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Windsor to profit from new North American trade agreement

Windsor to profit from new North American trade agreement

There was excitement from both industry officials and labour Monday about what the new United States-Mexico-Canada Agreement will mean to the Canadian auto industry and automotive towns like Windsor.

DAVE WADDELL, WINDSOR STAR
October 1, 2018

“It means companies better be ready to invest in people and equipment to meet the demand,” said Flavio Volpe, president of the Automotive Parts Manufacturers Association. “There’s room for industry growth.”

“The deal is the first time in the history of trade negotiations between two auto-producing nations that they’ve raised the regional vehicle content for cars and manufacturers. It’s a significant development for auto cities like Windsor.

“Automakers are going to buying more parts and content from current suppliers (in North America). It’s going to get busy.”

The deal, which still needs to be approved by the legislatures of all three countries, requires cars to have 75 per cent North American parts content to avoid tariffs. Under NAFTA cars were required to have 62.5 per cent North American parts to avoid tariffs.

The threat of a crippling 25 per cent tariff on Canadian vehicles coming into the U.S. has been effectively shelved by the very high ceiling set before that would occur (2.6 million vehicles).

Along with the retention of an independent dispute resolution process, Volpe felt the guarantees to the auto industry are the most beneficial takeaways to Canada from the negotiations.

“We manufactured 2.2 million vehicles in total in Canada last year,” said Volpe, with 1.8 million of those being shipped to the U.S.

“There’s room for industry growth.

“We’d need three new plants producing vehicles entirely exported to the U.S. to trigger the tariffs.”

Volpe said the cost of cars is likely to rise a bit, but the trade off is more economic activity and jobs in North America. That activity could be further boosted by the American threat of tariffs on those manufacturers exporting to North America, but not building here.

“That makes the idea of investing in North America a little more palatable,” Volpe said.

An employee at Radix Inc. works on a robot handling station at the Oldcastle company on Monday, October 1, 2018.DAN JANISSE / WINDSOR STAR

Jonathon Azzopardi, president of the Canadian Association of Mold Makers and vice-president of APMA, said the agreement protects the North American auto industry against global infiltration.

“The federal government did the country a great favour by signing the agreement with the U.S. before signing the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership),” Azzopardi said.

“The two agreements together are critical to the future of auto in Canada.  CPTPP, without the 75% North American content, would have been very bad and opened up the Canadian market to low-cost products.”

Azzopardi said Canada now needs to shift its trade attention to China.

“Let’s move our focus to the real threat and that is China,” Azzopardi said.

“Canada would be best to join forces with the US and bring better terms to the table with China before it’s too late.”

Not only were Canadian auto industry officials happy with the outcome, labour was also pleased. The new deal addresses longstanding complaints from auto unions on Mexican wages, collective bargaining and union organization.

Michael Finnerty, a millwright at Radix Inc. works on a indexing table at the Oldcastle company on Monday, October 1, 2018. DAN JANISSE / WINDSOR STAR

The deal requires 40 per cent of the work done in building vehicles in Mexico be completed by workers making $16 per hour. Mexican workers have also been given the right to organize into unions without harassment.

Unifor’s national president Jerry Dias said the agreement puts the auto industry in the best position its been in for a quarter century.

“The deal sets the foundation for stability in the auto sector,” Dias said.

“The key takeaway is fixing the generational problem of the migration of auto jobs from Canada and the U.S. to Mexico. It changes the economics of the assembly structure.

“The structural pieces for economic stability are there.”

Shelley Fellows, vice-president of operations for Tecumseh’s Radix Inc., said the impact of the new deal on the local economy will be significant.

“There’s a pent up demand,” Fellows said. “Business doesn’t like uncertainty and a lot of expansion plans were put on hold in the short term.

“Now companies are ready to expand, buying equipment or building infrastructure, we’ll start to see that quite rapidly.”

Fellows said Radix had put a planned 40,000 square foot expansion on hold during the 13 months of talks. Radix is hoping the talks concerning the steel and aluminum tariffs that are still in place will see those sanctions lifted soon. Once that issue is sorted, the company will move forward with its expansion plans.

“We’re going to have that, plus the growth in the industry that will occur because of the (content origin) changes,” Fellows said. “I’m feeling quite optimistic.”

Stephen MacKenzie, CEO of the Windsor-Essex Economic Development Corporation, felt Canadian negotiators did a fine job considering the playing field is never level when you’re dealing with an economy the size of the U.S.

He said making the concessions of more American access to the Canadian dairy market and raising the de minimis limit on online and cross-border shopping to $150 without duty wasn’t an unreasonable price in the overall picture of the agreement.

“We just need to get the tariffs off steel and aluminum,” MacKenzie said. “The feedback from our industry partners is they’re pretty pleased.”

The deal essentially creates a North American perimeter, with the rules of content, for the auto industry. MacKenzie expects that will lead to new investment from foreign companies not already here.

“Foreign companies were already exploring this area before the deal was done,” MacKenzie said. “Windsor has a strong business case from a geographical standpoint and from the cluster of automotive businesses already here.”

Shelley Fellows, VP of operations at Radix Inc. is shown at the Oldcastle company on Monday, October 1, 2018.DAN JANISSE / WINDSOR STAR

The Windsor-Essex Regional Chamber of Commerce membership is also much relieved to see a new trade agreement reached, according to interim president Janice Forsyth.

“We’re delighted,” Forsyth said.

“People were holding their breath, but it’s a great step forward. Businesses can move forward with clarity and predictability.

“It’s a great day for our region and for Canada.”

The deal hasn’t been met with universal acceptance.

The NDP panned the agreement for lacking protection for dairy farmers, extending drug patent and intellectual property protections and not including any chapters on indigenous and gender rights.

“Many Canadians were worried we wouldn’t get a deal, but today many of the same Canadians are worried about what we have given up to get this deal,” said Essex MP Tracey Ramsay, the NDP’s trade critic.

“Canadians were looking for a better deal and instead, we seem to be getting a new name, but a worse deal.”

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