TORONTO, Sept. 21, 2017
/CNW/ - The North American Free Trade Agreement (NAFTA) has enabled
the North American auto industry to become one of the most
competitive in the world, allowing it to boost productivity and
gain global market share.
Under the agreement, the auto industry has developed one of the
world's most highly integrated supply chains, with three-quarters
of US-made auto parts exports sent to its NAFTA partners. The
entire North American auto industry has changed and become stronger
under NAFTA, enabling it to increase its competitiveness, add to
production at home, and gain market share abroad. North America now accounts for roughly 22% of
global auto industry exports, up from less than 19% a decade
ago.
"NAFTA is a win-win-win for the auto sector, as employment
growth in the sector has outpaced overall job creation across
North America. Any disruption of
the free flow of vehicles and parts would negatively affect
economic growth and labour markets," said Carlos Gomes, Senior Economist and Auto Industry
Specialist, Scotiabank. "Efforts to modernize NAFTA should ensure
that the agreement remains flexible enough for the North American
auto sector to maintain its outperformance of recent years."
In the US, NAFTA has enabled the auto industry to outperform
other industrial sectors, which has pushed its share of overall US
manufacturing activity to new highs. The auto sector now accounts
for a record 12.4% of total US manufacturing activity, up from less
than an estimated 10% share prior to the introduction of NAFTA.
Auto industry output in Canada
is advancing nearly four times faster than the overall growth rate
of manufacturing as a whole. Roughly 75% of the value of all auto
parts used in North American-built vehicles is sourced within
NAFTA, well above the 62.5% threshold required for finished
automobiles to move duty-free between NAFTA countries.
Mexican auto production has more than tripled since the
mid-1990s and exports of vehicles and parts have surged tenfold
such that Mexico now accounts for
6.5% of global auto trade. However, Mexico's NAFTA partners have also benefitted
substantially from the agreement. Mexico is now the destination for more than
one-third of all auto parts exports from the US, up from less than
5% when NAFTA took effect in 1994. Auto-sector export growth to
Mexico from Canada has picked up even more quickly, albeit
from a smaller base.
NAFTA has been good for auto-sector jobs in the US and
Canada. During the recent
expansion, US employment in the industry has increased by more than
five times the rate of overall manufacturing employment growth and
three times the pace of total economy-wide employment gains.
Similarly, auto-sector job creation in Canada has run ahead of manufacturing
employment growth and the rate of job creation in the rest of the
economy.
Read the full Scotiabank Global Auto Report online at:
http://www.scotiabank.com/ca/en/0,,3112,00.html.
Scotiabank provides clients with in-depth research into the
factors shaping the outlook for Canada and the global economy, including
macroeconomic developments, currency and capital market trends,
commodity and industry performance, as well as monetary, fiscal and
public policy issues.
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SOURCE Scotiabank