Calls content rules 'outrageous' as Japanese vehicles allowed no tariff access faster than US.
October 6, 2015
by CANADIAN PRESS
TORONTO — The Canadian auto industry could shed as many as 20,000 jobs a result of the Trans-Pacific Partnership (TPP) trade deal, according to autoworkers’ union Unifor, as Canada’s tariff on imported vehicles is rapidly phased out and domestic content rules are loosened.
The trade deal will see Canada’s 6.1% tariff on imported vehicles phased out over a five-year period, giving Japanese automakers much quicker access to the Canadian auto market than the US one.
South of the border, tariffs on Japanese cars will remain in place for 25 years, while tariffs on Japanese trucks will be in place for 30 years, according to the Office of the United States Trade Representative.
“This is going to have a disastrous impact,” said Unifor’s national president Jerry Dias. “Why is that the Americans can protect their industry but Canada just can’t do it?”
Canadian auto industry consultant Dennis DesRosiers said it’s unclear whether the benefits of the trade deal to the Canadian auto sector – such as greater access to international markets for Canadian parts manufacturers – outweigh the downsides.
“I like free trade,” DesRosiers said. “I think free trade is good for nations and that we need to move to a freer, if not free trade, system. But you’ve got to do it gradually, because when you get into the woodwork, there’s an awful lot of potential negatives.”
Meanwhile, domestic content requirements – rules that dictate what percentage of a vehicle or auto part must be made within the TPP in order to be sold within the region tariff-free – will be slashed.
Under the North American Free Trade Agreement, or NAFTA, an auto part needed to contain 60 per cent North American content in order to remain duty-free. For a fully assembled vehicle, the minimum content requirement was 62.5%.
The new trade deal will allow for the tariff-free movement of vehicles that have as little as 45 per cent domestic content. For parts, the threshold will be even lower.
Dias called it “outrageous” that the government has inked a deal allowing for a car made up of mostly Chinese parts to be imported into Canada tariff-free.
“What they did is create a huge disincentive for everybody to invest here in Canada,” Dias said.
DesRosiers said the NAFTA rules forced many Asian automakers to set up power train, engine and transmission manufacturing plants in North America in order to satisfy the domestic content requirements.
The lower threshold negotiated in the TPP could lessen the need for those automakers to keep those operations in North America, DesRosiers said.
“So do we get less engine investments and power train investments from these Asian companies in the future? We don’t know because it comes down to competitiveness factors at the end of the day, but there’s less of a push, there’s less of a need,” DesRosiers said.
Prime Minister Stephen Harper promised during a news conference Monday that he would soon announce measures to help attract new auto investment in Canada and ensure the stability of Canadian car assembly plans.
Harper has already pledged to spend $4.3 billion over the next 15 years to protect Canadian farmers from the impact of the TPP.
However, Dias said the auto industry isn’t looking for cash to soften the blow of the trade deal.
“We need jobs in Canada,” he said. “We don’t need bailouts.”
The United Steelworkers union has also condemned the deal, saying it will kill manufacturing jobs, dairy farm jobs and harm Canadians dependent on pharmaceutical drugs.
“There have been over 400,000 good paying manufacturing jobs lost under Harper’s government. The safeguarding of Canadian jobs has been completely lost under Harper. His government has used every opportunity to dismantle the job-saving supply management systems in Canada. The dairy farmers have much to fear about Harper’s deal,” said Ken Neumann, national director for the United Steelworkers.
© 2015 The Canadian Press