TPP negotiators move closer to deal on auto sector rules
September 24 2015 09:14 PM

Ed Fast, Canada’s trade minister, speaks during an interview in Toronto. Fast told Canadian Broadcasting Corp yesterday that he would be in Atlanta next week and would make sure the Trans-Pacific Partnership, which will cover 40% of the world economy, would be in the country’s best interests.

Reuters, Bloomberg/Washington

Japan, the US, Mexico and Canada are moving closer to a deal on rules for the automotive industry in a landmark Pacific trade deal, a leading obstacle to agreement on the 12-nation pact, officials briefed on the talks said yesterday.
Although two-day talks between negotiators from the four nations on auto trade did not reach a final agreement, ministers were readying for meetings in Atlanta next week for a final push to get the deal over the finish line.
The US has not confirmed the meeting of top trade officials from the 12 nations in Atlanta. But Canadian Trade Minister Ed Fast told Canadian Broadcasting Corp he would be in Atlanta next week and would make sure the Trans-Pacific Partnership, which will cover 40% of the world economy, would be in the country’s best interests.
“If Canada is not part of the TPP, our whole auto industry will be at risk, because we will lose lots of opportunities to expand our markets within the Asia-Pacific region. We are looking to include clauses that would safeguard our industry,” he said, declining to give details.
Canadian Prime Minister Stephen Harper said he’s confident a Pacific trade deal that would stretch from Chile to Japan will be reached.
Clinching a deal on the Trans-Pacific Partnership will form the “basis of the global trade network in the Asia Pacific for the generation to come,” Harper said yesterday in a leadership debate for the October 19 Canadian federal election.
“We are entering the final stages of a trade discussion in the Asia-Pacific that I think frankly is going to conclude successfully,” Harper said.
He warned the nation’s auto sector won’t “necessarily like everything that is in” an eventual agreement.
“What I am saying is we simply cannot afford as a country to have our auto sector shut out of global supply chains,” he said, adding not being part of a pact would be “a disaster.” Canada, the US, Mexico and Japan have been working to resolve an impasse over how much local content is needed before cars can be traded duty-free, one of the issues which blocked a deal at the last TPP ministerial meeting in July.
Mexico and Canada, partners with the US in the 20-year-old North American Free Trade Agreement, have built automotive supply chains based on a threshold of 62.5% local content, and objected to having a much lower threshold in the TPP, which they feared would favour Asian auto parts makers such as Thailand.
An official close to the TPP negotiations said the auto talks in San Francisco were productive and progress was made in narrowing gaps on the outstanding issues.
“While agreement on a landing zone was not reached, the four parties took an important step forward and agreed to continue their work in the near future,” he said.
Another official cautioned there was still a long way to go, but a third said the plan was to come to an agreement in Atlanta, where ministers would meet from September 30 until October 1 or October 2. All four parties are committed to coming to an agreement but there are no final figures yet, the third source said.
A low local content threshold would mean that Japanese car makers such as Toyota Motor Corp could source inputs from fellow Asian nations and still qualify for duty-free imports to the US under the TPP, which is set to scrap tariffs of 2.5% on cars and 25% on light trucks, likely phased out over 20 or so years.
US unions want the threshold be at least as high as NAFTA and rise to 75%. Auto parts makers in Canada and Mexico have said the minimum must be 50%.

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