WHAT THE TPP DEAL MEANS
Union says auto jobs put at risk
The Trans- Pacific Partnership trade deal could have major ramifications for Canada’s already struggling auto industry, resulting in cheaper vehicles for consumers, but a more competitive landscape for manufacturers.
Unifor, the union that represents Canadian workers at the Detroit Three, said the deal would put an estimated 20,000 auto jobs at risk by eliminating tariffs and significantly reducing content rules for vehicles and auto parts.
Under the TPP agreement, Canada will phase out its existing 6.1 per cent tariff on imported passenger vehicles over the next five years — a move expected to lower the cost of Japanese- made vehicles.
“Certainly it’s good news for consumers and to us that means it’s good news across the board,” said Michael Hatch, chief economist at the Canadian Automobile Dealers Association.
In exchange, Canadian manufacturers will get preferential access to TPP member countries representing 40 per cent of the world’s economic output, including key Asian markets like Japan, Malaysia and Vietnam.
The deal also stipulates imported vehicles must have at least 45 per cent of their content made in a TPP member country in order to enter Canada tariff- free. The threshold for auto parts is 40 to 45 per cent.
Under existing NAFTA rules, those numbers are 62.5 per cent for vehicles and 60 per cent for parts.
Unifor economist Jim Stanford said this could encourage Canadian parts makers to relocate their production to cheaper TPP member states or even non- TPP countries like China.
“There’s no possible way to paint this deal as benefiting the auto industry,” Stanford said in an interview.
“There’s no possible way to say that new exports to Japan and Malaysia and Vietnam will somehow offset both the inflow of imports from those places, and more importantly, the potential relocation of a big chunk of our supply chain.”
Prime Minister Stephen Harper said Monday he would make an announcement on new funding for the auto sector in the next few days.
“I believe that this sector has a bright future under this deal. It’s a good deal for the sector,” Harper said. “Being left out of this deal would have been devastating for the auto sector.”
Canadian auto parts manufacturers, which employ 81,000 people, will be almost evenly split between those that will benefit from the TPP and those that will struggle to adapt, said Flavio Volpe, president of the Automotive Parts Manufacturers Association.
“On one hand, prospects to supply vehicle assembly in foreign markets will open for large Canadian suppliers with multinational footprints and access to mobile capital,” Volpe said in a statement.
“On the other hand, small and medium- sized suppliers to Canada’s vehicle assembly supply chain will face new competitive pressure from large, multinational firms from TPP countries and further abroad.”
Major parts maker Linamar Corp. applauded the deal, calling it a “great chance for us to grow and compete on a global scale.”
Reaction was mixed from the vehicle assembly sector.
Canada is currently a manufacturing base for American and Japanese automakers, both of which have already been shifting production to lower- cost jurisdictions like Mexico.
The Canadian Vehicle Manufacturers’ Association, which represents the Canadian arms of Fiat Chrysler Automobiles NV, General Motors Co. and Ford Motor Co., said it was “concerned” to learn that the U. S. negotiated a much longer phase- out of its tariffs — 25 years for automobiles and 30 years for trucks, according to reports — compared to Canada’s five- year plan.
“Due to the highly integrated nature of the Canadian and U. S. auto sectors, the CMVA consistently recommended that Canada achieve the same terms for the Canadian auto sector as the U. S. achieved for its auto sector,” the organization said.
On the other hand, the Japan Automobile Manufacturers Association of Canada expressed disappointment auto tariffs wouldn’t be eliminated immediately and said it supports the new content rules.
“We support the provision of forward- looking, flexible rules of origin which reflect the realities of current global supply chains,” the organization said.
But Stanford, the Unifor economist, said the TPP deal reduces the incentive for Toyota Motor Corp. and Honda Motor Co. to continue making vehicles in Canada.
In April, Toyota announced it would move production of the popular Corolla sedan from Cambridge, Ont., to Mexico and has not yet announced what it will replace it with.
“This deal makes it less appealing for Toyota to replace it with anything,” Stanford said. “They’ve made it 6.1 per cent less appealing to invest in Canada.”
There’s no possible way to paint this deal as benefiting the auto industry.