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CPTPP motor vehicle side letter won’t open Japanese market, auto industry representatives say

CPTPP motor vehicle side letter won’t open Japanese market, auto industry representatives say

Some industry representatives have dismissed the federal government’s side letter with Japan, saying it won’t help Canada gain access into the Japanese market as Canada’s trade minister promised

Alicja Siekierska – Financial Post
March 8, 2018

Some representatives of the Canadian auto industry have dismissed the federal government’s newly released side letter with Japan on motor vehicles as “useless”, saying the document will not help Canada gain access into the Japanese market as Canada’s trade minister has promised.

Side letters with 10 countries were released shortly after Canada’s trade minister François-Philippe Champagne signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in Santiago, Chile on Thursday. Canada is expected to ratify the deal later this fall, as it has to pass legislation through Parliament.

The document signed with Japan on motor vehicles, which Champagne has touted as a major victory that will grant greater access to the Japanese market, says that Canada will not face non-trade barriers.

“I confirm that Canada is not and will not be discriminated against in the application of Japan’s non-tariff measures on motor vehicles,” the side letter, signed by Champagne and Japan’s Minister of Economic revitalization Toshimitsu Motegi reads.

Speaking on a conference call with reporters from Santiago, Champagne said the side letter with Japan will put the Canadian auto sector “in a much better position.”

“The side letter will remove non-tariff trade barriers which were present for a long time in the auto sector, both in Canada and the U.S., with respect to the safety standards allowing for Japan to recognize our Canadian standards to make it easier for the Canadian automotive sector to access that market,” Champagne said.

“Overall one understands and hears (the Canadian auto industry) concerns. We have positioned them in a place which leaves them in a better place than they’ve ever been.”

However, Flavio Volpe, president of the Automotive Parts Manufacturers Association, said the side letter does not touch upon the issues the auto industry hoped to address that would open up the Japanese market. He also called Champagne’s claims “laughable.”

“The side letters do not inventory any of the non-tariff barriers to sales in Japan that the Canadian auto sector repeatedly raised with the government,” Volpe said.

“However, the Minister’s drive to achieve another vanity trophy paid for by the regular people who work in Canada’s auto sector is amazing to watch and I congratulate him on this ignominious achievement.”

The side letter says that vehicles manufactured in Canada certified under Japan’s Preferential Handling Procedure, a process which allows exporters to sell cars in Japan if they comply with certain procedures, will benefit from streamlined testing. The document also allows vehicles manufactured in Canada that comply with Federal Motor Vehicle Safety Standards of the United States (FMVSS) to comply with corresponding Japanese regulations.

Japan and Canada are also cooperating on developing an enforceable dispute settlement mechanism, the document says, that would apply to the side-letter agreement. Champagne said the letter marks the first time Japan has agreed to a side letter on autos that would be subject to dispute resolution.

David Worts, executive director of the Japan Automobile Manufacturers Association of Canada, said the side letter will help address some of the issues Canadian auto representatives had previously cited, including access to the Japanese market.

“The door is open,” he said.

But Unifor president Jerry Dias, whose union represents more than 23,000 Canadian auto workers, said “the side letters mean nothing” and that they are “unenforceable.”

“It’s lollipops and rainbows. We’ve dealt with side letters in NAFTA which have proven to be inherently useless,” Dias said.

“Ultimately, you can’t get away from the fact that you’re going to have more Japanese vehicles imported to the Canadian market, and we’re going to have no access there. Anyone that actually believes that we’re going to be selling cars in Japan, that this is a game changer, are naive.”

While Volpe and Dias have been vocal in their criticism of the CPTPP, some auto organizations have been supportive of the agreement.

Linda Hasenfratz, the chief executive of Canada’s second-largest auto parts manufacturer Linamar Ltd., previously said that the trade agreement will create “huge opportunity for Canadian companies to become more global and grow in a while variety of sectors.”

With files from the Canadian Press.

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