A Ford Edge sits ready for the ceremonial drive off the line during Ford's official kick-off of the new 2015 Ford Edge production at the assembly plant in Oakville, Ontario on Thursday, February 26, 2015. Ford Motor Co. of Canada Ltd. chief executive officer Dianne Craig says key automotive provisions of the Trans-Pacific Partnership trade agreement are bad for Canada, so the new Liberal government needs to take a careful look at the deal before approving it.Peter Power/The Globe and Mail
Key automotive provisions of the Trans-Pacific trade agreement are bad for Canada, so the new Liberal government needs to take a careful look at the deal before approving it, says Ford Motor Co. of Canada Ltd. chief executive officer Dianne Craig.
"We see [the Trans-Pacific Partnership] as a setback," Ms. Craig said in an e-mail on Sunday. "At a minimum, the Canadian negotiators should have at least ensured Canada's auto sector mirrored the U.S. standards."
She is the only CEO of an auto maker operating in Canada to speak out against the deal, which removes tariffs on Japanese-built automobiles entering this country, allows auto makers in all 12 TPP countries to import vehicles with less regional content in them than the current rules of the North American free-trade agreement and removes tariff barriers on Canadian-built vehicles shipped to Malaysia and Vietnam.
Ms. Craig will take her case to Ottawa next month after the Liberal cabinet is appointed.
One of the key issues she raised is the period during which Canada's 6.1-per-cent duty on vehicles imported from Japan will be eliminated under the TPP. That will happen over a five-year period once the trade deal comes into force, compared with a 25-year phaseout for the 2.5-per-cent U.S. tariff on passenger cars and 30 years for the 25-per-cent U.S. tariff on Japan-built trucks.
The impact the tariff elimination will have on sales depends on whether Japan-based companies reduce prices or take the tariff reduction as a contribution to profits, "but the industry is so competitive, so it still matters," Ms. Craig said.
The TPP trade deal has won public support from Canada's second- and third-largest auto parts companies, Linamar Corp. and Martinrea International Inc.
Executives of several of Canada's smaller parts makers have spoken out privately against the deal, saying that as suppliers mainly to auto makers in North America, they can't compete with companies in such low-wage countries as Vietnam and Malaysia. Among their fears is that Japan-based companies will increase their purchase of components made in those countries, assemble them into vehicles made in Japan, and then have the ability to ship those vehicles duty-fee to Canada.
Ford previously supported the Canada-EU free-trade deal, but opposed the Canada-South Korea deal, which will eliminate the 6.1-per-cent tariff on vehicles imported from South Korea. That will benefit Hyundai Canada. and Kia Canada.
Those Japan-based companies that have been asked whether they will reduce prices as a result of the elimination of the tariff on vehicles they make in their home country have said it's too early to tell if they will do so.
Mazda Canada Inc. and Subaru Canada Inc. stand to benefit most from tariff reduction. Each of those auto makers imported more than 70 per cent of the vehicles they sold in Canada last year from Japan.
Ford and the Canadian units of the Fiat Chrysler Automotives NV and General Motors Co. had also urged the federal government to ensure there was a clause in the TPP that prevented governments from manipulating currencies. Such a clause is not in the deal.
The previous Conservative government, which agreed to the TPP deal, promised during the election campaign to offer $1-billion over 10 years to attract new automotive investment and change the terms of financial support it offered to the industry, in part as an acknowledgment that sections of the industry would be harmed by the deal.
The federal government treated financial support to auto makers as loans and considered those loans taxable income, a measure that infuriated auto makers, notably Toyota Motor Manufacturing Canada Inc.
Ms. Craig said she will urge the new government to offer grants instead of loans and no longer make such financial support taxable.
The Canadian Automotive Partnership Council, a joint industry-union group that advises the federal, Ontario and Quebec governments on automotive policy, made such a recommendation last year.
The 10-year, $1-billion campaign promise made by the Tories represents a "drop in the bucket" when it comes to new automotive investment and the amounts of money that Mexico and southern U.S. states are offering, Ms. Craig noted.
She said she will urge Ottawa to increase that amount and adopt a national automotive strategy that will help encourage auto makers to increase investment in Canada.