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OTTAWA—Canada has joined 10 other Pacific region countries in a sweeping new trade deal, one that Ottawa touts as a progressive step forward but critics warn puts the country’s auto sector at risk.
The revised Trans-Pacific trade deal, called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, was finalized in Japan on Tuesday, a reality few thought possible a year ago when President Donald Trump pulled the United States from the agreement.
But the remaining nations, led by Japan, revived the pact with negotiations producing a finalized trade agreement, billed as the largest in the world.
“It’s a great day for progressive trade around the world,” Prime Minister Justin Trudeau told a business audience in Davos, Switzerland, where he is attending the World Economic Forum.
“The agreement reached in Tokyo today is the right deal,” said Trudeau, who stayed away from a meeting of TPP leaders in November in order to press for better terms.
“Our government stood up for Canadian interests, and this agreement meets our objectives of creating and sustaining growth, prosperity and well-paying middle-class jobs today and for generations to come,” Trudeau added.
When finalized, it will give Canada favoured market access to the TPP member nations. Japan is seen as the most valuable market, but the partnership also includes Australia, New Zealand, Brunei, Chile, Malaysia, Peru, Singapore, Vietnam and Mexico.
It may have initially been a political and psychological boost to the Canadian team in Montreal as a sixth round of trade talks with the United States and Mexico to rewrite the North American free trade pact get underway in earnest.
But critics say it actually undercuts their attempts to work out a better deal with the U.S.
Canada’s minister of international trade, François-Philippe Champagne, said the Trans-Pacific Partnership will make Canada part of the largest trading agreement in the world, covering 500 million people, representing about 14 per cent of the global economy.
He said it will provide billions of dollars in economic benefits to Canadians.
While declining to link the announcement to the troubled NAFTA talks, which formally resumed Tuesday, Champagne said the announcement couldn’t have come at a better time.
“The United States is our largest trading partner and will always be there… our relationship is providing millions of good, middle-class jobs. But when you have more than 70 per cent of your exports to one country, I think people realize that it’s in Canada’s best interest to look west and to look east, Champagne said.
“When you are looking at a fast-growing economy like Vietnam, like Malaysia, Japan, the third-largest economy of the world, I think it makes sense for Canada as a Pacific Nation to position itself for success for decades to come,” he told reporters at a Toronto news conference.
“We wanted to make sure that Canada would be the first mover in one of the fastest-growing regions in the world, ensuring not only our current prosperity but obviously for decades to come.”
He pointed to specific industries in Canada that will see improvement: Vietnam’s steel tariff will drop to zero in 10 years from about 40 per cent today. Aluminum tariffs will go down by 30 per cent.
News of a deal sparked a range of reactions across Canadian business. Pork producers — who already export 70 per cent of their products to 100 different countries — cheered the agreement, saying it would open up new markets. The Forest Products Association of Canada said their industry stands to benefit too by knocking down tariffs as high as 40 per cent across Pacific nations.
But Unifor President Jerry Dias condemned it as the “worst trade deal ever.”
“Rebranding of TPP as Progressive Agreement for Trans-Pacific Partnership is a joke. With this deal it’s the same old story. Shameful broken trade promises. This isn’t progress for workers it’s a mockery,” he said on Twitter.
Speaking in Montreal after being briefed on the deal, Dias said he was furious and said “everybody” in Canada’s automotive industry feels the same.
He now fears Canadian autoworkers will have to compete with “cheap labour” in Asia and suggested Toyota and Honda would be thrilled because they’ll be able to make cheaper cars in Japan and ship them for sale in North American markets.
“We have such a trade imbalance with Japan right now it’s ridiculous. For every car we ship to Japan, they send 600 back, so this doesn’t change it at all,” Dias said.
“So now I’ve got Ford, GM and Chrysler saying, ‘why would we invest in Canada when they continue to sign trading deals with other nations that completely undermine the investments that we’re making?’” he said.
That concern was echoed by other auto sector stakeholders who said the federal government needs to ensure reciprocal access to foreign markets. And until those concerns are put to rest, they want autos excluded from the trade pact.
“We’re going to insist on it,” Flavio Volpe, president of the Automotive Parts Manufacturers’ Association.
He said rules of origin for autos and parts under TPP mark a “much lower barrier to entry” and will allow imports to be sourced from foreign markets, likely China.
“You’ve just handicapped your own domestic market,” he said in an interview.
Mark Nantais, president of the Canadian Vehicle Manufacturers’ Association, said terms of the TPP could in fact lead to job losses as auto manufacturers move production to lower cost jurisdictions.
“All indications are that it fails miserably… it will disadvantage companies that have invested in job-sustaining manufacturing,” he said in an interview.
Moving ahead with TPP is not helpful at a time when Canada is trying to negotiate new trade rules with the U.S. and Mexico under a new North America trade arrangement that will also include autos, he said.
Champagne tried to tackle those worries head-on, saying the revised pact includes improved arrangement on autos with Japan, including an effort to dismantle non-tariff barriers that have stood in the way of selling Canadian-made autos in that market. Canada’s regulatory standards, for example, will now be recognized the same as the United States and the European Union.
“We have provided the auto sector for the first time, meaningful market access by removing these trade barriers that were present,” Champagne said.
Jacques Lefebvre, head of the Dairy Farmers of Canada, said Canada’s agreement to open up its dairy sector in the TPP when the U.S. isn’t part of it “doesn’t make sense.”
He noted that Canada’s original concessions — to allow an additional 3.25 per cent of foreign imports of dairy — were made when the U.S. was at the table.
He said “the markets available to us through TPP today are 60 per cent smaller than what they were with the U.S. How is that going to create options or opportunities for Canadian dairy?”
He said he hoped the Liberal government would uphold the previous government’s promise of a $4.3 billion, 15-year compensation package for farmers hurt by the TPP.
Christopher Monette, spokesman for Teamsters Canada which represents 125,000 workers in affected sectors such as dairy and transportation, expressed surprise at the deal.
“We’re disappointed Canada is giving away even more dairy market access. The government is going to have to make sure dairy workers in processing plants are fairly compensated just like dairy farmers.”
He flagged the labour protections in TPP as weak.
“Canadian workers are now going to be competing with cheap labour from around the Pacific Rim, especially in Vietnam and Malaysia. This signals a race to the bottom for wages, working conditions, environmental standards.”
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