The Effects Of Economic Globalization On The Canadian Automobile Workplace

The Effects Of Economic Globalization On The Canadian Automobile Workplace 

Contents

Introduction. 1

Discussion. 2

Effects on the automobile industry workplace. 6

Annotated Bibliography. 10

 

 

Introduction

            The business sector has been one of the most fundamental aspects of the contemporary human society. Indeed, the contemporary human society has been striving to come up with strategies that would enhance the efficiency, productivity and profitability of the business sector. Needless to say, different sectors have different value to the varied economies. Nevertheless, efforts have been made to expand the markets for products and services provided in different sectors. One of the most popular efforts in this regard has been globalization, which has primarily involved the opening up of the borders of nations and encouraging economic integration. This was aimed at enhancing free trade between countries. Globalization has elicited numerous concerns in the contemporary human society. This has primarily been as a result of its effects on the economies themselves. 

            Critics have underlined the fact that globalization is primarily driven by businesses that seek to enrich themselves and create more wealth for their owners. They state that a large number of multinational corporations have been increasingly going beyond the reach and control of governments, thereby undermining national sovereignty (Azzi 15). In addition, they usually play governments of different countries against each other, with different governments striving to create the best conditions for the corporations. Governments are always eager to attract investments, in which case they reduce corporate taxes alongside the labor, social and environmental standards. Low tax rates reduce the government revenue while the lowering of standards result in degradation of environment and mistreatment of workers. 

            Proponents of globalization have underlined the fact that the phenomenon has enhanced the economies of different countries such as South Korea, Hong Kong, Singapore and Taiwan, simply because of increased growth rates (Azzi 16). The countries also have higher living standards and increased employment. 

            Of course, there will always be differing effects of globalization on the varied sectors of the economy. Indeed, developed countries are affected in a different manner by globalization from developing countries. In Canada, the automobile industry comes as one of the most fundamental industries. Its production accounts for more than 40% of the country’s GDP. However, it has not been spared the effects of globalization. As much as there may be some positive aspects or effects on the economy, the automotive industry in Canada has been negatively affected by globalization. This paper examines the effects of economic globalization on the Canadian automobile workplace, and the quality of lives of Canadian workers. 

 

Discussion 

            Economic globalization has been one of the most controversial topics in the contemporary human society. Indeed, a large number of countries have been trying to contend with the mixed results or effects of economic globalization. Needless to say, the introduction of the phenomenon was aimed at bringing immense economic benefits to the varied countries that embraced it. However, the phenomenon had varying effects or impacts on different countries, as well as on different countries within a particular country. This means that the effects of globalization may be different for a developing country from the impacts of the same on a developed country. On the same note, the effects of the phenomenon on the banking industry may be different from those of the hotel or the manufacturing industry. 

            As one of the most developed countries in the entire globe, Canada has not been left behind as far as implementing some economic globalization policies are concerned. Economic globalization underlines the process by which the international market is integrated as a result of the interexchange of products, world views, ideas, as well as other elements of culture. It may also be used to underline the worldwide movement towards financial, economic, communication and trade integration. This phenomenon means the opening up f the nationalistic and local perspectives to a significantly broader outlook pertaining to an interdependent and interconnected world that involves or incorporates the free transfer of goods, capital, as well as services across national frontiers. Of particular note, however, is the fact that economic globalization does not incorporate or include the unrestricted movement or flow of labor. Countries and people respond in different degrees and different ways to globalization. Of particular note is the fact that globalization impacts more strongly on rich countries than poor countries that lack or are deficient of capital, goods to trade and advanced technology. The phenomenon has the capacity to cause homogenization as individuals would increasingly consume comparable goods and services. However, it is also known to elicit a backlash as some people and groups react to the effects of globalization with movements that lay emphasis on national and local concerns.

            Canada has distinguished itself as one of the most globally integrated countries in the entire globe (Azzi 9). It incorporates a highly advanced information technology and communication system, a population that is frequently travelling abroad, an economy that primarily relies on trade, as well as a government that is significantly active and vibrant in international organizations, not to mention it’s the composition of the population of individuals from varied cultural backgrounds. 

