How Trans-Pacific trade deal could hurt Canada’s auto industry

Observers say TTP could exposed auto parts makers to Asian competitors.

0 October 1, 2015
by By Alex Posadzki, Canadian Press

15-April-auto-parts-ASIP-625TORONTO — Few details are known about the Trans-Pacific Partnership, but observers say the trade deal, currently under negotiation in Atlanta, could spell trouble for Canada’s beleaguered automotive industry, with parts makers likely to bear the brunt of the pain.

Here are a few things to know about Canada’s auto manufacturing sector and how the TPP could impact it:

Economic impact: The manufacturing of vehicles and auto parts contributes roughly $20 billion to the country’s GDP and directly employs 120,000 people, not including spin-off jobs, according to a 2014 report from the Automotive Policy Research Centre at McMaster University.

NAFTA: Under the North American Free Trade Agreement, or NAFTA, an auto part needed to contain 60 per cent North American content and a fully assembled vehicle needed to have 62.5 per cent North American-made content in order to remain duty free.

TPP: Japan has been pushing to allow for the tariff-free movement of vehicles and auto parts that contain as little as 30 per cent content produced in the countries that are part of the trade agreement. The risk is that Canadian auto parts makers will lose business to low-cost Asian producers that aren’t part of the trade deal, such as China, Vietnam and Thailand.

Jobs: Canadian auto parts manufacturers employed roughly 81,700 people in 2014, according to a report from the Conference Board of Canada. Tony Faria, an auto industry expert at the University of Windsor, predicts that roughly 10,000 of those jobs could be at stake due to the TPP.

Challenges: In recent years, manufacturers of both auto parts and vehicles have been shifting production from Canada to Mexico and the southern United States, where labour costs are cheaper. More than 200 auto parts manufacturing facilities have been shuttered over the past decade, according to the Automotive Policy Research Centre, and layoffs have been made at assembly plants as well. General Motors announced in April that it will lay off 1,000 workers at its Oshawa plant as it shifts production of the Camaro to Michigan, and more job losses are expected.

Trade: Although Canada once exported more automotive products than it imported, the surplus shrank to a deficit in 2007 and has remained that way ever since. Some industry observers are concerned that the proposed trade deal could widen that deficit even further.

Quote: “Before actually seeing what comes out of the deal, it’s really hard to say what the economic impact will be. It depends what the deal is and it depends where you are in the industry and what your business model is and what your business looks like. Without those details, it’s hard to have a firm answer.” Dina Ignjatovic, the auto sector economist at TD Economics

© 2015 The Canadian Press

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