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ANALYSIS
Why the bridge blockade hit at a bad time for Canada's economy
It's a pivotal moment for the auto sector, and U.S. politicians want an excuse to 'Buy American'
February 15, 2022
Canada's economy has billions of reasons to hope that recent border blockades get quickly forgotten as a fleeting phenomenon by decision-makers in the United States.
This country's second-most valuable export industry, automobiles, depends even in normal times on being perceived as reliable by its main customer and not as some incident-prone flake.
And these aren't normal times. In fact, it's an abnormally sensitive time, as American politicians and the auto industry have big decisions to make about the future of the sector.
Look to history for some uncomfortable lessons on what could happen when Americans start having fears over the long term about disruptions to their vital industrial imports.
It happened to the oil industry. The effect lasted decades.
When supplies were interrupted by Middle Eastern rivals in the 1970s, the U.S. responded by re-engineering trade routes.
ANALYSIS As the blockades have shown, anarchy is usually bad for business
"We must end vulnerability to economic disruption by foreign suppliers," then-president Gerald Ford said in his 1975 State of the Union address.
The U.S. soon banned most exports of its oil, and the ban remained in place for 40 years, stemming from an energy law whose initial version in the House of Representatives was introduced by Michigan's John Dingell.
Lawmakers use disruption to promote 'Buy American'
Fast forward to February 2022, and that late congressman's wife is now a member of Congress who has some concerns about the reliability of Canadian auto imports.
In an interview with CBC News, Michigan Democrat Debbie Dingell mused about possible consequences from days of blockages at the top binational checkpoint caused by truckers' opposition to COVID-19 vaccine mandates in Canada.
She said it took longer than it could have to reopen the Ambassador Bridge between Windsor, Ont., and Detroit, and she cited Canada's reluctance to arrest protesters.
When asked if this episode makes her question the wisdom of relying on imports from Canada, Dingell replied: "I'm going to be very blunt: It does.
"We cannot let ourselves be held hostage to these kinds of situations. If this is going to become a new and regular situation, we've got to bring our supply chain back home. We can't count on this bilateral relationship we have."
That single bridge carries $300 million in goods every day that account for one-quarter of Canada-U.S. trade.
Ambassador Bridge blockade could have 'enormous' impact on Canadian trade, experts say
The bridge was blocked for nearly a week before protesters were cleared out on Sunday.
Dingell's comments echoed similar ones from another Michigan Democratic congresswoman, Elissa Slotkin. And they come at a bad time for Canada.
That's because American politicians could play an outsize role in the next few months in shaping the next few decades of auto production.
Why the timing is so awkward for Canada
Democrats are expected to make one more push to pass their agenda in a large spending bill — and one dilemma is whether they'll include a 'Buy American'-style policy that incentivizes companies to build electric vehicles in the U.S.
The outcome holds considerable stakes for that key industry in southern Ontario, with automobiles being Canada's second-largest export product to the U.S. after oil.
Members of the Canadian government alluded to those stakes in a news conference on Monday when they announced new emergency measures.
Ambassador Bridge blockade stalled billions in trade — and there could be other effects: expert
Deputy Prime Minister Chrystia Freeland said the disruptions have shaken Canada's reputation as a place in which to invest and do business.
"The world is watching us," Freeland said. "Our jobs, our prosperity and our livelihoods are endangered."
Auto-industry lobbyist Flavio Volpe had a unique perch last week into the sensitive political economics at play.
He was in Washington just a few days ago trying to convince people on Capitol Hill that Canada is a reliable trading partner that should be treated as such in U.S. domestic policy.
Volpe has been trying to convince U.S. lawmakers that any tax incentives for electric vehicles should emulate the language of the new North American trade agreement.
His characterization of Canada as a safe trading partner took a dent after he left town: Trade was stalled, plants were idled and Volpe was in court trying to get the border crossing in Windsor reopened.
A new 'Buy American' plan is alarming the auto sector — and the federal government
Volpe's Automotive Parts Manufacturers' Association was before the Ontario Superior Court of Justice in a successful bid for an injunction to end the days-long blockade at the Ambassador Bridge.
He said Canada has been making progress in winning sympathy for its views on Capitol Hill, but its advocacy just got harder.
"This, I think, sets us back to the beginning," Volpe said in an interview. "Frankly, I'm not sure we're going to get a sympathetic hearing in the short term."
He said Canada's advocacy effort on electric vehicles in Washington might have to take a short pause while the dust settles from the blockade.
It's critical that American decision-makers see border blockades as a singular event and not as the dawn of a new era in protest tactics, Volpe said.
"Now I have to make the argument, as a car guy, that we, as a country, are doing our part to secure vital infrastructure."
Industry analyst weighs in on likely outcome
One industry analyst says it's logical that politicians who've always supported Buy American policies will use this episode to push those policies.
"It becomes a political football. People in the United States that scream for American-made will use this and say, 'See? ... Why don't we just produce stuff here for domestic consumption?'" said Joe McCabe, president of Pennsylvania-based AutoForecast Solutions.
"It just puts more credence in their argument."
Simmering Canada-U.S. trade dispute erupts into the open
Whether it actually results in steering private companies' future investment decisions out of Canada is a more complicated question.
McCabe said people who know the auto industry know that disruptions happen sometimes; last winter, for example, the deep freeze in Texas caused shortages in component parts.
And the shortages in component parts lead to stalled lines. That then brings a chain reaction from one plant to another — and even after the part gets shipped, it can take days to restore operations to normal.
What would really hurt Canada, McCabe said, is if border blockades keep happening.
"You need many of these [incidents] to make people say, 'Canada's not the place to be,'" he said.
"I don't think this one does that. But it will support the detractors.... It will reinforce people that want to exit Canada. It sort of gives them another arrow in the quiver to exit the market."
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