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Canadian auto sector in 11th-hour push to stave off S. Korean trade deal

Ford Canada President Dianne Craig speaks at the announcement of a $700 million investment at the Oakville Assembly Plant on Thursday, September 19, 2013 in Oakville, Ont.


Auto makers are waging a last-ditch fight to kill an "imminent" Canada-South Korea free trade deal, warning that it would damage the Canadian auto industry and the wider economy.

Dianne Craig, Ford Motor Co. of Canada Ltd. president and chief executive, said Thursday that the 2007 Korea-United States trade agreement has been a "disaster" for auto makers and she urged the Conservative government not to make the same mistake.

"We understand that they need to look for what's in the best interests of Canada," Ms. Craig said in an interview.

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"But, frankly, autos are the greatest driver of GDP and we think we need to have a pretty strong voice in this conversation. This is not good for autos, which means it's not good for the economy, which means it's not good for Canadians."

Ms. Craig said federal officials told Ford and other auto makers in December that a deal with South Korea was "imminent."

Ford executives have expressed deep reservations in subsequent meetings – the most recent of which occurred earlier this week. She declined to say what's on the table, other than to say the deal is worse than what the United States got.

"We continue to have a dialogue, a very respectful and professional discussion," Ms. Craig said.

"They are very willing to listen to our point of view."

Fierce opposition from auto makers appears to have caused Ottawa to at least pause before going ahead with a deal. Federal officials will say only that the government hasn't yet taken a final position.

Speaking in Vancouver last week, Prime Minister Stephen Harper said he "hopes" the two sides will reach a deal shortly, but seemed to hedge a bit, acknowledging it might not happen at all, according to audio of an interview with cultural media organizations recorded by the 24 Hours newspaper.

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Ms. Craig said Ottawa would be better off working through the Trans-Pacific Partnership trade negotiations to push South Korea to open its markets to more imports, including cars, and combat currency manipulation. Canada and the United States are among the 12 TPP negotiating partners. South Korea is not, but has expressed interest in joining. Canada, like other members, would have a veto on its entry.

Vehicles made up more than 80 per cent of Canada $2.7-billion trade deficit with South Korea in 2012, according to a Ford data sheet. Canada imported 131,174 Korean-made vehicles in 2012. Canada exported fewer than 3,000 to South Korea.

Canada puts a 6.1 per cent duty on vehicles imported from outside NAFTA. Under the U.S.-South Korea deal, the U.S. tariff on cars have dropped to 2.5 per cent and will be eliminated entirely next year.

But Ms. Craig said persistent non-tariff barriers mean U.S. and European auto makers have been unable to make significant inroads in the Korean market in spite of free trade deals.

"To us, they are not a good fair trade partner and they have proven that in the last two agreements," she said. "That is our concern for Canada. All you have to do is look at the data and it speaks volumes."

Canadian agricultural exporters, including pork and beef producers, have a very different view. They have lost tens of millions of dollars in sales to U.S. rivals since 2010 because they now face much higher tariffs.

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Ms. Craig rejected the notion that free trade with Korea might be the price auto makers should pay for the billions of dollars the Ontario and federal governments poured into the industry in recent years, including a a $71.6-million federal loan last year to help Ford retool its Oakville, Ont., assembly plant.

"There are many components that go into manufacturing competitiveness in Canada," she said. "There is a lot the government has done to support our industry. But frankly this [Korea-Canada] agreement would set automotive manufacturing back in Canada."

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