* Ford of Canada, Unifor union say deal has drawbacks
* S. Korea has little appetite for Canadian vehicles
* Canada needs more trade pacts to compete, analysts say
* Auto sector employed 117,200 in Canada last year
By Susan Taylor
TORONTO, March 11 A new free trade agreement
with South Korea will throw a wrench into Canada's auto sector
recovery, union leaders and an automaker warned on Tuesday,
highlighting the pressure on an industry already struggling with
competition from Mexico.
The pact, which immediately drew fire from Ford Motor Co
of Canada Ltd and Canada's largest private-sector union,
underscores problems with the size and cost of cars being
produced in the country's industrial heartland, experts said.
"We don't, in Canada, build the type of vehicles that are
much in demand in South Korea," said Tony Faria, a University of
Windsor professor and auto industry expert. "It's not as if any
trade deal we set up with South Korea is necessarily going to
result in more vehicles being exported."
Canada and South Korea said earlier on Tuesday they had
wrapped up talks on a long-delayed free trade deal, Canada's
first in fast-growing Asia. Canada's Conservative government
touted the benefits of the deal, which it expects to boost
exports by 32 percent, equivalent to C$1.7 billion ($1.53
billion) a year.
But Unifor, a union representing more than 39,000 workers in
the country's auto sector, estimates that 33,000 manufacturing
jobs in Canada could be lost from the pact, including up to
4,000 auto assembly and parts jobs.
"I wouldn't say it's the death of the industry, but it's
another nail (in the coffin)," said Jerry Dias, Unifor's
The federal government pointed to a 2012 study prepared by a
University of Toronto professor for the Department of Foreign
Affairs, Trade and Development, which concluded the elimination
of the tariff on vehicles imported from South Korea would have
only a modest impact on domestic production, cutting output by
just over 4,000 vehicles.
In 2013, the auto sector employed 117,200 people in Canada,
according to Statistics Canada. Some 96,700 of those jobs, or
nearly 83 percent, were in Ontario, the most populous province.
Ford Canada Chief Executive Officer Dianne Craig was also
harsh in her view of the deal.
"No Canadian manufacturer can compete with a market
controlled by non-tariff barriers and currency manipulation. The
trade agreement negotiated by the Canadian government with South
Korea fails to address these issues," she said in a statement.
Canadian Prime Minister Stephen Harper said that Ford was
being hypocritical given its support for the U.S.-Korea free
Ontario's government was disappointed that the 6.1 percent
tariff on South Korean auto imports will be phased out in three
annual cuts and not a longer period. South Korea's 9 percent
tariff on imports will be eliminated immediately.
Ontario's Minister of Economic Development, Trade and
Employment Eric Hoskins, said he was also unhappy that Canada
was unable to negotiate the same "snap-back provision" included
in the U.S.-Korea deal. Such snap-backs would roll back tariff
reductions if it was shown that Korea used non-tariff barriers
to protect its market.
A spokesman for Canadian International Trade Minister Ed
Fast said the government believed the Canadian agreement is as
strong, and in some areas stronger, than the U.S. agreement when
it comes to dealing with non-tariff barriers.
Canadians bought more new vehicles in 2013 than ever before,
as consumers brushed off high debt to buy more trucks and luxury
vehicles. Sales jumped 4 percent, topping the previous
record-setting year in 2002.
Still, Canada's auto industry has seen a slow, long-term
decline, in terms of its share of North American auto production
Since the North American Free Trade Agreement was signed 20
years ago, auto production in Mexico has more than tripled,
while production in Canada has only edged higher, Scotiabank
senior economist Carlos Gomes said in a report.
"Your problem is Mexico at this point, it really, really
is," said Sean McAlinden, chief economist of the Center for
Automotive Research, who pointed to a surge of production plant
investment in the low-cost jurisdiction.
Within two years, Mexico will likely produce two cars for
every vehicle assembled in Canada, he said.
"To offset the Mexican advantage ... Canada needs more free
trade agreements to sell vehicles worldwide. Period. You just
can't rely on the Canadian or even the North American market,"
But there appears to be little appetite in South Korea for
the large vehicles assembled in Canada, including vans, sedans
and sport-utility vehicles.
Ford Canada said that Canadian vehicle and parts exports to
South Korea totaled C$15 million in 2013, while similar imports
from that country added up to C$2.8 billion.
MIXED INDUSTRY RESPONSE TO DEAL
Not all automakers with production in Canada were opposed to
the trade deal.
The Japanese Automobile Manufacturers Association of Canada,
a group that includes Toyota Motor Manufacturing Canada Inc
and is chaired by Honda Canada Chief Executive
Officer Jerry Chenkin, endorses the agreement because it could
pave the way for a similar pact with Japan.
"We urge the government to rev-up trade negotiations with
Japan and the 12 countries in the Trans Pacific Partnership,"
said the group.
General Motors Co, whose GM Korea Co subsidiary is
that country's third-largest automaker, said in 2010 that it
supported the U.S.-Korean free trade deal. Hyundai Motor Co
and its smaller subsidiary, Kia Motors Corp
, dominate the Korean market.
"We will continue to work closely with the Canadian and
Korean governments to ensure the agreement is implemented in a
way that brings the full benefit of fair competition to
customers in both markets," GM Canada said in a statement.
Chrysler Canada, a unit of Fiat Chrysler Automobiles
, declined comment. Fiat Chief Executive Officer Sergio
Marchionne said last month that he dropped his opposition to the
deal after Canadian Prime Minister Harper reminded him that his
company did not reject the U.S. trade deal with South Korea.