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TPP talks should wait until after NAFTA, auto groups warn

In this Wednesday, April 26, 2017, photo, Chevrolet Camaros are lined up in the lot of a Chevrolet dealership in Richmond, Va.

Steve Helber/AP Photo

Two major auto-industry groups in Canada are urging the federal government to hold off negotiating a massive pan-Pacific trade deal while the country is in the midst of trying to renegotiate the North American free-trade agreement with the United States and Mexico.

Some of the automotive sections of the Trans-Pacific Partnership deal will harm Canada's auto-parts makers and the Canadian units of the Detroit Three auto makers, groups representing those companies say.

Agreement on the TPP, which included Canada, the United States, Mexico, Japan, Chile and seven other countries, was reached in 2015, but the Americans withdrew last January in one of President Donald Trump's first acts after being sworn in.

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The remaining 11 countries are considering setting up a new round of negotiations, although part of the attraction of being in the deal for some of the countries was that it would have given them duty-free access to the U.S. market.

The possibility of resurrecting the TPP comes amid fears that NAFTA will fall apart as Mr. Trump reiterates his long-standing criticism that the deal has been bad for Americans.

"The No. 1 priority should be NAFTA," said Mark Nantais, president of the Canadian Vehicle Manufacturers' Association, which represents the Detroit Three auto makers in Canada. "We should be negotiating these [other] agreements as a NAFTA bloc because of the high integration of our industry."

The level of content in vehicles necessary for duty-free shipment was substantially lower under the TPP than in NAFTA and thus is "very negative for Canadian auto parts," said Flavio Volpe, president of the Automotive Parts Manufacturers' Association of Canada.

NAFTA, which is being renegotiated with talks in their fourth session near Washington this week, requires that vehicles contain 62.5 per cent North American content in order to qualify for duty-free shipment. U.S. negotiators are expected to demand that that number be raised to 85 per cent in a new NAFTA – a demand that could be formally made as soon as Friday.

For some components, the TPP requirement was as low as 30-per-cent content, Mr. Volpe said, and that includes content from some low-cost Asian countries.

"It not only means that you have to do less to qualify [for duty-free treatment], you can do it in Vietnam," he said.

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The Trudeau government is defending the fact it's actively considering new free-trade talks on a pan-Pacific deal even while renegotiating NAFTA.

Trade Minister François-Philippe Champagne's office says the government has the capacity to manage more than one big trade negotiation.

Foreign Affairs Minister Chrystia Freeland is overseeing NAFTA talks while Mr. Champagne handles other trade matters.

"We have a strong and deep bench of officials, respected and admired the world over," said Joseph Pickerill, spokesman for Mr. Champagne.

"The discussions now on whether and how to proceed … are being led by an entirely different team responsible for Asian trade engagement, so there isn't a draw down on resources."

Critics say, however, that NAFTA talks and TPP negotiations could conflict with each other, particularly on thorny matters such as the regional content rules for autos.

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No decision has been made yet to embark on new TPP talks, but Mr. Pickerill said it's important Canada be at the TPP table.

A TPP deal would likely mean greater access to the historically sheltered Japanese market.

"Now more than ever, diversification is important and our priority is to be ambitious and seize the opportunities while being mindful of the sequencing, timing and approach to any new markets in such a way as to maximize the opportunities for middle-class Canadians across the board," Mr. Pickerill said.

The Japan Automobile Manufacturers Association of Canada supports a new TPP agreement, president David Worts said.

"We need a trade agreement with Japan to create a level playing field for us with [South] Korea and with Europe," he said.

The Canada-South Korea and Canada-EU agreements eliminate the 6.1-per-cent duty Canada levies on vehicles imported into this country from outside NAFTA.

Without a TPP or a Canada-Japan bilateral trade agreement, Japan-based auto makers still face that tariff even though two of them operate assembly plants in Canada and have made capital investments of billions of dollars since the plants were opened in the 1980s.

With files from Adrian Morrow

As NAFTA is being renegotiated, the director of operations at a Canadian thermoplastics plant in Mexico considers what the trade deal could mean for the manufacturing business. Take a tour of the Exo-s factory in San Juan Del Rio. The Canadian Press
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