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Auto executives, Ontario officials to set strategy for NAFTA talks

The Magna plant in Puebla, Mexico on Wednesday, January 22, 2015.

Brett Gundlock/Boreal Collective/The Globe and Mail

Ontario Premier Kathleen Wynne has convened a meeting of senior auto sector executives to make sure the government and the industry are on the same page amid the looming renegotiation of the North American free-trade agreement.

The meeting is scheduled for Friday with executives from the Canadian units of the five auto makers that manufacture vehicles in the province, chief executive officers from several of the largest Canadian parts makers, Unifor president Jerry Dias and representatives of trade organizations in the auto sector.

It's part of the government's plan to try to influence the NAFTA talks. The talks will be crucial to the future of vehicle assembly, which employs 43,000 people in the province. Ontario is also home to most of the 72,000 jobs in the auto parts sector.

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The meeting "is an opportunity to talk with auto manufacturers and auto parts suppliers about NAFTA and the government's U.S. engagement strategy," said a source familiar with the agenda for the meeting.

A key piece of Ontario's strategy is to make sure U.S. governors and other politicians in Great Lakes states are aware of how critical the cross-border trade in autos is, the source said.

"The auto sector wants certainty that all levels of government are working together to make sure those bilateral relationships are as strong as possible," the source said.

Ms. Wynne met last week with Governor Rick Snyder of Michigan, which is Ontario's largest automotive trading partner.

Shipments between the two jurisdictions topped $40-billion (U.S.) last year, according to data compiled by the Center for Automotive Research, an industry think-tank in Ann Arbor, Mich.

She has also contacted 27 governors of states whose largest or second-largest customer is Ontario.

The U.S. auto sector exports about $60-billion (Canadian) worth of products to the province annually.

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Parts industry executives met with Prime Minister Justin Trudeau last month and said they were pleased with how the federal government had so far handled the Trump administration's threats to tear up the trade deal.

But the pressure is expected to ratchet up soon because the U.S. government is on the verge of sending letters to Canada and Mexico containing official notification that it intends to renegotiate the deal.

Tearing up the deal would create havoc in the auto sector, which has spent almost a quarter-century restructuring itself along north-south lines by investing in Mexico, making supply chains as efficient as possible and harmonizing regulations.

But there are other outcomes that have the Canadian industry worried.

One theme the auto executives are likely to emphasize is that the agreement should continue as a trilateral deal and not separate bilateral agreements, said one senior auto industry source.

"It's more open for the U.S. to play one against the other if we get into bilateral," the source said. "There's a lot more at stake in the auto sector trilaterally. [There's] a lot of Canadian parts investment in Mexico in particular."

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Magna International Inc., Canada's largest auto-parts maker, has about 30 plants in Mexico that generate sales of about $4.5-billion annually.

Another key point that's expected to be up for negotiation is rules of origin. Vehicles can now be shipped tariff-free among the three countries if they have 62.5-per-cent North American content.

Canadian industry officials expect the Americans to insist on a minimum U.S. content as a way of shifting work back to the United States or creating more U.S. jobs, which was one of President Donald Trump's election promises.

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