The Trans-Pacific Partnership, if ratified, would put the Canadian automotive industry at risk, undermining the competitiveness of Canada’s assembly and small and medium-sized auto parts plants, a new study from the Canadian Centre for Policy Alternatives concludes.
“This report shows that the TPP poses enormous risk to our very important auto industry, with virtually no upside,” said Unifor National President Jerry Dias.
“We urge the federal government to read this report carefully. The message is clear, the TPP must not be ratified.”
Queen’s University professor and auto industry expert John Holmes, who co-authored The Devil is in the Details: The TPP’s Impact on the Canadian Automotive Industry with Jeffrey Carey, also from Queen’s, said the TPP will be a “game changer” for the auto industry worldwide.
“The proposed treaty will significantly affect decisions regarding what, where, and how automotive products will be produced within the wider TPP region, with Canada getting the short end of the stick.”
A critical side deal in the TPP, negotiated between the United States and Japan but applicable to all TPP countries, further reduces how much of a vehicle or automotive part needs to be produced within the TPP region for it to get duty-free access under the agreement, the study released July 7 found.
That means vehicles assembled using parts made outside the TPP region, such as China, will benefit in North America without any reciprocal gains in Asia for North American auto firms.
“Weakening regional content requirements for vehicles and automotive parts to qualify for preferential tariff treatment could have a greater adverse impact on Canadian assembly and parts operations than removing tariffs per se,” Carey said.
Other concerns found in the report:
- growth in Canadian vehicle exports to markets outside North America will be limited at best;
- the large difference in vehicle import tariff phase-out periods between U.S. and Canada will favour locating new assembly investment and reinvestment in the U.S. rather than Canada;
- increased Canadian import penetration by vehicles built in Japan is possible with an attendant negative impact on domestic vehicle production and, in turn, domestic parts production; and
- small and medium-sized Canadian parts makers will face increased competitive pressure from parts produced in low-cost non-TPP countries due to the weaker rules of origin for both vehicles and parts. Suppliers furthest from the assembler in the supply chain and producing discrete parts for components such as engines, suspensions and brake systems will be most vulnerable.
“While undoubtedly there will be winners and losers, the automotive provisions in the TPP, if implemented, will have overall negative consequences for automotive production and employment in Canada,” Holmes concludes.
To read the full report, click here.