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How the Canada-EU Free Trade Deal Could Change the Auto Industry

Published on February 6, 2014 by in Blog, CATI

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Canada’s auto sector could be in for some absolutely gargantuan changes soon, as a result of a new and wide-ranging free-trade deal with the European Union. Aside from affecting the import and export of many different types of products such as prescription drugs, cheese and beef, automobiles are among one of the hottest-button issues.

The deal eliminates a vast range of tariffs on products, and because Ontario’s automobile manufacturing sector is so intertwined with its American counterpart, there are some people raising questions about how this will affect the automotive world.

The Facts

What this means is that Canada, which is currently responsible for exporting around 13,000 vehicles a year to the European Union will now be permitted the export of up to 100,000 vehicles per year. The catch being that they contain at least 20% Canadian manufactured content. Vehicles with over 50% Canadian manufactured content can enter the EU duty free, without being subject to that quota.

Both Canada and EU will now also start phasing out their existing tariffs on vehicles and on parts, continuing over the next seven years. As it stand right now, Canada’s tariff on vehicles is 6.1%, whereas the EU’s is 10%.

The deal was struck at a joint conference held in Brussels, Belgium in October 2013. However, since the document has to not only be translated into 24 languages for the EU, but also be approved by all 28 members of the EU, the deal isn’t expected to be in place until sometime in 2015.

So What Does This Mean?

According to some preliminary figures, this is expected to boost Canada’s economy by around $12 billion, as well as supply close to 80,000 jobs. Most of these jobs will be for people looking to become a mechanic or others with experience from an auto mechanic course, because an increase of cars on the road means an increase in automotive careers!

The majority of Canadian cars, at least those built by the Detroit Three (Chrysler, Ford and GM) and most Japanese auto-makers, are built with a majority of their parts imported from the U.S. So, what this means is that if the U.S. signs a similar deal, there will basically be nothing distinguishing a U.S. made car from one made in Canada.

Basically what this means is this:

  • More European cars will be able to be imported into Canada.
  • More North American cars will make it into Europe
  • There will be an increase in automotive sector jobs – especially in auto mechanic training, as mechanics will have to become more familiar with more varieties of European vehicles.
  • We might finally get some great diesel cars!

While a lot remains to be seen about how the deal pans out, you can be sure that it’s very likely this will greatly bolster not only the economy, but Canada’s automotive sector as well.

 
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