TPP, Japan, United States, Auto Trade Barriers, and the North American Economy

U.S. Trade Representative Michael Froman made headlines today by rekindling hopes that Japanese auto-related trade barriers could be eased through Japan’s participation in the Trans-Pacific Partnership (TPP) free trade negotiations.

Why would getting more U.S. cars in the Japanese marketplace help Canada and the United States (not to mention Mexico)?

The short–if wonky–one-line answer:  The North American auto industry is “a highly integrated industry.”

Here’s just one example of how Canada and the United States’ economic partnership, and ability to effectively work together on trade  issues, creates jobs in both countries.  (Note:  Martinrea is still (page 9) in business and making profits–along with jobs–throughout Canada, the United States, and Mexico.)

Martinrea Rear Suspension Assembly

Source: Pastor, The North American Idea, Pg. 102

Canada and the U.S. working together–through multilateral efforts like the TPP–is only one piece of ensuring a robust North American economy.

The value of effective border management–i.e. securing the Canada-U.S. border is a way that protects both nations and facilitates trade–cannot be overstated.  From Robert Pastor’s The North American Idea:

“To assemble a North American car, auto parts, on average, have to cross the border seven times.  The auto industry estimated their “speed bump”–the total costs of the additional restrictions due to 9/11–added $800 to the price of each car.  This is quite a conclusion, and it might help to explain why the North American auto industry collapsed in 2009.” (page 123)

And it’s important to add that the Canada-U.S. economic partnership doesn’t mean insulating each nation from global economy’s headwinds.

Instead the partnership pushes each nation to become more effective at competing in the global marketplace.  Result:  sustainable and longterm economic growth in both nations.

And what’s a good first step to effective border management?  For both nations to complete and build on bilateral initiatives like the Regulatory Cooperation Council (RCC) and the Beyond the Border (BTB) Action Plan, two initiatives that aim to enhance border security while facilitating cross-border trade and investment.


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