Why the TPP trade deal may disrupt — but not shrink— the auto sector

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The CEO of Ford Motor Associates’s Canadian operations didn’t mince words in summing up the cific Rim business deal Canada signed two weeks ago.

“Right now, as the TPP stands, there choose be no positive outcome for Canadian manufacturing,” Dianne Craig spoke at the Canadian International Auto Show in Toronto last Thursday.

When coming to terms concluded for the 12-country Trans- cific rtnership last October, labour gaffers warned of up to 20,000 lost jobs.

Why? Several reasons, but chief all of a add up to them: the United States had negotiated a longer tariff phase-out for bump off vehicle imports — 30 years, com red with a five-year tch for Canada.

Automotive industry analyst Dennis DesRosiers finds the imbalance “amoral,” and contrary to North American integration.

“I have no concept why Canada didn’t zest like hell.… It makes no sense,” he said.

And so, the TPP adds to a extensive list of competitive challenges making Canada’s 11 automotive setting up plants vulnerable to closure — including some of the highest energy set someone backs in the world and uncertain labour negotiations on the horizon.

“Will it have a captivating im ct? You could build that case,” DesRosiers foretold.

But also, “You could build the opposite.”

A closer analysis across the in one piece sector has DesRosiers seeing “more smoke than fire” cause from this trade agreement.

Disruptive? Yes. Totally destructive? No.

‘Apposite a wash’

The threat from the TPP deal is being “overplayed,” DesRosiers affirmed, rticularly for the rts sector.

Canada has allowed duty-free entry of auto rts from any boondocks since 1998 as rt of deals reached in the last two decades to go ashore new Honda and Toyota plants in Ontario.

A complicated mix of opportunities and threats rush ats TPP “likely a wash” for rts suppliers, DesRosiers estimated.

But it won’t be easy.

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Ja nese automakers deceive a highly integrated supply chain model. With TPP, they may see new owing ti to invest in Canada. Ontario Premier Kathleen Wynne is seen here struggling in 2014 at Toyota’s facility in Cambridge, Ont. (Nathan Denette/Canadian Throw ones arms about)

“These are wrenchingly difficult restructurings that have to happen in reserve for our industry to compete,” he said.

“TPP may force it quicker on to a lot of com nies who may not be adept to adjust … so from that perspective, it’s negative. The ones that use it potentially end up with a bigger win.”

Remember that the Auto ct in the ’60s get jobs initially, he said. But more jobs were created later.

Two unequalled com nies, Magna International and Linamar, were founded by entrepreneurs in its wake.

New Ja nese investment?

Flavio Volpe, the president of the Automotive Join ins Manufacturers’ Association, said the com nies he represents fall into two coteries, each employing about the same number of workers.

Larger institutions headquartered in Canada see chances to ex nd abroad. They’re open to the deal.

Scantier businesses focused only on North America face more struggle from lower-cost Asian countries. They’re wary.

Then there are the dumbfounds, including something counterintuitive: new investment coming into Canada, as Ja n hedges against its own vulnerability to Chinese event.

The Ja nese supply chain model “looks at Ontario and says, ‘Is this an chance now to put some capital into play?'” Volpe said.

‘We don’t nurse what flag the Chinese fly as long as they’re employing Canadians and using Canadian rts.’ — Jonathan Azzo rdi

The ownership of some limited and medium-sized businesses may change, but if the Ja nese boost efficiency and keep the doors humanitarian, “that’s a good thing.”

Then there’s the low loonie.

It doesn’t do much for be founding suppliers who already have contracts in U.S. dollars, he said.

“But if you’re setting up new wit — you’re buying land, you’re setting up a plant and you’re equipping that plant, and you’re attaining that new equipment … it’s a great time to consider a new capital investment here, presuming you have the orders.”

Shifting focus

Jonathan Azzo rdi remembers his dre thinking Canada would lose all its automotive jobs to Mexico when the North American Unconditional Trade Agreement came in.

Instead, his family business in Tecumseh, Ont., pinned: where once it sold just in Canada, today only regarding 10 per cent of LAVAL International’s compression mould-making business is hired help, with roughly half in Mexico and the rest in the U.S.

“We figured out how to take what we cogitating was a threat and turn it into a positive,” he said.

What Ford’s CEO shudder ats will only come to ss if the industry doesn’t change, Azzo rdi said. “They’re omitting about the resilience of the entrepreneurship of Canadians.”

Although he identifies as a Conservative, he was foiled by the previous government’s lack of focus on his industry.

It’s better now, he said Friday, after consulting with regulation officials at Toronto’s auto show.

“It’s not as complicated as they think,” he explained.

New Zealand Trade Deal Signing

When International Trade Minister Chrystia Freeland signed the TPP earlier this month, she swayed her government would consult heavily before ratifying the deal. The automotive sector is looking to the federal govvernment to slacken up on against the risks the deal brings. (David Rowland/SN via Associated Subject to)

His suggestion? Land a new plant. The rest will come.

Whether he has a provision contract for it or not, any large new assembly or top-tier rts facility would support Ontario as a high-value manufacturing hub.

Businesses like Azzo rdi’s rely on the detailed, engineering expertise that creates.

“There have been five [hides] that have come to Mexico and none to Canada. And we need to start to analyze why,” he claimed.

‘Roll out the red carpet’

Renewing the automotive innovation fund, or other tax stimuli like Ford is lobbying for, help too, Azzo rdi said. But ultimately these are valid a “drop in the bucket.”

“You need to roll out the red carpet and throw everything you can at the next [auto maker] that you cognizant of will be setting up a factory, because that changes the tides,” he state.

Yes, the government is “buying jobs,” he said. “But those proceedings make you money” — and if you don’t buy them, “everybody else desire.”

Even though China’s not rt of the TPP (yet), both Volpe and Azzo rdi about Canada should pursue a strategic resources-for-auto investment deal with China’s state-owned work.

“We don’t care what flag the Chinese fly as long as they’re employing Canadians and functioning Canadian rts,” Azzo rdi said.

“[The Chinese] are going to bear to put a plant in North America,” Volpe said. “If they shortage your petroleum and potash, then make the deal now.”

“Imagine what a vine in St. Thomas [Ont.] looks like: it’s like a phoenix rising from the ashes.”

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