Canada gets expanded quota for autos in EU talks
A worker on the production line at Chrysler's assembly plant in Windsor, Ontario, works on a minivans on January 18, 2011. (Geoff Robins / THE CANADIAN PRESS)
Published Sunday, July 7, 2013 1:25PM EDT
Last Updated Sunday, July 7, 2013 10:11PM EDT
Canada has opened the door to increase car sales in Europe by eight-fold to 100,000 units under a proposed new trade deal, The Canadian Press has learned.
That potential win for the Canadian auto sector is one of several new elements highlighted in a leaked document -- a seven-page German analysis, dated June 18 -- that reveals several never-before-reported elements of the Harper government's continuing negotiations with the European Union.
If signed, these new elements would require Canada to eliminate its foreign ownership rules on uranium mining and lock in the most recent liberalized ownership rules in the lucrative telecom sector.
Although it's unclear whether the automotive quota represents a real or empty victory for the hard-pressed industry, the document does contain Germany's reaction to the state of the talks, including a blistering comment on the sectoral deal.
"So Canada has achieved 100 per cent of its negotiating position ... Conclusion: The car package is unacceptable in its present form," the German analysis states.
But in an earlier document from the European commission, also obtained by The Canadian Press, the auto deal is categorized as at most a pyrrhic victory for Ottawa that would make it easier for the Harper government to sell a free-trade agreement to Canadians.
"Given the significant EU trade surplus in the export of passenger cars ... this request is of a political rather than economic importance so as to be able to present the car deal as balanced," the commission states.
The note points out that last year Canada exported a mere 13,000 cars to the EU, while shipments the other way totalled 114,000.
The document also says that Canada is willing to get rid of non-resident ownership restrictions on the uranium industry. Current regulations cap foreign ownership of uranium mines at 49 per cent.
"Canada will revise the conditions allowing for majority control over a company for the stage of first production for uranium mining and allow EU companies to obtain approval more easily," the document says.
Saskatchewan is one of the world's leading uranium producing regions in the world. Premier Brad Wall and industry players have been pushing Ottawa to relax the foreign ownership restrictions in the sector.
The document also sheds new light on how sub-national government procurement would be liberalized to allow European firms access to Ontario and Quebec's public hydro sectors, and freedom to bid on provincial and municipal tendering, as well as on universities, schools and hospital contracts.
It is open to question whether the auto deal that Germany takes such exception to would have a material impact on two-way trade in the sector, which has in the past been decisively one-way from Europe to Canada.
In the comments, the German memo explains that for the first 100,000 unit of exports, the Canadian content of those vehicles needed to qualify as Canadian will come down from the current EU policy of 60 per cent to 30 per cent.
That means Ontario-assembled cars, which carry significant American content, will have a lower hurdle to clear.
Given Canada's current small share, however, analysis suggests the relaxed rules may be more beneficial to the U.S., since American manufacturers have "the possibility to export to the EU via Canada" duty-free.
The document also notes that the 100,000 quota would likely be rolled into a North American package if the EU and the U.S. get together on a free-trade deal of their own, but would remain "permanent" if that does not happen. Above the quota, stricter rules of origin will be applied.
A spokesman for Trade Minister Ed Fast cautioned that nothing is settled until all items are settled, adding that European negotiators will be in Ottawa this week to resume talks.
Canadian Auto Workers president Ken Lewenza said the quota is useless unless there are penalties to Europe for not meeting it, such as a delay in the elimination of the 6.1 per cent duty Canada charges on European car exports.
Ideally, he said, the deal should require European automakers to open plants in Canada, as some Japanese automakers have done.
But trade lawyer Lawrence Herman of Cassels Brock says critics shouldn't be too quick to dismiss the potential benefits, even if they are unlikely to be immediate payoffs.
"I would say it's a good deal for the auto sector because it is giving them expanded access to Europe, but whether we can take advantage of that is another matter."
He added that European negotiators are likely banking on low interest among their consumers for North American brands.
Facing an election in two years, the Harper government is counting on its first and only major deal with a large, advanced market as evidence it is meeting the challenges of the global economy. But given that it is making numerous concessions to finalize the pact, it must also be able to point to clear victories.
The possibility of higher auto exports, as well as expanded access for beef sales -- another key Canadian goal in the talks -- would at least provide some cover for concessions Ottawa has apparently made over foreign investment, drug patents, government procurement and in the dairy sector, each of which will have their critics.
"There is a huge imbalance between what Canada has offered and what we are getting," said Stuart Trew, a trade specialist for the Council of Canadians. "On procurement, Canada has given up everything the Europeans were demanding and for what, I have to ask?"
The German document makes clear that Canada has made several concessions in the talks, although it limits its comments to just a few.
The deal would lock in the recent relaxation of restrictions in the telecommunications industry governing foreign ownership, meaning Ottawa could not change its mind in the future.
As well, the document goes into detail about market liberalization in government procurement, a controversial chapter in Canada. As previously reported, Europe believes it has freed up access to bid on about 70 per cent of contracts in the hydro-electric sector.
But the German notes complain that local public transport remains outside the deal at the moment, as does Ontario's green energy plan, and provincial regional development in the case of Canada's smaller provinces and territories.
It can live with the latter, document states, since the threshold for favouring local, non-urban contractors is extremely low at $1 million or less, and it will be limited to 10 instances a year.
"In the overall package, however, the positive impact of the including of the Canadian provinces and other subcentral contracting authorities, and the improvement in the field of energy, is likely to outweigh the negative impact of these exceptions," the document says.