The governing Conservatives have lined up enough support for a massive Pacific Rim trade agreement from big auto-parts makers to expose a split in the industry ahead of talks this week that may yield a 12-country deal.
Talks between trade ministers resume shortly in Atlanta and one of the most contentious subjects is provisions agreed to by Japan and the United States that some warn could sideswipe some of the 80,000 auto-parts manufacturing jobs in Canada. Conservative Leader Stephen Harper has acknowledged some in the auto sector may not like the terms that would be reached in a Trans-Pacific Partnership (TPP) agreement.
The Conservatives, however, are working to identify and galvanize public expressions of support for the TPP – trying to counter what they consider excessively negative statements about the impact of the deal.
Two major Canadian auto parts makers are emerging to speak up on behalf of a TPP deal, saying this country has no choice but to sign a pact that includes Canada's NAFTA partners.
The chief executive of Linamar Corp. and the executive chairman of Martinrea International Inc. say the TPP could help them win more contracts abroad because it will open up foreign markets. They're the second and third biggest auto-parts makers in Canada by revenue.
In the case of Martinrea, the Conservative government went so far as to solicit comments from executive chairman Rob Wildeboer and distribute them to the media.
Canada's International Trade Minister Ed Fast enters the Atlanta round without any evidence that Ottawa has managed to substantially improve proposed TPP rules on the auto trade that prompted Canadians to walk away from a deal in Maui in July.
Mr. Fast's office said Canada will not agree to a TPP deal unless the terms are made more favourable for Canada. "Discussions have been positive, but we need to see movement to address Canada's key interests," spokesman Rick Roth said.
A source familiar with negotiations says Japan has resisted major concessions on measures that would reduce the minimum domestic content for autos and auto parts. For instance, the source said, Japan has wanted the threshold for parts to be 30 per cent and only offered to raise this to 32.5 per cent domestic content during talks with Canada and Mexico.
For the last two months Canada's Auto Parts Manufacturers' Association (APMA) and its Mexican counterparts have been raising concerns that unduly low domestic content rules would lead to an influx of foreign car parts, produced by cheaper labour, that would displace auto-parts jobs in both countries.
They have warned if these provisions come into force, "our companies and workers would be placed in a competitively disadvantaged [position] in the North American market. [It] would seriously compromise our operations in the North American region, and we may be forced to significantly reduce our operations."
But Linamar's CEO Linda Hasenfratz says Canada can't walk away.
"It's critical that we be part of TPP," Ms. Hasenfratz said in an interview Monday at the APMA's annual outlook conference, where she was a keynote speaker.
"Two of our major trading partners are going to be part of it, so I don't really see how there's an option for us not to be in it."
Ms. Hasenfratz said the deal will open up global markets to parts suppliers and their auto-maker customers. If auto makers in Canada and elsewhere in North America increase their exports to other countries – she pointed to the removal of non-tariff barriers to foreign autos that exist in Japan – that could lead to increased sales for Canadian parts makers.
Mr. Wildeboer said if Martinrea is able to win work abroad, it's good for Canada because it helps create jobs at its head office in Toronto and the company strives to use Canadian tool makers to design and develop the tooling for the parts even if those parts are built elsewhere.
For the small and medium-sized Canadian-based firms that represent about half the jobs in Canada's auto-parts sector, lower minimum required domestic contents for auto parts could leave them unable to compete with cheaper Asian parts.
Chief executives of smaller parts makers who are worried about the TPP deal declined repeated requests from The Globe and Mail to speak publicly for fear of alarming employees and angering the federal government.