Auto industry could be Harper’s biggest ally in ambitious trade plan

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They were, for a prime minister, remarkably sharp words. In Seoul this week, Stephen Harper took direct aim at Ford Motor Co. of Canada Ltd., dressing the company down for what he called duplicity in its criticism of the newly concluded free-trade agreement with South Korea.

It's more than a little ironic, then, that car makers form the Prime Minister's best hope at furthering his trade ambitions with Japan, where a new round of free-trade talks will start in less than two weeks.

Ottawa has been sparring with the auto industry for months now. Ford has said Mr. Harper got a bad deal with South Korea. The prime minister effectively told Ford to shut its mouth, saying one industry – and one company – shouldn't be allowed to block trade for the rest of the Canadian economy, which will see 98 per cent of duties in South Korea eventually removed when the trade deal comes into force.

Mr. Harper's confrontation with Ford made clear that auto industry attacks have posed a serious problem for Ottawa as it sought to wrap up the South Korean deal, more than nine years in the making. But that very same industry could be Mr. Harper's biggest ally as he seeks a similar "economic partnership agreement" to knock back duties on trade with Japan.

The auto makers haven't spoken with one voice. While Ford loudly inveighed against the Korean agreement, Japanese companies more quietly offered their support. It wasn't a gesture of maple leaf solidarity so much as one of self-interest: Toyota and Honda desperately want Ottawa to sign a similar deal with Tokyo, to secure even footing with Hyundai and Kia. The South Korean deal will wipe away Canada's 6.1 per cent duty on South Korean-made cars; Japanese companies want the same.

They made that unmistakably clear in Canada this week. "We continue to encourage the Canadian government to turn its attention toward the swift completion of an economic partnership agreement with Japan," Jerry Chenkin, the chief executive of Honda Canada said in a statement Tuesday. Mr. Chenkin also chairs the Japan Automobile Manufacturers Association of Canada.

But Canada, which is already eager to conclude that deal with Japan, doesn't need much urging from Honda. What it needs is Honda to push Tokyo, which has been seen as dragging its feet. The South Korean deal has stoked hope that the Japanese car makers will do exactly that.

"I suspect the Japanese industry will have words with the Japanese people in [government] and say, 'Listen, hurry up. We can't be behind the Koreans," said Wilf Wakely, a Tokyo-based lawyer who is president of the Canadian Chamber of Commerce Japan. "So it's very good. It's a nice little carrot."

Negotiations on the Canada-Japan deal started in November of 2012; since then, four rounds have been concluded. A fifth is now scheduled for March 24 in Tokyo. (The South Korean deal took 14 rounds.)

Mr. Wakely is not an unbiased source, given his organization's strong support for a trade deal. But his hope is shared by senior Canadian government officials, who say pressure from car makers could well prove useful to Canada.

There is hope, too, that shifts underway in Japan could smooth the path for a trade deal. Historically, Tokyo has balked at free trade provisions for the agricultural sector, under pressure from powerful farm groups who have not been eager for greater competition.

(Japan Agriculture, the main lobby group, maintains a staff roster fully 240,000 strong and has curried tight ties with the ruling Liberal Democratic Party.)

But divisions are beginning to form in JA, as some in the aging industry – two-thirds of Japanese farmers are over 60 – speak out against a domestic system they say has led to inefficient farms, and poor agricultural practices. It is, they say, no longer working.

Any bid for change inside Japan's agricultural industry stands to shift how the country approaches international trade talks.

As in South Korea, worries from farmers and car makers form a central obstacle to getting a Japanese trade agreement done. But if those groups start pushing for change, it may work to the interest of Canadian negotiators eager for another deal.

"The boys are pushing very hard, working very diligently at it," Mr. Wakely said. "We're rooting them on."