• Press Releases
Statement on the Future of JAMA Canada and the Japanese-brand Auto Industry in Canada
TORONTO, December 15, 2020 – After 36 years of activities focused on improving trade and investment in the automotive sector, as well as strengthening the economic partnership between Canada and Japan, directors and members of the Japanese Automobile Manufacturers Association of Canada (JAMA Canada) have decided that the association has successfully fulfilled its core mandate. Consequently, the office in Toronto will be closing at the end of the current fiscal year – March 31, 2021.
With the successful entry into force of several new trade agreements, including the CPTPP, CETA and the new NAFTA, trade issues are now secondary to more pressing regulatory concerns facing the auto industry, particularly stricter GHG emissions, ZEV mandates and new technology challenges and opportunities in the next generation of sustainable mobility – namely connected, autonomous, shared & electrified vehicles.
Since their entry into Canada over 50 years ago, JAMA Canada members have made meaningful and substantial contributions to the Canadian auto industry, the economy, and society overall; and will continue to do so in the years to come. After increasing localization through extensive investment in their thriving export-based manufacturing facilities in Ontario, as well as distribution, sales and service operations across the country, the focus of Japanese automakers in Canada is no longer on trade policies and initiatives, which was the basis of JAMA Canada’s mandate. Instead, it has shifted to more technical, regulatory, and next generation vehicle challenges – issues facing all automakers in Canada.
New Milestones in 2020:
- Cumulative production of Japanese-brand vehicles built in Canada since 1986 passed 20 million units in September of 2020; in the process, both Honda and Toyota reached their 9 millionth vehicle built-in-Canada milestone in 2020.
- While overall production in Canada dropped 29.5% to 1.175 million units through the first ten months of 2020 due to the pandemic, Japanese-brand output at 631,142 units led the industry with a 53.7% share of total light vehicle production, up from 46.3% in 2019.
- Collectively, JAMA Canada members build more vehicles in Canada than they sell here, and export more vehicles than they import from Japan, the US, Mexico, and Europe combined.
- From 1965 to 2019 – 17.9 million vehicles were sold in Canada
- From 1986 to 2019 – 19.5 million vehicles were built in Canada
- Canada has been a net exporter of Japanese brand vehicles every year since 1993, with a cumulative total of 5.2 million net exports through 2019.
- 7 manufacturing plants: 5 light vehicle plants (2 at Honda, 3 at Toyota), 1 engine plant (Honda) & 1 commercial truck plant (Hino Motors Canada) – all in Ontario
- Canada exported over 3.5 times as many vehicles as were imported from Japan in 2019
- Production exceeds sales as members built 1.23 light vehicles in Canada for every one sold in Canada
- 64 Japanese affiliated auto parts & other related plants in Ontario, Quebec & BC
- Over 94,000 direct & indirect employment (vehicle & auto parts production, export/import, distribution, sales/service – 1,238 dealerships across Canada)
- Over 218,000 jobs supported through direct, intermediate & spin-off employment (2019 study – Mordue / Sweeney)
- Since 1986, $14.6 billion cumulative investment in Canadian manufacturing by Japanese automakers, including $1.9 billion new investment in advanced manufacturing in 2017/2018.
Prospective Outlook for Production in Canada:
For Japanese-brand manufacturers in Canada, assembly plants in Alliston, Cambridge and Woodstock re-started production lines in May after shutting down in March due to falling demand as a result of the COVID-19 pandemic. While Japanese-brand output fell 14.5% for the first ten months of 2020 compared to 2019, combined production at Honda and Toyota in Canada increased 7.0% in the 3Q of 2020 compared to 2019 – a hopeful sign that a sustainable recovery is underway. Moreover, production at TMMC will be increasing as a result of the production shift last year from Corolla to RAV-4 in Cambridge, as well as the addition of the new Lexus NX crossover due to start production in 2022.
Over the longer term, with continuing cooperation and support from both federal and provincial governments, maintaining open borders in the multilateral rules-based global trade system, as well as pursuing further trade diversification, we anticipate a bright future for the continuing localization and growth of the Japanese auto industry in Canada to serve markets throughout North America and beyond. This includes a significant role for JAMA Canada members and Japanese related auto parts suppliers in the transition to the next generation of sustainable mobility.
For more information, contact:
David Worts, Executive Director
Japan Automobile Manufacturers Association of Canada
Backgrounder on JAMA Canada:
The Japanese Automobile Manufacturers Association of Canada (JAMA Canada) was established as a local initiative of six Japanese Canadian subsidiaries in 1984 to address trade and economic issues in the automotive sector. About the same time, two other organizations were established along with JAMA Canada that were advocates for the Japanese auto sector in Canada: CAJAD (Canadian Association of Japanese Auto Dealers – opened in 1983 and closed in 2002) and PAC (Pacific Automotive Cooperation – opened in 1984 and closed in 1997)*.
Moreover, since the closure of the JAMA Informationsbüro office in Germany about 15 years ago, JAMA Canada has been the only `local associate office` of JAMA around the world.
JAMA Canada was set up specifically to focus on trade matters due to the more diverse membership of the Automobile Importers of Canada (then AIAMC, and now GAC – Global Automakers of Canada). At the time, we felt compelled to organize and coordinate a response to three separate but related events that threatened our business in Canada:
- the Canadian Government’s demand for restraints on vehicle exports from Japan following the Voluntary Export Restraint agreement between the US and Japan in 1981;
- the Canadian Customs action at the Port of Vancouver in 1982, which effectively stopped the entry of Japanese cars into Canada by staging a vehicle-by-vehicle inspection slowdown;
- the Federal Government Task Force on the auto industry tabled its report in 1983 entitled “An Automotive Strategy for Canada”. This report recommended, among other things, protection in the form of local content requirements as a condition for access to the Canadian market.
