Canada’s Liberal government insists the new trans-Pacific free trade deal — with its lower rules of origin values — is good for the country’s auto sector, but automakers, parts suppliers and unions are split on that assessment.
“We have provided the auto sector meaningful market access,” International Trade Minister Francois-Philippe Champagne said of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, struck Tuesday.
But just about every auto association, from suppliers to automakers to unions, in Canada disagrees, mostly because they consider the rules of origin weak, especially when compared to those in the North American Free Trade Agreement.
The CPTPP mandates 45 per cent of a fully assembled vehicle originate within the 11 countries in the agreement in order to be considered duty-free. The requirement for parts is 35 per cent.
That’s markedly less than what’s currently required under the North American Free Trade Agreement, in which the percentages are 62.5 and 50 per cent, respectively.
Flavio Volpe, head of the Automotive Parts Manufacturers’ Association, is worried cheaper parts made in Asia will flood the Canadian auto sector.
“It makes me uncompetitive in my own home market,” Volpe said of the CPTTP.
He said the U.S. is currently pushing for a new NAFTA that increases domestic content requirements, and keeps Chinese parts out of North America — but the revamped TPP deal moves Canada and Mexico the opposite way, reducing local requirements and letting more product from non-TPP countries like China into the supply chain.
“These are real and substantive gains over anything remotely achieved in the last deal. Of course, I appreciate there are still very real concerns but we are committed to ensuring what we have secured will be real, actionable and workable for the auto sector,” Champagne’s spokesman Joseph Pickerill insisted in an email to Automotive News Canada. “Auto parts will see further gains, I would encourage you to speak to Linnemar or Martinrea for more information on that front.”
LINAMAR NOT AFRAID
He’s right. Linamar CEO Linda Hasenfratz, a strong supporter of global trade, supports the deal.
“Perhaps those opposing TPP are afraid of global competition, I am not. I don't agree that it will be a negative for the auto sector,” Hasenfratz said in a long email to Automotive News Canada. “Folks are worried about vehicle imports hurting local production, but the only big player in the group in auto production is Japan and they are already invested in Canada and the US for production. They aren't going to dial back on those investments and suddenly start bringing cars from Japan; that just wouldn't make sense.
“On the parts side folks are worried about competition from Asia, but I say we have to be competitive on a global basis and will do so based on efficiency, innovation and great products.
Hasenfrazt said “bigger markets to sell to and buy from are better.”
“It simply creates more opportunities for more growth,” she said. “TPP is the biggest trading bloc in the world, and it is right we will be in it, it will create huge opportunity for Canadian companies to become more global and grow in a whole variety of sectors.”
Linamar has more than auto interests, including scissor lift and agriculture divisions.
Martinrea didn't immediately respond to a request for comment.
The Canadian Vehicle Manufacturers’ Association (CVMA) says it “remains concerned that the tentative CPTPP agreement … will disadvantage auto companies that have invested in job sustaining manufacturing in Canada while providing competitive advantage to other TPP countries.”
The CVMA says access for automotive exports from its factories to the CPTPP markets has not been materially improved by the agreement.
“Canada’s trade agenda needs to ensure our large manufacturers get fair reciprocal access to the markets of our trading partners before we further open up Canada’s market to companies that do not manufacture in Canada or employ significant numbers in Canada,” Mark Nantais, CVMA president, said in a statement. “Otherwise this is a harmful one-way street for automakers who invest billions in Canada. We urge the government to address these concerns prior to signing onto the agreement, or exclude auto until such time as the auto sectors concerns can be addressed.”
Unifor President Jerry Dias said his union, which represents tens of thousands of autoworkers in Canada, estimates the new CPTPP will lead cost the country 24,000 auto jobs.
“Let's be clear, the TPP is the worst trade deal ever!” Dias tweeted after the deal was announced.
Jonathon Azzopardi, head of the Canadian Association of Mold Makers, told the Windsor Star he was surprised by the deal but that it’s too early to tell what it might mean to the auto industry.
“But I can tell you right now that those other countries that are in the agreement are not interested in buying our products,” he told the newspaper. “I can say that with a fairly high degree of certainty.”
But Canada’s Japanese-brand auto manufacturers praised the pact.
"The CPTPP will open up new opportunities for diversifying and expanding trade. Importantly, this agreement will also restore a level playing field on vehicle tariffs that are needed as a result of Canada's trade agreements reached with South Korea and Europe,” Japan Automobile Manufacturers Association of Canada Executive Director David Worts said in a statement. “Japanese automakers first came to Canada in 1965, and since that time we have built a significant and growing presence here.
“Today we manufacture almost half of all light vehicles produced in this country and export over four times as many vehicles as we import from Japan."