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The Trans-Pacific Partnership trade deal could have major ramifications for Canada’s already struggling auto industry, resulting in cheaper vehicles for consumers, but a more competitive landscape for Canadian manufacturers.
Unifor, the union that represents Canadian workers at the Detroit Three, said the deal would put an estimated 20,000 auto jobs at risk by eliminating tariffs and significantly reducing content rules for vehicles and auto parts.
Under the TPP agreement, Canada will phase out its existing 6.1 per cent tariff on imported passenger vehicles over the next five years — a move that is expected to lower the cost of Japanese-made vehicles for Canadian consumers.
“Certainly it’s good news for consumers and to us that means it’s good news across the board,” said Michael Hatch, chief economist at the Canadian Automobile Dealers Association.
In exchange, Canadian manufacturers will get preferential access to TPP member countries representing 40 per cent of the world’s economic output, including key Asian markets like Japan, Malaysia and Vietnam.
The deal also stipulates that imported vehicles must have at least 45 per cent of their content made in a TPP member country in order to enter Canada tariff-free, while the threshold for auto parts is 40 to 45 per cent.
Under existing NAFTA rules, those numbers are 62.5 per cent for vehicles and 60 per cent for parts.
Unifor economist Jim Stanford said this could encourage Canadian parts makers to relocate their production to cheaper TPP member states or even non-TPP countries like China.
“There’s no possible way to paint this deal as benefitting the auto industry,” Stanford said in an interview.
“There’s no possible way to say that new exports to Japan and Malaysia and Vietnam will somehow offset both the inflow of imports from those places, and more importantly, the potential relocation of a big chunk of our supply chain.”
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