Canadian Vehicle Manufacturers' Association

Canadian Vehicle Manufacturers' Association

March 12, 2008 16:44 ET

Automakers Welcome Standing Committee Report on Proposed Canada-Korea FTA

TORONTO, ONTARIO--(Marketwire - March 12, 2008) - "The CVMA is encouraged by many of the recommendations and findings of the Parliamentary Standing Committee on International Trade examination into the ongoing negotiations between Canada and South Korea on a potential free trade agreement," said Mark Nantais, President of the Canadian Vehicle Manufacturers' Association (CVMA). Nantais noted that, "the implementation of the recommendations focused on eliminating non-tariff barriers and opening South Korea's closed market under the FTA negotiations are critical to the success of the proposed FTA for Canada's automotive industry."

CVMA members support opening foreign markets through multi-lateral and bi-lateral trade agreements that fully eliminate both tariff and non-tariff barriers (NTBs) in order to be effective. South Korea has a history of using non-tariff barriers, such as income tax audits for purchasers of foreign built vehicles and introducing unique regulations, to limit international competition in its domestic market. South Korea maintains the most closed automotive market in the OECD with less than 5% of vehicles sold imported from offshore; the average OECD importation rate was roughly 52% in 2007.

"Given the reality that the South Korean market is essentially closed to automotive imports, we have consistently argued that timelines for tariff elimination must allow for the elimination of Korean NTBs and other impediments to accessing the Korean market before Canadian tariffs on automotive products are substantially reduced. As such, the Committee's recommendation that 'Canada should not trade off accelerated tariff phase-out in automobiles for promises of market access, or for any other FTA provision,' is critical.

Other important recommendations made by the Committee include the need for an expedited dispute resolution along with the inclusion of tariff snap-back mechanisms in the proposed FTA. However, an 'accelerated' dispute resolution mechanism with the application of the proposed snap-back penalty at the end of the process is unlikely to deter new market restricting NTBs from emerging in South Korea.

Nantais insisted that, "in order to eliminate the repetitive history of Korean NTBs and create a level playing field for exporters, the tariff snap-back provisions must take effect in advance of the dispute resolution process. If Korea is truly interested in free and fair trade, then negotiating a tariff snap-back provision that would be applied at the beginning of the dispute resolution process should not be a concern because the provision would never be violated, the penalties would never be applied, and Canadian exporters would not face NTBs when accessing Korea's market. Without the assurances that this provision would provide, the proposed FTA would perpetuate an already unacceptable trade imbalance."

"Given the concerns raised by many Canadian industries about accessing South Korea's historically closed market, the timing and recommendations of the study are welcomed by our industry. We look forward to continuing to work with the Canadian negotiators to ensure a fair and level playing field for all Canadian industries seeking access to the Korean market under the proposed FTA."

About the Canadian Vehicle Manufacturers' Association

The CVMA is the national association representing Canada's leading manufacturers of light and heavy duty vehicles. Our membership includes Chrysler Canada Inc., Ford Motor Company of Canada, Limited, General Motors of Canada Limited and International Truck & Engine Corporation Canada.

In partnership with the Government of Canada and the Government of Ontario, CVMA members have contributed over 80% of almost $10.15 billion in new automotive (parts and assembly) investment announced since 2002. These investments involve a transition to flexible manufacturing, new advanced skills training programs, significant investments in research and development, and the implementation of leading-edge environmental technologies.

In 2007, our member companies produced over 71% of the 2.5 million light duty vehicles built in Canada and accounted for 53% of all light duty vehicles sold in Canada. Our members purchase over 80% of all automotive parts produced in Canada for vehicle production across North America.

The automotive industry has been the driving force of Canada's economy for over 100 years.

Contact Information

  • Canadian Vehicle Manufacturers' Association
    Mark A. Nantais
    (416) 364-9333