As the auto parts sector awaits the appointment of a new trade minister, the industry is split over the Trans-Pacific Partnership, the trade deal that Canada signed and will soon have to ratify. 

New revelations from the still secret deal show that Canada agreed to phase out its 6.1 per cent tariff on imports of Japanese vehicles over a five-year period, much shorter than the 25 years that the U.S. was able to negotiate.

That's bad news for the Canadian retail arms of Ford, Chrysler and GM, who will face tough competition from some Japanese cars and trucks years before their American counterparts, says Flavio Volpe, president of the Automotive Parts Manufacturers Association.

"On the sales side, they're looking at more robust competition from Toyota and Mitsubishi in five years, while in the U.S., it's 25 years," he said.

Although the TPP, agreed to in principle on Oct. 5, mandates that tariffs on autos and auto parts be reduced to zero in all 12 member countries, the pace at which the tariffs are removed was negotiated separately.

The Japanese were able to put pressure on Canadian negotiators for a quick phase-out of the tariff in part because of the Canada-Korea trade deal that quickly dropped tariffs on Korean cars, according to Volpe.

The U.S. has a much lower 2.1 per cent tariff on Japanese cars, but a 25 per cent tariff on light trucks, a key segment of the auto industry.

That's one reason Dianne Craig, CEO of Ford Canada, spoke against the trade deal earlier this week, calling it a "setback" in an email exchange with the Globe and Mail. She is the only auto industry figure in Canada to comment publicly on the deal.

Ready to lobby Liberals

Once a Liberal cabinet is appointed, it is likely to face intense lobbying over the deal from the auto parts sector.

Flavio Volpe

Flavio Volpe, president of the Automotive Parts Manufacturers Association, says his membership is divided over the benefits of the TPP. (CBC)

Volpe admits there is a split among members of the Automotive Parts Manufacturers Association over the deal.

Big Canadian parts makers with international operations are getting tariff-free access to new markets, but the Canadian auto parts sector also includes many metal stampers and makers of plastic parts who are reliant on North American sales.

"The bigger companies hope to get access to new markets. They've got mobile capital and can build where they sell," Volpe said.

"The smaller companies that don't have that mobility and are disproportionately invested in Canadian production, they're worried."

Bad deal for some parts makers

The full terms of the TPP have not been released, but it's known that the amount of content made in a TPP country needed for a vehicle to be imported tariff-free has been lowered to 45 per cent.

That means automakers can put parts made in low-cost jurisdictions that are not part of the TPP, such as Thailand and China, into a vehicle and still import it tariff-free to Canada.

For parts makers, the effect of the TPP varies depending on the kind of parts they make.

Higher-end parts, such transmissions and engines, enjoy a higher rate of protection, with at least 45 per cent content, but with other parts, it's 40 per cent or 35 per cent.

With the details of the trade deal still under wraps, company executives are waiting to see which of their parts will face more intense competition, Volpe said.

What's Canada's auto policy?

John Holmes, a Queen's University professor who studies the auto sector for the Automotive Policy Research Centre in Hamilton, believes Canada's auto sector will take a big hit from the TPP.

"I do think a segment of the auto parts industry in Canada will come under a lot of competitive pressure and probably not survive," he told CBC News.

"A handful of Canadian-owned manufacturers will benefit, but not necessarily the ones who employ people in Canada, in Ontario," he said.

Holmes, who advocates for creation of an automotive policy geared to keeping jobs in Canada, said the deal raises fresh questions about what Canada's auto policy should be.

"Do you support Canadian companies as they do business overseas or do you support jobs in Canada?" he said.

On Thursday, DesRosiers Automotive Consultants reported that Canada's share of North American light vehicle manufacturing had shrunk to 12.6 per cent in the first three quarters of the year, from 17 per cent in 2007. Meanwhile, Mexico's share has grown to 19.5 per cent.

Holmes points to the Export Development Corporation's $526-million loan to Volkswagen, which has no manufacturing in Canada, just to talk to Canadian parts makers, with no guarantee of Canadian jobs.

That was another example of promoting parts makers who do business in Mexico or the U.S., rather than working to keep Canadian jobs, he said.

Holmes dismissed a promise of $1 billion over 10 years to attract auto investment made by the previous Conservative government, saying it was nothing on the scale of the incentives auto assemblers are attracting now to relocate to Alabama or Tennessee.