            Globalization has always faced stiff competition from other historical forces especially nationalism. This has resulted in a situation where history has seem both periods where the globe has become considerably more integrated, as well as instances where the trend has become reversed. As much as the term globalization was coined in the latter half of the 20th century, the phenomenon is much older dating back at least to the 19th century (Azzi 10). In the case of Canada, its economy has been heavily relying on external capital and markets, at least, since the 17th century. The Canadian economy in the early years was colonial, in which case, a large proportion of its investments emanated from its imperial powers (France and Britain). The prosperity of the country’s economy was highly dependent on the exports of natural resources such as fish and furs, minerals, wheat and lumber, as well as the imports that the country made with regard to manufactured goods.  This was a form of globalization, albeit a selective one thanks to its imperial ties. Indeed, the country had overseas investment and trade links although these were fundamentally within the empire as the imperial powers or the colonial system would shut out the other parts of the globe. 

            At the advent of the 19th century, the country’s economy stated undergoing fundamental modifications as it changed from a colonial economy to a continental economy. Around the 1840s, Britain ditched the mercantilist system that used to give imports from its colonies such as Canada more preference (Azzi 10). This action meant that Canada would have to compete with other countries such as the United States as it sold its products to Britain, in which case it was forced to seek new markets in the south. Marking the new dawn of globalization of Canada was the signing of the Reciprocity Agreement between the United States and Canada in 1854, which took effect from 1855 to 1855. This agreement introduced free trade for numerous natural products and assisted in shifting the trade in the country to a north-south pattern. 

            After the World War II, successive government of the country took up a policy where they introduced lower tariffs in an effort to promote trade. Indeed, the country made up one of the original or pioneer signatories to the GATT agreement and even participated in negotiations that resulted in a significant reduction of international tariffs. A large number of people viewed multilateral trade agreements as a technique for offsetting the influence that the United States had on the economy and its trade (Azzi 11). This resulted in an expansion of Canadian exports and created an era where the country experienced immense economic growth lasting up to the mid-1970s. Within this period, Canadians experienced low rates of unemployment and high standards of living. 

            In the 60’s and 70’s, Canada sought to cut ties with the United States thanks to the tarnished image of the later after the Vietnam War. The country took up the “Third Option” a strategy that advocated for the diversification of the country’s trade in order to lower its reliance on the American market, thereby becoming truly globalised (Azzi 13). However, this policy had little effect as few countries were interested in expanding their trade with the country. In addition, geographical realities safeguarded the United States’ position as the natural trading partner for Canada. 

            Canada has maintained intense connections to and its reliance on the rest of the world. Testament to this is the fact that over 67% of Canadians use the internet while the average Canadian makes over 500 minutes every year in international calls (Azzi 13). On the same note, Canadians make over 25 million trips annually to other countries, while foreign investments in Canada amount to more than 500 billion. The country’s exports take up over 40% of its GDP. 

          Effects on the automobile industry workplace 

            As one of the largest automobile producing countries in the globe, Canada’s automobile industry has taken up a large proportion of the effects of economic globalization. Unfortunately, economic globalization has negatively affected the automobile industry in Canada. Research shows that the creation of the World trade Organization and the North American Free Trade Agreement in 1995 resulted in trade deficits (Conklin & Cadieux 3). Indeed, the auto-trade deficit, as at 2008, exceeded $12 billion. The imports of automobiles from Germany has gone up by 243% while the exports to the same dropped by 39% (Walker 8). This has resulted in a trade deficit of $2.4 billion with Germany, which means that for every dollar that Canada exports to Germany, it imports $29. Similar trends have been observed in the trade balance between Canada and Japan with import to Canada increasing by 118% while exports from Canada have reduced by 69% leading to trade deficits of $6.3 billion (Conklin & Cadieux 6). This implies that Canada imports $135 for even dollar that it exports to Japan (Walker 6). Within the same period, trade imbalances have deteriorated between Canada and South Korea, with exports from Canada declining by 75% while imports from South Korea have increased by $710 leading to a trade deficit of $1.7 billion. Statistics show that Canada imports $177 from South Korea for every dollar that it exports to the country (Walker 8). This has, therefore, led to a reduction of the level of productivity of the automobile industry. 

