Canada signs Trans-Pacific Partnership deal

Canada has signed on to the Trans-Pacific Partnership (TPP) trade deal, a landmark agreement that will create the largest trading zone in the world.

The deal will reduce or remove tariffs and other barriers on sectors across the economy over the next 15 years and potentially increase Canadian exports in a wide variety of products and services.

The 12-country TPP — which includes Canada, the United States, Japan, Mexico, Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam — represents a market of nearly 800 million consumers and almost 40 per cent of the global economy, with a combined GDP of about $28.5 trillion. China was left out of the agreement, which supporters promoted as a counterweight to its growing influence.

The TPP agreement is expected to eclipse the North American Free Trade Agreement (NAFTA) in economic importance to Canada and includes two of the world’s three largest economies (the U.S. and Japan). NAFTA still exists, but in areas where the two agreements conflict the TPP will usually prevail.

The TPP agreement must be ratified by Parliaments in each country, which could take several years to complete.

The deal is a win for the Canadian economy, the government and other supporters say, as it secures access to hundreds of millions of new customers in the Asia-Pacific region.

But the deal also exposes middle class workers to additional low-cost competition from foreign labor, notably in the auto sector – and by extension, the plastics industry. TPP allows more foreign car parts into North America without tariffs. The Canadian government says that it secured better terms for the rules of origin for vehicles and automotive parts than other TPP partners like Japan and the U.S. had initially been pushing for. The TPP deal requires 45 per cent net-cost domestic content rules for cars, 45 per cent of net-cost content for “core parts,” and 40 per cent for other parts. NAFTA rules up to now have stipulated that cars must have 62.5 per cent North American content for finished vehicles and 60 per cent for auto parts to be sold tariff-free in Canada, the U.S. and Mexico.

For this reason, the Automotive Parts Manufacturers’ Association (APMA) and Unifor, the country’s largest private-sector union, have raised concerns in the past weeks that the agreement could reduce the level of domestically made auto parts in vehicles sold in Canada by allowing Japanese auto companies to export cars to North America with significantly less North American content than is currently required.

In a statement issued on Oct. 5, however, APMA called the TPP “reasonable.” “Canadian negotiators made a significant, material advance on the automotive parts rules of origin from the proposal they rejected in Maui and these new reasonable terms will have varying effects on Canada’s automotive parts manufacturing.” the statement read, in part. “On one hand, prospects to supply vehicle assembly in foreign markets will open for large Canadian suppliers with multinational footprints and access to mobile capital. On the other hand, small and medium sized suppliers to Canada’s vehicle assembly supply chain will face new competitive pressure from large, multinational firms from TPP countries and further abroad.”

During a press conference also held on Oct. 5, Prime Minister Stephen Harper said that an announcement on further funding for the automotive sector would be coming within the next few days.