Auto parts suppliers are eagerly awaiting ratification of the new North American free-trade deal — a pact that could result in up to an additional $8 billion in annual Canadian parts orders, according to an Automotive Parts Manufacturers Association internal estimate.
But the industry is stuck in a waiting game on the deal, which awaits ratification from Canada and the United States, where an impeachment inquiry into President Donald Trump threatens to upstage the deal.
“We would be compliant on Day 1,” Rob Wildeboer, chairman of Martinrea International Inc., said, adding that his company meets the higher-content rules in the free-trade deal negotiated last fall by Canada, the United States and Mexico.
Martinrea, the third-largest Canadian supplier, sources much of its materials from within North America.
APMA President Flavio Volpe said the United States-Mexico-Canada Agreement (USMCA) could be a major boon for his members, adding anywhere from $6 billion $8 billion a year in new business, thanks to increased local-content requirements, according to an internal APMA estimate. That’s because USMCA would require 75 per cent of a vehicle’s components to be sourced from within the three countries to cross borders without tariffs, up from 62.5 per cent in the current North American Free Trade Agreement (NAFTA).
“The content levels are going to drive the business for us,” Volpe said.
The deal, reached in 2018, requires ratification by all three countries to take effect. Mexico ratified earlier this year. Canada has yet to, although the United States appears to be the biggest roadblock as Congress is split between the two major parties, making passage uncertain.
With the Liberals having negotiated the new deal and now returning to power — albeit in a minority government — there is a good chance Canada will vote to ratify the pact, industry insiders said shortly after the Oct. 21 election.
UNCERTAINTY IN THE U.S.
However, the American political calculus became even more questionable in September, when Speaker of the House Nancy Pelosi said the House of Representatives would open a formal impeachment inquiry into Trump. The inquiry, which centres on evidence Trump pressured Ukraine’s president to investigate the son of political rival Joe Biden, has engulfed American politics and threatens to delay or derail USMCA ratification, which was already uncertain given many Democrats’ concerns over labour provisions in the deal.
Trump seemed to acknowledge as much, telling reporters in September that he did not think Pelosi would “have time” to bring up the USMCA for a vote. U.S. Trade Representative Robert Lighthizer, meanwhile, appeared more optimistic, saying he was confident it would pass because “it would be a catastrophe” for the American economy if it did not.