May 7, 2008 / 6:39 PM / 10 years ago

Canada says security costs hurt domestic carmakers

OTTAWA (Reuters) - Chinese and Indian cars will soon hit the North American market and will have a price advantage, partly because security-related costs add to the price of North American vehicles, Canadian Industry Minister Jim Prentice said on Wednesday.

Prentice said the costs and delays involved in North American automobile parts traveling back and forth across the U.S.-Canadian border on their way to final assembly add several hundred dollars to the price of a North American vehicle.

“Not long from now, we will see the first Chinese- or Indian-manufactured vehicles arrive on North American shores, ready to be sold to eager consumers. These vehicles will have encountered a border delay only once,” he said.

Speaking to a conference in Washington, Prentice said North American businesses face longer border delays, higher inspection rates, additional fees and more layers of security at a time when they cannot afford it.

“I would add that these problems have created a two-headed monster. We want security and prosperity,” he said in the prepared text of his remarks.

“Instead, we make it more difficult to have either. Not only do we hamper the legitimate trade and travel that provide the foundation for North American prosperity, but we are also clearly misallocating resources.”

He said the money and resources spent investigating legitimate travel should instead target areas of highest risks, while lowering barriers and improving border infrastructure to make trade move faster.

Even without border-related costs, however, North American vehicles, still face a significant price difference with those made in China and India.

India’s Tata Motors Ltd unveiled its Nano car in New Delhi in January at a price of $2,500, a fraction of the cost of North American vehicles.

Chinese manufacturers have begun selling their cars abroad and have talked about cracking the North American market.

A U.S.-Chinese venture has said it plans to import vehicles into the United States this year, though most companies are still grappling with quality, safety and distribution issues before tackling the competitive U.S. market.

Reporting by Randall Palmer; Editing by Peter Galloway

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