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FACE ‘PAIN POINTS’ TO AVOID AUTO TARIFFS: VOLPE

FACE ‘PAIN POINTS’ TO AVOID AUTO TARIFFS: VOLPE

Shane McNeil, BNN Bloomberg
July 31, 2018

A major voice in the North American auto parts industry says a tariff-avoiding deal can be made with the Trump administration – but Canada would have to absorb a small hit.

“Through the course of the last year, up until May when the Americans put their pens down on the NAFTA discussion, we worked on a new automotive agreement that had higher levels of local content and an expanded list of parts that you would track to get to that point,” Automotive Parts Manufacturers’ Association President Flavio Volpe said in a BNN Bloomberg interview Monday. “There are some pain points there for Canada and Mexico, but it’s workable for everybody, especially, if this American administration also overlays that with higher than a 2.5-per-cent import tariff into the U.S. for other cars.”

Volpe said that while the deal would require some give from Canada’s end, the country could see benefits in a stronger, shared North American market.

“It [would] exact a higher price from [the U.S.’] NAFTA partners, but then also give them the bonus of ‘we’ll protect the [North] American market that we all participate in,’” he said.

Volpe warned automotive tariffs would affect industries on both sides of the Canada-U.S. border.

“If there was a U.S. tariff on auto parts and cars, you’d see the industry here in Canada and, really, Central Canada, grind to a halt,” Volpe said. “And if U.S. dealers don’t take delivery of cars that are 25 per cent more expensive, then U.S. automakers in Canada – General Motors, Ford, Chrysler – will pause their production, which means they’ll pause their purchases from U.S. parts producers and U.S. resin producers.”

“It’s a mess,” he continued, “and that’s before Canada would respond with a retaliatory tariff.”

U.S. Trade Representative Robert Lighthizer urged Canadian NAFTA negotiators to “compromise” in a congressional testimony last week, adding the countries could reach a tentative agreement by August. Volpe said that statement overlooks the stake U.S. automakers have in the Canadian market.

“[Lighthizer is] a good negotiator and he’s being a little disingenuous, playing to a domestic audience,” Volpe said. “They’re American companies. If anybody in Canada has to compromise, based on what he said, it would be the American companies in Canada.”

However, Volpe said Canada could learn from the European Union on how to direct Trump’s tariff attentions elsewhere.

“The precedent has been set publicly,” Volpe said of the deal reached last week which saw the EU get a tariff reprieve in exchange for a promise of more soybean imports from the U.S. “So, if there’s a way to negotiate our way out of it … for the Europeans it might be soybeans, for Canada and Mexico it’s about an integrated supply chain and interdependency between the countries.”

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