Commentary: In Support of Canada’s Trade Agenda
The Canadian government has made great progress on its trade negotiations by concluding a trade agreement in principle with the European Union, and the imminent bilateral agreement with the Republic of Korea. With this momentum in pursuit of a broader trade agenda in Asia, we urge the government to ‘rev-up’ trade negotiations with Japan and the 12 countries in the Trans Pacific Partnership. Expanding trade initiatives in Europe and Asia will spur economic growth through access to global markets and diversify liberalized trade beyond NAFTA.
In a recent open letter to Prime Minister Harper, a large group of Canadian exporters called for the completion of an FTA with Korea. Clearly, Canadian industries are being disadvantaged by Korea’s trade deals with the US, Europe and Australia in the same way that Japanese automakers in Canada would be hurt if Canada were to sign deals with Europe and Korea, but not Japan.
While the auto industry in Canada continues to be highly trade-dependent, maintaining and growing the economic engine created by the Japanese auto industry in Canada requires the further liberalization of trade. The negotiation and ratification of agreements with the Europe Union, Korea, Japan and the TPP will create a level playing field, and ensure Canadian consumers continue to enjoy the full benefit of freer trade. More than ever, a globally competitive environment is crucial to ensure the long term viability and sustainability of the Canadian auto industry.
It’s also time to take the long history of harmonious relations between Canada and Japan to the next level. A bilateral trade agreement will create a multi-billion dollar gain for the Canadian economy, year on year.
Built on a strong legacy of trade liberalization in North America, Japanese automakers have been investing in Canada since the mid-1980s. Several Japanese automakers have established world-class assembly plants and more than 50 Japanese parts-related plants have been set up on Canadian soil. As a result, Canada has been a net exporter of Japanese brand vehicles every year since 1993 with a cumulative net export of over 3 million vehicles. In addition, a network of more than 1,200 dealerships in every province has brought countless jobs in communities big and small. More than 68,000 Canadians are employed through the manufacture, sale, service, distribution, export or import of Japanese vehicles in Canada.
A key part of any trade agreement is a phasing out of tariffs. While two of every three Japanese brand vehicles are built in North America, one third are imported from Japan to meet the wide ranging transportation needs of Canadians. Currently, a 6.1 per cent tariff is imposed on these vehicles. With the expectation that automobiles from the EU and South Korea would be entering Canada free of tariffs, a bilateral trade agreement with Japan would be critical to maintain equitable treatment.
Canada has been involved in negotiating an FTA with Korea since 2004 and an economic partnership agreement with Japan since 2012. It’s time to complete these agreements and finish the job. Concluding trade negotiations swiftly is critical to maintain competitiveness in the Canadian market and to ensure an equitable and balanced playing field for those investing and doing business in Canada.
For decades, both Canada and Japan have been strong advocates of the multilateral process
including trade liberalization in the GATT and the WTO. However, with the ongoing problems facing the WTO Doha Round, the focus has shifted dramatically to bilateral and regional preferential trade negotiations. While these are necessary so as not to be left behind, FTAs or EPAs should be seen as stepping stones to the broader goal of global trade liberalization, not ends in themselves. Logically, countries that have similar preferential agreements in common with other trade partners should then seize the opportunity to build toward multilateral solutions.