Sector slams TPP as ‘ dumb move’
Fears pact will undermine NAFTA talks
Some representatives of the Canadian auto industry slammed Canada’s decision to sign a revised Trans-Pacific Partnership on Tuesday, calling the deal harmful to the auto sector and warning that it undermines Canada’s position in NAFTA negotiations.
International Trade Minister François-Philippe Champagne announced Tuesday that Canada and the ten countries that remained in the deal after the U.S. backed out had agreed to sign the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
But the agreement was swiftly criticized by several representatives of the Canadian auto industry, including Flavio Volpe, president of the Auto Parts Manufacturers’ Association, who said in an interview with the Financial Post that “this could not be a worse time to make a dumb move.” Canada struck the TPP deal just as negotiators began the sixth — and pivotal — round of NAFTA talks in Montreal.
Volpe said the TPP agreement’s automotive rules of origin, which originally stipulated that vehicles must contain between 35 and 45 per cent TPP- produced content in order to gain duty-free access to the Canadian market, will make it easier for TPP countries to import vehicles to Canada.
At the same time, he said the rules will hamper the national auto industry’s ability to compete. At the same time, the U.S. has proposed increasing the North American content rule under NAFTA to 85 per cent, and introducing aU. S.-content rule of 50 per cent.
“That regional content means the majority of the parts and materials for vehicles can come from outside TPP countries — namely China — and you didn’t get anything in return,” Volpe said.
“What they’ve done is given access to the Canadian and the Mexican markets to nine additional countries at the exact same time that we’re hosting the Americans in NAFTA negotiations, who want to increase regional value content to keep out parts from China ... You lose moral authority to say that you’re a defender of fortress North America.”
When asked about concerns from some in the auto industry about the proposed regional content values, Champagne pointed to a bilateral side-letter with Japan that he said will remove non-tariff trade barriers preventing Canada from penetrating the Japanese market.
“What we’ve achieved is really in terms of market access,” he told reporters in Toronto on Tuesday. “Part of the issue that the auto industry was facing is the inability to effectively export into markets like Japan because of non- tariff trade barriers ... This is the first time we have an enforceable side letter for the auto sector and I think it’s a significant achievement.”
Canada has also signed side-letters that pertain to the auto industry with Malaysia and Australia. A spokesperson f or Champagne said those letters will be made available to the public at a later date.
Despite the side-letter with Japan, Canadian Vehicle Manufacturers’ Association president Mark Nantais said he is still concerned that market access to TPP countries will not improve under the new agreement.
“This will disadvantage auto companies that have invested millions in jobs and sustaining manufacturing in Canada, while providing a competitive advantage to the TPP countries involved,” he said. “We are concerned that access to various TPP markets has not been materially improved at all.”
Volpe said the Canadian government should not have signed the TPP deal — or, at least, left the automotive portion out of it — until the uncertainty surrounding NAFTA negotiations was resolved.
“If you want to sell cars out of the back door of the factory to Canadian consumers, you are going to have to compete with a TPP- sourced car that does not have to meet any of the higher NAFTA requirements ... You are conceding your home market,” he said.
Unifor president Jerry Dias, whose union represents more than 23,000 Canadian auto workers, said Canada moving ahead with TPP “completely undermines the entire negotiating strategy in Montreal.”
“In one fell swoop, they cut off the legs of the NAFTA negotiating committee,” Dias said in an interview, adding that the biggest winner of the TPP deal was U. S. President Donald Trump.
“Canada was in such a rush to show Trump that we can trade with others that we completely undermined ourselves ... This shows that we have no strategic vision. It makes absolutely no sense.”
Eric Miller, president of Washington- based Rideau Potomac Strategy Group and an adviser on the 2009 auto bailout, said the TPP deal does not undermine Canada’s position in the NAFTA negotiations and that it shows the U. S. that Canada has other options.
“In the multi- level chess that is international trade, it actually helps Canada position by sending a signal that Canada has other options, it is not putting all of its eggs in the NAFTA basket and that it is looking at other partners out there and will ensure it has a significant amount of trade diversification.”
Miller also pointed to Canadian auto parts companies like Magna International Inc. and Linamar Corp., whose CEOs have previously come out in favour of TPP, that could benefit from TPP because of their extensive global footprint.