quite, free trade. The Pact introduced a system wherein American-designed cars had to include Canadian-made parts and a ratio whereby every American car sold in Canada was matched by a car built here. Canada's market was no longer threatened by the American one – it was part of it – with cars and car parts traded tariff-free. Existing manufacturers had to expand their Canadian branches or risk losing the benefits of the Pact, with a 'buy-in' investment of $260-million (more than $2.5-billion in today's dollars). The Pact was deeply controversial among the American public, but auto builders weren't complaining. The Big Three could dramatically simplify their production, making an interchangeable range of vehicles on either side of the border. The Auto Pact's success and unpopularity The effects were dramatic and rapid. New factories sprouted across southern Ontario and Quebec. Existing plants were vastly expanded. Before the Pact, American-owned plants in Canada were building around 650,000 cars and exporting less than 1,000 of them to the U.S. Ten years later, Canadian plants built 1.5 million cars, exporting one million of them. By the 1970s, about 10 per cent of all cars sold in America were Canadian-made and many more included Canadian parts. On the American side, exports to Canada jumped dramatically as production grew. The Pact remained unpopular yet successful throughout the 1970s and 80s, despite U.S. President Richard Nixon's administration threatening to cancel it on several occasions. In 1986, it became part of the Canada-U.S. Free Trade Agreement, which kept most of its provisions in force while simultaneously rendering them obsolete. Its effect continued. By 1999, Canadian car production peaked at a whopping three million vehicles. Canada's auto sector has faced challenges and turbulent times since: Recessions, bailouts, downsizing and outsourcing have led to an industry that is somewhat leaner and shabbier than the monolith it once was. Still, it has remained an essential part of the Canadian economy, thanks in large part to a modest man in a modest limousine.
Globe and Mail
23 minutes ago
- Globe and Mail
Canada's trade strategy suffers from delusions of friendship
John Turley-Ewart is a contributing columnist for The Globe and Mail, a regulatory compliance consultant and a Canadian banking historian. Ontario Premier Doug Ford recently declared on CNN that in Canada, U.S. President Donald Trump is the 'most disliked politician in the world . . . because he has attacked his closest family member.' In January, just before Mark Carney announced his leadership bid for the Liberal Party, he appeared on The Daily Show and told Americans that Canada and the United States could be 'friends with benefits.' Are prominent U.S. leaders making time for media appearances to defend Canada as their 'closest family member'? Believing that trading partners are family, or friends even, betrays our leaders' wide-eyed view of the world that not even historical precedent appears able to shake. It has invited complacency and deepens the damaging economic consequences when trade relationships evolve or break apart. If there is one long-term takeaway for Canadian leaders from Mr. Trump's assault on Canada's access to U.S. markets, it's realizing that countries we trade with are neither family nor friends, but jurisdictions that do business with us – business that is transactional, situational and evolving. We have had Donald Trump-like figures before who upended our economy and who we should have already learned this lesson from. One of the first was Robert Peel, who was the British prime minister between 1841 and 1846. Unlike Mr. Trump, he was a protectionist-turned-free-trader. In 1842, he cut tariffs on British timber imports that gave Canadian timber preferential access to British markets. Consequently, our timber exports fell. In 1846, Mr. Peel dropped Britain's protectionist tariffs on grain, ending Canada's preferential grain market access that had been in place since 1815. Lumber producers praise federal plan to diversify markets amid trade war with U.S. Three years later, Canada's then Governor-General, Lord Elgin, reported that property in Montreal and 'in most of the Canadian towns . . . had fallen by 50 per cent in value' and that 'three-fourths of the commercial men are bankrupt.' By 1854, the search for a market to replace lost share in Britain was secured through a reciprocity deal with the U.S. that removed duties on fish, timber, coal and grain just as railways began to boom in Canada, opening more efficient transportation routes to move Canadian goods south. The good times lasted 12 years. U.S. President Andrew Johnson cancelled the trade deal in 1866, given growing protectionist sentiment in the U.S. and popular belief that the deal was benefitting Canadians more than Americans. The abrogation of the 1854 trade agreement helped cement efforts to create what we now know as Canada through Confederation in 1867, a project that was expected to create one national economy to help compensate for lost trade with the U.S. Today's interprovincial trade barriers measure the success of that intention. There are plenty of other past examples. The U.S. Fordney-McCumber Act in 1922 slapped an average 40-per-cent tariff on imports. This was followed by the American Smoot-Hawley Tariff Act in 1930, and in 1971, President Richard Nixon's administration imposed a 10-per-cent tariff on many Canadian goods crossing the border. Opinion: Ottawa can't let our canola industry – a true Canadian success story – fade away The present isn't any friendlier than the past. Last week, China took hostage Canada's multibillion-dollar canola export trade, imposing 75.8-per-cent duties on Canadian canola seed. This is a transparent attempt to force the federal government to backtrack on Ottawa's 100-per-cent tariff on Chinese-made electric vehicles. Equally transparent is China's goal of crushing our EV sector through the sale of cheap EVs produced using low-wage work, heavily subsidized, stolen or misappropriated IP, and as Human Rights Watch has documented, forced labour. Canada has negotiated many trade agreements with other countries, yet, those deals are often more sizzle than steak. As trade experts noted earlier this year in Policy Magazine, 'Today, Canada has more comprehensive trade agreements than any other G7 country. But having a trade agreement is one thing; leveraging it is another. Utilization rates of these agreements have remained low. . .' The 2017 Canada-EU Comprehensive Economic and Trade Agreement is an example. It has yet to win full ratification by all EU member states. The obstacles are material. Differing approaches to environmental, agricultural and digital regulations and standards are persistent barriers. The Europeans seem not to care, given all the Canadian interprovincial trade barriers that also complicate EU trade with Canada. In Britain, objections to Canada's dairy and supply management systems as well as rules of origin closed the doors on free trade. Trade negotiations with Britain collapsed in 2024. The world isn't made up of countries that want to trade with Canada because they are our family or friends. It's comprised of countries who only value how Canada can serve their economic needs and political agendas. It's time we admitted to that reality. Doing so will at the very least reduce the shock when trade deals go sideways.
