Auto industry urges Trudeau to mitigate impact of TPP deal

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Canada's cornerstone auto industry is calling on prime-minister-designate Justin Trudeau for assistance to attract more investment and offset the impact of the Trans-Pacific Partnership trade deal, which would leave the sector more vulnerable to foreign competition.

The Trans-Pacific Partnership agreement reached on Oct. 5 by Canada and 11 other Pacific Rim countries would eliminate Canadian tariffs on Japanese vehicles and make it easier for manufacturers to use offshore parts in cars. It would be a boon for low-wage Asian suppliers of parts, but a challenge for Canadian firms.

Every indication is that Mr. Trudeau's Liberals, who won a majority government on Monday, will ratify the TPP, the biggest trade agreement Canada has ever signed, rather than rejecting it as the NDP had promised.

During the election campaign, the Harper Conservatives had promised $1-billion over 10 years in aid for the auto sector, but it was not a government commitment. The Tories had pledged to funnel this money into the Automotive Innovation Fund, which runs out in 2017-18, and promised to disburse it as grants rather than repayable loans for certain types of investments.

Now that Stephen Harper's government is defeated, it will be up to the Liberals to decide what to offer an industry that directly employs more than 120,000 Canadians and has seen the ground shift under its feet.

Canada has a terrible record in recent years of attracting new auto investment compared with Mexico and the southern United States, where governments dole out hundreds of millions of dollars to finance new assembly plants. Canada was once the fourth-largest automotive-assembly country in the world, but as of 2014 is the 10th-largest.

Flavio Volpe, president of the Automotive Parts Manufacturers' Association, said the changes that the TPP accord would bring – including an increase in allowable offshore content in autos, and the elimination of tariffs on Japanese cars – would have been offset in part by the Conservative promises "for funding for new car-maker commitments."

Mr. Volpe is looking to the Liberals now. "Past Liberal governments have been supporters of advanced manufacturing innovation and we look forward to hearing about and supporting this prime minister's strategic priorities," he said.

For Mark Nantais, president of the Canadian Vehicle Manufacturers' Association, which represents Canadian units of the Detroit Three auto makers, the need for assistance goes beyond the TPP. "Canada has not gotten its fair share of new auto investment and that's because these other jurisdictions are pursuing auto investment very, very aggressively," he said.

"As long as we have other jurisdictions … that are continuing to put together very aggressive support packages for the auto industry, we've got to be able to compete."

He said governments offering assistance to auto makers elsewhere "understand what the economic benefit of the auto industry is – and the return on the investment." He later added: "One job in the sector supports nine other jobs."

The auto assemblers want Canada to set the terms of the auto fund so that any assistance is no longer taxable.

The Liberals, who officially take power in early November, have said little about how Canada's ratification of the TPP would proceed.

"Canadians know that trade is important to creating good-paying jobs and growing our economy," Liberal spokesman Cameron Ahmad said.

"Mr. Trudeau remains committed to holding an open and transparent debate in Parliament on the TPP agreement, and consulting with Canadians."

The defeated Conservatives, before they went to the polls, set in motion a government commitment to provide farmers as much as $4.3-billion over 15 years in compensation for losses from both the TPP and the earlier Canada-European Union trade agreement.

In the wide-ranging TPP agreement, a 6.1-per-cent import duty on Japanese cars would be phased out over five years. The deal would also ease the domestic-content rules for vehicles and car parts, overriding rules in NAFTA that have protected Canadian auto jobs for decades.

Under NAFTA, the content rule was 62.5 per cent. The threshold would now be 45 per cent for cars and certain higher-value components, allowing more foreign parts to be used by auto makers in Canada, the United States and Mexico.

Union officials have warned these concessions could put at risk some of the 80,000 auto-parts manufacturing jobs in Canada – a fear rejected by Conservative Trade Minister Ed Fast.