Canada gets expanded quota for autos in EU talks

Critics suggest Canada is still giving up too much in its potential EU free-trade deal.

OTTAWA – Canada has opened the door to increase car sales in Europe by eight-fold to 100,000 units under a proposed new trade deal, The Canadian Press has learned.

That potential win for the Canadian auto sector is one of several new elements highlighted in a leaked document – a seven-page German analysis, dated June 18 –that reveals several never-before-reported elements of the Harper government’s continuing negotiations with the European Union.

If signed, these new elements would require Canada to eliminate its foreign ownership rules on uranium mining and lock in the most recent liberalized ownership rules in the lucrative telecom sector.

Although it’s unclear whether the automotive quota represents a real or empty victory for the hard-pressed industry, the document does contain Germany’s reaction to the state of the talks, including a blistering comment on the sectoral deal.

“So Canada has achieved 100% of its negotiating position … Conclusion: The car package is unacceptable in its present form,” the German analysis states.

But in an earlier document from the European commission, also obtained by The Canadian Press, the auto deal is categorized as at most a pyrrhic victory for Ottawa that would make it easier for the Harper government to sell a free-trade agreement to Canadians.

“Given the significant EU trade surplus in the export of passenger cars … this request is of a political rather than economic importance so as to be able to present the car deal as balanced,” the commission states.

The note points out that last year Canada exported a mere 13,000 cars to the EU, while shipments the other way totalled 114,000.

The document also says that Canada is willing to get rid of non-resident ownership restrictions on the uranium industry. Current regulations cap foreign ownership of uranium mines at 49%.

“Canada will revise the conditions allowing for majority control over a company for the stage of first production for uranium mining and allow EU companies to obtain approval more easily,” the document says.

Saskatchewan is one of the world’s leading uranium producing regions in the world. Premier Brad Wall and industry players have been pushing Ottawa to relax the foreign ownership restrictions in the sector.

The document also sheds new light on how sub-national government procurement would be liberalized to allow European firms access to Ontario and Quebec’s public hydro sectors, and freedom to bid on provincial and municipal tendering, as well as on universities, schools and hospital contracts.

It is open to question whether the auto deal that Germany takes such exception to would have a material impact on two-way trade in the sector, which has in the past been decisively one-way from Europe to Canada.

In the comments, the German memo explains that for the first 100,000 unit of exports, the Canadian content of those vehicles needed to qualify as Canadian will come down from the current EU policy of 60% to 30%.

That means Ontario-assembled cars, which carry significant American content, will have a lower hurdle to clear.

Given Canada’s current small share, however, analysis suggests the relaxed rules may be more beneficial to the US, since American manufacturers have “the possibility to export to the EU via Canada” duty-free.

The document also notes that the 100,000 quota would likely be rolled into a North American package if the EU and the US get together on a free-trade deal of their own, but would remain “permanent” if that does not happen. Above the quota, stricter rules of origin will be applied.

Canadian Auto Workers president Ken Lewenza said the quota is useless unless there are penalties to Europe for not meeting it, such as a delay in the elimination of the 6.1% duty Canada charges on European car exports.

Ideally, he said, the deal should require European automakers to open plants in Canada, as some Japanese automakers have done.

But trade lawyer Lawrence Herman of Cassels Brock says critics shouldn’t be too quick to dismiss the potential benefits, even if they are unlikely to be immediate payoffs.

“I would say it’s a good deal for the auto sector because it is giving them expanded access to Europe, but whether we can take advantage of that is another matter.”

He added that European negotiators are likely banking on low interest among their consumers for North American brands.

The possibility of higher auto exports would at least provide some cover for concessions Ottawa has apparently made over foreign investment, drug patents, government procurement and in the dairy sector, each of which will have their critics.

“There is a huge imbalance between what Canada has offered and what we are getting,” said Stuart Trew, a trade specialist for the Council of Canadians. “On procurement, Canada has given up everything the Europeans were demanding and for what, I have to ask?”

The German document makes clear that Canada has made several concessions in the talks, although it limits its comments to just a few.

“In the overall package, however, the positive impact of the including of the Canadian provinces and other subcentral contracting authorities, and the improvement in the field of energy, is likely to outweigh the negative impact of these exceptions,” the document says.

©The Canadian Press