Globalization
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The effects taken on the city of St. Catharines by General Motors after the implementation of the North American Free Trade Agreement.
When the term globalization is used, people often imagine a world that has no boundaries in the areas of communication, trade and mass production. Although this may sound ideal, there are also the negative effects of globalization that a society may be exposed to, which include: the outsourcing of labour, deregulation of the economy and massive cut backs in wages and labour. The effects of globalization have and are still currently taking place in the city of St. Catharines, Ontario. Globalization took its toll on the city in January of 1994, when Canada, the United States and Mexico launched the North American Free Trade Agreement (NAFTA) and through this formed the worlds largest free trade area. The NAFTA was established to bring economic growth and a strong foundation for future growth for the member countries. The NAFTA has greatly affected many manufacturing areas of employment. The General Motors manufacturing plant, which is known for being the worlds largest automaker and a global sales leader since 1931 having operations in 32 countries world wide and employing more than 325 000 has particularly been affected. This is evident in St. Catharines Ontario where the NAFTA has been detrimental to the city due to cut backs by General Motors, which put people out of work, when labour was outsourced where the job could be done cheaper according to the Center for Immigration Studies. The effects of globalization are also felt throughout the city St. Catharines with the detrimental toll that it is taking on the citys social factors and indicators. Another aspect that reveals the negative effects of the NAFTA and globalization on the city of St. Catharines is the “spin off effect”. The spin off effect reveals how the cut backs made by the General Motors plant also effects the employment of companies contracted by General Motors to produce specific parts.
The outsourcing of labour that is advocated by the NAFTA agreement has been proven to be futile, and also was only in the interest of the company to perform this practise to increase their profit margin. To compete on the same level as Ford and Chrysler, General Motors has already made massive cut backs in the city of St. Catharines and also corporation wide. General Motors Canada over the past decade has eliminated one third of its work force in Canada. From the St. Catharines region alone 2, 315 jobs were eliminated in the spring of 1995 when the NAFTA was put into full swing. It has also been proven that the outsourcing of labour is senseless because at the time that the NAFTA was implemented General Motors was very profitable. This reveals that the outsourcing of labour is and was virtually meaningless because General Motors is able to achieve the same level of profitability at the current Canadian plant locations that it had prior to 1995. This is because of the weakened Canadian dollar, which means that the employees are paid less for performing the same amount of work that is done in American General Motors plants. General Motors Canadas profit margin exceeded 4.5% in 1995; this was 7 times as high as Chrysler Canadas, and some 90 times higher than Ford Canadas. None of the Big Three Canadian auto majors have attained a 5% profit margin during the past decade. GM Canada exceeded the 12.5% return-on-net-assets target in both 1994 and 1995. Also it has become apparent that the outsourcing of labour has not at all helped General Motors in the long run since they are now faced with a large deficit. This deficit is causing the company to make even more cutbacks that is resulting in displacement of many employees and also the termination of many positions.
The numbers above reveal that there was no need for outsourcing labour and more plant closures since General Motors has already reached a level of profitability that has never been reached by car manufactures before. The only explanation for General Motors corporate policy at the time of the NAFTA was that they wanted to make the largest possible profit as quickly as possible and without caring for its employees. Cutbacks are still being made presently at the St. Catharines plant and jobs are being eliminated and moved to the United States and Mexico where General Motors is attempting to reach a new level of profitability because they have recently dropped to extremely low profit levels.
Another negative effect that is brought to the city of St. Catharines through the NAFTA is the deterioration of social conditions. The NAFTA, which opened up the markets between Canada, the United States and Mexico, put a lot of pressure on the social safety nets of St. Catharines. The Canadian Auto workers