Auto Parts Exported From Canada to US At Record Pace

TORONTO, Feb 27, 2004; Reuters reported that Canadian auto-parts exports to the United States hit a record high last year as U.S. buyers had to pay more for the parts because of the stronger Canadian dollar, a report released on Friday said.

Shipments to the United States rose by 6 percent in U.S. dollar terms to $18.7 billion (C$25 billion) last year, topping the previous high of $18.3 billion, set in 2000, according to Bank of Nova Scotia's Canadian Auto Report. The report cited data from the U.S. Department of Commerce.

"Part of that 6 percent increase is because U.S. automakers are having to spend more dollars in order to be able to buy the same amount of product from us," said Carlos Gomes, auto industry specialist at Scotiabank, noting that in Canadian dollar terms, exports to the U.S. declined last year.

Gomes added that Canadian suppliers also benefited from a lower cost structure than their U.S. counterparts, estimating that domestic firms have a 15 percent labor-cost advantage over U.S. suppliers, despite the higher Canadian dollar.

The Canadian dollar surged 20 percent against the U.S. currency over the past year, leading to concerns it may dampen exports and growth.

Gomes said suppliers in Canada, which was overtaken by Mexico as the biggest auto-parts exporter to the United States in the late 1990s, were clawing back market share.

Canada now accounts for 25.3 percent of total auto parts imported to the United States, compared with 26.8 percent for Mexico. The gap has narrowed since 2001 when Mexican suppliers held 28.9 percent of overall parts shipments into the United States.

"Given Canada's large labor-cost disadvantage vis-a-vis Mexico, the recent gains by Canadian parts makers likely reflect the benefits of focusing on value-added products," Gomes said.

The report said the Canadian auto-parts industry also increased its lead over Japanese suppliers in the U.S. market, despite the increasing number of Japanese-owned assembly plants in North America.

"This is a clear indication that these facilities are sourcing more automotive parts in North America," Gomes said.