            On the same note, the Canadian workplace has seen immense change in the composition of workers. Research shows that the Canadian workplace has seen an increase in the relative employment of skilled or nonproduction workers. This increase has been reflected in almost every other manufacturing industry in Canada, as well as other developed countries such as the United States. This shift in the demand towards the more skilled workers may be attributed to two factors (Conklin & Cadieux 6). First, there has been an increase in the usage of computers, as well as other high-technology machines or equipment in the production or manufacturing process. These equipments require the services of skilled workers for them to operate. In addition, less skilled jobs have been significantly outsourced to other countries in which the costs are significantly lower. However, the later seems to have caused the former. In explaining the manner in which outsourcing increases the relative demand of skilled labor, scholars use a firm’s value chain which incorporates the activities that are involved in the production of a service or a good right from research and development, through assembly and marketing to after sales service (Tavakoli and Grenier 5). In this regard, Canadian auto-firms have the least amount of skilled labor relative to the unskilled labor in the assembly stage, followed by the component production, marketing and sales, with research and development having the highest proportion of skilled to unskilled labor (Feenstra 4). The firms that are outsourcing to countries that offer lower wages for unskilled labor send the activities that use the highest proportion of unskilled labor. In this case, assembly and component production would be outsourced to countries such as China and India, while the tasks that require skilled labor are undertaken in the country (Feenstra 6). The increased outsourcing or off-shoring of activities would have resulted from trade agreements with foreign countries resulting in a reduction of tariffs or an enhancement of the infrastructure in the foreign country and a reduction in the costs there (Tavakoli and Grenier 5). The outsourcing of less skill-intensive tasks means that the tasks that are carried out at home are more skilled-labor intensive, resulting in an increase in the relative skilled-labor demand in Canada. 

            On the same note, globalization has resulted in increased competitiveness via increased flexibility in the automotive industries. As much as there is increased demand for skilled workers, there is a general requirement that workers continuously enhance their skills. The production sequences, as well as the role and ownership of varied service providers in the production process have been restructured thereby changing the production architecture (Reichhart and Holweg 63). Works and production managers are required to implant more standardized processes in and across national borders so as to achieve higher levels of targeted efficiency and quality. The restructuring has necessitated that workers mobilize tacit knowledge, as well as enhance or upgrade their knowledge and skills (Tavakoli and Grenier 6). Indeed, there has been increased emphasis on the acquisition of multiple skills and flexibility not to mention increased scope for self-regulation by employees. 

            In addition, there has been a change in the role and power of labor unions in the workplace. Scholars have underlined the fact that the increased transnationalization of production would inexorably result in the weakening of the local union’s ability to mobilize their powers. This means that globalization has prompted a shift in power, as well as a weakening of the local unions to take part in workplace change (Lévesque and Murray 2). A large number of observers have fatalistically pointed at the heightened disparity between international employers and unions. In this case employers are characterized by heightened capital mobility, the capacity to make coercive comparisons, as well as the capacity to secure concessions in exchange for future a promise of future investment. In this case, local unions have become bereft or powerless in the face of such an array of immense employer resources (Murray et al 244). On the same note, the heightened decentralization of bargaining in a large number of national systems coupled with the dismantling of pattern bargaining in some places has further stressed the local unions that have less likelihood for achieving their objectives when they are isolated from other unions (Lévesque and Murray 3). This means that the local unions are not only increasingly isolated but they also have lower capacity for inflicting economic costs on corporations or employer in the automobile industry. 

            In addition, globalization has had mixed effects on the economic welfare of employees and the quality of lives that employees in the automobile industry in Canada lead. Of particular note is the fact that the effects of economic globalization on the wages that individuals in the automobile industry is dependent on the positions or the skill levels of the individuals in question. Indeed, it is noted that economic globalization has resulted in an increase in the demand for skilled workers in the automobile industry (Sturgeon et al 14). This is especially considering the increased usage of computers and other equipments in driving operations in the automobile industry. In this regard, the skilled laborers have experienced an increase in their relative wages. It is worth noting that the same cannot be said as far as the unskilled laborers are concerned. Indeed, scholars have noted that the unskilled laborers have not only had their wages driven down by the reduced demand for them (Sturgeon et al 17). Of course, the outsourcing of less skill-intensive tasks has driven the wages down. However, there has also been an influx of immigrants who also have low skills in the automobile production process, in which case the supply of such services has gone up thereby driving their wages down. 

 

 

 

 

Annotated Bibliography 

Sturgeon, Timothy., Biesebroeck Johannes.Van. and Gereffi, Gary. (2007) Prospects for Canada in the NAFTA Automotive Industry: A Global Value Chain Analysis, Industry Canada, Research Report. 2007 Print 

This report examines the trends of Canada’s automobile industry in the age of globalization. Indeed, it examines the trends that North American automotive industry has taken up while posing the question on whether the comparative advantage that Canada has in this industry can be sustained. It acknowledges that the Canadian automobile industry has primarily been shaped by the historical ties that the country has with the Big 3 American Automakers including Chrysler, Ford and General Motors, as well as the proximity of the country to the heartland of the United States industry in Michigan, as well as the surrounding Mid-western states. 

