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New U.S. trade report predicts modest economic gains from new NAFTA

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OTTAWA — With Washington riveted to the Mueller report, a comprehensive economic assessment of the new North American free trade deal quietly emerged Thursday, predicting less-than-stellar economic gains for the United States.

Moreover, the much anticipated report of the U.S. International Trade Commission undercut the Trump administration’s rationale for forcing a renegotiation of the North American Free Trade Agreement, said one leading Canadian trade lawyer. 

The new report arrived in the face of rising doubts in some quarters about the real impact of the U.S.-Mexico-Canada Agreement, or USMCA, and with political roadblocks to ratification piling up in all three countries. The trade commission tome — all 379 pages of it — landed Thursday after being delayed months by the 35-day shutdown of the American federal government.

Its findings are significant because it is widely viewed as a neutral body that can provide a sober assessment of the economic merits of the new deal, which faces growing opposition — primarily from Democrats who want to deny Trump a political victory on a trade deal he sees as positive.

The commission predicted modest economic growth in the U.S. as a result of the agreement — a 0.35 per cent increase in gross domestic product and 176,000 new jobs, an increase of just 0.12 per cent.

“That’s it? All this time and all this headache, and the disruption to the North American supply chain and to the companies for the sake of 176,000 jobs?” said Cyndee Todgham Cherniak, a Toronto-based international trade lawyer.

The report also predicted that U.S. exports to Canada would increase by $19.1 billion, and that U.S. imports from Canada would also increase by the exact amount — $19.1 billion.

Todgham Cherniak said the identical figures debunk the American raison d’etre for renegotiating NAFTA — that the U.S. was suffering under an unfair trade deficit that needed correcting.

“The trade deficit issue is completely neutralized.”

That figure was not lost on Foreign Affairs Minister Chrystia Freeland, who railed repeatedly in the long NAFTA talks against the U.S. argument that it was facing a trade deficit.

“According to that main U.S. report, what they’re saying is the new NAFTA benefits both countries … I think that is a classic win-win outcome,” she told reporters at the Algoma Steel plant in Sault Ste. Marie, where she continued to decry “illegal” U.S. tariffs on Canadian steel and aluminum.

In the crucial auto sector, the assessment was positive but with one caveat: it might make autos more expensive for consumers because of new content rules that would prevent the use of cheaper, foreign parts — something Trump has railed against as being a job killer in the U.S.

The complicated content formula for what constitutes a North American-made auto — known as rules of origin — and updated labour provisions aimed at Mexico were key issues in the contentious NAFTA renegotiation.

The new deal “would strengthen and add complexity to the rules of origin requirements in the automotive sector by increasing regional value content (RVC) requirements and adding other requirements.”

It would increase the production of automotive parts and create new jobs, but also “lead to a small increase in the prices and small decrease in the consumption of vehicles in the United States.”

Dan Ujczo, a trade lawyer and Canada-U.S. specialist in Columbus, Ohio, said the analysis confirms that the U.S. is never going to get a better deal with Canada and Mexico than the current agreement. But he suggested it’s all probably moot given the wider political turmoil unleashed by the Mueller report, which examines whether the Trump campaign colluded with Russia to meddle in the 2016 presidential election.

“Unfortunately, today’s other report is going to consume Washington for the remainder of the spring and likely stall consideration by Congress in 2019,” Ujczo said.

The Trump administration anticipated the arrival of the trade commission’s unvarnished assessment by launching a new charm offensive to sell the merits of the new free trade pact, and to counter growing skepticism about the economic benefits of the deal.

The U.S. Trade Representative said Thursday the new, yet-to-be-ratified deal will bring auto jobs back to the U.S. from Mexico. In a new nine-page “white paper,” it said the new continental trade deal will generate $57 billion in new auto manufacturing investments and create 76,000 new jobs in the American automotive sector in the next five years.

A senior USTR official, who briefed journalists on the condition of anonymity, dismissed a report from the International Monetary Fund last month which said the new rules of origin and the labour provisions would lead to a decline in vehicle production in all three countries.

The new USTR report, however, made no mention of the punishing steel and aluminium tariffs that Trump imposed on Canadian and Mexican steel imports — duties both countries cite as obstacles to ratifying the new pact.

Flavio Volpe, the president of the Canadian Automotive Parts Manufacturers’ Association, said that there is no way that the U.S. automakers came meet the new content requirements for autos with tariffs of 25-per-cent and 10-per-cent on Canadian and Mexican steel and aluminum still in place.

