Trump team sig­nals au­to­mo­bile bor­der tax for Canada

The Globe and Mail (Prairie Edition) - - FRONT PAGE - GREG KEENAN TORONTO STEVEN CHASE OT­TAWA

The in­com­ing Trump ad­min­is­tra­tion has ut­tered the word Cana­dian auto in­dus­try ex­ec­u­tives have been dread­ing, say­ing a tax on ve­hi­cles im­ported into the United States could be ap­plied to Canada.

A bor­der tax will ap­ply “when a com­pany that’s in the U.S. moves to a place, whether it’s Canada or Mex­ico or any other coun­try seek­ing to put U.S. work­ers at a dis­ad­van­tage,” Sean Spicer, a spokesman for pres­i­dent-elect Don­ald Trump, said dur­ing a con­fer­ence call with re­porters on Fri­day, Bloomberg News re­ported.

Un­til Fri­day, the name Canada had not arisen specif­i­cally in com­ments by the ad­min­is­tra­tion on auto ex­ports or in the tweets Mr. Trump has sent out threat­en­ing to im­pose a “big bor­der tax” on Gen­eral Mo­tors Co. and Toy­ota Mo­tor Corp. for im­port­ing ve­hi­cles to the United States from Mex­ico.

Those Twit­ter com­ments and Mr. Trump’s prom­ise to tear up NAFTA have cre­ated up­heaval among auto com­pa­nies and parts sup­pli­ers – and have al­lowed Mr. Trump to steal the spot­light this week from the shiny new metal at the North Amer­i­can In­ter­na­tional Auto Show, the an­nual gala in Detroit where auto mak­ers show off their lat­est of­fer­ings.

Mr. Trump’s tar­get so far has been Mex­ico; he did not sin­gle out Canada or any auto mak­ers op­er­at­ing in this coun­try in his tweets. But Cana­dian in­dus­try of­fi­cials did not ex­pect to stay off the radar. “I was just won­der­ing when this would come,” said Ray Tan­guay, an au­to­mo­tive ad­viser to the On­tario and fed­eral gov­ern­ments, when in­formed of Mr. Spicer’s com­ments Fri­day.

For­eign Af­fairs Min­is­ter Chrys­tia Free­land’s of­fice said it is in talks with Trump staff on the mat­ter and noted there is sig­nif­i­cant op­po­si­tion to a bor­der tax within the United States.

“We have a con­struc­tive work­ing re­la­tion­ship with the Trump tran­si­tion team, and dis­cus­sions are on­go­ing,” said Joseph Pick­er­ill, Ms. Free­land’s di­rec­tor of com­mu­ni­ca­tions. “This par­tic­u­lar pro­posal is some­thing that has been floated for quite some time and is op­posed by at least as many Amer­i­can law­mak­ers as sup­port it, but at this stage, we are go­ing to con­tinue to work with the in­com­ing ad­min­is­tra­tion on the in­ter­con­nect­ed­ness and to the mu­tual ben­e­fit of our two economies.”

The five auto mak­ers that as­sem­ble ve­hi­cles in Canada ex­ported about $60-bil­lion worth of cars, crossovers and mini­vans to the United States last year.

In the past four months, four of them have an­nounced in­vest­ments to­talling more than $2-bil­lion at their Cana­dian plants, in­clud­ing a $400-mil­lion in­vest­ment an­nounced Mon­day by Honda Mo­tor Co. Ltd., at its assem­bly plant in Al­lis­ton, Ont.

The sub­ject of how the auto in­dus­try in Canada should re­spond to Mr. Trump’s threats and the po­ten­tial dis­man­tling of the North Amer­i­can free-trade agree­ment was un­der dis­cus­sion at a meet­ing in Detroit this week of the Cana­dian Au­to­mo­tive Part­ner­ship Coun­cil, a joint in­dus­try-union group set up to ad­vise the gov­ern­ment.

Mr. Tan­guay up­dated the group, which in­cludes the CEOs of all five auto mak­ers, on a re­port he is writ­ing that will of­fer rec­om­men­da­tions to gov­ern­ments on how Canada can at­tract new au­to­mo­tive in­vest­ment.

To head off bor­der taxes on Cana­dian ex­ports, in­dus­try lead­ers need to ex­plain how closely in­te­grated the auto in­dus­try is in Canada, the United States and Mex­ico – and how U.S. in­ter­ests would be hurt if such taxes were im­posed, Mr. Tan­guay said on Fri­day.

While Canada has a trade sur­plus with the United States on fin­ished ve­hi­cles, it runs a deficit of about $11-bil­lion on parts be­cause of the high value of parts that auto mak­ers in Canada im­port from U.S. sup­pli­ers. Cana­dian in­dus­try of­fi­cials need to lobby the gov­er­nors of such states as Michi­gan, Ohio and In­di­ana – the sources of many of those parts – so they can lobby the new ad­min­is­tra­tion, Mr. Tan­guay said.

“Those guys, I think, are go­ing to be a voice of rea­son,” said Rob Wilde­boer, ex­ec­u­tive chair­man of Toronto-based Mart­in­rea In­ter­na­tional Inc., Canada’s third-largest auto parts maker.

Mex­ico also im­ports bil­lions of dol­lars’ worth of U.S. parts for cars as­sem­bled there, Mr. Wilde­boer said.

While Mr. Trump and ad­min­is­tra­tion of­fi­cials have sin­gled out auto mak­ers that are shift­ing pro­duc­tion to Mex­ico or else­where, none of the com­pa­nies is shut­ting a U.S. plant in or­der to open one else­where.

PETER POWER/THE GLOBE AND MAIL

Ford Edges are as­sem­bled in Oakville, Ont., in this 2015 photo. The five com­pa­nies build­ing cars in Canada im­port lots of parts from states that may have rea­son to op­pose Don­ald Trump’s tax pro­posal.

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