 

 

Reichhart, Andreas. and Holweg, Mathias. ‘Co-located supplier clusters: forms, functions, and theoretical perspectives’, International Journal of Operations & Production Management Vol. 28, No. 1, pp.53-78. 2008, print 

This paper incorporates a study done to determine the theoretical perspectives pertaining to collocation of supplier clusters. The study was carried out through semi-structured interviews with operation executives in the automotive industry. It reached the conclusion that the transaction cost economics are less suitable in the study of dedicated co-location. 

 

Macaluso, Grace. CAW demands new ‘bold vision’ for Canada’s auto industry. Financial post, 2012. Web retrieved from http://business.financialpost.com/2012/04/16/caw-demands-new-bold-vision-for-canadas-auto-industry/

            This article examines the reaction of Canada’s auto workers union to the increased negative effects of globalization. It states that the Union has been calling for a termination of Free Trade talks between the country and other nations such as Germany and Japan, and South Korea, while also asking for the imposition of tariffs on entities that do not assemble vehicles in Canada. The Union also put down a 10-point strategy that would reform the automotive industry in Canada so as to enhance its competitiveness in the era of globalization. 

 

Lévesque, Christian and Murray, Gregor.  Union Bargaining Power in the Global Economy: A Comparative Study of  Workplace Change and Local Unions in Canada and Mexico

This paper examines the impact of globalization on the powers and roles of labor unions especially in the automotive industry. The study is not restricted to Canada alone but also Mexico with specific mention of the United States. The reference to the United States has been underlined by the fact that it forms an immense ally to the two countries as far as trade is concerned. On the same note, the two countries have been competing against each other as far as trade in automobile is concerned, with Mexico taking up an immense proportion of the United States market while Canada has had its market shrinking. The paper argues that the bargaining power of local unions in the context of globalization would be enhanced through increased internal solidarity, the pursuit if an independent agenda, as well as stronger articulation with other union levels and community activity. 

 

Murray, Gregor., Lévesque Christian., and Vallée, Guylaine. The Re-Regulation of Labour in a Global Context: Conceptual Vignettes from Canada ”, The Journal of Industrial Relations, vol. 42, no 2, pp. 234-257, 2000, print 

            This paper draws from three vignettes pertaining to Canadian labor regulation and aims at coming up with a theoretical account pertaining to the nature of labor regulation, as well as re-regulation after the entry of globalization. Once it has identified the varied dimensions pertaining to globalization, it examines four characteristics of labor regulation while paying particular attention to the impact that globalization has had on them. The features examined, in this case, include the roles that organizational processes and contingency play in shaping work rules, the type of employment relationship, the nature of rules pertaining to work, the significance of balance of power between the actors in shaping the regulation of labor, as well as the actors’ strategic interdependence. 

 

Walker, Cathy.  Canadian Auto Industry Effects of Globalization and Current Financial Crisis. CAW Research Department, 2009. Web retrieved from http://www.slideshare.net/cathywalker856/canadian-auto-industrycawnov2009

This paper examines the trends that the Canadian automotive industry has demonstrated since the entry of globalization. It chronicles the changes that the trade balances between Canada and other countries such as Germany, Japan and South Korea has experienced right from the entry of globalization with regard to the automobile industry. Indeed, it notes that in all these cases, there has been a worsening of trade balances or trade deficits between Canada and the three countries, with the exports from Canada to these countries decreasing, while imports from these countries to Canada have been on the increase.

 

Azzi, Stephen. Globalization. Historical Canada. 2011 Web retrieved from http://www.thecanadianencyclopedia.com/en/article/globalization/

This article examines the globalization phenomenon with respect to the effects that it has had on the Canadian industries. It defines the phenomenon and gives an apt description of its history and development right from the times when Canada was under colonial rule. In addition, it traces the attitudes that different regimes have had with regard to globalization, the reactions that the phenomenon developed or elicited from the Canadian public, the changing aspects of the relationship between Canada and its main trade partner (the United States), as well as the effects that the different trade agreements have had on the economy in general. In addition, it captures the varied arguments that proponents and opponents of the concept of globalization have put forward, without offering support for any side. 

