APMA sounds alarm over potential Canada-China free-trade talks

Published on: January 28, 2016

“China has expressed publicly it would have preconditions to such discussions,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association. “If we’re going to negotiate better access to what China needs from Canada so that Chinese state-driven companies can benefit, we should be asking that same state to direct strategic investments into Canada.”

During a visit to Ottawa earlier this month, Han Jun, China’s vice-minister of financial and economic affairs, said the world’s second-largest economy would be willing to sign a free-trade accord with Canada, but only if it gained greater access to Canadian oil reserves. China also is pressing Ottawa to ease restrictions on takeovers of Canadian companies by Chinese state-owned enterprises.

“This would not be a negotiation between equals,” said Volpe. “China’s economy is five or six times larger than Canada, and has been growing, depending on the year, three to five times faster. At 1.4 billion, its population is 40 times larger than that of Canada.”

But, Canada has an opportunity to set conditions for free-trade talks that could benefit auto towns, like Windsor, said Volpe. Chinese auto manufacturers are eager to export vehicles to North America, he said. “If they want to sell here, they should build here.” 

The government, he added, could make a strong case for setting up a car plant in Canada. “The combined Canada-Ontario corporate tax rate is 10 per cent cheaper than any of our competitors in the U.S. And, we build at a disproportionately better rate of quality than any of those states. Canadian plants have won 38 per cent of J.D. Power awards yet manufacture just 14 per cent of North American production.”

Ottawa has yet to decide whether it will ratify the Trans-Pacific Partnership Trade agreement, which has generated opposition from a number of industry groups, including the APMA.

The APMA contends that the TPP’s lower content rules for automotive parts will lead to increased competition from low-cost rivals and hurt small to medium-sides suppliers, many of which are located in southwestern Ontario.

“I see the China-Canada talks as an opportunity to address vulnerabilities we’ve built into the TPP,” said Volpe. “We lowered the value content to such a level that the Chinese supply chain will achieve the best benefit in access to North America. If you can secure Chinese final assemblers in North America, perhaps that Chinese-owned supply chain can find a Canadian footprint.”

A joint study by the Canada-China Business Council and Canadian Council of Chief Executives suggested that a free-trade deal with China would create up to 25,000 new jobs in sectors such as automotive, chemicals and seafood by 2030. As well, Canada could see its exports rise $7.7 billion over the next 15 years — growth of nearly 45 per cent over current levels, the study said.

But Volpe feared the Canadian economy could end up the big loser in trade talks without preconditions set by the federal Liberals.

“The only thing that scares me is if we engage China formally and don’t try to negotiate those benefits or conclude a deal in the future that gives them access to one end of the economy without benefit to the other end.
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