The North American auto industry is increasing the pressure on Canada, the U.S. and Mexico to extract a better deal for NAFTA car makers from a proposed Pacific Rim trade pact as negotiators sit down to meetings with Japan this week concerning the issue.
For the first time, auto parts makers in all three countries are speaking publicly with a united voice on the matter – with industry leaders urging Ottawa, Washington and Mexico City to resist Japan's efforts to water down domestic content rules for car manufacturing in North America.
Negotiations to create the Trans-Pacific Partnership – a massive free-trade zone covering 12 countries from Chile to Japan – hit a wall in Hawaii in late July over a deal Washington quietly struck with Tokyo that could hit the North American auto sector hard.
Ottawa and Mexico City, which had been left out of the loop, balked at an arrangement the United States had assured Japan it could sell to its NAFTA partners. Under the Japan-U.S. agreement, cars could be sold duty free in TPP member countries with only 45 per cent domestic content and auto parts would be allowed to enter duty free as long as they had just 30 per cent domestic content.
Now, six weeks later, as TPP countries launch a push to wrap up a deal, American, Canadian and Mexican auto parts makers have penned a Sept. 8 letter to Canadian Trade Minister Ed Fast, U.S. Trade Representative Michael Froman and Mexico's Minister of Economy Ildefonso Guajardo Villarreal, urging their governments to fight for a domestic content rule of 50 per cent, both for vehicles themselves and for auto parts.
At stake are three million jobs in the North American auto-parts manufacturing sector, they warn. Auto parts makers fear their sector would suffer serious damage if Ottawa and Mexico City fail to obtain a better deal in a TPP accord.
"An inadequate content rule for parts will dramatically impact our domestic parts manufacturing industry and the jobs that come with it," wrote Flavio Volpe, president of Canada's Automotive Parts Manufacturers' Association; Steve Handschuh, president of the U.S. Motor & Equipment Manufacturers Association; and Oscar Albin, executive president of Mexico's Industria Nacional de Autopartes, in the letter.
"[This] industry today accounts for 20 per cent of all trade across the three NAFTA markets."
Under North American free-trade agreement rules today, more than 60 per cent of a light-duty vehicle and a similar portion of parts must be made in Canada, Mexico or the United States for them to enter these markets free of tariff.
On Wednesday, Takeo Mori, Japan's negotiator for auto trade, will meet with Wendy Cutler, deputy U.S. trade representative, in Washington to resume talks on vehicles and auto parts. Mr. Mori will talk with Canada and Mexico on Thursday and Friday. Canada's chief TPP negotiator Kirsten Hillman is heading to Washington to join the discussion.
The erosion of manufacturing jobs in Canada is a major federal election campaign issue. NDP Leader Thomas Mulcair will visit an auto-parts company in Niagara Falls, Ont., Wednesday, to unveil his party's auto policy.
In a controversial move, the Conservative government has chosen to continue Trans-Pacific negotiations during the election campaign when Ottawa is supposed to be run in "caretaker" mode. The Privy Council Office, the bureaucratic support arm of the Prime Minister's Office, released guidelines at the campaign outset that justified the move, saying "the failure to participate in ongoing negotiations during the caretaker period could negatively impact Canada's interests."
The Department of Foreign Affairs, however, is assuring Canadians it won't negotiate away industrial benefits. "As with any issue under negotiation, Canada's objective is to secure an outcome that enables Canadian producers to remain competitive," Foreign Affairs spokeswoman Diana Khaddaj said Tuesday.