December 1, 2015 / 10:10 PM / 2 years ago

Canada auto parts makers back TPP, urge further government support

MONTREAL, OTTAWA (Reuters) - Canada’s Liberal government should commit to a 12-nation Pacific Rim free-trade deal inked by the country’s former leaders, but it also must invest further in local auto assembly, a group representing auto-parts manufacturers said Tuesday.

Production Associates inspect cars moving along assembly line at Honda manufacturing plant in Alliston, Ontario March 30, 2015. REUTERS/Fred Thornhill

The Automotive Parts Manufacturers Association said the Trans-Pacific Partnership (TPP) will lead to increased competition from low-cost rivals, but that Canada should stick with the deal struck by its former Tory government.

The Liberal government led by Prime Minister Justin Trudeau, elected in October, has said it will consult Canadians before committing to any deal.

“I don’t think we have a choice,” said association president Flavio Volpe in a phone interview. “We were very involved and put a lot of pressure while the negotiations were on, and that was the time to do it. But now it’s closed.”

While some in Canada’s auto sector have worried about increased Asian imports, others such as Linamar Corp (LNR.TO) argue it could help bring in new business.

Under the North American Free Trade Agreement, a vehicle must have 62.5 percent North American content, and an auto part must contain 60 percent content, to qualify for tariff-free status. TPP would decrease that threshold to 30 percent for parts and 45 per cent for finished vehicles.

One Canadian auto union said the TPP could result in 20,000 lost jobs because it would allow automakers and auto parts makers to sell their products tariff-free, even if they outsource the majority of their content to low-cost countries.

Auto-parts makers, who met with federal International Trade Minister Chrystia Freeland and Economic Development Minister Navdeep Bains on Monday, are not looking for direct financial compensation, Volpe said.

Rather, he said the Liberals should help automakers assembling cars in Canada win new capacity.

“What we need is to keep our customers here,” Volpe said.

In October, Harper promised C$1 billion ($747.94 million) over 10 years to the auto industry if he retained power.

“When (Harper) started to speak about how that $1 billion would be configured more in terms of grants versus loans, that was encouraging,” said Stephen Carlisle, president of General Motors Canada, on Tuesday in an Ottawa interview. “That would be a conversation we would like to see continue.”

The Liberals will support the auto industry, Freeland said.

“Should Canada decide to ratify the TPP, we know that working with affected sectors in transition will be important.”

With additional reporting by David Ljunggren in Ottawa; Editing by Alan Crosby

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