Auto sector in the balance
Commenting on the newly negotiated U.S.-Mexico trade deal, The Standard made an understatement when it said it leaves us mired in ambiguity. This is exemplified by the automotive provisions of this trade agreement which is effectively a template for a North American agreement.
The agreement contains a 75 per cent content provision, replacing the 62.5 per cent North American content provision in NAFTA.
The especially glaring ambiguity is whether Canada can or will sign onto an agreement with an identical 75 per cent North American content provision. The source of the ambiguity lies outside this agreement. It lies within provisions of the TransPacific Partnership (TPP) which the Trudeau government has already declared support for. This is because the TPP contradicts the U.S.-Mexico deal insofar as it has a far lower 45 per cent domestic automotive content provision.
In view of this, there is an obvious question. Can the Canadian government agree to a 75 per cent content rule if it is a party to the TPP with its 45 per cent rule? Logic tells you it cannot.
This creates another question. If it isn’t possible to reconcile these provisions, which will the Canadian government sign on to?
These questions show the Trudeau government and Canadians who welcome the U.S.-Mexico agreement appear to have manoeuvered themselves into a problematic situation, where the government will have to either do an about face on the TPP, or adhere to it and reject a deal replacing NAFTA. The fate of what remains of the auto industry in Canada could be determined by that choice.