Canadian Automakers Make Last Minute Lobbying Effort to Delay Korean Trade Deal
Imported vehicle sales by country. Source: Canadian Vehicle Manufacturers Association
Companies building cars in Canada are lobbying at the last minute to, kill an “imminent” free trade deal between Canada and South Korea that the automakers say would damage the Canadian auto industry and the greater Canadian economy. Ford Motor Co. of Canada Ltd. president and chief executive, Dianne Craig, said on Thursday that the U.S.-Korea trade agreement enacted in 2007 has been a “disaster” for auto makers. Craig urged the Conservative government not to make the same mistake as the United States.
“We understand that [the Canadian government] need[s] to look for what’s in the best interests of Canada,” Ms. Craig said in an interview with Toronto’s Globe & Mail. “But, frankly, autos are the greatest driver of GDP and we think we need to have a pretty strong voice in this conversation. This is not good for autos, which means it’s not good for the economy, which means it’s not good for Canadians.”
According to Ms. Craig, Canadian officials told Ford and other Canadian car companies in December that the free trade agreement with South Korea was “imminent.” Without getting into details, Craig said that the deal currently on the table is worse than what the United States got in 2007, but that the automaker is continuing discussions with the government on the issue.
The fierce opposition from Ford and other automakers has apparently resulted in Ottawa applying the brakes and at least temporarily delaying the agreement. Canadian federal officials won’t comment other than saying that the government hasn’t yet taken a final position.
Prime Minister Stephen Harper said last week that he “hopes” Canada and South Korea will reach a deal shortly, though he acknowledged the agreement might fall through.
Ford’s position is that instead of a bilateral agreement with Korea, Canada would be better off working through the current Trans-Pacific Partnership to make South Korea make its markets more open to imports including cars, and end currency manipulation. Canada is one of the twelve Trans-Pacific Partnership negotiating partners. South Korea has expressed interest in joining the TPP and like the other 11 members, including the U.S., Canada has veto power over new members. That gives Canada some leverage beyond the bilateral talks.
Canada had a $2.7 billion (Canadian dollars) trade deficit with South Korea in 2012, and motor vehicles represented more than 80% of that. That year Canada imported 131,174 Korean-made vehicles in 2012 versus exporting fewer than 3,000 Canadian built vehicles to South Korea.
Bringing up the U.S.-South Korea trade deal, Craig pointed out that under that agreement by next year U.S. tariffs on Korean cars will have been eliminated, but that continuing non-tariff barriers have kept American and European automakers from gaining market share in South Korea despite the free trade deal.
“To us, they are not a good fair trade partner and they have proven that in the last two agreements,” Craig said. “That is our concern for Canada. All you have to do is look at the data and it speaks volumes.”
Some Canadians have said that the trade agreement and car imports from Korea just might have to be the price the auto industry has to pay in exchange for the billions of dollars in government assistance to that industry in recent years. Ford itself received a $71.6 million loan from the Canadian government just last year to help pay for some retooling at Ford’s Oakville, Ontario assembly facility. Craig rejected that connection.
“There are many components that go into manufacturing competitiveness in Canada,” she said. “There is a lot the government has done to support our industry. But frankly this [Korea-Canada] agreement would set automotive manufacturing back in Canada.”
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The CVMA's chart purporting to show that imported cars dominate the Canadian market is grossly misleading. Since the Canada-US Auto Pact was signed in 1966, and continuing through FTA and NAFTA, Canada and the US have constituted a single market for motor vehicles. The car companies have organized production accordingly, producing a model in a plant for sale in both countries. So, cars built in the US and sold in Canada are not truly "imports" - they are effectively part of domestic North American production. As are cars built in Canada for sale in the US. If the CVMA made a chart of vehicle exports on the same basis as their imports chart, it would show Canada as a huge exporter of motor vehicles. Of course, this wouldn't suit their totally self-interested lobbying, so they won't do it.
Ford supported the US South Korea Free Trade pact in 2007, but are dead set against the newly signed Canada South Korea Free Trade pact signed yesterday. Where is the logic? We get Diane Craig, Prez of FoMoCo Canada, absolutely working herself up into a full steam aneurysm railing against South Korea, blah, blah this, blah blah that, and claiming the auto industry is the main driver of wealth in Canada. She is joined by the union brains trust at Unifor, and the intellectually bankrupt government of Ontario. So our Prime Minister told Ford to get its story straight yesterday, and I applaud him for it, just as I think most of his other policies are somewhere right of Genghis Khan and stupid. And unnecessarily mean and unfair. What he told Ford was, in the US you have free trade with Korea which you supported, the US and Canada have NAFTA, so if you want to export to South Korea - do so. But Canada is not going to have a special agreement to satisfy Ford, nor should they expect to be treated as a special case. Great gnashing of teeth followed from the usual suspects.