“You can get there, but you won’t get there profitably,” said Volpe.

Mike Blanchfield, The Canadian Press


Automotive

Electric car sales climb in wake of new $5,000 federal rebate program

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electric car

OTTAWA — Transport Canada data shows more than 14,000 electric vehicles were purchased nationwide during the first three months of the federal government’s new rebate program.

On May 1, Ottawa began offering rebates of up to $5,000 on the purchase of some electric vehicles.

The rebate is intended to bring the price of zero-emission vehicles closer to their gas-powered cousins.

Dan Woynillowicz, policy director at Clean Energy Canada, says the rebate is the only thing he can point to as a reason why electric car sales jumped 30 per cent since January.

The increase happened despite a drastic drop in electric car purchases in Ontario in the first three months of the year after the province cancelled its rebate in 2018.

The federal government wants 10 per cent of all cars sold to be zero-emission by 2025, 30 per cent by 2030 and 100 per cent of sales by 2040.

The Canadian Press

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Automotive

From Nazis to hippies: End of the road for Volkswagen Beetle

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FRANKFURT — Volkswagen is halting production of the last version of its Beetle model this week at its plant in Puebla, Mexico. It’s the end of the road for a vehicle that has symbolized many things over a history spanning eight decades since 1938.

It has been: a part of Germany’s darkest hours as a never-realized Nazi prestige project. A symbol of Germany’s postwar economic renaissance and rising middle-class prosperity. An example of globalization, sold and recognized all over the world. An emblem of the 1960s counterculture in the United States. Above all, the car remains a landmark in design, as recognizable as the Coca-Cola bottle.

The car’s original design — a rounded silhouette with seating for four or five, nearly vertical windshield and the air-cooled engine in the rear — can be traced back to Austrian engineer Ferdinand Porsche, who was hired to fulfil Adolf Hitler’s project for a “people’s car” that would spread auto ownership the way the Ford Model T had in the U.S.

Aspects of the car bore similarities to the Tatra T97, made in Czechoslovakia in 1937, and to sketches by Hungarian engineer Bela Barenyi published in 1934. Mass production of what was called the KdF-Wagen, based on the acronym of the Nazi labour organization under whose auspices it was to be sold, was cancelled due to World War II. Instead, the massive new plant in what was then countryside east of Hanover turned out military vehicles, using forced labourers from all over Europe under miserable conditions.

Re-launched as a civilian carmaker under supervision of the British occupation authorities, the Volkswagen factory was transferred in 1949 to the Germany government and the state of Lower Saxony, which still owns part of the company. By 1955, the millionth Beetle — officially called the Type 1 — had rolled off the assembly line in what was now the town of Wolfsburg.

The United States became Volkswagen’s most important foreign market, peaking at 563,522 cars in 1968, or 40% of production. Unconventional, sometimes humorous advertising from agency Doyle Dane Bernbach urged car buyers to “Think small.”

“Unlike in West Germany, where its low price, quality and durability stood for a new postwar normality, in the United States the Beetle’s characteristics lent it a profoundly unconventional air in a car culture dominated by size and showmanship,” wrote Bernhard Rieger in his 2013 history, “The People’s Car.”

Production at Wolfsburg ended in 1978 as newer front drive models like the Golf took over. But the Beetle wasn’t dead yet. Production went on in Mexico from 1967 until 2003 — longer than the car had been made in Germany. Nicknamed the “vochito,” the car made itself at home as a rugged, Mexican-made “carro del pueblo.”

The New Beetle — a completely retro version build on a modified Golf platform — resurrected some of the old Beetle’s cute, unconventional aura in 1998 under CEO Ferdinand Piech, Ferdinand Porsche’s grandson. In 2012, the Beetle’s design was made a bit sleeker.

The end of the Beetle comes at a turning point for Volkswagen as it rebounds from a scandal over cars rigged to cheat on diesel emissions tests. The company is gearing up for mass production of the battery-driven compact ID.3, a car that the company predicts will have an impact like that of the Beetle and the Golf by bringing electric mobility to a mass market.

The last of 5,961 Final Edition versions of the Beetle is headed for a museum after ceremonies in Puebla on July 10 to mark the end of production.

___

AP photo blog about the last Volkswagen Beetle: https://bit.ly/32bXuMx

David McHugh, The Associated Press






















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