Letter to Minister Fast regarding the TPP.
The Honourable Ed Fast, P.C., M.P.
Minister of Trade
Department of Foreign Affairs, Trade & Development
125 Sussex Drive
Ottawa, Ontario, K1A 0G2
Dear Minister Fast:
As Trans-Pacific Partnership (TPP) negotiations move toward conclusion, the Canadian Vehicle Manufacturersâ€™ Association reiterates its position that achieving alignment between U.S. and Canada auto terms with Japan remains critical for future assembly and supply chain investment in Canada.
Canada has difficult but important choices in this historic negotiation and must be fully aware of their implications. Concessions by Canada that, for example, lead to material differences with U.S. terms for auto tariff reduction time periods, rules of origin or assured access past Japan’s well established non-tariff barriers would compromise the economic rationale for auto assembly and supply chain investments to be made in Ontario and Canada, and undermine the hard won, historic benefits of regulatory, infrastructure and supply chain integration and alignment between the Canadian and U.S. auto economies.
As we have set out in prior communications, we believe the following key provisions are necessary to create the proper foundation for free and open trade in automotive goods:
- That there be the same terms and outcomes between Canada and the U.S. with respect to automotive trade;
- A long, back-ended tariff phase out for Canadaâ€™s auto tariffs on Japanese imports of cars and trucks commensurate with the timeline for phasing out tariffs secured by the United States;
- For passenger vehicles, it is recommended that the TPP rule of origin include the option to use a net cost rule of origin methodology, without tracing, with averaging, and regional value content (RVC) between 35% and 50%. In no circumstances should the content rule exceed 50%;
- The inclusion of strong and enforceable currency disciplines in the financial chapter of the Trans Pacific Partnership agreement to ensure that market access provisions in the final agreement are not undermined by a country(s) inclination to manipulate its currency given the intersection of trade and finance.
Additionally, the following remain important factors for inclusion:
- Elimination of existing non-tariff barriers (NTBs) and the establishment of effective tools to address new NTBs, should they arise.
- An accelerated dispute settlement mechanism that includes (1) a â€œsnapbackâ€ mechanism and (2) a mechanism delaying the phase out of the tariff on Japanese cars and trucks by the amount of time between when an NTB is proposed and when it is dismantled
- The creation of a bilateral Automotive Oversight Body to ensure the enactment and enforcement of key commitments, including, auto tariffs, technical barriers (with its own working group), auto taxes and tax incentives, currency manipulation distribution outlets and service centers, competition policy enforcement, and compliance with global business practices.
Automotive trade under NAFTA is one of the most successful trade relationships in the world,accounting for $100 billion in two-way trade annually between Canada and the United States, which is more than 20% of the total trade between the two countries. Vehicles and parts are designed, tested and produced seamlessly on both sides of the border for use in either market. Both markets have largely shared driving conditions, infrastructures, environment, and public policy objectives. As a result of this high degree of integration, it is critical that Canada achieve the same auto provisions with Japan in both the TPP and CJEPA as the United States.
We expect the U.S. will make it their priority to achieve, in large part, the outlined requirements and therefore Canada must do the same to reasonably enjoy the continued benefits of our historic integration on our auto assembly and supply chain industry and its enormous related job impact.
On behalf of the members of the CVMA, I would be very pleased to discuss this in more detail at a mutually convenient opportunity and will look forward to your response.
Mark A. Nantais
Canadian Vehicle Manufacturers’ Association