Japanese Auto Industry in Canada
Trade Issues – Modernizing NAFTA
On Modernizing the North American Free Trade Agreement (NAFTA):
JAMA Canada supports liberalized trade, such as NAFTA, for delivering mutual benefits to
trade partners that enhance competitiveness for both automakers and parts suppliers,
encourage adoption of advanced technologies to provide safe and sustainable mobility for
consumers that meet their transportation needs, and to provide reliable, long term
employment for skilled and highly qualified Canadians.
The auto industry in Canada was built on a foundation of open trade, and continues to be highly
trade-dependent and deeply integrated in North America.
In the context of the NAFTA region, Japanese automakers have made significant, long term
commitments to localization under the principle of ‘build where we sell’.
- Japanese automakers have established a high-quality manufacturing and R&D; presence in
North America based on the NAFTA framework. - The NAFTA framework has made North America a highly integrated and globally
competitive region for automotive manufacturing and trade. - JAMA Canada hopes for a framework that will continue to support and strengthen the
competitiveness of the North American auto industry.
Recommendations for updating NAFTA:
- JAMA Canada strongly supports the continuation of the NAFTA as a trilateral trade
agreement, recognizing that 3 out of every 4 Japanese brand sales in Canada are vehicles
built in Canada, the US and Mexico. - Moreover, the success of NAFTA for the auto industry stems from a single set of rules
established through uniform regulations, which has allowed automakers to develop highly
integrated supply chains and production facilities across the region allowing increasing
levels of trade in both vehicles and parts to the benefit of all NAFTA countries. - The current NAFTA automotive rules of origin (ROO) should be retained. NAFTA
provided critical improvements over the Canada-US FTA, particularly with respect to
automotive rules of origin. Although the Regional Value Content (RVC) threshold was
increased significantly from 50% in the FTA to 62.5% in NAFTA, the NAFTA rules were
clearer, more flexible and more predictable. - Key elements of the NAFTA ROO include: RVC net-cost method, tracing, averaging,
accumulation, uniform regulations, phase-in for new plants/models, advanced rulings, etc. - To be effective, rules of origin in modern trade agreements should be clear, simple,
predictable, flexible and easily administered. It is also important to recognize that NAFTA
automotive rules of origin have the highest regional content thresholds, and do not include
any country-specific sourcing. - Specific improvements to modernize NAFTA in the 21 st century:
- update and expand the list of job categories for temporary entry of business
persons, - update customs and trade facilitation provisions recognizing the integrated
nature of global supply chains in North America and around the world - update border infrastructure with mechanisms to address bottlenecks
- create additional framework agreements within NAFTA – for example, for
automated vehicles, data flows, cybersecurity and other measures that facilitate
e-commerce - Increase regulatory co-operation with flexibility to align with or mutual
recognition of major international standards (e.g. UN-ECE and US FMVSS) - Adopt a generalized provision (referenced in CETA in the event of TTIP
agreement) for cross-cumulation with other FTA partners in common
- update and expand the list of job categories for temporary entry of business
- Finally, as a general rule, we strongly recommend not including any provisions in trade
agreements that signatories don’t want to use or to have used against them (e.g. country-
specific RVC provisions in preferential rules of origin).
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