Auto industry divided over TPP; WEEDC to voice opposition

Monday, November 9, 2015

The Windsor Star/Grace Macaluso

As the new Liberal government reviews the Trans-Pacific Partnership, opposing sides in the debate over the far-reaching free-trade deal are ratcheting up their rhetoric.

Canada’s auto industry is divided over the agreement that includes 12 Pacific Rim countries representing 40 per cent of the global economy. On Monday, Rakesh Naidu, interim CEO of the WindsorEssex Economic Development Corporation, added his voice to the growing chorus against the Trans-Pacific Partnership and its impact on the auto sector.

Q What are Naidu’s concerns about the TPP.

A Naidu’s worries echo those of the Automotive Parts Manufacturers’ Association, which argues that the lower content rules under TPP will hurt small- and medium-sized parts makers. “For the auto industry we have in our region — a lot of small- and medium-sized tool, mould, die and stamping companies — TPP will be quite challenging,” Naidu said.

Q What are the content rules for auto parts under TPP?

A Under TPP, the required level of content for auto parts and vehicles falls anywhere from 35 per cent to 45 per cent, compared to 62.5 per cent under the North American Free Trade Agreement. Higher-end parts, such as transmissions and engines, enjoy a higher rate of protection, with at least 45 per cent content, but with other parts, it’s 40 per cent or 35 per cent. The lowest level includes engine parts and metal stamped parts, such as bodies-in-white.

Naidu said the Windsor region has a large cluster of companies specializing in producing components that would fall into the 35 per cent category. “It gives more incentive to other companies to get into their product line because of the 35 per cent rule. It means our companies will face a higher level of competition.”

Q What will the economic development corporation do to advance its case against TPP.

A Naidu said he will join forces with other organizations, including the APMA, to develop a “unified voice.” He said he plans to contact both federal Economic Development Minister Navdeep Bains and International Trade Minister Chrystia Freeland “within the next few days.”

Q What are the key differences between the Japanese carmakers and the Detroit Three over TPP?

A Under TPP, the 6.1 per cent import tariff on Japanese vehicles would be eliminated over five years. The Japanese Automobile Manufacturers Association of Canada, which represents Toyota and Honda, says it supports the deal although it would have preferred that import duties be eliminated upon the deal’s implementation.

That would ensure parity with its South Korean and European competitors whose vehicles will enjoy tariff-free status under terms of separate free-trade deals with Canada, said JAMA spokesman David Worts. For example, under the Canada-South Korea trade deal, vehicles arriving from Korea will be duty-free by Jan. 1, 2017. “We want to make sure we all have a level playing field,” Worts said.

Meanwhile, the Canadian Vehicle Manufacturers’ Association, which represents General Motors, Ford and Fiat Chrysler, wants import tariffs removed over 25 years, which would match the phasing-out period secured by the United States. The CVMA also complains that TPP lacks enforceable language with respect to countries devaluing currencies to gain cost advantages over Canada.

Q Why does JAMA support the shorter, five-year phase-out period for import duties?

A Worts said the shorter period “makes sense because the auto tariffs between the U.S. and Canada are not aligned.” Canada’s 6.1 per cent tariff is 2.5 times higher than the U.S. vehicle tariff, he noted. “So there’s no reason for Canada’s tariff phase-out to be aligned with the U.S.”

Q What is the new Liberal government’s stand on TPP?

A International Trade Minister Freeland has said that the Liberals believe in liberalized trade, but noted that deal was negotiated by the Conservative government.

After the text was released last week, Freeland said she wanted Canadians to send her comments about it.

“I’m going to take that seriously — we’re going to review it,” she said.