From the time Japanese automakers began setting up business operations in Canada in 1965, the challenge was not only in setting up dealerships in key markets across Canada, but also determining what would appeal to Canadian consumers when the market was dominated by large American cars and light trucks, along with other imported vehicles from Europe.
Finding little early success, things began to change with the first ‘oil shock’ in 1973, as the market began to shift due to rising gas prices in favour of smaller engines and more fuel-efficient cars. During this period, virtually all Japanese brand vehicles sold in Canada were imported from Japan.
With the second oil shock in 1979, US automakers in North America were losing market share and facing financial losses, while Japanese market share was increasing. Under duress, Japan agreed to a ‘voluntary export restraints’ (VER) to give US automakers ‘breathing space to regain competitiveness’. This set the stage for Canada to pursue a similar ‘orderly marketing agreement’ with Japan (referenced colloquially as the ‘voluntary restraint agreement’ (VRA).
Rising market share in North America, the Plaza Accord in 1985, and the prospects of FTA negotiations between Canada and the US were all critical factors for Japanese automakers to invest in local manufacturing – first in the much larger US market, and eventually in Canada. Given the much smaller Canadian vehicle market, Japanese investors also needed the assurance of competitive access to the larger US market to achieve the necessary scale and scope of integrated manufacturing and assembly operations. Prudently, assembly plants in Canada began with small footprints and limited capacity, but with plans for long term localization and growth.
In Canada, the first vehicle manufacturing plant was opened by Honda in Alliston in 1986, followed by the first Toyota assembly plant in Cambridge in 1988, with the GM – Suzuki joint venture plant (CAMI) in Ingersoll in 1989. This first wave of vehicle investment would also lead to significant auto parts investment from Japan, as well as the establishment of Pacific Automotive Cooperation (PAC), a unique joint venture company between JAMA and JAPIA (Japan Auto Parts Industries Association) in 1984.
With the entry into force of the Canada-US FTA (CUSFTA) in 1989 and the NAFTA in 1994 (which supported further industry integration in Canada, the US and Mexico), Japanese automakers and Japanese parts suppliers ramped up localization to take advantage of preferential access in the NAFTA, particularly duty-free trade in both vehicles and parts with the US. As a result, Canada became a net exporter of Japanese brand vehicles for the first time in 1993. By 2019, the cumulative volume exceeds 5.2 million net vehicle exports.
The rescinding of the Canada-US Auto Pact in 2001 was a significant development in ‘leveling the playing field’ for JAMA Canada. Even though the bilateral Auto Pact had been replaced by the CUSFTA in the US, this was a necessary step for Canada to finally eliminate the discriminatory treatment for all non-US foreign automakers in Canada that had been excluded from the 1965 Auto Pact.
In retrospect, the Auto Pact was a sectoral bilateral treaty for the US (which required the US to seek a waiver from the GATT), while Canada decided to implement the Auto Pact multilaterally, in order to attract automakers from other countries to Canada to take advantage of its unique provisions. The Government of Canada proceeded to offer duty-remission programs to all non-Auto Pact automakers doing business in Canada. Moreover, higher level production-based remission programs were designed to allow non-Auto Pact manufacturers with plants in Canada to eventually qualify for full Auto Pact status and benefits. Since these benefits included duty-free entry of both finished vehicles and auto parts from any country (not just the US), as well as duty-free access to the larger US market, this was a deal breaker for the US who demanded that Canada agree that all of these programs be terminated by 1996, as a core condition of both the CUSFTA and the NAFTA.
With the end of the Auto Pact, Canada began diversifying and expanding trade opportunities with other countries including South Korea and the European Union. This eventually led to the Canada-South Korea FTA in 2015, and the Canada EU Trade Agreement (CETA) which came into force provisionally in 2016.
Although Canada and Japan began negotiations for a bilateral trade agreement (CJEPA) in 2013, this was abandoned in favour of the original Trans Pacific Partnership (TPP) which included Canada and Japan along with 10 countries. The TPP was signed, but not ratified, in 2016. Following the withdrawal of the US from the TPP after the 2016 US election, the remaining eleven members of the TPP were eventually able to conclude the CPTPP, which came into force at the end of 2018.
For JAMA Canada, the most significant aspect of the CPTPP is that vehicle exports from Japan can be fully competitive with rival imports from other countries in North America, Europe and Asia. When fully in force in 2022, the CPTPP will deliver substantial benefits to consumers, dealers and JAMA Canada members from duty-free access for vehicles imported from Japan, estimated at $200 million annually.
Now that trade issues, particularly those that have a significant impact on the auto sector, have largely been resolved (CPTPP, CETA and the new NAFTA just recently entered into force), JAMA Canada members, along with all automakers in Canada, are currently facing an array of important regulatory issues, intense competition, changing tastes among ever demanding consumers, as well as technological disruption – all of which are displacing concerns about automotive trade.
At the same time, the recent growth of anti-globalization sentiment and the rise of managed trade and protectionism are not dissimilar to the scenario that gave rise to the formation of JAMA Canada back in the 1980`s. However, today it is much broader than the ‘US-Japan car wars’ of the 1980’s & 1990’s in which Canada was caught in the cross-fire as a result of the integration of the auto industry in North America created by the 1965 Canada-US Auto Pact.
Since their arrival in Canada over 50 years ago, Japanese brand automakers have become an integral part of Canada’s social and economic fabric, investing billions of dollars in Canada, employing tens of thousands of Canadians, contributing to Canada’s international trade balance and giving back to their communities through their charitable and philanthropic work. This long-term partnership has grown stronger as the relationship has deepened, on a foundation of liberalized and diversified trade initiatives that have created jobs and business opportunities in both Canada and Japan. In a nutshell, this is the legacy of JAMA Canada.