WHY HARMONIZED VEHICLE REGULATIONS BETWEEN CANADA AND THE U.S. ARE IMPORTANT FOR THE AUTOMOTIVE INDUSTRY.
Two years ago, in February 2011, Prime Minister Stephen Harper and U.S. President Barack Obama announced two initiatives under the rubric of a Shared Vision for Perimeter Security and Economic Competitiveness.
One of them, was the establishment of the Regulatory Cooperation Council, or RCC for short. The two year mandate for the RCC, as outlined in the Progress Report to Leaders last December, was to promote economic growth and job creation and provide benefits to consumers and businesses through increased regulatory transparency and coordination.
GREATER ALIGNMENT
Under the Regulatory Cooperation Council, a Joint Action Plan was established in December 2011 which had 29 separate initiatives designed to achieve greater regulatory alignment in key sectors such as agriculture, food, transportation, health, consumer products, workplace chemicals, the environment, nanotechnology and small business.
Ten of the 29 initiatives under the RCC Joint Action Plan are the responsibility of the Transportation Working Group and two of these 10 initiatives relate specifically to motor vehicle safety standards. One initiative deals with existing standards while the other deals with the development of future standards. The automotive industry is also implicated under the Environment Working Group of the RCC, which has three of the 29 initiatives — one of which is emission standards for light duty vehicles.
All well and good, but at the end of the day you may be thinking “what does all of this have to do with me and my business as a dealer?” Actually, a fair bit, if you consider that the Canadian automotive market is relatively small, representing about two per cent of global production and about two per cent of global sales.
Canada elected not to pursue an indigenous vehicle manufacturing sector in the first half of the last century. Instead, by creation of a sectoral trade agreement with the U.S. in the mid-1960s (the Auto Pact), it chose to encourage foreign vehicle manufacturers to establish vehicle assembly facilities in Canada, in order to take advantage of the economies of scale in producing cars on both sides of the border for sale in either market.
GREATER CHOICE, BETTER PRICES
In this way, Canadian consumers benefitted from a wider variety of vehicles at lower prices than would have been possible if vehicle manufacturers had to set up assembly plants behind high tariff walls in Canada to serve the Canadian population. Canada currently exports about 85 per cent of the vehicles that are produced here (mostly to the U.S.) and imports about 83 per cent of the vehicles that are sold here (again, mostly from the U.S.)
While Canadian Motor Vehicle Safety Standards (CMVSS) and Federal Motor Vehicle Safety Standards (FMVSS) have been largely aligned for the last two to three decades the last 10 years has seen increased regulatory alignment between the two countries.
Most of this has been positive, however we need to remember that the Canadian vehicle market, while similar to that of the United States, is still different. While it makes sense to align our standards with those of the U.S. to improve efficiencies and reduce costs, that should not be used as a tool for competitive advantage to either outright exclude vehicles from entering the Canadian market or to significantly increase the compliance cost, especially if those vehicles are likely to have significantly greater appeal to Canadian consumers than their American counterparts.
