Why Mexicans Don't Drink Molson. Andrea Mandel-Campbell

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СКАЧАТЬ After out-competing American furniture makers, its hard-won but short-lived leadership was quickly usurped by China, which now commands 50 per cent of the U.S. wood bedroom furniture sector, up from just 4.8 per cent in 1996.

      Until now, Canadians have comforted themselves with the idea that somehow the Canadian and Chinese economies were “complementary”: China was poor in natural resources, which Canada could happily supply. But while that assumption is true, it leaves out a crucial part of the equation, not to mention entire swaths of the economy. Not only are the Chinese manufacturing increasingly sophisticated products, from bicycles and barbecues to handsets and pharmaceuticals, that compete directly with Canadian goods, but foreign multinationals, Americans in particular, are moving to China to manufacture. “The U.S. companies are going to China big time, and we need to be there to support our U.S. clients, whether it’s in the auto industry, banking, whatever. We need to be there because we are part of the North American fabric,” explains Neil Tate, a special adviser to the Bank of Montreal on Asia. “We need to do that to protect ourselves, to survive, to increase our business not only in China, but in the U.S. and to increase our two-way trade between Canada and the U.S.”

      Yet we don’t seem to be doing it. Canadian companies, large and small, have been slow to sign up for the new game in town: global supply chains. Canadians have lagged behind their peers in offshoring and outsourcing, thus betraying a reluctance to tap into lower-cost markets as sources of cheap components or manufacturing bases. While the world’s stock of foreign direct investment expanded a hundredfold between 1990 and 2002, Canada’s increased just 4.4 times³⁶ — an indication that Canadian companies are neither creating their own global supply chains nor becoming part of someone else’s.

      According to a 2004 survey conducted by Canada’s Automotive Parts Manufacturers’ Association (APMA) of its members, Asian facilities accounted for a minuscule 0.29 per cent of their production and Asian suppliers represented less than 5 per cent of inputs. Perhaps not surprisingly, 71 per cent of the respondents admitted that one or more of their major customers had threatened to switch to overseas suppliers in the previous three years.³⁷

      During apma’s 2005 annual convention in Hamilton, a GM vice-president warned that Canada’s decades-long decision to rely on a sixty-five-cent dollar instead of increasing competitiveness was costing billions in new business. GM was expected to award just $200 million in new supply contracts to Canada in 2005, down from $2 billion in 2003, he said.³⁸ “China is nipping at our heels, and standing still is a recipe for disaster,” says Gerry Fedchun, apma’s president. “A lot of companies in our industry say, ‘I’m all right Jack.’ But it’ll catch up to them, and they will not be around. If you don’t think you have to change, you’re screwed.” The proof is in the pudding: with a slew of auto parts makers in bankruptcy protection, Canada recorded a deficit in automotive trade in the second quarter of 2006 — the first since 1991.

      With some 60 per cent of all Chinese exports produced by foreign multinationals, putting the nation on track to become the world’s largest exporter by 2010, billions of dollars’ worth of foreign investment pouring into Brazilian steel capacity from China, South Korea and Europe, and more going into building India’s back office to the world, opting out of the loop is akin to the “kiss of death,” says Lorna Wright, associate professor of international business at York University’s Schulich School of Business. “The world is getting more interconnected. If you are not careful, if you cut yourself out of the chain, you’re dead.”

      Howard Balloch is willing to bet money on it. The former ambassador who now runs his own investment boutique headquartered in Beijing says it’s only a matter of time before the Chinese are producing higher-quality parts more cheaply than they can be made in Canada. And those parts won’t just be put into the cars coming off assembly lines in Shanghai — they’ll be in the vehicles rolling out of Detroit and Oshawa.

      “The auto parts companies that come to China establish themselves early, bring technology and, because they have a head start, end up owning the Chinese production facilities — they win,” says Balloch. “Otherwise Chinese companies are going back to Canada and buying up what’s left of our industry, and that’s as inexorable as the tides.”

       THE ANTI-BRANDERS

      An old Chinese parable explains Canada’s place in the world, says David Fung, a Hong Kong–born self-made millionaire who now makes his home in Vancouver. It goes like this: A fox meets a tiger in the forest. The fox says to the tiger, “Don’t eat me because I am really powerful. If you don’t believe me, follow me around the forest and you’ll find everyone bowing to me.” Sure enough, everywhere the tiger and the fox went, all the animals bowed. “Well, of course, everybody was really bowing to the tiger,” says Fung. “In Canada, we take the U.S. to be our tiger.”

      The problem is, as global supply chains weave their way around the planet, companies consolidate and free-trade agreements are thrown out like so many nets into the sea, the tiger may find better things to do than follow a fox around the forest. Shorn of its protector, the fox falls prey to the law of the jungle. And Canada, like the fox, has very little in the way of natural defences to shield it from the ferocity of global markets. In fact, on closer inspection, this fox, with its puffy tail and pointy ears, begins to resemble an overgrown squirrel.

      The first telltale sign of Canada’s vulnerability is in its companies. In an era where size matters, the country has precious few multinationals. Despite laying claim to the second-largest proven oil reserves in the world, Canada has no “super-majors” like Exxon Mobil or British Petroleum. Few countries are carpeted with such vast tracts of trees, yet there is not a single tier-one forestry company to rival those of the Scandinavians or the Americans. Canada’s mining companies have traditionally been the most international, but only two — Barrick Gold and Teck Cominco — still have Canadian head offices and are pipsqueaks compared with behemoths like Anglo-American of the United Kingdom, Brazil’s cvrd and Anglo-Australian miner bhp Billiton. Aluminum maker Alcan is perhaps the most global Canadian company, but with us$20 billion in sales it is considered small by international standards (the newly merged Arcelor Mittal steel giant has sales of us$77.5 billion) and is an increasingly likely takeover target.

      As for Canada’s blue chip banks, they are irrelevant internationally, dwarfed by multinational monoliths like Citigroup and Holland’s ing Group and even outgunned by Australia, where poisonous animals outnumber the population.* According to the Fortune 500 list of the world’s biggest companies in 2004, Canada’s leading entry was George Weston Ltd. at 240. But while Weston has grown fat plying Canadians with baked goods and President’s Choice brand foods at its ubiquitous Loblaws and Superstore chains, French grocer Carrefour is in an entirely different weight class, with a global empire that includes more than two hundred stores in China alone.†

      Canada’s lack of global girth exposes an even softer underbelly. While Sweden has Ikea, Finland has Nokia and Italy has the fashion triumvirate of Armani, Gucci and Prada, Canada does not have, nor has it ever had, a single global brand. Even landlocked and impossibly mountainous Switzerland boasts a swath of high-altitude names, from banks and Rolex watches to Nestlé chocolate, Nescafé instant coffee and pharmaceutical giants Novartis and Roche.

      In contrast, Canada is almost anti-brand. In a country without a lot of large companies, an inordinate number of them are generic manufacturers or outsourced contractors hired to make other companies’ products. The no-name club includes Cott, which is now the largest private-label soft drink manufacturer in the world; Celestica, a contract electronics manufacturer; Apotex, a generic drug manufacturer; Patheon, a leading contract drug maker; and Peerless Clothing, which manufactures men’s suits under licence for upscale brands like Calvin Klein and Ralph Lauren. Even Montreal-based Gildan Activewear, one of the largest T-shirt makers in the world, is no Fruit of the Loom.

      Some say its because we’re СКАЧАТЬ