Globe and Mail
23 minutes ago
- Globe and Mail
Consulting giant Bain & Co. expanding push in Canada with Montreal office
U.S. consulting company Bain & Co. is raising its bet on Canada with the launch of a new office in Montreal, deepening its relationships in the country at a time of significant upheaval for many businesses. Boston-based Bain, one of the world's big three management consultancies, will open a bureau in Quebec's largest city in October, the firm's executives confirmed. Matthieu Vigneron, a 20-year consulting veteran with expertise in the realms of aerospace, telecom and technology, will lead a team of 30 employees to start. Bain has operated in Canada from a base in Toronto for more than three decades, quadrupling its Canadian operation over the past 15 years and boosting its personnel to 250 people. The Montreal expansion marks its first foothold into another Canadian city, building on a client list that includes financial services companies, retailers, and utilities, as well as investment and private capital funds. 'It's a longer-term play that we're making here,' said Jed Fallis, who leads Bain's business in Canada as managing partner. 'We look out and see the companies and clients that we do work with, and then the ones that we don't, and think there's a lot of opportunity for us.' Last year was not a great year for consulting, with the sector's market growing around 3 per cent – about half the rate of nominal gross domestic product growth, according to an estimate from Kennedy Intelligence, a research firm serving the industry. But the rise of artificial intelligence and the volatility of the current business environment are among the factors that could play into executives' demand for outside advice. 'In the case of Quebec, they have a very specific set of answers that are going to be appropriate for them,' Mr. Fallis said in an interview earlier this month, adding that Bain helps their customers execute on its recommendations, if needed. 'We think that we can do that far, far more effectively by having a local French-speaking team who can better meet the needs of Quebec-based clients.' Bain declined to disclose the names of its Quebec customers, citing confidentiality. But one of its long-standing contracts in the province is with financial giant Desjardins Group. Opinion: Once an AI world leader, Canada is now losing the AI startup race The banking co-operative was bleeding thousands of customers a year and facing heavy competition from digital-forward rivals when it turned to Bain in 2017 for help. Desjardins was able to reverse course and add 140,000 customer-members over the next five years, according to a case study published on Bain's website. Bain was attracted to Montreal in part for its talent pool, including generalists graduating from university and the more specialized data scientists and AI experts, Mr. Fallis said. With a local presence in Quebec, Bain could tap into that expertise more effectively than it has previously been able to from its Toronto base, he said. Mr. Fallis added that building expertise in AI and advising clients on how to navigate it will be particularly important. 'I think it will upset the competitive dynamic in many different industries,' he said. Canada might possess world-class research and a robust talent pool, but the country is falling behind as global competitors race ahead in AI adoption, Royal Bank of Canada said in a report published in June. Only 12 per cent of Canadian firms 'have integrated AI into their production or services, placing Canada among the lowest in AI adoption in the OECD,' according to RBC. Bain's two main rivals in management consulting, McKinsey & Company and Boston Consulting Group, already have offices in Montreal. Bain is significantly smaller than its competitors, and isn't trying to chase them to become big for big's sake, said Tom Rodenhauser, managing partner of Kennedy Intelligence. 'It's a different animal,' Mr. Rodenhauser said, adding the consultancy has more of an investment banking mindset and does a lot of work on deals. 'They have runway to continue doing what they're doing.' Bain & Co. spun off its investment business into Bain Capital in 1984. That firm now has around US$185-billion in assets under management, holding private equity stakes in Canadian companies including BRP Inc. and Canada Goose.