 

 

 

Feenstra, Robert C. Globalization and its impact on Labor. Global Economy Lecture, 2007. Print 

            This paper examines the impact of globalization, especially free trade on varied aspects of the Canadian economy. Of particular note is the fact that it borrows immensely from the free trade that came with the making of the European Union. As much as the context is different the effects of free trade in the European Union and in Canada are similar especially with regard to the trends pertaining to outsourcing and wage differences in the automobile industry. The paper acknowledges that there are variations or restructuring or modifications in the wages for skilled and non-skilled laborers, especially considering the changes in the demand for their services in the automobile industry with the entry of globalization. Indeed, it acknowledges that there has been an increase in the demand of skilled laborers in the automobile industry, while the demand for non-skilled laborers has gone down considerably. This has resulted from the outsourcing of particular tasks to countries that offer unskilled labor at considerably low cost. 

 

Tavakoli, Akbar and Grenier, Gilles. Globalisation and Wage Inequality: A Comparison of the Manufacturing Sector in Canada and the United States from 1970 to 2001. The University of Ottawa, 2004. Print 

This paper acknowledges the worsening economic position of low-skilled workers in comparison to high-skilled workers in a large number of industrialized nations since late 70s. The paper renders credence to this notion by comparing the United States and Canada with regard to the evolution of relative wages of both non-production and production workers (skilled and non-skilled workers) in the manufacturing industry from 1970 to 2001. The study outlined in this paper demonstrates the fact that the wage ratio between the two groups is impacted by similar economic globalization variables for the two countries. Of particular note, however, is the fact that the overall effect of globalization is significantly higher in the case of Canada apart from the case of technological changes. On the same note, when imports from developing countries and technological changes are compared, the later comes with a more harmful impact on low-skilled workers. In the case of Canada, the union variable has a more pronounced effect among other variables, while the two countries are minimally affected by immigration. 

 

Conklin, David. W & Cadieux, Danielle. Globalization Threatens Canada’s Auto Industry: Implications for the Economy and Society. New York: Ivey Publishing, 2006. Print

            The 12-page book underlines the crucial role that the automobile industry has played in the Canadian economy. This is especially considering that a large number of jobs in the country are dependent on the automotive industry. As much as globalization was aimed at expanding the industry’s (as well as other sectors’) market, the phenomenon has had negative effect on the Canadian economy. Indeed, it states that a large proportion of automobile-related jobs in the country in the future would be dependent on the Canadian plants’ international competitiveness. Canadian automobile companies cannot afford to persistently increase wages as this would result in an increase of production costs in the country to levels that are beyond those of other countries such as China and Mexico, among other emerging economies. This would cause manufacturers to shift production of the same to low-cost economies. 

 

 

 

Works cited 

Conklin, David. W & Cadieux, Danielle. Globalization Threatens Canada’s Auto Industry: Implications for the Economy and Society. New York: Ivey Publishing, 2006. Print

Tavakoli, Akbar and Grenier, Gilles. Globalisation and Wage Inequality: A Comparison of the Manufacturing Sector in Canada and the United States from 1970 to 2001. The University of Ottawa, 2004. Print 

Feenstra, Robert C. Globalization and its impact on Labor. Global Economy Lecture, 2007. Print 

Azzi, Stephen. Globalization. Historical Canada. 2011 Web retrieved from http://www.thecanadianencyclopedia.com/en/article/globalization/

Walker, Cathy.  Canadian Auto Industry Effects of Globalization and Current Financial Crisis. CAW Research Department, 2009. Web retrieved from http://www.slideshare.net/cathywalker856/canadian-auto-industrycawnov2009

Murray, Gregor., Lévesque Christian., and Vallée, Guylaine. The Re-Regulation of Labour in a Global Context: Conceptual Vignettes from Canada ”, The Journal of Industrial Relations, vol. 42, no 2, pp. 234-257, 2000, print

Lévesque, Christian and Murray, Gregor.  Union Bargaining Power in the Global Economy: A Comparative Study of  Workplace Change and Local Unions in Canada and Mexico

Macaluso, Grace. CAW demands new ‘bold vision’ for Canada’s auto industry. Financial post, 2012. Web retrieved from http://business.financialpost.com/2012/04/16/caw-demands-new-bold-vision-for-canadas-auto-industry/

Reichhart, Andreas. and Holweg, Mathias. ‘Co-located supplier clusters: forms, functions, and theoretical perspectives’, International Journal of Operations & Production Management Vol. 28, No. 1, pp.53-78. 2008, print 

Sturgeon, Timothy., Biesebroeck Johannes.Van. and Gereffi, Gary. (2007) Prospects for Canada in the NAFTA Automotive Industry: A Global Value Chain Analysis, Industry Canada, Research Report. 2007 Print

 

 

 

 

 

 

 

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